AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999

REGISTRATION NO. 333-67389
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

MRS. FIELDS' ORIGINAL COOKIES, INC. GREAT AMERICAN COOKIE THE MRS. FIELDS' BRAND, INC. PRETZELMAKER HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS COMPANY, INC. (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF DELAWARE (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION
INCORPORATION OR ORGANIZATION) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
INCORPORATION OR ORGANIZATION)

6749 6749 6749 6749
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)

87-0563472 87-0552899 58-1295221 87-0563472
(I.R.S. EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.) IDENTIFICATION NO.) IDENTIFICATION NO.)

2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY,
SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY,
UTAH 84121 UTAH 84121 UTAH 84121 UTAH 84121
(801) 736-5600 (801) 736-5600 (801) 736-5600 (801) 736-5600
(ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND
TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES) EXECUTIVE OFFICES) EXECUTIVE OFFICES) EXECUTIVE OFFICES)

MICHAEL WARD, ESQ. MICHAEL WARD, ESQ. MICHAEL WARD, ESQ. MICHAEL WARD, ESQ.
VICE PRESIDENT OF ADMINISTRATION GREAT AMERICAN COOKIE COMPANY, THE MRS. FIELDS' BRAND, INC. PRETZELMAKER HOLDINGS, INC.
MRS. FIELDS' ORIGINAL COOKIES, INC. INC. 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY,
2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY,
SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, UTAH 84121 UTAH 84121
UTAH 84121 UTAH 84121 (801) 736-5600 (801) 736-5600
(801) 736-5600 (801) 736-5600
(NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING
ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS
FOR SERVICES) FOR SERVICES) FOR SERVICES) FOR SERVICES)

----------------
COPIES TO:

RANDALL H. DOUD, ESQ.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212)735-3000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

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AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

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

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS PROHIBITED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

MRS. FIELDS' ORIGINAL COOKIES, INC.

PROSPECTUS (SUBJECT TO COMPLETION)

FEBRUARY 4, 1999
EXCHANGE OFFER FOR
$53,725,000
10 1/8% SERIES B SENIOR NOTES DUE 2004
GUARANTEED BY
THE MRS. FIELDS' BRAND, INC.
GREAT AMERICAN COOKIE COMPANY, INC. AND
PRETZELMAKER HOLDINGS, INC.

Terms of the Exchange Offer

. Expires 12:00 midnight, . The notes mature on
New York City time, December 1, 2004, and pay
, 1999, unless extended. interest on June 1 and
December 1 of each year,
beginning on June 1,
1999.

. Not subject to any
condition other than that
the Exchange Offer not
violate applicable law or
any interpretation of the
staff of the Securities
and Exchange Commission.

. We will not receive any
proceeds from the
Exchange Offer.

. The exchange of notes
will not be a taxable
exchange for U.S. income
tax purposes.

. We can amend or terminate
the Exchange Offer.

. The terms of the notes to
. We will exchange all be issued are identical
outstanding notes that to those of the
are validly tendered and outstanding notes, except
not validly withdrawn. for certain transfer
restrictions and
registration rights.

. You may withdraw tendered
outstanding notes any
time prior to the
expiration of the
Exchange Offer.

. The notes are senior
unsecured debt, fully and
unconditionally
guaranteed on a senior
basis. The guarantees are
general unsecured
obligations of the
guarantors.

For a discussion of certain factors that you should consider prior to tendering
your outstanding notes in the Exchange Offer, see "Risk Factors" beginning on
page 16.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

, 1999

TABLE OF CONTENTS

Page
----

Prospectus Summary....................................................... 4
Summary Historical and Pro Forma Financial and Store Data................ 13
Risk Factors............................................................. 16
Forward-Looking Information.............................................. 26
The Transactions......................................................... 27
Use of Proceeds.......................................................... 29
Capitalization........................................................... 30
The Exchange Offer....................................................... 31
Selected Historical Financial Data....................................... 39
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 42
Where You Can Find More Information...................................... 68
Business................................................................. 69
Management............................................................... 82
Beneficial Ownership of Capital Stock.................................... 87
Certain Relationships and Related Transactions........................... 88
Description of Notes..................................................... 91
Description of Certain Indebtedness...................................... 123
Plan of Distribution..................................................... 123
Certain United States Federal Tax Considerations......................... 124
Legal Matters............................................................ 124
Experts.................................................................. 125
Unaudited Pro Forma Condensed Combined Financial Statements.............. P-1
Index to Historical Financial Statements................................. F-1

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

The registrants' principal executive offices are located at 2855 East
Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and their telephone
number is (801) 736-5600.

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus or incorporated by reference in this prospectus.
We are not making offers to exchange notes in the Exchange Offer or soliciting
offers to exchange outstanding notes in any jurisdiction in which such an offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.

PROSPECTUS SUMMARY

The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus contains specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage
you to read this prospectus in its entirety.

The Exchange Offer

Mrs. Fields' Original Cookies, Inc. completed on August 24, 1998, the private
offering of its 10 1/8% Series C Senior Notes due 2004. On November 27, 1997,
Mrs. Fields had completed a private offering of 10 1/8% Series A Senior Notes
due 2004. The notes are guaranteed by The Mrs. Fields' Brand, Inc. and Great
American Cookie Company, Inc. Pretzelmaker Holdings, Inc., also became a
guarantor of the notes when it became a wholly owned subsidiary of Mrs. Fields.

Mrs. Fields, Mrs. Fields' Brand and Great American entered into a
registration rights agreement with the placement agents in the private offering
in which they agreed, among other things, to deliver to you this prospectus and
to complete the Exchange Offer on or before March 5, 1999. You are entitled to
exchange in the Exchange Offer your outstanding notes for registered notes with
substantially identical terms. If the Exchange Offer is not completed on or
prior to March 5, 1999, the interest rate on the 10 1/8% Series C Senior Notes
due 2004 will be increased. The amount of the increase will be $.05 per $1,000
principal amount of notes per week for each 90-day period until we have
completed the Exchange Offer, up to a maximum amount of $.20 per week per
$1,000 of principal amount. The increase in interest rate does not apply to the
10 1/8% Series A Senior Notes due 2004, since the registration rights do not
apply to them. You should read the discussion under the heading "Summary
Description of Notes" and "Description of Notes" for further information
regarding the registered notes.

We believe that the notes issued in the Exchange Offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to certain conditions. You should read the
discussion under the heading "Summary of the Exchange Offer" and "The Exchange
Offer" for further information regarding the Exchange Offer and resale of
notes.

The Company

Overview

Mrs. Fields is one of the largest retailers in the premium snack-food
industry, with cookies and pretzels as its major product lines. Based on
numbers of retail units, Mrs. Fields is the largest retailer of baked on-
premises cookies and the second largest retailer of baked on-premises pretzels
in the United States. Mrs. Fields is one of the most widely recognized and
respected brand names in the premium cookie industry. Mrs. Fields has recently
developed a significant presence in the rapidly growing, health-oriented
pretzel market.

Mrs. Fields operates and franchises stores located predominantly in shopping
malls, and also licenses kiosks and carts at airports, universities, stadiums,
hospitals and office building lobbies.

How We Have Done

For the fiscal year ended January 3, 1998 and the 39 weeks ended October 3,
1998, Mrs. Fields generated pro forma net revenue and EBITDA (as defined in
this prospectus) of $200.6 million and $32.1 million and $132.5 million and
$15.8 million, respectively. Our condensed pro forma combined statements of
operations data in this prospectus give effect to the offering of the 10 1/8%
Series C Senior Notes due 2004, the acquisitions of Great American and the
capital stock and stores of some Great American franchisees, an offering of
units consisting of notes and warrants to purchase common stock by Mrs. Fields'
Holding Company, Inc., the parent company of Mrs. Fields, and a capital
contribution from Mrs. Fields' Holding to Mrs. Fields, the acquisitions of 70%
of the capital stock of Pretzel Time, Inc. and assets of H&M Concepts Ltd. Co.,
pretzel retailers, and the related financings, as if all of these transactions
had occurred on December 29, 1996.
4

Pro Forma Information

Pro forma information is not indicative of actual results and may not be
indicative of future results. We have presented pro forma information
throughout this prospectus, however, because we believe that the changes to our
business since 1996 make the pro forma information more meaningful to you.

History of Our Operations

Mrs. Fields Inc., one of the predecessors of Mrs. Fields, was founded in 1977
by Debbi Fields and, following its initial success, embarked on an aggressive
national expansion program in the early 1980s. By the late 1980s, however, Mrs.
Fields Inc. experienced financial difficulty as a result of excessive debt
levels, certain poor real estate locations, and a recessionary retailing
environment. In connection with a financial restructuring by its lenders, a new
management team was put into place in mid-1994 under the leadership of Larry A.
Hodges, who has extensive experience in the food and retailing industries. Mr.
Hodges introduced a new strategic plan for Mrs. Fields, which involved the
following key elements:

(1) identifying stores to
close or franchise,

(2) introducing company-
wide operating
procedures to improve
store operating
margins,

(3) developing a marketing
strategy and
promotional calendar to
turn around sales from
stores that have been
open at least two years
and

(4) improving employee
morale through
selective new senior
hires, increased
training and various
incentive plans.

The savings from the improved store operations were reinvested in marketing
and other measures designed to improve sales from stores that have been open at
least two years.

Mrs. Fields was formed in September 1996 in connection with the acquisitions
of Mrs. Fields Inc., The Original Cookie Company, Incorporated, and Hot Sam
Company, Inc. by Mrs. Fields' Holding, a subsidiary of Capricorn Investors II,
L.P. As of January 3, 1999, Capricorn had invested more than $28 million in
Mrs. Fields through Mrs. Fields' Holding.

Mrs. Fields operates and franchises 1,021 retail cookie stores under the Mrs.
Fields, Original Cookie, and Great American brands. We have cookie stores in 48
states, with Great American stores concentrated in the southeastern and south
central states and Mrs. Fields and Original Cookie stores strongly represented
in the western, midwestern and eastern states. We believe that Mrs. Fields
cookies are positioned in the premium quality, baked on-premises market of what
we believe to be the approximately $12 billion U.S. cookie industry.

Pretzels

Mrs. Fields operates and franchises 312 retail pretzel stores under the
Pretzel Time and Hot Sam names. We acquired Hot Sam in connection with the
acquisition of Original Cookie. In order to expand its presence in the retail
pretzel industry, we acquired the business of H&M and the common stock of
Pretzel Time. Our pretzel stores are located in shopping malls as well as in
airports, sports arenas, amusement parks and resort areas throughout the United
States and Canada.

Our Strategy

Our objective is to increase sales and profitability by focusing on
continuing company-owned stores.

An additional objective is to increase sales and profitability at both our
continuing company-owned and franchised stores in prime locations by
implementing the key elements of our long-term business strategy. The key
elements of our business strategy are as follows:

. Enhance Quality of Company-Owned Store Base. We have targeted stores that
sell our various products to be either closed or

franchised by the end of fiscal year 2000. We expect these measures to
result in enhanced operating margins, as unprofitable stores are closed
and certain other stores are converted into franchises, thereby increasing
royalty payments and eliminating overhead costs at the operating company
level associated with such stores.

. Improve Productivity of Continuing Company-Owned Stores. We have embarked
on a program to improve the performance of our continuing company-owned
stores in prime locations by:

(1) expanding product offerings,

(2) raising the average sale by tying sales of products together,

(3) promoting catering services by individual stores to corporate
customers,

(4) decreasing store expenses,

(5) improving merchandising, and

(6) increasing training and various incentive programs for management and
sales staff.

. Capitalize on the Strong Mrs. Fields Brand Name. Management believes that
the Mrs. Fields brand is the most widely recognized and respected brand
name in the retail premium cookie industry. We intend to continue
converting our continuing company-owned stores and to-be-franchised
Original Cookie stores to Mrs. Fields brand stores. We will also test the
success of converting selected Great American company-owned stores to
Mrs. Fields brand stores. We intend to further capitalize on the Mrs.
Fields brand name by:

(1) further developing and expanding new channels of distribution for our
products,

(2) increasing the emphasis on our mail order business, and

(3) developing and capitalizing on licensing opportunities.

. Develop Great American Brand. Management believes that the Great
American brand has high consumer awareness in the southeast United
States. Management intends to build on the Great American brand by
continuing to franchise additional Great American stores and by testing
the success of converting selected company-owned Original Cookie stores
into Great American stores.

. Capitalize on the Strong Pretzel Time Brand Name. We believe that there
are significant opportunities to improve our existing Hot Sam store
operations by continuing to convert our continuing company-owned and to-
be-franchised Hot Sam stores to Pretzel Time stores. In addition, we
believe there are significant new Pretzel Time franchising opportunities.

. Develop New Company-Owned and Franchised Stores, Including
Internationally. We plan to build and franchise new stores, as well as
carts and kiosks, in existing and new markets, including mall and non-
traditional locations, such as amusement parks and other entertainment
centers. In addition, we plan to grow internationally by expanding our
international franchise operations.

. Realize Purchasing and Overhead Cost Savings As a Result of Recent
Acquisitions. As a result of the acquisitions described in this
prospectus, we expect to realize significant cost savings from the
elimination of duplicative administrative functions, the consolidation of
management information systems and the reduction of the cost of food and
other supplies as a result of our enhanced purchasing power with vendors.

. Pursue Further Strategic Acquisitions of Related Businesses. We intend to
selectively pursue strategic acquisitions, in addition to those described
in this prospectus, in order to expand our geographic presence and
achieve operating efficiencies.

The Offering and the Transactions

The Offering. On August 24, 1998, Mrs. Fields consummated the offering of the
Series C 10 1/8% Senior Notes due 2004. We used the proceeds to help finance
the acquisitions described below.

The Mrs. Fields' Holding Transactions. On August 24, 1998, Mrs. Fields'
Holding consummated a separate offering of senior secured discount notes and
warrants. The Mrs. Fields' Holding notes are senior obligations of Mrs. Fields
and are secured by all of the issued and outstanding capital stock of Mrs.
Fields. We discuss potential risks of this pledge in the "Risk Factors" section
of this prospectus. Concurrently, Mrs. Fields' Holding made a capital
contribution to Mrs. Fields consisting of the entire net proceeds of its notes
and units, approximately $29.1 million.

The Great American Transactions. Mrs. Fields used the proceeds of its
offering in August 1998, together with cash from other sources, including the
capital contribution from Mrs. Fields' Holding and available cash of Great
American and Mrs. Fields,

(1) to finance the acquisition of Cookies USA, Inc., the parent of Great
American, and to pay certain liabilities of Great American,

(2) to finance the acquisition of the stock of two Great American
franchisees,

(3) to finance a tender offer and consent solicitation for all of the
outstanding $40 million in total principal amount of Great American's
10 7/8% Senior Secured Notes due 2001, and

(4) to finance other acquisitions that had not yet been completed as of the
date of the offering.

Cookies USA was merged with and into Mrs. Fields and the franchisees acquired
were merged with and into Great American.

Prior Transactions. Mrs. Fields made an offering of Series A 10 1/8% Senior
Notes due 2004 in November 1997. Proceeds of these notes were used to pay
various debt of Mrs. Fields, Mrs. Fields' Holding and Mrs. Fields' Brand, to
repay an advance to Mrs. Fields' Holding, and to pay a dividend to Mrs. Fields'
Holding.

Other Recent Transactions. Mrs. Fields has also recently acquired a number of
other pretzel and cookie stores, including Pretzel Time and Great American
stores, as part of its acquisition program.

Recent Developments

On October 5, 1998, Mrs. Fields purchased all of the retail cookie and
related business and operations of eleven Great American stores for an
aggregate purchase price of $2.8 million under an asset purchase agreement
dated as of October 5, 1998, by and among The Cookie Conglomerate, Inc., The
Cookie Conglomerate, LLP and two individuals who were the partners of Cookie
Conglomerate, LLP and the shareholders of Cookie Conglomerate, Inc. The sellers
were franchisees of Great American. The sellers' rights under franchise
agreements and subleases with Great American were terminated upon closing of
the transaction. The acquisition was funded with financing provided by T&W
Financial Services Company, L.L.C.

On November 19, 1998, Mrs. Fields purchased all of the outstanding capital
stock of Pretzelmaker Holdings, Inc. under an agreement among Mrs. Fields,
Pretzelmaker, and the holders of its capital stock. Pretzelmaker is the holding
company for a pretzel retail company. The purchase price was approximately $5.4
million and Mrs. Fields assumed indebtedness, including severance payments, of
approximately $1.6 million.

On December 9, 1998, Mrs. Fields purchased three shares of Pretzel Time, Inc.
common stock for $500,000 in cash. On December 30, 1998, Mrs. Fields completed
the acquisition of the remaining outstanding common stock of Pretzel Time, Inc.
under a stock purchase agreement dated December 30, 1998, for a purchase price
of approximately $4.7 million, $2.5 million of which was paid in cash on
January 5, 1999 and $2.0 million of which is payable on or before December 30,
1999.

SUMMARY OF THE EXCHANGE OFFER

Registration Rights Holders of 10 1/8% Series C Senior Notes due 2004 are
Agreement......... entitled to exchange their notes for registered notes
with substantially identical terms. The Exchange
Offer is intended to satisfy these rights. After the
Exchange Offer is complete, you will no longer be
entitled to any exchange or registration rights with
respect to your notes. We are also making the
Exchange Offer available to holders of Series A 10
1/8% Senior Notes due 2004.

The Exchange Offer...... We are offering to exchange $1,000 principal amount
of 10 1/8% Series B Senior Notes due 2004 of Mrs.
Fields' Original Cookies, Inc. which have been
registered under the Securities Act, for each $1,000
principal amount of our Series A 10 1/8% Senior Notes
due 2004 issued in November 1997 and Series C 10 1/8%
Senior Notes due 2004 issued in August 1998. The
outstanding notes were issued in private offerings.
The registered notes will have guarantees that are
identical in all material respects to the guarantees
on the unregistered notes. All outstanding notes that
are validly tendered and not validly withdrawn will
be exchanged.

As of this date there are $53,725,000 of outstanding
notes that are eligible to be exchanged in the
Exchange Offer.

We will issue notes registered under the Securities
Act on or promptly after the expiration of the
Exchange Offer.

Resales............ We believe that you can offer for resale, resell and
otherwise transfer the notes issued in the Exchange
Offer without complying with the registration and
prospectus delivery requirements of the Securities
Act if:

. you acquire the notes in the ordinary course of
your business;

. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the notes;

. you are not an "affiliate" of ours, as defined in
Rule 405 of the Securities Act.

If any of these conditions is not satisfied and you
transfer any new notes without delivering a proper
prospectus or without qualifying for a registration
exemption, you may incur liability under the
Securities Act. We do not assume or indemnify you
against such liability.

Each broker-dealer acquiring notes issued in the
Exchange Offer for its own account in exchange for
outstanding notes, which it acquired through market-
making or other trading activities, must acknowledge
that it will deliver a proper prospectus when any
notes issued in the Exchange Offer are transferred. A
broker-dealer may use this prospectus for an offer to
resell, a resale or other retransfer of the notes
issued in the Exchange Offer.

Expiration Date.... The Exchange Offer will expire at 12:00 midnight, New
York City time, on , 1999, unless we decide to
extend the expiration date.

Conditions to the
Exchange Offer.... The Exchange Offer is subject to customary
conditions, some of which we may waive.

Procedures for
Tendering Notes Held
in the Form of
Book-Entry Interests... Most of the outstanding notes were issued as global
securities and were deposited upon issuance with The
Bank of New York. The Bank of New York issued a
certificateless depositary interest in those
outstanding notes, which represents a 100% interest
in such notes, to The Depository Trust Company.
Beneficial interests in the outstanding notes, which
are held by direct or indirect participants in The
Depository Trust Company through the certificateless
depositary interests are shown on, and transfers of
the notes can be made only through, records
maintained in book-entry form by The Depository Trust
Company.

You may tender your outstanding notes:

. through a computer-generated message transmitted by
means of The Depository Trust Company's Automated
Tender Offer Program system and received by the
Exchange Agent and forming a part of a confirmation
of book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal; or

. by sending a properly completed and duly executed
letter of transmittal, which accompanies this
prospectus, and other documents required by the
letter of transmittal, or a facsimile of the letter
of transmittal and other required documents, to the
Exchange Agent at the address set forth on the
cover page of the letter of transmittal;

and either:

. a timely confirmation of book-entry transfer of
your old notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to the
procedure for book-entry transfers described in
this prospectus under the heading "The Exchange
Offer--Book Entry Transfers" must be received by
the Exchange Agent on or prior to the expiration
date; or

. the documents necessary for compliance with the
guaranteed delivery described in "The Exchange
Offer--Guaranteed Delivery Procedures" must be
received by the Exchange Agent.

Procedures for
Tendering Notes Held
in the Form of
Registered Notes....... If you hold registered notes, you must tender your
registered notes by sending a properly completed and
duly executed letter of transmittal, together with
other documents required by it, and your
certificates, to the Exchange Agent, in accordance
with the procedures described in this prospectus
under the heading "The Exchange Offer--Procedures for
Tendering Notes."

Withdrawal Rights....... You may withdraw your tender of outstanding notes at
any time prior to 12:00 midnight, , 1999.

United States Federal
Income Tax
Considerations........ The Exchange Offer should not result in any income,
gain or loss to the holders or Mrs. Fields for United
States federal income tax purposes. See "Certain
United States Federal Income Tax Considerations."

Use of Proceeds......... We will not receive any proceeds from the issuance of
notes pursuant to the Exchange Offer.

Exchange Agent.......... The Bank of New York is serving as the Exchange Agent
for the Exchange Offer.

Shelf Registration
Statement.............. Under certain circumstances, certain holders of notes
may require us to register their notes under a shelf
registration statement.

SUMMARY DESCRIPTION OF NOTES

The form and terms of the notes to be issued in the Exchange Offer are the
same as the form and terms of the outstanding notes except that the notes to be
issued in the Exchange Offer have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not
contain the registration rights and liquidated damages provisions contained in
the outstanding notes. The notes issued in the Exchange Offer will evidence the
same debt as the outstanding notes and both the outstanding notes and the notes
to be issued are governed by the same indenture.

Aggregate Amount ....... $53,725,000 in principal amount of 10 1/8% Series B
Senior Notes due 2004 of Mrs. Fields' Original
Cookies, Inc.

Maturity Date...... December 1, 2004.

Interest Payment June 1 and December 1 of each year, commencing June
Dates............. 1, 1999.

Guarantee.......... The notes issued in the Exchange Offer will be fully
and unconditionally guaranteed by our wholly owned
subsidiaries, Mrs. Fields' Brand, Great American and
Pretzelmaker, on a senior basis. The guarantees will
be identical in all material respects to the
guarantees on the outstanding notes. Under certain
circumstances, certain of our existing and future
subsidiaries will also become guarantors. You should
read "Description of Notes--the Guarantees."

Ranking............ The notes being issued in the Exchange Offer:

. are general unsecured obligations of Mrs. Fields

. rank senior in right of payment to all
subordinated indebtedness of Mrs. Fields

. rank equal in right of payment with all existing
and future senior indebtedness of Mrs. Fields

Optional Redemption..... At our option, we may redeem the notes at any time on
or after December 1, 2001. In addition, at any time
before November 20, 2001, we may redeem up to 35% of
the aggregate principal amount of notes ever issued
under the indenture with the net cash proceeds of one
or more equity offerings to the public. Our optional
redemption prices for the notes are contained in this
prospectus under the heading "Description of Notes--
Optional Redemption."

Change of Control....... Upon the occurrence of a change of control of
ownership of the stock or assets of Mrs. Fields, the
holders of notes have the right to require us to
repurchase their notes at a purchase price equal to
101% of their total principal amount on the date of
purchase, plus accrued interest to the date of
repurchase. For more information, see "Description of
Notes--Repurchase at the Option of Holders--Change of
Control."

Certain Covenants....... The indenture under which the outstanding notes have
been and the new notes will be issued contains
certain covenants that, among other things and
subject to certain exceptions, restrict our ability
to:

. pay dividends

. redeem capital stock

. make certain restricted payments or investments

. incur additional indebtedness

. issue preferred equity interests

. merge, consolidate or sell all or substantially all
of our assets

. create liens on assets

. sell assets

. enter into transactions with affiliates or related
persons.

All of these limitations and prohibitions are subject
to a number of important qualifications and
exceptions. For more information, see "Description of
Notes--Certain Covenants."

Form of Notes Issued in
the Exchange Offer ....

The notes issued in the Exchange Offer with respect
to notes currently represented by global securities
will be represented by one or more permanent global
securities in bearer form deposited with The Bank of
New York, as book-entry depositary, for the benefit
of DTC. Notes that are issued in the Exchange Offer
that have been exchanged for notes in the form of
registered definitive certificates will be issued in
the form of registered definitive certificates until
holders direct otherwise. For more information, see
"Description of Notes--Book-Entry, Delivery and
Form."

Use of Proceeds.........
We will not receive any proceeds from the Exchange
Offer.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND STORE DATA

The following table presents:

(1) summary historical financial and store data for Mrs. Fields and its
predecessors; namely, Mrs. Fields Inc. and subsidiaries, The Original
Cookie Company, Incorporated and the pretzel business of Hot Sam Company,
Inc., as of December 30, 1995 and December 28, 1996 and for each of the two
52-week periods then ended;

(2) summary consolidated historical financial and store data for Mrs.
Fields as of January 3, 1998, September 27, 1997 and October 3, 1998 and
for the 53 weeks ended January 3, 1998, the 39 weeks ended September 27,
1997 and the 39 weeks ended October 3, 1998; and

(3) summary combined pro forma financial and store data for Mrs. Fields,
Great American, Deblan, Chocolate Chip, the eight Great American stores
purchased from a Great American franchisee, Cookie Conglomerate and
Pretzelmaker for the 53 weeks ended January 3, 1998 and the 39 weeks ended
October 3, 1998 as if each of the Mrs. Field's offerings in November 1997
and August 1998, the acquisition of Great American, the acquisition of the
stock of two Great American franchisees, the acquisition of eight Great
American stores, the tender offer for outstanding Great American notes, the
offering of units consisting of notes and warrants of Mrs. Fields' Holding
and the capital contribution of the net proceeds from the units offering to
Mrs. Fields, and the acquisitions of H&M, Pretzel Time, Cookie Conglomerate
and Pretzelmaker had occurred as of December 29, 1996. Except for data
presented with respect to the acquisition of eight Great American stores,
the summary combined pro forma data do not give effect to the purchase by
Mrs. Fields of a number of other pretzel and cookie stores, or the purchase
of the remaining 30.0% of common stock of Pretzel Time, because those
transactions were immaterial to the pro forma combined financial position
and results of operations. The historical results of operations for the 39
weeks ended October 3, 1998 are not indicative of the results to be
expected for the full fiscal year of Mrs. Fields. The summary combined pro
forma data do not purport to represent what Mrs. Field's results actually
would have been had the offerings in November 1997 and August 1998, the
acquisition of Great American, the acquisition of the stock of two Great
American franchisees, the acquisition of eight Great American stores, the
tender offer for outstanding Great American notes, the offering of units
consisting of notes and warrants of Mrs. Fields' Holding and the capital
contribution of the net proceeds from the units offering to Mrs. Fields,
and the acquisitions of H&M, Pretzel Time, Cookie Conglomerate and
Pretzelmaker occurred as of December 29, 1996 nor do such data purport to
project the results of Mrs. Fields for any future period. The summary
historical and pro forma financial and store data should be read in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the "Unaudited Pro Forma Condensed
Combined Financial Statements," "Selected Historical Financial Data," and
the historical financial statements and the related notes thereto,
contained elsewhere in this Registration Statement. The following
information will also assist you in understanding the Mrs. Fields and
predecessors historical combined financial and store data:

. On September 17, 1996, Mrs. Fields completed the acquisitions of
substantially all of the assets and assumed certain liabilities of the
predecessors.

. The historical combined data for the 52 weeks ended December 30, 1995
reflects the combined results of the predecessors. The historical
combined data for the 52 weeks ended December 28, 1996 reflects the
combined results of the predecessors (for the period December 31, 1995
through September 17, 1996) and Mrs. Fields (for the period September 18,
1996 through December 28, 1996). Information for these periods for the
predecessors and Mrs. Fields are set out separately in the "Selected
Historical Financial Data" but are combined here. This presentation is
not in conformity with generally accepted accounting principles.

. In order for the data to be comparable for the periods presented, certain
statements of operations data for the predecessors has been reclassified
to be consistent with the Mrs. Fields historical financial statement
presentation.

Mrs. Fields
and Predecessors Mrs. Fields Mrs. Fields Mrs. Fields Mrs. Fields
------------------- ------------ ----------- ------------------ -----------
Historical Historical Pro Forma Historical Pro Forma
Combined Consolidated Combined Consolidated Combined
------------------- ------------ ----------- ------------------ -----------
53 Weeks 53 Weeks
52 Weeks Ended Ended Ended 39 Weeks Ended
------------------- ------------ ----------- --------------------------------
December December January January September October October
30, 1995 28, 1996 3, 1998 3, 1998 27, 1997 3, 1998 3, 1998
-------- -------- ------------ ----------- --------- -------- -----------
(Dollars in thousands)

Statement of Operations
Data:
Net store and batter
sales.................. $145,537 $123,930 $123,987 $183,852 $83,759 $ 89,938 $121,217
Net store and batter
contribution(1)........ 19,654 19,133 25,087 36,683 13,214 11,804 19,671
Franchising, licensing
and other revenue,
net.................... 5,993 5,278 6,520 16,722 3,767 6,021 11,268
General and
administrative
expenses............... 24,828 20,557 16,730 28,335 10,803 12,621 19,762
Income (loss) from
operations............. (1,091) 1,135 8,415 12,738 2,378 (314) 518
Net loss................ (4,464) (5,988) (974) (3,638) (3,224) (9,690) (12,545)
Other Data:
Cash flows from
operating activities... (27) 6,784 919 4,658 791 676 214
Cash flows from
investing activities... 1,958 (22,716) (15,505) (16,214) (3,216) (34,315) (34,681)
Cash flows from
financing activities... (4,784) 18,793 24,164 23,555 (98) 22,498 21,422
Interest expense........ 4,407 4,842 7,830 16,097 5,070 8,981 12,798
Total depreciation and
amortization........... 10,427 9,192 10,403 19,405 6,596 9,707 15,325
Capital expenditures.... 4,714 3,892 4,678 N/A 3,216 5,616 N/A
EBITDA(2)............... 9,336 10,327 18,818 32,143 8,974 9,393 15,843
Store contribution for
stores in the process
of being closed or
franchised(1).......... $ (2,344) $ (1,933) $ (1,798) $ (2,839) $(1,999) $ (2,125) $ (2,786)
Ratio of earnings to
fixed charges(3)....... -- -- -- -- -- -- --
Store Data:
Percentage change in
comparable store
sales(4)............... (1.6)% (1.2)% 0.6% N/A 1.3% (0.9)% N/A
Total company-owned
stores open at end of
period................. 540 482 481 619 496 568 589
Total franchised or
licensed stores open at
end of period.......... 415 418 553 962 540 765 960

Mrs. Fields
Historical
Consolidated
October 3, 1998
----------------------
(Dollars in thousands)

Balance Sheet Data:
Cash and cash equivalents.............................. $ 5,146
Total assets........................................... 222,657
Mandatorily redeemable cumulative preferred stock of
subsidiary............................................ 1,171
Total debt and capital lease obligations, including
current portion....................................... 140,156
Total stockholder's equity............................. 50,131

- --------

(1) Store contribution is determined by subtracting all store operating
expenses including depreciation from net store sales. Management uses store
contribution information to measure operating performance at the store
level. Store contribution for stores in the process of being closed or
franchised as a separate caption is not in accordance with generally
accepted accounting principles. Store contribution may not be comparable to
other similarly titled measures.

Mrs. Fields
and Predecessors Mrs. Fields Mrs. Fields Mrs. Fields Mrs. Fields
------------------ ------------ ----------- ----------------- -----------
Historical Historical Pro Forma Historical Pro Forma
Combined Consolidated Combined Consolidated Combined
------------------ ------------ ----------- ----------------- -----------
53 Weeks 53 Weeks
52 Weeks Ended Ended Ended 39 Weeks Ended
------------------ ------------ ----------- ------------------------------
December December January January September October October
30, 1995 28, 1996 3, 1998 3, 1998 27, 1997 3, 1998 3, 1998
-------- -------- ------------ ----------- --------- ------- -----------

Income (loss) from
operations............. $(1,091) $ 1,135 $ 8,415 $12,738 $2,378 $ (314) $ 518
ADD:
Depreciation and
amortization.......... 10,427 9,192 10,403 19,405 6,596 9,707 15,325
------- ------- ------- ------- ------ ------ -------
EBITDA................. $ 9,336 $10,327 $18,818 $32,143 $8,974 $9,393 $15,843
======= ======= ======= ======= ====== ====== =======

(2) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interest, preferred stock accretion and dividends of
subsidiaries and other income (expense). EBITDA is not intended to
represent cash flows from operations as defined by generally accepted
accounting principles and should not be considered as an alternative to net
income (loss) as an indicator of operating performance or to cash flows as
a measure of liquidity. EBITDA has been included herein because it is one
of the indicators by which Mrs. Fields assesses its financial performance
and its capacity to service its debt.

(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (whether paid or accrued
and net of debt premium amortization), including the amortization of debt
issuance costs and original issue discount, noncash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with capital lease obligations, letter
of credit commissions, fees or discounts and the product of all dividends
and accretion on mandatorily redeemable cumulative preferred stock
multiplied by a fraction, the numerator of which is one and the denominator
of which is one minus the current combined federal, state and local
statutory tax rate. For fiscal years 1995 and 1996, earnings were
insufficient to cover fixed charges by $3,960,000 and $3,985,000,
respectively. For the 53 weeks ended January 3, 1998, the 39 weeks ended
September 27, 1997 and the 39 weeks ended October 3, 1998, Mrs. Field's
earnings were insufficient to cover fixed charges by $319,000, $3,045,000
and $9,622,000, respectively. For the 53 weeks ended January 3, 1998 and
the 39 weeks ended October 3, 1998, pro forma combined earnings were
insufficient to cover pro forma combined fixed charges by $3,623,000 and
$12,879,000, respectively.

(4) Mrs. Fields includes in comparable store sales only those stores that have
been in operation for a minimum of 24 consecutive months. The percentage
change in comparable store sales is calculated from the previous period.

RISK FACTORS

You should consider carefully all of the information in this prospectus,
including the following risk factors and warnings, before deciding whether to
exchange your outstanding notes for the notes to be issued in the Exchange
Offer. Except for the first two risk factors described below, the risks factors
generally apply to the outstanding notes as well as to the notes to be issued.
The risks described below are not the only ones that could affect us or our
securities.

You May Have Difficulty Selling the Notes Which You Do Not Exchange

If a large number of outstanding notes are exchanged for notes issued in the
Exchange Offer, it may be difficult for holders of outstanding notes that are
not exchanged in the Exchange Offer to sell such notes, since those notes may
not be offered or sold unless they are registered or there are exemptions from
registration requirements under the Securities Act of 1933 or state laws that
apply to them. See "The Exchange Offer--Consequence of Failure to Exchange
Notes."

In addition, if you do not tender your outstanding notes or if we do not
accept some outstanding notes, those notes will continue to be subject to the
transfer and exchange provisions of the indenture, the existing transfer
restrictions of the outstanding notes that are set forth in the legend on such
notes and in the offering circulars relating to the outstanding notes.

If You Do Not Exchange Your Outstanding Notes in the Exchange Offer, You Will
Not Be Entitled to an Increased Interest Rate

In addition, once the Exchange Offer has been completed, holders of
outstanding 10 1/8% Series C Senior Notes due 2004 will not be entitled to any
increase in the interest rate on their notes. Holders of other outstanding
notes are not entitled to any increase in the interest rate on their notes,
regardless of whether the Exchange Offer is completed.

If You Exchange Your Outstanding Notes, You May Not Be Able to Resell The Notes
You Receive in the Exchange Offer Without Registering Them and Delivering a
Prospectus

Certain holders may not be able to resell notes they receive in the Exchange
Offer without registering those notes or delivering a prospectus. Based on
interpretations by the Commission in no-action letters, we believe, with
respect to notes issued in the Exchange Offer, that:

. holders who are not "affiliates" of Mrs. Fields within the meaning of
Rule 405 of the Securities Act,

. holders who acquire their notes in the ordinary course of business, and

. holders who do not engage in, intend to engage in, or have arrangements
to participate in a distribution (within the meaning of the Securities
Act) of the notes do not have to comply with the registration and
prospectus delivery requirements of the Securities Act.

Holders described in the preceding sentence must tell us in writing at our
request that they meet these criteria. Holders that do not meet these criteria
could not rely on certain interpretations of the Commission in no-action
letters, and would have to register the notes they receive in the Exchange
Offer and deliver a prospectus for them. In addition, holders that are broker-
dealers may be deemed "underwriters" within the meaning of the Securities Act
in connection with any resale of notes acquired in the Exchange Offer. Holders
that are broker-dealers must acknowledge that they acquired their outstanding
notes in market-making activities or other trading activities and must deliver
a prospectus when they resell the notes they acquire in the Exchange Offer in
order not to be deemed an underwriter.

All holders should review the more detailed discussion in "The Exchange
Offer--Procedures for Tendering Notes and Consequences of Exchanging
Outstanding Notes."

We Have Substantial Debt, Which Could Adversely Affect Our Financial Results
and Prevent Us From Fulfilling Our Debt Obligations, Including Those Under The
Notes

We incurred a substantial amount of debt to finance the purchase of Great
American and the other companies and assets we acquired. We continue to have a
substantial amount of debt.

The following chart shows certain important credit statistics:

At January 2, 1999
------------------

Total indebtedness of Mrs. Fields and subsidiaries........ $149.2
By rank, this debt was:
Equal in right of payment to the notes.................. $ --
Subordinated to the notes............................... $ --
Senior to the notes..................................... $ 8.5

The number is net of unamortized discount, and includes capital lease
obligations of $1.5 million and mandatorily redeemable preferred stock having a
book value of approximately $1.3 million outstanding, together representing
1.4% of our total book capitalization. Substantially all of our subsidiaries'
debt is effectively senior to the notes.

Stockholders' equity................................................... $55.7
Debt to equity ratio................................................... 27:1

Moreover, in recent periods our earnings have not been sufficient to cover
our fixed charges.

39 weeks ended 53 weeks ended
October 3, 1998 January 3, 1998
--------------- ----------------

Approximate deficiency in earnings to fixed
charges presented on a combined pro forma
basis..................................... $12.9 million $3.6 million

Additional Borrowings Available--Despite Current Indebtedness Levels, We and
Our Subsidiaries May Still Be Able to Incur Substantially More Debt. This Could
Further Exacerbate the Risks Described Above

Although the indenture and our existing credit agreement with LaSalle
National Bank limits our ability and that of our subsidiaries to incur
additional indebtedness and issue preferred stock, including secured
indebtedness, under certain circumstances, which effectively ranks senior to
the notes with respect to the assets securing indebtedness. See "Unaudited Pro
Forma Condensed Combined Financial Statements," and "Description of Notes--
Certain Covenants." We currently plan to incur additional debt for working
capital purposes, which will be effectively senior to the notes.

Our substantial indebtedness could have important consequences to you. For
example:

. we may not be able to satisfy our obligations with respect to the notes;

. a substantial portion of our cash flows from operations will be required
to be dedicated to debt service and will not be available for other
purposes;

. our ability to obtain additional financing in the future could be
limited;

. the indenture contains financial and restrictive covenants that limit our
ability to, among other things, borrow additional funds, dispose of
assets or pay cash dividends. If we do not comply with such covenants,
there could be an event of default, which, if not cured or waived, could
have a material adverse effect on us; and

. the amount of debt that we have could prevent us from repurchasing all
the notes tendered to us upon the occurrence of a change of control of
our stock or assets.

See "Description of Notes--Repurchase at the Option of Holders--Change of
Control."

Ability to Service Debt--to Service Our Indebtedness, We Will Require a
Significant Amount of Cash. Our Ability to Generate Cash Depends on Many
Factors Beyond Our Control

Our ability to make scheduled payments of principal, or to pay interest on,
or to refinance our indebtedness, including the notes, depends on our future
performance. In turn, our future performance depends partly on general
economic, financial, competitive, legislative, regulatory and other factors
beyond our control. We cannot be sure that our business will generate enough
cash flows from operations or that future borrowings will be available in an
amount that will allow us to pay principal and interest on our indebtedness,
including the notes, or to make necessary capital expenditures, or to allow us
to obtain refinancing on commercially reasonable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

The Notes Are Effectively Subordinated to the Debt of Our Credit Agreement

We entered into an Amended and Restated Loan Agreement, as amended, dated as
of February 28, 1998, with LaSalle National Bank for $15.0 million under which
we pledged substantially all of our assets as security for amounts that we may
borrow under the agreement, including all of the capital stock of Great
American and Mrs. Fields' Brand. As a result of the pledge, the notes are
effectively subordinated to our obligations under the agreement with respect to
our assets, including proceeds from those assets. If there is a default on the
notes, or we go into bankruptcy, liquidation or reorganization, we would have
to use our assets to make payments under the agreement (or any successor or
additional financing) before we could use the assets to make payments on the
notes. If there is not enough collateral granted under the agreement with
LaSalle National Bank (or any successor or additional financing) to pay amounts
owing under the agreement, LaSalle National Bank would be entitled to share any
amount available for payment with you and other of our creditors. Currently our
agreement with LaSalle National Bank would permit borrowing of up to $15.0
million and all of those borrowings, since they are secured, would be
effectively senior to the notes and the guarantees. See "Description of Certain
Indebtedness."

A Default Under Our Credit Agreement Could Cause a Default Under the Notes

The agreement with LaSalle National Bank contains certain restrictive
covenants similar to those in the indenture, requiring us to comply with
certain financial ratios. If we are not able to comply with these and other

provisions of the agreement because of events beyond our control, there could
be a default under the agreement, as a result of which LaSalle National Bank
could elect to declare all amounts borrowed under the agreement, together with
accrued interest, to be due and payable. If we are unable to repay such
borrowings, LaSalle National Bank could proceed against the assets that we have
pledged. The acceleration of indebtedness under the agreement with LaSalle
National Bank may constitute an event of default under the notes which could
also give rise to an acceleration under the notes. If the indebtedness under
the agreement is accelerated as a result of a breach of a covenant, we cannot
be sure that we would have enough assets to repay in full such indebtedness and
our other indebtedness, including the notes, or that we could continue to
operate our business as a result of such acceleration. Great American and Mrs.
Fields' Brand have guaranteed amounts under the agreement with LaSalle National
Bank as well as the notes, and we cannot be sure that their guarantees would be
sufficient for both sets of obligations.

We May Not Be Able To Extend or Renew the Credit Agreement or Obtain
Alternative Financing

The agreement with LaSalle National Bank, which is designed to provide us
seasonal working capital, will expire on March 31, 2001. We cannot be sure that
we will be able to extend or renew the agreement or obtain alternative
financing to meet our seasonal working capital needs when the agreement
expires. If we do not have a revolving credit facility in place, we may not be
able to satisfy our seasonal working capital needs, which would have a material
adverse effect on us and our results of operations. Currently there are no
amounts outstanding under the agreement with LaSalle National Bank.

Our Stock Has Been Pledged by Mrs. Fields' Holding; A Default on the Mrs.
Fields' Holding Notes Could Trigger a Change Of Control of Mrs. Fields; We May
Not Have the Ability to Raise the Funds Necessary to Finance the Change of
Control Offer Required by the Indenture

Mrs. Fields' Holding, our parent company, has pledged all of our outstanding
common stock to secure its obligations under its notes. If Mrs. Fields' Holding
defaults on its notes, there could be a foreclosure on our common stock, and
the foreclosure would constitute a change of control which would result in an
event of default permitting acceleration under the agreement with LaSalle
National Bank and the indenture. The change of control would also permit you to
require us to repurchase any or all of the notes held by you. We may not have
enough resources to repay in full borrowings under the agreement with LaSalle
National Bank and to repurchase all of the notes required to be repurchased.

We Have Incurred Net Losses During the Past Several Years

We and our predecessors have incurred net losses during the past several
years. Although we have put into place new business strategies aimed at
enhancing revenues and operating results and we have recorded positive EBITDA
since our formation in September 1996, economic, financial, competitive, legal
and other factors, many of which are beyond our control, can affect our
operations. We cannot be sure that we will be able to put into place our
planned strategies without delay or that these strategies will result in future
profitability. See "Selected Historical Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our Growth Strategy Is Based on Acquisitions, Which May Provide the Desired
Economic Benefits

We have achieved growth through acquisitions such as the acquisition of Great
American and certain of its franchisees and their stores, the acquisitions of
Pretzel Time and Pretzelmaker, and the business of H&M and intend to continue
doing so. While we believe there are significant opportunities for cost savings
and volume efficiencies as a result of acquisitions, we cannot be sure that
such acquisitions will provide such opportunities and economic benefits. Many
factors beyond our control, such as general economic conditions, increased
operating costs, our response to customers or competitors, and regulatory
developments, can affect our ability to realize such economic benefits from
prior acquisitions and/or any future acquisitions as well as our ability to

integrate successfully our businesses with any acquired businesses.
Consequently, we cannot be sure that such acquisitions will result in the
economic benefits that management expects on a timely basis or at all. See
"Business--Business Strategy."

We May Not Be Able to Obtain Leases in the Future

Our success depends in part on our ability to secure leases in high quality
shopping malls at rents we believe to be reasonable. Approximately half of the
leases for such stores expire during the next 5 years and generally do not
provide for renewal options in our favor. In addition, we currently plan to
open approximately 375 new-company owned and franchise stores over the next 5
years. We believe that the market for the type of locations historically leased
by us is highly competitive and, as a result, we cannot be sure that we will
succeed in obtaining such leases in the future at rents that we believe to be
reasonable or at all. See "Business--Properties."

We Have Continuing Obligations Under Real Estate Leases

We lease locations for all the stores we own and for most of our franchised
stores and sublease these locations to our franchisees. Accordingly, we are the
primary obligor for payments under such leases. If certain locations should
prove to be unprofitable, we would remain obligated for lease payments if we
determined to withdraw from these locations. See "Business--Properties."

A Decline in Mall Traffic Could Adversely Affect Our Business

We believe that the amount and proximity of pedestrian traffic near our
stores strongly influence sales of our products, which we believe are
frequently impulse purchases. In recent years, visits to major shopping malls,
where a large percentage of our stores are located, have declined from 3.7
visits per month in 1989 to 3.0 visits per month in 1996. This trend has had a
negative impact on our revenues. We cannot be sure that this trend will not
continue or that such trend can be offset by increased sales per customer. A
continued decline in mall traffic could adversely affect our financial
condition and results of operations.

Volatility in Cost of Ingredients We Use May Adversely Affect Our Results

The cost of butter, eggs, sugar, flour, chocolate and other ingredients can
fluctuate due to changes in economic conditions, weather, demand and other
factors, many of which are beyond our control. We recently experienced a
substantial increase in the cost of butter. Although we believe that there are
alternative suppliers of these ingredients, we have no control over
fluctuations in the price of commodities and cannot be sure that we will be
able to pass on any price increases in our product ingredients to our
customers.

Failure to Integrate Our Information Systems, Which is Currently Underway,
Could Adversely Affect Us

We have made a substantial investment in developing a customized,
sophisticated point-of-sale management information system (the "POS" system).
We are upgrading our back-office system to a Windows 95 environment and are
currently upgrading all Mrs. Fields stores to Pentium 333 machines, and we plan
to install our upgraded back-office system, along with the POS registers and
Pentium 333 machines, in our core Original Cookie stores, Hot Sam stores,
Pretzel Time stores and certain Great American stores by August 1999. We cannot
be sure that we will successfully integrate this system or that we will achieve
a fully integrated system within budget. Therefore, we cannot be sure that our
attempts to integrate the POS system will not adversely affect our financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Failures in Year 2000 Compliance Could Disrupt Our Operations

We are in the process of assessing Year 2000 issues with respect to our
significant vendors and financial institutions as to their compliance plans and
whether any Year 2000 issues will impede the ability of such vendors to
continue providing goods and services to us. Failure of our key suppliers to
remedy their own Year 2000 issues could delay shipments of essential products,
thereby disrupting our operations. Furthermore, we

rely on various service providers, such as utility and telecommunication
service companies, which are beyond our control. This assessment is
approximately 20% complete with final completion anticipated by the end of the
first quarter of 1999. Based on the results of the assessment to date,
management is not aware of any Year 2000 issues relating to our significant
vendors, financial institutions or our non-information technology systems.

We do not have a contingency plan in place to address untimely or incomplete
remediation of Year 2000 issues, but we intend to develop such plans during the
first half of 1999. These contingency plans are expected to address issues
related to significant vendors and financial institutions.

The Minimum Wage Increase May Adversely Impact Our Financial Condition And
Results Of Operations

As of January 2, 1999, 1,636 of our 6,614 employees that work at stores owned
by us earned the federal hourly minimum wage. As a result of an increase in the
minimum wage from $4.75 to $5.15 on September 1, 1997, we have experienced an
increase of wages of approximately $291,000 annually. These increased labor
costs could adversely affect our financial condition and results of operations.
We cannot be sure that we can fully absorb the increased labor costs through
our efforts to increase efficiencies in other areas of our operations.

We Depend Upon Key Franchisees And Licensees For Revenue; There Is No Assurance
That Franchise And License Agreements Will Not Be Terminated

We depended upon 11 franchisees for 19.7% of our franchise revenues for the
39 weeks ended October 3, 1998. For the same period, franchise revenues made up
4.1% of our total net revenues. We cannot be sure that these franchise
agreements will not be terminated or that our relations with franchisees will
not change, or that our franchisees will continue to perform as they have in
the past. The termination of these key franchise agreements or poor performance
by our franchisees may have an adverse affect on our financial condition and
results of operations. In addition, we depend on 3 licensees for 68% of our
licensing revenue. We cannot be sure that our licenses will not be terminated
or that our relations with licensees will not change, or that our licensees
will continue to perform as they have in the past. The termination of key
license agreements or poor performance by our licensees may have an adverse
affect on our financial condition and results of operations.

There May Be A Negative Effect On Our Financial Condition If Our Trademarks Are
Challenged

We believe that our trademarks have significant value and are important to
the marketing of our retail outlets and products. Although our trademarks are
registered in all 50 states and registered or pending in many foreign
countries, we cannot be sure that our trademarks cannot be circumvented, or
that our trademarks do not or will not violate the proprietary rights of
others, or would be upheld if challenged or that we would not be prevented from
using our trademarks. Any challenge against us for our use of our trademarks
could have an adverse effect on our financial condition and results of
operations, through either a negative ruling with regards to our use, validity
or enforceability of our trademarks, or through the time consumed and the legal
costs of defending against such a claim. In addition, we cannot be sure that we
will have the financial resources necessary to enforce or defend our
trademarks.

The Loss Of Key Management Personnel Could Adversely Affect Our Operations

Our success depends on the continued services of our senior management,
particularly Larry A. Hodges, our President and Chief Executive Officer. In
addition, our continued growth depends, in part, on attracting and retaining
skilled managers and employees as well as management's ability to effectively
utilize our key personnel in light of recent and future acquisitions. If Mr.
Hodges or other senior management left us, there could be an adverse effect on
our operations. We cannot be sure that management's efforts to integrate,
utilize, attract and retain personnel will be successful. See "Management." We
have entered into employment agreements with all of our senior managers.

We May Suffer Adverse Effects From Competition With Other Specialty Food
Retailers, Changes In Demographic Trends And Consumer Preferences

We compete with other cookie and pretzel retailers, as well as other
confectionery, sweet snack and specialty food retailers, many of which have
greater resources than us. The specialty retail food and snack industry is
highly competitive with respect to price, service, location and food quality.
Consequently, we cannot be sure that we will compete successfully with these
other specialty food retailers. In addition to the risks from current
competitors, we cannot be sure that we can successfully compete with any new
entrants into the specialty foods or snack foods industry who may have new and
successful products or marketing. Inability to compete adequately would result
in price reductions, reduced margins and losses of market share for us.

Changes in consumer preferences, tastes and eating habits, local, regional
and national economic conditions, demographic trends and mall traffic patterns
also affect the specialty or snack foods industry. Factors such as increased
food, labor and benefits costs, the availability of experienced management and
hourly employees and difficulties or delays in developing and introducing new
products to suit consumer preferences may adversely affect the specialty retail
industry in general and our outlets in particular. Consequently, our success
will depend on our ability to recognize and react to such trends adequately.
Any changes in these factors could adversely affect our profitability. In
addition, the failure of customers to respond favorably to our marketing or new
products, could be an adverse effect on our profitability. See "Business--
Competition."

Our Financial Condition And Results May Be Affected By Adverse Publicity

Our ability to compete depends in part on maintaining our reputation with the
consumer. Publicity resulting from food quality, illness, injury, or other
health concerns, including food-borne illness claims, or operating issues
stemming from one store, a limited number of stores, or even a competitor's
store can adversely affect multi-unit specialty retail food and snack chains
such as us. Consequently, we cannot be sure that such adverse publicity will
not adversely affect our financial condition and results of operations.

Our Financial Condition And Results Of Operations May Be Adversely Affected By
Government Regulation Of Our Business

Numerous governmental authorities have issued regulations that apply to us
and our stores, including, without limitation, federal, state and local laws
and regulations governing health, sanitation, environmental protection, safety
and hiring and employment practices, including laws, such as the Fair Labor
Standards Act, governing such matters as minimum wages, overtime and other
working conditions. The Food and Drug Administration administers regulations
that apply to our products. If we fail to obtain or retain the required food
licenses or to comply with applicable governmental regulations, or if there is
any increase in the minimum wage rate, employee benefit costs or other costs
associated with employees, there could be an adverse effect on our business,
financial condition or results of operations. Even if we obtain such regulatory
approval, a marketed product, its manufacturer and its manufacturing facilities
are subject to periodic inspection, and discovery of problems may adversely
affect our business.

In addition, the sale of franchises is regulated by various state laws as
well as by the Federal Trade Commission. The FTC requires that franchisors make
extensive disclosure in a Uniform Franchise Offering Circular to prospective
franchisees but does not require registration. However, a number of states
require registration of the Uniform Franchise Offering Circular with state
authorities or other disclosure in connection with franchise offers and sales.
In addition, several states have franchise relationship laws or business
opportunity laws that limit the ability of the franchisors to terminate
agreements or to withhold consent to renewal or transfer of these agreements.
While we believe that we are in compliance with existing regulations, we cannot
predict the effect of any future legislation or regulation on our business
operations or financial condition. Additionally, bills have occasionally been
introduced in Congress which would provide for federal regulation of certain
aspects of franchisor-franchisee relationships.

All full-time store managers and assistant managers are able to enroll in a
group health insurance plan. However, there have been a number of proposals
before Congress which would require employers to provide health insurance for
all of their full-time and part-time employees. The approval of such proposals
could have a material adverse impact on our results of operations and financial
condition in particular and the specialty retail industry as a whole.

Litigation Against Us Could Have An Adverse Effect On Our Business

We are involved in routine litigation in the ordinary course of business,
including franchise disputes. Although we have not been adversely affected in
the past by such litigation, there can be no assurance as to the effect of any
future disputes.

Although we are not currently subject to any product liability litigation,
there can be no assurance that product liability litigation will not occur in
the future involving our products. Our quality control program is designed to
maintain high standards for food preparation procedures used by stores owned or
franchised by us. Products are periodically inspected by our personnel at both
the point-of-sale locations and the manufacturing facilities to ensure that
they conform to our standards. In addition to insurance held by our suppliers,
we maintain insurance relating to personal injury and product liability in
amounts that we consider adequate for the retail food industry. While we have
been able to obtain such insurance in the past, there can be no assurance that
we will be able to maintain these insurance policies in the future.
Consequently, any successful claim against us, in an amount materially
exceeding our coverage, could have a material adverse effect on our business,
financial condition and results of operations.

Our Controlling Stockholder May Take Certain Actions That May Be Contrary To
Your Interests

Capricorn Investors II, L.P. is the controlling stockholder of Mrs. Fields'
Holding, which controls all of our capital stock. As a result, Capricorn is in
a position to elect all of our directors who, in turn, elect all of our
executive officers. In addition, Capricorn, through Mrs. Fields' Holding, is in
a position to amend our certificate of incorporation and by-laws, effect
corporate transactions such as mergers and asset sales and otherwise control
our management and policies without the approval of any other security holder,
subject to the provisions of the indenture. Accordingly, Capricorn will be able
to, directly or indirectly, control all of our affairs in a manner that may be
contrary to your interests. See "Beneficial Ownership of Capital Stock."

We May Not Continue To Have Increased Sales In The Fourth Quarter

Our operating results are subject to seasonal fluctuations. Historically, we
have realized our highest level of sales in the fourth quarter due to increased
mall traffic during the Christmas holiday season. However, we cannot be sure
that this seasonal trend will continue or that we can continue to rely on
increased sales during the fourth quarter. If this seasonal trend changes,
there may be an adverse effect on our financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Seasonality."

We May Be Unable To Repurchase The Notes From You Upon A Change Of Control Due
To Insufficiency Of Funds

Upon the occurrence of a change of control of ownership of our stock or
assets, you may require us to repurchase all or a portion of your notes at 101%
of their total principal amount, together with the accrued and unpaid interest,
if any, and liquidated damages, if any, to the date of repurchase. If a change
of control of ownership of our stock or assets were to occur, we may not have
the financial resources to repay all of our obligations under the notes and the
other indebtedness that would become payable upon such event. See "Description
of Notes--Repurchase at the Option of Holders--Change of Control."

Fraudulent Conveyance Risks. Federal And State Statutes Allow Courts, Under
Specific Circumstances, To Void Payments Under The Notes And Guarantees And
Require Noteholders To Return Payments Received.

Fraudulent transfer laws of both the federal bankruptcy law and state laws
permit creditors or a trustee in bankruptcy to set aside or recover a
"fraudulent transfer." A payment or obligation that the borrower made with
actual intent to hinder, delay, or defraud any of its creditors is also a
fraudulent transfer. Because Mrs. Fields has incurred a substantial amount of
debt in connection with the acquisition of Great American and the other assets
and capital stock of companies it has recently acquired and because Mrs. Fields
and the existing guarantors cannot be sure that their businesses will generate
enough cash flows from operations or that future borrowings will be available
in an amount that will allow Mrs. Fields and the existing guarantors to pay
principal and interest on their indebtedness including the notes and the
guarantees, we cannot be sure that a court would not set aside payments made to
holders of the notes as a fraudulent transfer.

A fraudulent transfer is a payment or obligation that a borrower makes in
exchange for less than reasonably equivalent value, if the borrower, when it
makes the payment or incurs the obligation:

. is insolvent or is rendered insolvent by the payment or the incurring of
the obligation, or

. is engaged or is about to engage in a business or transaction for which
its assets constitute unreasonably small capital, or

. intends to incur, or believes that it will incur, debts beyond its
ability to repay as they mature.

For these purposes, a borrower is generally considered insolvent if:

. the sum of its debts, including contingent liabilities, were greater than
all of its assets at a fair valuation,

. if it had unreasonably small capital to conduct its business, or

. if the present fair saleable value of its assets were less than the
amount that would be required to pay the probable liability on its
existing debts, including contingent liabilities, as they become absolute
and matured.

A payment or obligation that the borrower made with actual intent to hinder,
delay, or defraud any of its creditors is also a fraudulent transfer.

A court may hold any such obligation incurred by the borrower void or
unenforceable, may subordinate the obligation to the claims of other creditors,
or may require the holders of the obligations or the recipients of any such
payments to return any payments received. If Mrs. Fields or the existing
guarantors met any of the fraudulent transfer law's financial condition tests
described above when they issued the notes or the guarantees, or when they were
called upon to make a payment on the notes or the guarantees, and did not
receive reasonably equivalent value in exchange, a court could conclude that
the issuance of the notes, the making of the guarantees or the payment under
the notes or the guarantees should be set aside or returned.

Mrs. Fields and the existing guarantors believe:

(1) they were not insolvent when, or as a result of, the issuance of the
notes or the guarantees,

(2) that they will not engage in a business or transaction for which
their remaining assets would constitute unreasonably small capital, and

(3) that Mrs. Fields and the existing guarantors did not and do not
intend to incur or believe that they will incur debts beyond their ability
to pay such debts as they mature.

Mrs. Fields has incurred, however, a substantial amount of debt in connection
with the purchase of Great American and the other assets and capital stock of
companies it acquired. Mrs. Fields' total indebtedness (net of unamortized
discount) on a consolidated basis, including capital lease obligations and
mandatorily redeemable preferred stock, represents 73.8% of its total book
capitalization. In addition, Mrs. Fields' cash

flow, and consequently its ability to pay dividends and service debt, including
its obligations under the notes, depends upon its future performance. In
addition, Mrs. Fields and its predecessors have incurred net losses during the
past several years. As a result, there can be no assurance that a court ruling
on these questions would agree with Mrs. Fields' analysis of its and the
guarantors' financial condition.

The guarantees are limited by their terms so as to not constitute a
fraudulent transfer under applicable law. If the guarantees were challenged
under this provision, the court would have to, among other things, analyze the
direct and indirect benefits obtained by the guarantors in comparison to the
probability that the guarantors would be called upon to pay the guarantees. It
is possible that a court would limit the guarantees under this provision to an
amount that is significantly below the amount of the notes. Management cannot
accurately predict what a court would do in such a case.

If Mrs. Fields or a guarantor caused a subsidiary to pay a dividend when the
subsidiary met any of the fraudulent transfer law's financial condition tests
described above, in order to enable Mrs. Fields or the guarantor to make a
payment in respect of the notes or the guarantees, a court could conclude that
the dividend as well as the payment is a fraudulent transfer and that the
holders should be required to return the payment, because in the absence of
other facts, courts generally conclude that a subsidiary that pays a dividend
does not receive reasonably equivalent value in exchange.

In addition, subject to certain defenses, the holders may have to return
payments made by Mrs. Fields on the notes or the guarantors on the guarantees
within 90 days before the commencement of a bankruptcy case by or against them,
if, among other things, Mrs. Fields or the guarantors were insolvent at the
time the payments were made. Mrs. Fields or the guarantor would be presumed
insolvent on and during the 90 days immediately preceding the date of the
filing of its bankruptcy petition.

In any of the preceding cases, there could be no assurance that the holders
would ultimately recover the amounts owing under the notes and the guarantees.

There Is No Public Market For The Notes To Be Issued; Transfers Of The
Outstanding Notes Are Restricted

The notes to be issued are being offered only to the holders of the
outstanding notes. There is no public market for the notes to be issued. If
such a market were to develop, the notes could trade at prices that may be
higher or lower than the initial offering price of the outstanding notes. The
placement agents for the outstanding notes currently make a market in the
outstanding notes. The placement agents have informed us that they currently
intend to make a market in the notes to be issued. However, the placement
agents may cease their market-making at any time. The liquidity of the trading
market in these notes, and the market price quoted for these notes, may be
adversely affected by changes in the overall market for similar securities,
existing interest rates, and by our operating results. As a result, you cannot
be sure that an active market will develop for these notes.

The outstanding Series A 10 1/8% Senior Notes due 2004 were issued on
November 26, 1997 and the outstanding Series C 10 1/8% Senior Notes due 2004
were issued on August 24, 1998, to institutional investors and certain
accredited investors, and are eligible for trading in the Private Offering,
Resale and Trading Through Automated Linkages ("PORTAL") Market of the National
Association of Securities Dealers, Inc., a screen-based automated market for
trading of securities eligible for resale under Rule 144A. To the extent that
the outstanding notes are tendered and accepted in the Exchange Offer, the
trading market for the remaining untendered outstanding notes could be
adversely affected.

FORWARD-LOOKING INFORMATION

This prospectus contains forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events, based on the information currently available to us. Such
forward-looking statements relate to future events or our future performance,
including financial performance, growth in net sales and earnings, cash flows
from operations, capital expenditures, the ability to refinance indebtedness,
and the sale of assets. The forward-looking statements also include, among
other things, our expectations and estimates about our business operations
following the acquisitions of Great American and certain of its franchisees and
their stores, the offering by Mrs. Fields' Holding and its capital contribution
to us, other recent transactions discussed in this prospectus and the offering
of notes in August 1998, including the integration of the businesses of Great
American with Mrs. Fields and our ability to achieve certain cost savings and
other synergies related to such transactions. The forward-looking statements
are principally contained in the sections "Summary," "The Transactions,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." In some cases, you can identify forward-looking
statements by terms such as "may," "will," "should," "expects," "plans,"
"contemplates," "anticipates," "believes," "estimates," "projected,"
"predicts," "potential," or "continue" or the negative of these terms or
similar terms. In evaluating these statements, you should specifically consider
various factors, including the risks outlined in the "Risk Factors" section
above. These factors may cause our actual results to differ materially from any
forward-looking statement. Other factors, such as the general state of the
economy, could also cause actual results to differ materially from the future
results covered in the forward-looking statements.

These statements are only predictions, the forward-looking events discussed
in this prospectus may not occur and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about us. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

THE TRANSACTIONS

On August 24, 1998, we completed the offering of notes, the acquisition of
Great American and the acquisition of the stock of two Great American
franchisees. We also received as a capital contribution from Mrs. Fields'
Holding the net proceeds from a simultaneous offering of units consisting of
notes and warrants to purchase common stock by Mrs. Fields' Holding. In
addition, we purchased approximately $38.9 million of Great American notes that
had been tendered in our tender offer for them at that time. We used the net
proceeds of our offering, the capital contribution from Mrs. Fields' Holding,
and available cash of Mrs. Fields and Great American, to complete these
transactions, to pay for the remaining Great American notes that were tendered
after this date, and to pay related expenses. We used remaining proceeds to
finance other acquisitions that had not yet been completed as of the date of
the offering, including the purchase of eight stores from a Great American
franchisee.

The Great American Transactions

The Great American Acquisition and the Great American Tender Offer

Pursuant to a Securities Purchase Agreement, dated as of August 13, 1998, by
and among Cookies USA, the sellers of Cookies USA securities and Mrs. Fields,
we acquired all of the outstanding capital stock and subordinated indebtedness
of Cookies USA for a total purchase price of approximately $18.4 million.
Concurrently, we completed the merger of Cookies USA into Mrs. Fields and the
mergers of Deblan and Chocolate Chip into Great American. Great American became
a wholly owned subsidiary of Mrs. Fields.

As of the expiration of our tender offer for Great American notes at midnight
on September 14, 1998, all of the notes had been tendered. We have accepted and
paid the entire $40.0 million in principal amount of those notes, and none
remain outstanding.

The Acquisition of Great American Franchisees

When we agreed to purchase Cookies USA, we also entered into agreements with
the stockholders of Deblan and Chocolate Chip, two of Great American's
franchisees to purchase a total of 29 Great American franchises for total
consideration of approximately $15.0 million. The price included the repayment
of approximately $0.6 million of debt. We acquired the franchises by acquiring
100% of the capital stock of the two corporations through which the 29
franchises were held. In connection with these transactions, certain debt on
the balance sheet of one such corporation was retired with cash on hand, and
certain debt on the balance sheet of the second corporation was retired with
funds from the franchisee that controlled the corporation.

Agreements with Franchisees of Great American

We entered into settlement agreements and waivers with the two franchisees
that sold us 29 Great American franchises and with certain other Great American
franchisees. In addition to these franchisees, at least 80% in total of the
Great American franchisees have executed settlement agreements and waivers.
These agreements provided that the Great American franchisees that are parties
to them released, subject to certain exceptions, all of their claims against
us, Great American, Capricorn and certain other parties, including claims that
Great American franchisees brought in 1997 to prevent a sale of Great American
to Mrs. Fields. On August 24, 1998, a motion was filed dismissing with
prejudice the claims brought in the 1997 litigation.

The settlement agreements and waivers give "tag-along" rights to the Great
American franchisees that hold at least five Great American franchises. The
tag-along rights provide that, in the event that:

(1) either Mrs. Fields or Mrs. Fields' Holding proposes to sell to an
unaffiliated party substantially all of its rights as owner of the Great
American brand or as the franchisor of Great American,

(2) either Mrs. Fields or Mrs. Fields' Holding proposes to make an
initial public offering of its common stock, or

(3) either Mrs. Fields or Mrs. Fields' Holding sells a controlling
interest to an unaffiliated party,

we will purchase all of the franchises of such Great American franchisees,
provided that their franchises have had positive cash flow in the most recent
12-month fiscal period and sales not more than 20% below the fiscal period
immediately preceding such period, or the number of months it has been
operating, if fewer than 12.

The purchase price for the franchises will be 5 times their most recent 12-
month EBITDA or, if the franchises have operated for fewer than 12 months, the
greater of 5 times their most recent EBITDA and documented development cost for
the stores. Great American franchisees that hold fewer than 5 Great American
franchises do not have tag-along rights but will have the right, upon
completion of Mrs. Fields' sale of its rights as owner of the Great American
brand or as the franchisor of Great American, the initial public offering or
the change of control, and provided they are in compliance with their franchise
agreements, to receive in cash the greater of $3,500 or $2,000 per store owned
by such franchisee. In the case of an initial public offering, the franchisees
could receive shares of common stock with an equivalent value. The form of
payment will be at our election.

Under the settlement agreements and waivers, we have also undertaken, among
other things,

(1) to maintain the margin on batter sold to Great American franchisees,

(2) to extend franchise agreements, and

(3) to permit the Great American franchisees to convert their stores to
Mrs. Fields brand stores at their sole expense in areas where there is no
overlap with existing Mrs. Fields brand franchise stores.

The Mrs. Fields' Holding Units

Mrs. Fields' Holding completed its offering of units consisting of notes and
warrants to purchase common stock of Mrs. Fields' Holding on August 24, 1998.
The notes which are part of the units are senior obligations of Mrs. Fields'
Holding and are secured by all of Mrs. Fields' issued and outstanding capital
stock.

The Prior Transactions

Mrs. Fields' Holding acquired substantially all of the assets of H & M on
July 25, 1997 for an aggregate purchase price of $13.8 million, excluding the
assumption of certain liabilities. Mrs. Fields' Holding acquired 56.0% of the
shares of common stock of Pretzel Time on September 2, 1997 for a total
purchase price of $4.2 million and extended a $500,000 loan to the founder and
minority stockholder of Pretzel Time. At the time of our previous offering of
notes on November 26, 1997:

(1) we received the business of H&M and 56.0% of the shares of common
stock of Pretzel Time from Mrs. Fields' Holding,

(2) we received all of the common stock of Mrs. Fields' Brand from Mrs.
Fields' Holding,

(3) various debt of Mrs. Fields, Mrs. Fields' Brand and Mrs. Fields'
Holding was refinanced, and

(4) we paid a dividend of $1,065,000 and repaid an advance of $1,500,000
to Mrs. Fields' Holding.

On January 2, 1998, we purchased an additional 4.0% of the shares of the
common stock of Pretzel Time.

Increase in Pretzel Time Ownership

On June 12, 1998, we purchased an additional 10.0% of the common stock of
Pretzel Time for a purchase price of $875,000, increasing our equity interest
in Pretzel Time to 70.0% at that time.

Other Recent Transactions

In June 1998, we acquired 5 additional Pretzel Time stores from a franchisee
for a purchase price of $657,000. We acquired one additional Pretzel Time store
from a franchisee and three cookie stores operating under other brand names,
which we intend to convert or develop into Mrs. Fields brand stores at purchase
prices aggregating $750,000. We intend to remodel the three cookie stores, at a
total estimated cost of $150,000. We purchased eight Great American stores from
a Great American franchisee for a total purchase price of $1.75 million on
September 9, 1998. The franchisee was a holder of certain securities of Cookies
USA that were sold pursuant to the agreement to purchase Great American and was
a party to that agreement.

RECENT DEVELOPMENTS

On October 5, 1998, Mrs. Fields purchased all of the retail cookie and
related business and operations of eleven Great American stores for an
aggregate purchase price of $2,800,000 under an asset purchase agreement dated
as of October 5, 1998, by and among The Cookie Conglomerate, Inc., The Cookie
Conglomerate, LLP and two individuals who were the partners of Cookie
Conglomerate, LLP and the shareholders of Cookie Conglomerate, Inc. The sellers
were franchisees of Great American. The sellers' rights under franchise
agreements and subleases with Great American were terminated upon closing of
the transaction. The acquisition was funded with financing provided by T&W
Financial Services Company, L.L.C.

On November 19, 1998, Mrs. Fields purchased all of the outstanding capital
stock of Pretzelmaker Holdings under an agreement among Mrs. Fields,
Pretzelmaker, and the holders of its capital stock. Pretzelmaker is the holding
company for a pretzel retail company. The purchase price was approximately $5.4
million and Mrs. Fields assumed indebtedness, including severance payments,
totaling approximately $1.6 million.

USE OF PROCEEDS

Neither Mrs. Fields nor the guarantors will receive any cash proceeds
pursuant to the Exchange Offer. In consideration for issuing the notes as
contemplated in this prospectus, Mrs. Fields will receive an equal principal
amount of outstanding notes.

The net proceeds received by Mrs. Fields from the offering, after deducting
the underwriting discounts and commissions and estimated expenses of the
offering of notes in August 1998, along with cash from other sources, including
the capital contribution of Mrs Fields' Holding and existing company cash, were
approximately $85.1 million. Of this amount, Mrs. Fields used approximately
$18.4 million for the acquisition of Great American, $41.6 million to pay for
the Great American notes tendered, including the tender offer premium of $1.6
million, $15.0 million to pay for the acquisition of Deblan and Chocolate Chip
including the repayment of approximately $0.6 million of debt, $0.9 million to
pay accrued interest on debt being retired, $1.4 million for severance and
related expenses, approximately $2.8 million to pay for certain other recent
acquisitions and approximately $5.0 million of fees and expenses related to the
offering in August 1998 and certain transactions described in this prospectus.

CAPITALIZATION

The following table sets forth the cash and cash equivalents and
capitalization of Mrs. Fields' Original Cookies, Inc. and subsidiaries at
October 3, 1998. This table should be read in conjunction with the historical
financial statements and related notes included elsewhere in this Registration
Statement. See "Selected Historical Financial Data."

Mrs. Fields'
Original Cookies, Inc.
and Subsidiaries
At October 3, 1998
----------------------
(Dollars in thousands)

Cash and Cash Equivalents.............................. $ 5,146
========
Credit Facility(1)..................................... $ --
--------
Debt and Capital Lease Obligations, including current
portions:
10 1/8% Series A, B and C Senior Notes due 2004(2)... 140,000
Original issue discount on Series C Senior Notes..... (591)
Pretzel Time Debt.................................... 440
Mrs. Fields' Original Cookies, Inc. Capital Lease
Obligations......................................... 276
Great American Capital Lease Obligations............. 31
--------
Total Debt and Capital Lease Obligations, including
current portion....................................... 140,156
--------
Mandatorily Redeemable Preferred Stock of Pretzel
Time(3)............................................... 1,171
--------
Stockholder's Equity:
Common Stock (pledged as collateral for parent
company debt)(4).................................... --
Additional Paid-in Capital(5)........................ 59,899
Accumulated Deficit.................................. (9,768)
--------
Total Stockholder's Equity........................... 50,131
--------
Total Capitalization................................... $191,458
========

- --------

(1) Under the indenture, Mrs. Fields is permitted to have one or more credit
facilities pursuant to which it will be able to borrow up to a maximum
aggregate principal amount of $15.0 million on a secured basis. Mrs.
Fields' Amended and Restated Loan Agreement, dated as of February 28, 1998,
provides for a maximum commitment of up to $15.0 million secured by
essentially all of the assets of Mrs. Fields. As of October 3, 1998, Mrs.
Fields had $12.7 million of available borrowings under its credit facility.
See "Description of Certain Indebtedness--Credit Agreement."

(2) Includes $100.0 million of Series A and Series B 10 1/8% Senior Notes of
Mrs. Fields and $40.0 million of 10 1/8% Series C Senior Notes.
(3) Liquidation preference as of October 3, 1998 was approximately $1.5
million.
(4) Less than $1,000.

(5) Gives effect to the capital contribution of Mrs. Fields' Holding of $29.1
million.

THE EXCHANGE OFFER

Terms of the Exchange Offer; Period for Tendering Notes

Upon the terms and subject to the conditions set forth in this prospectus and
in the accompanying letter of transmittal (which together constitute the
Exchange Offer), we will accept for exchange outstanding notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used in this prospectus, the "Expiration Date" means 12:00
midnight, New York City time, on , 1999, or such later date and time to
which we, in our sole discretion, extend the Exchange Offer.

The form and terms of the notes being issued in the Exchange Offer are the
same as the form and terms of the outstanding notes except that:

(1) the notes being issued in the Exchange Offer will have been
registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act, and

(2) the notes being issued in the Exchange Offer will not contain the
registration rights and liquidated damages provisions contained in the
outstanding notes. However, the holders of outstanding 10 1/8% Series A
Senior Notes due 2004 do not currently have such rights.

The notes issued in the Exchange Offer will evidence the same debt as the
outstanding notes and both the outstanding notes and the notes to be issued are
governed by the same indenture.

As of the date of this prospectus, there is $53,725,000 in total principal
amount of notes outstanding that are eligible for exchange in the Exchange
Offer. Our obligation to accept outstanding notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth under "--Certain
Conditions to the Exchange Offer" below.

Notes tendered in the Exchange Offer must be in denominations of principal
amount of $1,000 and any integral multiple thereof.

We expressly reserve the right, in our sole discretion:

(1) to extend the Expiration Date,

(2) to delay accepting any outstanding notes,

(3) if any of the conditions set forth below under "--Conditions of the
Exchange Offer" have not been satisfied, to terminate the Exchange Offer
and not accept any notes for exchange, or

(4) to amend the Exchange Offer in any manner.

We will give oral or written notice of any extension, delay, non-acceptance,
termination or amendment as promptly as practicable by a public announcement,
and in the case of an extension, no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. We
will also file a post-effective amendment with the Commission upon the
occurrence of any amendment to the terms of the Exchange Offer.

During an extension, all outstanding notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without expense to the holder that tendered them as promptly as practicable
after the expiration or termination of the Exchange Offer.

Procedures for Tendering Notes

The tendering by a holder of outstanding notes, and our mutual acceptance of
the outstanding notes, will constitute a binding agreement between us and the
holder on the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. Except as set forth below, to
tender in the Exchange Offer, a holder must:

(1) transmit a properly completed and duly executed letter of
transmittal, including all other documents required by such letter of
transmittal, or

(2) if notes are tendered pursuant to the book-entry transfer procedures
set forth below, the holder must transmit an agent's message to the
Exchange Agent on or prior to the Expiration Date.

In addition, either:

(1) the Exchange Agent must receive certificates for outstanding notes
and the letter of transmittal, or

(2) the Exchange Agent must receive, prior to the Expiration Date, a
timely confirmation of a book-entry transfer of the notes being tendered
into the Exchange Agent's account at The Depository Trust Company ("DTC"),
along with the letter of transmittal or a computer-generated message
transmitted by means of an agent's message, or

(3) the holder must comply with the guaranteed delivery procedures
described below.

The term "agent's message" means a computer-generated message, transmitted by
DTC by means of DTC's Automated Tender Offer Program ("ATOP") and received by
the Exchange Agent and forming a part of a book-entry transfer (a "book-entry
confirmation"), which states that the DTC has received an express
acknowledgment that the holder has received and agrees to be bound by the
letter of transmittal and that we may enforce such letter of transmittal
against such holder.

The method of delivery of outstanding notes, letters of transmittal and all
other required documents is at the election and risk of the holders. If such
delivery is by mail, we recommend that registered mail, properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to assure timely delivery. Do not send letters of transmittal or notes
to Mrs. Fields.

Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the notes surrendered for exchange are
tendered:

(1) by a holder of outstanding notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or

(2) for the account of an eligible institution.

An eligible institution is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.

If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, such guarantees must be by an eligible institution.
If notes are registered in the name of a person other than a signer of the
letter of transmittal, the notes surrendered for exchange must be endorsed by,
or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by us in our sole discretion, duly
executed by the registered holder with the holder's signature guaranteed by an
eligible institution.

We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in
our sole discretion. Our determination will be final and binding. We reserve
the absolute right to:

(1) reject any and all tenders of any particular note not properly
tendered,

(2) refuse acceptance of any particular note if, in our judgment or the
judgment of our counsel, acceptance of the note may be deemed unlawful, and

(3) waive any defects or irregularities or conditions of the Exchange
Offer as to any particular note either before or after the Expiration Date.
This includes the right to waive the ineligibility of any holder who seeks
to tender notes in the Exchange Offer.

Our interpretation of the terms and conditions of the Exchange Offer as to
any particular notes either before or after the Expiration Date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects or irregularities in connection with
tenders of notes for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of notes
for exchange, nor shall any of them incur any liability for failure to give
such notification.

If the letter of transmittal is signed by a person or persons other than the
registered holder or holders of outstanding notes, such outstanding notes must
be endorsed or accompanied by powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the
outstanding notes.

If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, sign the letter of transmittal or any notes or any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we
waive this requirement.

By tendering, each holder will represent to us that, among other things, the
person receiving the notes in the Exchange Offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the notes
issued in the Exchange Offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of Mrs. Fields',
is engaged in or intends to engage in or has an arrangement or understanding
with any person to participate in a distribution of such notes to be acquired
pursuant to the Exchange Offer, such holder or any such other person:

(1) may not rely on the applicable interpretations of the staff of the
Commission, and

(2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.

Each broker-dealer who acquired its outstanding notes as a result of market-
making activities or other trading activities and thereafter receives notes
issued for its own account in the Exchange Offer, must acknowledge that it will
deliver a prospectus in connection with any resale of such notes issued in the
Exchange Offer. See "Plan of Distribution." The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.

Acceptance of Outstanding Notes for Exchange; Delivery of Notes Issued in the
Exchange Offer

Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all outstanding notes
properly tendered and will issue notes registered under the Securities Act
promptly after acceptance of the outstanding notes. See "--Certain Conditions
to the Exchange Offer" below. For purposes of the Exchange Offer, we will be
deemed to have accepted properly tendered outstanding notes for exchange when,
as and if we have given oral or written notice thereof to the Exchange Agent,
with written confirmation of any oral notice given promptly thereafter.

For each outstanding note accepted for exchange, the holder of such
outstanding note will receive a note registered under the Securities Act having
a principal amount equal to that of the surrendered outstanding note.
Accordingly, registered holders of notes issued in the Exchange Offer on the
relevant record date for the first

interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid. Outstanding notes that we accept for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Under
the registration rights agreement, we are required to make certain additional
payments to holders of outstanding notes under certain circumstances relating
to the timing of the Exchange Offer. However, holders of outstanding 10 1/8%
Series A Senior Notes due 2004 are not entitled to such additional payments
under the registration rights agreement.

In all cases, we will issue notes in the Exchange Offer for outstanding notes
that are accepted for exchange only after timely receipt by the Exchange Agent
of:

(1) certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the Exchange Agent's account at
DTC,

(2) a properly completed and duly executed letter of transmittal or an
agent's message, and

(3) all other required documents.

If tendered outstanding notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged notes without expense
to the tendering holder. In the case of notes tendered by book-entry transfer
into the Exchange Agent's account at DTC, such non-exchanged notes will be
credited to an account maintained with DTC. We will return the notes or have
them credited to the DTC account as promptly as practicable after the
expiration or termination of the Exchange Offer.

Book-Entry Transfers

The Exchange Agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the Exchange Offer within two
business days after the date of this prospectus. Any financial institution that
is a participant in DTC systems must make book-entry delivery of outstanding
notes by causing DTC to transfer such outstanding notes in the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures. Such participant
should transmit its acceptance to DTC on or prior to the Expiration Date or
comply with the guaranteed delivery procedures described below. DTC will verify
such acceptance, execute a book-entry transfer of the tendered outstanding
notes into the Exchange Agent's account at DTC and then send to the Exchange
Agent confirmation of such book-entry transfer. The confirmation of such book-
entry transfer will include an agent's message confirming that DTC has received
an express acknowledgment from such participant that such participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce the letter of transmittal against such participant. Delivery of notes
issued in the Exchange Offer may be effected through book-entry transfer at
DTC. However, the letter of transmittal or facsimile thereof or an agent's
message, with any required signature guarantees and any other required
documents, must:

(1) be transmitted to and received by the Exchange Agent at the address
set forth below under "Exchange Agent" on or prior to the Expiration Date,
or

(2) the guaranteed delivery procedures described below must be complied
with.

Guaranteed Delivery Procedures

If a holder of outstanding notes desires to tender such notes and the
holder's notes are not immediately available, or time will not permit such
holder's notes or other required documents to reach the Exchange Agent before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:

(1) the holder tenders the notes through an eligible institution,

(2) prior to the Expiration Date, the Exchange Agent received from such
eligible institution a notice of guaranteed delivery, substantially in the
form we have provided (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of the
notes being tendered and the amount of notes being tendered. The notice of
guaranteed delivery shall state that the tender is being made and guarantee
that within five New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed appropriate letter of transmittal (or facsimile of the letter
of transmittal or agent's message) with any required signature guarantees
and any other documents required by the letter of transmittal will be
deposited by the eligible institution with the Exchange Agent, and

(3) the certificates for all physically tendered outstanding notes, in
proper form for transfer, or a book-entry confirmation, as the case may be,
together with a properly completed and duly executed appropriate letter of
transmittal (or facsimile of the letter of transmittal or agent's message)
with any required signature guarantees and all other documents required by
the letter of transmittal, are received by the Exchange Agent within five
New York Stock Exchange trading days after the date of execution of the
notice of guaranteed delivery.

Withdrawal Rights

Tenders of outstanding notes may be withdrawn at any time prior to 12:00
midnight, New York City time, on the Expiration Date. For a withdrawal to be
effective, a written notice of withdrawal must be received by the Exchange
Agent at one of the addresses set forth below under "--Exchange Agent." Any
such notice of withdrawal must:

(1) specify the name of the person that tendered the notes to be
withdrawn,

(2) identify the notes to be withdrawn, (including the principal amount
of such notes) and

(3) if you have transmitted certificates for outstanding notes, specify
the name in which such notes are registered, if different from that of the
withdrawing holder.

If certificates for outstanding notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn notes
and otherwise comply with the procedures of such facility. We will determine
all questions as to the validity, form and eligibility (including time of
receipt) of such notices and our determination will be final and binding on all
parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any
outstanding notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder. In the case of notes tendered by book-entry transfer into the
Exchange Agent's account at DTC, the notes withdrawn will be credited to an
account maintained with DTC for the outstanding notes. The notes will be
returned or credited to the DTC account as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Notes" above at any time on or prior to 12:00
midnight, New York City time, on the Expiration Date.

Certain Conditions to the Exchange Offer

We are not required to accept for exchange, or to issue notes in exchange
for, any outstanding notes. We may terminate or amend the Exchange Offer, if at
any time before the acceptance of such outstanding notes:

(1) any federal law, statute, rule or regulation shall have been adopted
or enacted which, in our judgment, would reasonably be expected to impair
our ability to proceed with the Exchange Offer;

(2) if any stop order shall be threatened or in effect with respect to
the Registration Statement of which this prospectus constitutes a part or
the qualification of the indenture under the Trust Indenture Act of 1939,
as amended; or

(3) there shall occur a change in the current interpretation by the staff
of the Commission which permits the notes issued pursuant to the Exchange
Offer in exchange for outstanding notes to be offered for resale, resold
and otherwise transferred by such holders (other than broker-dealers and
any such holder which is an "affiliate" of Mrs. Fields within the meaning
of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such notes acquired in the Exchange Offer are acquired in the
ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the
distribution of such notes issued in the Exchange Offer.

The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, the Exchange Offer will remain open for at
least five business days following any waiver of the preceding conditions. Our
failure to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.

Exchange Agent

The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. You should direct all executed letters of transmittal to the
Exchange Agent at the address set forth below. You should direct questions and
requests for assistance, requests for additional copies of this prospectus or
of the letter of transmittal and requests for notices of guaranteed delivery to
the Exchange Agent addressed as follows:

Main Delivery to: The Bank of New York,

As Exchange Agent

By Mail, By Hand and Overnight Courier: By Facsimile:
(For Eligible Institutions Only)
The Bank of New York (212) 815-6339
101 Barclay Street 7 East
New York, New York 10286 Confirm by telephone:
Attention: Odell Romeo (212) 815-6337

Delivery of the letter of transmittal to an address other than as set forth
above or transmission of such letter of transmittal via facsimile other than as
set forth above does not constitute a valid delivery of such letter of
transmittal.

Fees and Expenses

We will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer except for reimbursement of mailing expenses.

We will pay the estimated cash expenses to be incurred in connection with the
Exchange Offer. The expenses are estimated in the aggregate to be approximately
$250,000.

Transfer Taxes

Holders who tender their outstanding notes for exchange will not be obligated
to pay transfer taxes in connection therewith. If, however, notes issued in the
Exchange Offer are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the outstanding notes tendered, or
if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the Exchange Offer, then the holder must
pay the amount of any such transfer taxes, whether they are imposed on the
registered holder or any other persons. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.

Consequences of Failure to Exchange Notes

Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor Mrs. Fields is under any duty
to give notification of defects or irregularities with respect to the tenders
of outstanding notes for exchange. Outstanding notes that are not tendered or
are tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the provisions of the indenture regarding
transfer and exchange of the outstanding notes and the existing restrictions
upon transfer of the notes set forth in the legend on the outstanding notes and
in the offering circulars, relating to the outstanding notes. Except in certain
limited circumstances with respect to certain types of holders of outstanding
notes, we will have no further obligation to provide for the registration under
the Securities Act of such outstanding notes. See "Description of Notes--
Exchange Offer; Registration Rights." In general, outstanding notes, unless
registered under the Securities Act, may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. We do not currently expect to take any
action to register the outstanding notes under the Securities Act or blue sky
laws.

If outstanding notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered outstanding notes could be adversely
affected.

Upon completion of the Exchange Offer, holders of the outstanding notes will
not be entitled to any increase in the interest rate on the notes or any
further registration rights under the registration rights agreement, except
under limited circumstances. Holders of Series A 10 1/8 Senior Notes due 2004
are not entitled to any registration rights regardless of whether the Exchange
Offer is completed. See "Description of Notes--Exchange Offer; Registration
Rights."

Holders of the notes issued in the Exchange Offer and any outstanding notes
which remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.

Consequences of Exchanging Notes

Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, we believe that notes issued in the
Exchange Offer in exchange for outstanding notes may be offered for resale,
resold or otherwise transferred by the holders of such notes, other than by any
holder which is an "affiliate" of Mrs. Fields within the meaning of Rule 405
under the Securities Act. Such notes may be offered for resale, resold, or
otherwise transferred without compliance with the registration and prospectus
delivery requirements of the Securities Act, if:

(1) such notes issued in the Exchange Offer are acquired in the ordinary
course of such holder's business, and

(2) such holder, other than broker-dealers, has no arrangement with any
person to participate in the distribution of such notes issued in the
Exchange Offer.

However, the Commission has not considered the Exchange Offer in the context
of a no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must furnish a written representation, at our request, that:

(1) it is not an affiliate of Mrs. Fields,

(2) it is not engaged in, and does not intend to engage in, a
distribution of such notes issued in the Exchange Offer and has no
arrangement or understanding to participate in a distribution of notes
issued in the Exchange Offer, and

(3) it is acquiring the notes issued in the Exchange Offer in its
ordinary course of business.

Each broker-dealer that receives notes issued in the Exchange Offer for its
own account in exchange for outstanding notes must acknowledge that such
outstanding notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of such notes issued in the Exchange
Offer. See "Plan of Distribution."

In addition, to comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register thereunder the notes issued in
the Exchange Offer prior to offering or selling such notes. We have agreed,
pursuant to the registration rights agreement, subject to certain limitations
in such agreement, prior to any public offering of transfer restricted
securities, to register or qualify the transfer restricted securities for offer
or sale under the securities laws of such jurisdictions as any holder requests.
"Transfer restricted securities" means each note until:

(1) the date on which such note has been exchanged by a person other than
a broker-dealer for a note in the Exchange Offer,

(2) following the exchange by a broker-dealer in the Exchange Offer of a
note for a note issued in the Exchange Offer, the date on which the note
issued in the Exchange Offer is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Registration Statement,

(3) the date on which such note has been effectively registered under the
Securities Act and disposed of in accordance with a shelf registration
statement that we file in accordance with the registration rights
agreement, or

(4) the date on which such note is distributed to the public pursuant to
Rule 144 under the Securities Act.

Unless a holder so requests, we do not intend to register or qualify the sale
of the notes issued in the Exchange Offer in any such jurisdiction.

SELECTED HISTORICAL FINANCIAL DATA

The following table presents historical financial data for Mrs. Fields'
Original Cookies, Inc. and subsidiaries ("Mrs. Fields") and its predecessors;
namely, Mrs. Fields Inc. and subsidiaries ("Mrs. Fields Inc."), The Original
Cookie Company, Incorporated ("Original Cookie") and the pretzel business of
Hot Sam Company, Inc. ("Hot Sam") as of the dates and for the periods
indicated. The results of operations for the periods December 31, 1995 through
September 17, 1996 and September 18, 1996 through December 28, 1996 and the 39
weeks ended September 27, 1997 and October 3, 1998 are not indicative of the
results for the full fiscal year. The selected historical financial data has
been derived from the audited financial statements of Mrs. Fields and its
predecessors. Due to the acquisitions of the net assets of Mrs. Fields Inc.,
Original Cookie and Hot Sam on September 17, 1996, the financial data is not
comparable for all periods. However, in order for the presentations to be
meaningful for the periods presented, certain statement of operations
information for the predecessors has been reclassified to be consistent with
the Mrs. Fields historical financial statement presentation. The selected
historical financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and the related notes thereto, contained
elsewhere in this prospectus.

Predecessors
-------------------------------------------------------------------------------------------
The Original Cookie Company, Incorporated
and the Carved-out Portion of Hot
Mrs. Fields Inc. and Subsidiaries(1) Sam Company, Inc. (Combined)(1)
---------------------------------------- --------------------------------------------------
December December
52 Weeks Ended(2) 31, 1995 52 Weeks Ended(2) 31, 1995
---------------------------- through ------------------------------------ through
December December December September December December December September
31, 1993 31, 1994 30, 1995 17,1996(2) 31, 1993 31, 1994 30, 1995 17,1996(2)
-------- -------- -------- ---------- ---------- ---------- ---------- -----------

Statement of Operations
Data:
Net store sales......... $ 98,601 $ 87,863 $59,956 $ 29,674 $ 87,956 $ 89,648 $ 85,581 $ 54,366
Net store
contribution(3)........ 17,005 8,083 6,591 3,797 16,081 13,912 13,063 5,854
Franchising, licensing
and other revenue,
net.................... 3,993 7,241 5,993 3,786 -- -- -- --
General and
administrative
expenses............... 21,521 16,379 15,612 8,984 8,536 12,546 9,216 7,538
Income (loss) from
operations............. (1,251) (1,691) (3,526) (1,742) 4,004 (750) 2,435 (2,772)
Net loss................ (2,243) (5,320) (2,368) (2,304) (333) (5,355) (2,096) (5,645)
Other Data:
Cash flows from
operating activities... 5,839 1,728 (4,478) (447) (1,041) 3,699 4,451 (378)
Cash flows from
investing activities... (2,962) (2,030) 2,526 (385) (9,019) (3,779) (568) (1,200)
Cash flows from
financing activities... (2,496) (732) (185) (58) 7,052 3,134 (4,599) (1,380)
Interest expense........ 1,088 2,155 51 80 4,172 4,381 4,356 2,895
Total depreciation and
amortization........... 4,728 4,415 3,525 1,911 6,668 7,423 6,902 4,937
Capital expenditures.... 3,856 4,895 4,146 1,054 8,791 3,779 568 1,200
EBITDA(4)............... 3,477 2,724 (1) 169 10,672 6,673 9,337 2,165
Store contribution for
stores in the process
of being closed or
franchised(3).......... $ 6,424 $ 319 $ (802) $ (695) $ 933 $ (542) $ (1,542) $ (1,751)
Ratio of earnings to
fixed charges(5)....... -- -- -- -- -- -- -- --
Balance Sheet Data:
Working capital
(deficit).............. $ (2,673) $ (1,067) $(3,114) $(21,704) $ (2,023) $ (46) $ 128 $ (3,640)
Total assets............ 36,838 30,128 23,033 19,144 75,777 74,490 66,282 59,024
Debt and capital lease
obligations, including
current portion........ 87,549 22,850 21,226 21,224 33,822 36,956 32,357 30,977
Total stockholders'
equity (deficit)....... (66,645) (25,419) (28,017) (30,318) 30,038 24,684 22,588 16,943

Mrs. Fields(1)
-------------------------------------------------
September 18, 53 Weeks 39 Weeks 39 Weeks
1996 through Ended Ended Ended
December 28, January 3, September 27, October 3,
1996(2) 1998(2) 1997(2) 1998(2)
------------- ---------- ------------- ----------
(Dollars in thousands)

Statement of Operations
Data:
Net store and batter sales.. $ 39,890 $123,987 $ 83,759 $ 89,938
Net store contribution(3)... 9,482 25,087 13,214 11,804
Franchising, licensing and
other revenue, net......... 1,492 6,520 3,767 6,021
General and administrative
expenses................... 4,035 16,730 10,803 12,621
Income (loss) from
operations................. 5,649 8,415 2,378 (314)
Net income (loss)........... 1,961 (974) (3,224) (9,690)
Other Data:
Cash flows from operating
activities................. 7,609 919 791 676
Cash flows from investing
activities................. (21,131) (15,505) (3,216) (34,315)
Cash flows from financing
activities................. 20,231 24,164 (98) 22,498
Interest expense............ 1,867 7,830 5,070 8,981
Total depreciation and
amortization............... 2,344 10,403 6,596 9,707
Capital expenditures........ 1,638 4,678 3,216 5,616
EBITDA(4)................... 7,993 18,818 8,974 9,393
Store contribution for
stores in the process of
being closed or
franchised(3).............. $ 513 $ (1,798) $ (1,999) $ (2,125)
Ratio of earnings to fixed
charges(5)................. 2.85x -- -- --
Balance Sheet Data:
Working capital (deficit)... $ (2,889) $ 13,133 $(16,966) $ (2,276)
Total assets................ 110,055 149,684 125,470 222,657
Mandatorily redeemable
cumulative preferred stock
of subsidiaries............ 3,597 902 4,589 1,171
Debt and capital lease
obligations, including
current portion............ 67,563 101,081 78,084 140,156
Total stockholder's equity.. 16,961 30,765 27,664 50,131

- --------

(1) On September 17, 1996, Mrs. Fields completed the acquisitions of
substantially all of the assets and assumed certain liabilities of the
predecessors. As a result of purchase accounting adjustments related to the
acquisitions, the Mrs. Fields' financial statements are not directly
comparable to the predecessors' financial statements.

(2) Mrs. Fields and its predecessors operate using a 52/53-week year ending
near December 31.
(3) Store contribution is determined by subtracting all store operating
expenses including depreciation from net store sales. Management uses store
contribution information to measure operating performance at the store
level. Store contribution for stores in the process of being closed or
franchised as a separate caption is not in accordance with generally
accepted accounting principles. Store contribution may not be comparable to
other similarly titled measures.
(4) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interest, preferred stock accretion and dividends of
subsidiaries and other income (expense). EBITDA is not intended to
represent cash flows from operations as defined by generally accepted
accounting principles and should not be considered as an alternative to net
income (loss) as an indicator of operating performance or to cash flows as
a measure of liquidity. EBITDA has been included herein because it is one
of the indicators upon which Mrs. Fields assesses its financial performance
and its capacity to service its debt (see footnote 5 below). EBITDA may not
be comparable to similarly titled measures reported by other companies.

Predecessors
---------------------------------------------------------------------------------------
The Original Cookie Company, Incorporated
and the Carved-out Portion of Hot
Mrs. Fields Inc. and Subsidiaries(1) Sam Company, Inc. (Combined)(1)
---------------------------------------- ----------------------------------------------
December December
52 Weeks Ended(2) 31, 1995 52 Weeks Ended(2) 31, 1995
---------------------------- through --------------------------------- through
December December December September December December December September
31, 1993 31, 1994 30, 1995 17,1996(2) 31, 1993 31, 1994 30, 1995 17,1996(2)
-------- -------- -------- ---------- ---------- --------- --------- -----------

Income (loss) from
operations............. $(1,251) $(1,691) $(3,526) $(1,742) $ 4,004 $ (750) $ 2,435 $ (2,772)
ADD:
Depreciation and
amortization.......... 4,728 4,415 3,525 1,911 6,668 7,423 6,902 4,937
------- ------- ------- ------- ---------- --------- --------- ----------
EBITDA................. $ 3,477 $ 2,724 $ (1) $ 169 $ 10,672 $ 6,673 $ 9,337 $ 2,165
======= ======= ======= ======= ========== ========= ========= ==========

(see notes continued on page 41)

Income (loss) from
operations.................. $5,649 $ 8,415 $2,378 $ (314)
ADD:
Depreciation and
amortization............... 2,344 10,403 6,596 9,707
------ ------- ------ ------
EBITDA....................... $7,993 $18,818 $8,974 $9,393
====== ======= ====== ======

(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (whether paid or accrued
and net of debt premium amortization), including the amortization of debt
issuance costs and original issue discount, noncash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with capital lease obligations, letter
of credit commissions, fees or discounts and the product of all dividends
and accretion on mandatorily redeemable cumulative preferred stock
multiplied by a fraction, the numerator of which is one and the denominator
of which is one minus the current combined federal, state and local
statutory tax rate. For fiscal years 1993, 1994 and 1995 and the period
December 31, 1995 through September 17, 1996, Mrs. Fields Inc. and
subsidiaries' earnings were insufficient to cover fixed charges by
$2,028,000, $5,129,000, $2,127,000 and $2,099,000, respectively. For fiscal
years 1993, 1994 and 1995 and the period December 31, 1995 through
September 17, 1996, Original Cookie and Hot Sam (combined) earnings were
insufficient to cover fixed charges by $120,000, $5,131,000, $1,833,000 and
$5,645,000, respectively. For the 53 weeks ended January 3, 1998, the 39
weeks ended September 27, 1997 and the 39 weeks ended October 3, 1998, Mrs.
Fields' earnings were insufficient to cover fixed charges by $319,000,
$3,045,000 and $9,397,000, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

In 1996, an investor group led by Capricorn Investors II, L.P. formed Mrs.
Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc. as subsidiaries
of Mrs. Fields' Holding Company, Inc.

On September 17, 1996, Mrs. Fields initiated operations when it purchased
substantially all of the assets and assumed certain liabilities of Mrs. Fields
Inc. and subsidiaries, The Original Cookie Company, Incorporated and the
pretzel business of Hot Sam Company, Inc.

Mrs. Fields set out to increase sales and profitability of its cookie and
pretzel operations by implementing key elements of its business plan coupled
with strategic acquisitions. A key element of the business plan is closing or
franchising certain company-owned stores that do not meet specific financial
and geographical criteria established by management. Implementation of this
element of the business plan is expected to result in enhanced operating
margins as these stores are franchised or closed. In some of our tables we
refer to stores not planned for franchise or closure as "core" stores, meaning
continuing company-owned stores. Continuing company-owned stores will continue
to be operated by Mrs. Fields into the foreseeable future. As a result of
converting certain stores to franchises, royalty revenues are expected to
increase and net store sales and overhead expenses associated with operating
those stores are expected to be reduced.

As Mrs. Fields exits stores it has identified for closure, results from
operations are expected to improve on both a short-term and long-term basis.
With respect to these specific stores both ongoing operating losses and
negative cash flows are expected to cease.

Cash payments to landlords for early lease termination costs negatively impact
our immediate liquidity position. However, our overall financial position is
expected to be strengthened over time as cash flows from operating activities
increase. As cash is used to fund the store closure plans, corresponding store
closure reserves are reduced which has a neutral impact on working capital and
financial position. Should Mrs. Fields' cost estimates for exiting the
remaining stores not prove sufficient, it would have a negative impact on both
liquidity and results of operations.

Mrs. Fields believes that it has sufficient liquidity to complete its store
closure plans. A complete analysis of Mrs. Fields' store closure plans are
included in Note 5 to the Financial Statements.

Mrs. Fields is pursuing growth in both its cookie and pretzel businesses
through strategic acquisitions. Management expects that significant operating
synergies, expense leveraging and geographic market share can be achieved
through targeted acquisitions. On July 25, 1997, a subsidiary of Mrs. Fields'
Holding, Mrs. Fields' Pretzel Concepts, Inc., acquired substantially all of the
assets and assumed certain liabilities of H&M Concepts Ltd. Co., the largest
franchisee of Pretzel Time, Inc. On September 2, 1997, Mrs. Fields' Holding
acquired 56% of the common stock of Pretzel Time, the franchisor of the Pretzel
Time concept.

On November 26, 1997, Mrs. Fields received as a contribution from Mrs.
Fields' Holding, the business of Mrs. Fields' Pretzel Concepts and 56% of the
shares of common stock of Pretzel Time. On that same date Mrs. Fields received
as a contribution from Mrs. Fields' Holding, all of the common stock of The
Mrs. Fields' Brand, Inc. On January 2, 1998 and June 12, 1998, Mrs. Fields
acquired an additional 4% and 10%, respectively, of Pretzel Time common stock,
bringing its total ownership to 70%.

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
and subordinated indebtedness of Cookies USA, the parent company of Great
American Cookie Company, Inc. for a total purchase price of $18.4 million.
Concurrently, Cookies USA was merged with and into Mrs. Fields, at which time
Great American became a wholly owned subsidiary of Mrs. Fields. At the same
time Mrs. Fields also purchased the stock of two Great American franchisees,
Deblan Corporation and Chocolate Chip Cookies of Texas, Inc., together owning
and operating 29 Great American franchised stores, for total consideration of
$14.4 million. Deblan and Chocolate Chip were merged with and into Great
American at that time. On

September 9, 1998, Mrs. Fields acquired eight Great American franchise stores
from a Great American franchisee, for a purchase price of $1.9 million.

On October 5, 1998, Mrs. Fields purchased all of the retail cookie and
related business and operations of eleven Great American franchise stores from
a Great American franchisee for a total purchase price of $2.8 million.

On November 19, 1998, Mrs. Fields, under a stock purchase agreement among
Pretzelmaker Holdings, Inc., holders of all outstanding capital stock of
Pretzelmaker, and Mrs. Fields, acquired all of the outstanding capital stock of
Pretzelmaker for $5,739,000, including $5,419,000 related to outstanding
capital stock and $320,000 related to severance payments in lieu of outstanding
stock options, and assumed liabilities totaling $1,299,000.

There have not been any changes, modifications or amendments made to the
outstanding notes.

Year 2000

Management has assessed the Year 2000 issue and has determined that all
internal information technology systems including financial software, corporate
networks, the AS400 system and all other systems are Year 2000 compliant with
the exception of:

(1) systems used for collecting and communicating sales data from retail
locations, and

(2) internally developed plant production and distribution software.

This assessment was based primarily on independent, third party verification
from Mrs. Fields' vendors and suppliers.

Mrs. Fields is currently replacing its sales collection systems with software
and hardware that is Year 2000 compliant. Programming and development of the
software is complete and has been installed in approximately 10% of our stores.
We project installation will be complete by August 1999. The estimated cost of
this project is $1.9 million and includes software development and new store
computers and registers. The costs to complete this project are included in
Mrs. Fields' 1998 and 1999 budgets. Funding for this project is being provided
by internal cash flow and by a lease finance company.

Replacement of the plant production and distribution software will take place
in the first quarter of 1999 at an estimated cost of $50,000. To date, there
has not been any work done on the software, however due to the limited changes
that are required, we are confident that this time table will be met. No
information technology projects have been deferred as a result of Mrs. Fields'
Year 2000 efforts.

Mrs. Fields is neither dependent on the proper operation of the sales
collection systems nor the plant production and distribution software to run
the day-to-day operations of the business. Therefore, failure or malfunction of
these systems due to untimely or incomplete remediation would not have a
material adverse effect on our results of operations.

Management is in the process of assessing Year 2000 issues with respect to
its significant vendors and financial institutions as to their compliance plans
and whether any Year 2000 issues will impede the ability of such vendors to
continue providing goods and services to Mrs. Fields. Failure of Mrs. Fields'
key suppliers to remedy their own Year 2000 issues could delay shipments of
essential products, thereby disrupting Mrs. Fields' operations. Furthermore,
Mrs. Fields relies on various service providers, such as utility and
telecommunication service companies, which are beyond Mrs. Fields' control.
This assessment is approximately 20% complete with final completion anticipated
by the end of the second quarter of 1999. Based upon the results of the
assessment to date, management is not aware of any Year 2000 issues relating to
its significant vendors, financial institutions or its non-information
technology systems.

Mrs. Fields does not have a contingency plan in place to address untimely or
incomplete remediation of Year 2000 issues, but intends to develop such a plan
during the first half of 1999. These contingency plans are expected to address
issues related to significant vendors and financial institutions.

Results of Operations of Mrs. Fields and its Predecessors

The following table sets forth, for the periods indicated, certain
information relating to the operations of Mrs. Fields and its predecessors
expressed in thousands of dollars and percentage changes from period to period.
Annual data in the table reflects the combined results of the predecessors for
fiscal year 1995, the combined results of the predecessors (for the period
December 31, 1995 through September 17, 1996) and Mrs. Fields (for the period
September 18, 1996 through December 28, 1996), the consolidated results of Mrs.
Fields for the 53 weeks ended January 3, 1998 ("fiscal year 1997"), the 39
weeks ended September 27, 1997 and October 3, 1998. In order for the
presentations to be comparable, certain historical financial statement
information for the predecessors has been reclassified to be consistent with
the Mrs. Fields historical financial statement presentation.

For the 52 % of For the 53 % of
Weeks Ended Change Weeks Change
------------------------- from Ended from
December 30, December 28, 1995 to January 3, 1996 to
1995 1996 1996 1998 1997
------------ ------------ ------- ---------- -------
(dollars in thousands)

Statement of Operations
Data:
Revenues:
Net store and batter
sales................. $145,537 $123,930 (14.8)% $123,987 -- %
Franchising revenues... 1,870 2,414 29.1 3,574 48.1
Licensing revenues..... 2,031 1,656 (18.5) 2,028 22.5
Other revenue, net..... 2,092 1,208 (42.3) 918 (24.0)
-------- -------- --------
Total revenues......... 151,530 129,208 (14.7) 130,507 1.0
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 83,997 69,209 (17.6) 66,832 (3.4)
Food cost of sales..... 33,369 29,115 (12.7) 28,127 (3.4)
General and
administrative
expenses.............. 24,828 20,557 (17.2) 16,730 (18.6)
Depreciation and
amortization.......... 10,427 9,192 (11.8) 10,403 13.2
-------- -------- --------
Total operating costs
and expenses.......... 152,621 128,073 (16.1) 122,092 (4.7)
Interest expense........ (4,407) (4,842) 9.9 (7,830) 61.7
Interest income......... 88 141 60.2 246 74.4
Other income (expense).. 946 (2,422) (356.0) (1,805) (25.5)
-------- -------- --------
Net loss................ $ (4,464) $ (5,988) 34.1 % $ (974) (83.7)%
======== ======== ========
Supplemental
Information:
Core Stores:
Net store and batter
sales................. $ 93,775 $ 93,235 (0.6)% $104,316 11.9 %
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 44,495 44,963 1.1 50,858 13.1
Food cost of sales..... 21,703 22,274 2.6 22,677 1.8
Depreciation and
amortization.......... 5,579 4,932 (11.6) 3,896 (21.0)
-------- -------- --------
Total operating costs
and expenses.......... 71,777 72,169 0.5 77,431 7.3
-------- -------- --------
Core store
contribution........... $ 21,998 $ 21,066 (4.2)% $ 26,885 27.6 %
======== ======== ========
Stores in the Process of
Being Closed or
Franchised:
Net store sales......... $ 51,762 $ 30,695 (40.7)% $ 19,671 (35.9)%
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 39,502 24,246 (38.6) 15,974 (34.1)
Food cost of sales..... 11,666 6,841 (41.4) 5,450 (20.3)
Depreciation and
amortization.......... 2,938 1,541 (47.5) 45 (97.1)
-------- -------- --------
Total operating costs
and expenses.......... 54,106 32,628 (39.7) 21,469 (34.2)
-------- -------- --------
Stores in the process of
being closed or
franchised
contribution........... $ (2,344) $ (1,933) (17.5) $ (1,798) (7.0)
======== ======== ========
EBITDA(1) .............. $ 9,336 $ 10,327 10.6 % $ 18,818 82.2 %
======== ======== ========

For the 39 % of
Weeks Ended Change
------------------------ from
September 27, October 3, 1997 to
1997 1998 1998
------------- ---------- -------

Statement of Operations Data:
Revenues:
Net store and batter sales.................. $83,759 $89,938 7.4 %
Franchising revenues........................ 2,201 3,884 76.5
Licensing revenues.......................... 1,215 1,081 (11.0)
Other revenue, net.......................... 351 1,056 200.9
------- -------
Total revenues.............................. 87,526 95,959 9.6
------- -------
Operating costs and expenses:
Selling and store occupancy costs........... 48,200 52,357 8.6
Food cost of sales.......................... 19,549 21,588 10.4
General and administrative expenses......... 10,803 12,621 16.8
Depreciation and amortization............... 6,596 9,707 47.2
------- -------
Total operating costs and expenses.......... 85,148 96,273 13.1
Interest expense............................. (5,070) (8,981) 77.1
Interest income.............................. 153 530 246.4
Other income (expense)....................... (685) (925) 35.0
------- -------
Net loss..................................... $(3,224) $(9,690) 200.6 %
======= =======
Supplemental Information:
Core stores:
Net store and batter sales................... $69,713 $79,094 13.5 %
Operating costs and expenses:
Selling and store occupancy costs........... 36,222 42,826 18.2
Food cost of sales.......................... 15,536 18,500 19.1
Depreciation and amortization............... 2,742 3,839 40.0
------- -------
Total operating costs and expenses.......... 54,500 65,165 19.6
------- -------
Core store contribution...................... $15,213 $13,929 (8.4)%
======= =======
Stores in the Process of Being Closed or
Franchised:
Net store sales.............................. $14,046 $10,844 (22.8)%
------- -------
Operating costs and expenses:
Selling and store occupancy costs........... 11,978 9,531 (20.4)
Food cost of sales.......................... 4,013 3,088 (23.1)
Depreciation and amortization............... 54 350 548.1
------- -------
Total operating costs and expenses.......... 16,045 12,969 (19.2)
------- -------
Stores in the process of being closed or
franchised contribution..................... $(1,999) $(2,125) 6.3 %
======= =======
EBITDA(1).................................... $ 8,974 $ 9,393 4.7 %
======= =======

(1) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interests, preferred stock accretion and dividends
of subsidiaries and other income (expense). EBITDA is not intended to
represent cash flows from operations as defined by generally accepted
accounting principles and should not be considered as an alternative to net
income (loss) as an indicator of operating performance or to cash flows as
a measure of liquidity. EBITDA has been included herein because it is one
of the indicators by which Mrs. Fields assesses its financial performance
and its capacity to service its debt.

39 Weeks Ended October 3, 1998 Compared to the 39 Weeks Ended September 27,
1997

Company-owned and Franchised or Licensed Store Activity

As of October 3, 1998, there were 568 company-owned stores and 765 franchised
or licensed stores in operation. The store activity for the 39 weeks ended
September 27, 1997 and October 3, 1998 is summarized as follows:

1997 1998
-------------------- --------------------
Company- Franchised Company- Franchised
owned or Licensed owned or Licensed
-------- ----------- -------- -----------

Stores open as of the beginning of
the fiscal year..................... 482 418 481 553
Stores opened (including relocations
and acquisitions)................... 84 205 116 278
Stores closed (including
relocations)........................ (4) (86) (9) (65)
Non-continuing company-owned (exit
plan) stores closed
(September 18, 1996 forward)........ (63) -- (21) --
Stores sold to franchisees........... (3) 3 (4) 4
Non-continuing company-owned (exit
plan) stores franchised
(September 18, 1996 forward)........ (4) 4 (13) 13
Stores acquired from franchisees..... 4 (4) 18 (18)
--- --- --- ---
Stores open as of the end of the
period.............................. 496 540 568 765
=== === === ===

Revenues

Net Stores Sales. Total net store sales increased $6,179,000, or 7.4%, from
$83,759,000 to $89,938,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997.

Net store sales from continuing company-owned stores and batter sales
increased $9,381,000, or 13.5%, from $69,713,000 to $79,094,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
The increase in net store sales from continuing company-owned stores was
primarily attributable to:

(1) the operation of 69 Pretzel Time continuing company-owned stores
acquired in connection with the acquisition of H&M and Pretzel Time in July
1997,

(2) the operation of 52 Great American stores acquired in connection with
the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August and September 1998
and

(3) batter sales to Great American franchisees.

This increase in net store sales from continuing company-owned stores was
offset in part by the negative effect of a calendar shift. Mrs. Fields' year
end was December 28 in 1996 and January 3, 1998 in 1997. As a result, the New
Year's holiday week fell in the first quarter of 1997 and again in the fourth
quarter of 1997. The first quarter of 1998 did not benefit from the New Year's
holiday sales. Had this holiday been in the first quarter of 1998, net store
sales from continuing company-owned stores would have been approximately
$800,000 greater or $79,894,000.

Based on stores that have been open for at least two years (adjusted for the
calendar shift), system-wide continuing company-owned store sales were down
1.0% during the 39 weeks ended October 3, 1998 compared to the same period in
1997.

Net store sales from stores in the process of being closed or franchised
decreased $3,202,000, or 22.8%, from $14,046,000 to $10,844,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
This decrease results from closing 21 stores and franchising 13 stores during
the 39 weeks ended October 3, 1998 and the effect of closing or franchising 79
stores subsequent to December 28, 1996 and prior to the 39 week period ended
October 3, 1998.

Franchising Revenues. Franchising revenues increased $1,683,000, or 76.5%,
from $2,201,000 to $3,884,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997. The increase in franchising revenues
was primarily attributable to royalties earned from 141 Pretzel Time franchised
stores obtained in connection with the acquisition of H&M and Pretzel Time in
1997 and the 211 Great American franchised stores obtained in connection with
the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August and September 1998.

Licensing Revenues. Licensing revenues decreased $134,000, or 11.0%, from
$1,215,000 to $1,081,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. The decrease in licensing revenues was
primarily attributable to a dry mix license fee earned during the 39 weeks
ended September 27, 1997 that did not recur in the 39 weeks ended October 3,
1998.

Other Revenue, net. Other revenue, net, increased $705,000, or 200.9%, from
$351,000 to $1,056,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. The increase in other revenue, net, was
primarily attributable to area development fees earned from certain franchised
stores obtained in 1997, an increase in contribution from Mrs. Fields' mail
order division and miscellaneous other income.

Total Revenues. Total revenues increased by $8,433,000, or 9.6%, from
$87,526,000 to $95,959,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997 due to the reasons discussed above.

Operating Costs and Expenses

Selling and Store Occupancy Costs. Total selling and store occupancy costs
increased $4,157,000, or 8.6%, from $48,200,000 to $52,357,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.

Selling and store occupancy costs for continuing company-owned stores
increased by $6,604,000, or 18.2%, from $36,222,000 to $42,826,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
Within this overall increase, selling expenses for continuing company-owned
stores increased by $4,158,000, or 20.0%, from $20,804,000 to $24,962,000 for
the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September 27,
1997. The increase in selling expenses was primarily attributable to the 69
Pretzel Time continuing company-owned stores acquired in connection with the
acquisitions of H&M and Pretzel Time in 1997, the 52 Great American continuing
company-owned stores acquired in connection with the acquisitions of Great
American, Deblan and Chocolate Chip, and eight additional Great American
franchised stores in August and September 1998, and the effect of the minimum
wage increasing to $5.15 from $4.75 on September 1, 1997. Store occupancy costs
for continuing company-owned stores increased $2,446,000, or 15.9%, from
$15,418,000 to $17,864,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997. The increase in store occupancy costs
was primarily attributable to the increase in the number of stores discussed
above, Mrs. Fields' reacquiring 18 continuing company-owned stores from
franchisees during the 39 weeks ended October 3, 1998 and lease renewal
increases.

Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $2,447,000, or 20.4%, from $11,978,000 to $9,531,000
for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September
27, 1997. This decrease was primarily the result of closing 21 stores and
franchising 13 stores during the 39 weeks ended October 3, 1998 and the effect
of closing or franchising 79 stores subsequent to December 28, 1996 and prior
to the 39 week period ended October 3, 1998.

Food Cost of Sales. Total food cost of sales increased $2,039,000, or 10.4%,
from $19,549,000 to $21,588,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997.

Food cost of sales for continuing company-owned stores increased $2,964,000,
or 19.1%, from $15,536,000 to $18,500,000 for the 39 weeks ended October 3,
1998. This increase was primarily the result of

the addition of 69 Pretzel Time continuing company-owned stores in July 1997
and 52 Great American continuing company-owned stores acquired in connection
with the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August 1998. Food cost of sales
also increased due to the addition of the Great American batter facility in
August 1998 which produces batter for the Great American stores and the
increasing cost of butter. Butter is one of the main ingredients in a variety
of our products and is a condiment for other products. The price of butter has
increased from $0.78/lb. at the beginning of 1997 to a peak of $2.92/lb. in
September 1998.

The market for butter has been in a highly volatile state. During the last
week of September 1998, the price of butter increased to $2.92/lb. from
$2.05/lb. Management believes that the increased butter costs will continue to
negatively impact food cost of sales for the remainder of 1998. Additionally,
distribution costs increased during the 13 weeks ended October 3, 1998 as Mrs.
Fields' changed distributors to improve product availability and the
reliability of service to the stores.

Food cost of sales for stores in the process of being closed or franchised
decreased $925,000, or 23.1%, from $4,013,000 to $3,088,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. This
decrease was primarily the result of closing 21 stores and franchising 13
stores during the 39 weeks ended October 3, 1998 and the effect of closing or
franchising 79 stores subsequent to December 28, 1996 and prior to the 39 week
period ended October 3, 1998.

General and Administrative Expenses. General and administrative expenses
related to overhead at the operating company level increased $1,818,000, or
16.8%, from $10,803,000 to $12,621,000 for the 39 weeks ended October 3, 1998
compared to the 39 weeks ended September 27, 1997. The increase in expenses
related to overhead at the operating company level was primarily attributable
to the acquisitions of H&M and Pretzel Time in 1997 and the acquisitions of
Great American, Deblan and Chocolate Chip in 1998.

Depreciation and Amortization Expense. Total depreciation and amortization
expense increased by $3,111,000, or 47.2%, from $6,596,000 to $9,707,000 for
the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September 27,
1997. This increase was primarily attributable to increased goodwill from the
acquisitions of H&M and Pretzel Time in 1997 and the acquisitions of Great
American, Deblan and Chocolate Chip in 1998.

Depreciation and amortization expense for continuing company-owned stores
increased $1,097,000, or 40.0%, from $2,742,000 to $3,839,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. This
increase in depreciation and amortization expense was primarily attributable to
the addition of 69 Pretzel Time continuing company-owned stores in July 1997
and 52 Great American continuing company-owned stores in August and September
1998.

Total Operating Costs and Expenses. Total operating costs and expenses
increased by $11,125,000, or 13.1%, from $85,148,000 to $96,273,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997,
for the reasons discussed above.

Interest Expense. Interest expense increased $3,911,000, or 77.1%, from
$5,070,000 to $8,981,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. This increase was primarily attributable to
interest expense on the $100,000,000 high yield notes that were placed in
November 1997 and the $40,000,000 high yield notes placed in August 1998.

Interest Income. Interest income increased $377,000, or 246.4%, from $153,000
to $530,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks
ended September 27, 1997. This increase was primarily the result of interest
earned on excess cash provided by the $100,000,000 high yield notes that were
placed in November 1997 and the $40,000,000 high yield notes placed in August
1998.

Other Expenses. Other expenses increased $240,000, or 35.0%, from $685,000 to
$925,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended
September 27, 1997. This increase was primarily attributable to minority
interest from the acquisitions of H&M and Pretzel Time in 1997 and acquisition
expenses incurred during the 39 weeks ended October 3, 1998.

Net Loss. The net loss increased by $6,466,000, or 200.6%, from $3,224,000 to
$9,690,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks
ended September 27, 1997 due to the combination of factors described above.

Income from Continuing Company-Owned Stores. Income from continuing company-
owned stores decreased by $1,284,000, or 8.4%, from $15,213,000 to $13,929,000
for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September
27, 1997. Income from continuing company-owned stores was negatively impacted
by a 1.0% decline in sales from stores that have been open at least two years
and by the increases in selling and store occupancy costs, food cost of sales
and depreciation and amortization described above. Income from continuing
company-owned stores was also negatively impacted by a calendar shift whereby
Mrs. Fields' year end was December 28 for 1996 and January 3, 1998 for 1997. As
a result, the New Year's holiday week fell in the first quarter of 1997 and
again in the fourth quarter 1997. The first quarter of 1998 did not benefit
from the New Year's holiday sales. Had this holiday been in the first quarter
of 1998, income from continuing company-owned stores would have been
approximately $600,000 greater or $14,529,000.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income from stores in the process of being closed or franchised
increased by $126,000, or 6.3%, from $1,999,000 to $2,125,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. The
increase in negative income was primarily attributable to the addition of 52
stores from the acquisitions of Great American, Deblan and Chocolate Chip, and
eight additional Great American franchised stores in August and September 1998,
offset in part by closing 21 stores and franchising 13 stores during the 13
weeks ended October 3, 1998. In addition, 79 stores were closed or franchised
subsequent to December 28, 1996 and prior to the 39 week period ended October
3, 1998.

EBITDA. Earnings before interest, taxes, depreciation and amortization,
preferred stock accretion and dividends of subsidiaries, minority interest and
other income (expense) ("EBITDA") is presented as management believes that
certain investors find it to be a useful tool for measuring the ability to
service debt. EBITDA does not represent net income or cash flows from
operations as these terms are defined by generally accepted accounting
principles and does not necessarily indicate whether cash flows have been or
will be sufficient to fund cash needs. EBITDA increased by $419,000, or 4.7%,
from $8,974,000 to $9,393,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997 for the reasons discussed above. Had
the New Year's holiday week been in the first quarter of 1998, EBITDA would
have been approximately $600,000 greater, or $9,993,000.

Mrs. Fields generated $676,000 of cash from operating activities during the
39 weeks ended October 3, 1998, primarily from store sales and franchising and
licensing revenues less costs and expenses incurred to generate the store sales
and franchising and licensing revenues and less interest paid on the
$100,000,000 high yield notes. Mrs. Fields utilized $34,315,000 of cash from
investing activities during the 39 weeks ended October 3, 1998, primarily for
the acquisitions of Great American, Deblan and Chocolate Chip, capital
expenditures relating to store remodels and for renovations. Mrs. Fields
generated $22,498,000 of cash from financing activities during the 39 weeks
ended October 3, 1998, primarily from the issuance of new high yield notes and
an equity infusion from Mrs. Fields' Holding net of principal payments to
retire Great American long-term debt and payment of acquisition costs.

53 Weeks Ended January 3, 1998 ("Fiscal Year 1997") Compared to the 52 Weeks
Ended December 28, 1996 ("Fiscal Year 1996") (Comprised of the Mrs. Fields
Inc., Original Cookie and Hot Sam Pre-Acquisition Period of December 31, 1995
through September 17, 1996 and the Mrs. Fields Post-Acquisition Period of
September 18, 1996 through December 28, 1996)

Company-owned and Franchised or Licensed Store Activity

As of January 3, 1998, there were 481 company-owned stores and 553 franchised
or licensed stores in operation. The store activity for the 52 weeks ended
December 28, 1996 and the 53 weeks ended January 3, 1998 is summarized as
follows:

1996 1997
-------------------- --------------------
Company- Franchised Company- Franchised
owned or Licensed owned or Licensed
-------- ----------- -------- -----------

Stores open as of the beginning of
the fiscal year..................... 540 415 482 418
Stores opened (including
relocations)........................ 5 118 3 76
Stores acquired through business
acquisitions........................ -- -- 83 141
Stores closed (including
relocations)........................ (39) (122) (7) (89)
Non-continuing company-owned (exit
plan) stores closed
(September 18, 1996 forward)........ (17) -- (73) --
Stores sold to franchisees........... (9) 9 (3) 3
Non-continuing company-owned (exit
plan) stores franchised
(September 18, 1996 forward)........ (3) 3 (9) 9
Stores acquired from franchisees..... 5 (5) 5 (5)
--- ---- --- ---
Stores open as of the end of the
fiscal year......................... 482 418 481 553
=== ==== === ===

The activity reflected above resulted in 26,572 and 25,520 company-owned
equivalent store weeks and 21,658 and 25,732 franchisee/licensee equivalent
store weeks during the 52 weeks ended December 28, 1996 and the 53 weeks ended
January 3, 1998, respectively.

Revenues

Net Store Sales. Total net store sales increased $57,000, or less than 1.0%,
from $123,930,000 to $123,987,000 for the 53 weeks ended January 3, 1998
compared to the 52 weeks ended December 28, 1996.

Net store sales from continuing company-owned stores increased $11,081,000,
or 11.9%, from $93,235,000 to $104,316,000 for the 53 weeks ended January 3,
1998 compared to the 52 weeks ended December 28, 1996. The increase in net
store sales from continuing company-owned stores was primarily attributable to
the operation of Pretzel Time continuing company-owned stores obtained in
connection with the acquisitions of H&M and Pretzel Time in July 1997 and an
increase in average transaction amounts resulting from the introduction of
product line extensions and aggressive marketing initiatives, offset in part by
declining transaction counts in certain concepts. Also, three new continuing
company-owned stores were opened and five stores were acquired from franchises
during the 53 weeks ended January 3, 1998.

Based on stores that have been open for at least two years (adjusted for the
calendar shift), system-wide continuing company-owned store sales were up 0.8%
during the 53 weeks ended January 3, 1998 compared to the 52 weeks ended
December 28, 1996.

Net store sales from stores in the process of being closed or franchised
decreased $11,024,000, or 35.9%, from $30,695,000 to $19,671,000 for the 53
weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996.
This decrease results from the partial year effect of closing 73 stores and
franchising seven (net) stores during fiscal 1997 and the full year effect of
closing 56 stores and franchising seven (net) stores during fiscal year 1996.

Franchising Revenues. Franchising revenues increased $1,160,000, or 48.1%,
from $2,414,000 to $3,574,000 for the 53 weeks ended January 3, 1998 compared
to the 52 weeks ended December 28, 1996. The increase in franchising revenues
was primarily attributable to royalties earned from Pretzel Time franchised
stores obtained in connection with the acquisitions of H&M and Pretzel Time
coupled with new franchise openings in fiscal year 1997 and the full year
effect of new franchise openings in fiscal year 1996.

Licensing Revenues. Licensing revenues increased $372,000, or 22.5%, from
$1,656,000 to $2,028,000 for the 53 weeks ended January 3, 1998 compared to the
52 weeks ended December 28, 1996. The increase in licensing revenues is
primarily attributable to licensing fees earned on new license agreements
entered into during the 53 weeks ended January 3, 1998, and increased royalties
received from existing licensees.

Other Revenue, Net. Other revenue, net decreased $290,000, or 24.0%, from
$1,208,000 to $918,000 for the 53 weeks ended January 3, 1998 compared to the
52 weeks ended December 28, 1996. The decrease in other revenue, net is
primarily attributable to a favorable adjustment resulting from Mrs. Fields re-
negotiating a contract with one of its vendors during the 52 weeks ended
December 28, 1996 that did not recur during the 53 weeks ended January 3, 1998.

Total Revenues. Total revenues increased by $1,299,000, or 1.0%, from
$129,208,000 to $130,507,000 for the 53 weeks ended January 3, 1998 compared to
the 52 weeks ended December 28, 1996, for the reasons discussed above.

Operating Costs and Expenses

Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $2,377,000, or 3.4%, from $69,209,000 to $66,832,000 for the 53 weeks
ended January 3, 1998 compared to the 52 weeks ended December 28, 1996.

Selling and store occupancy costs for continuing company-owned stores
increased by $5,895,000, or 13.1%, from $44,963,000 to $50,858,000 for the 53
weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996.
Within this overall increase, selling expenses increased by $4,029,000, or
15.7%, from $25,650,000 to $29,679,000 for the 53 weeks ended January 3, 1998
compared to the 52 weeks ended December 28, 1996. The increase in selling
expenses was primarily attributable to an increase in the minimum wage during
the third quarter of 1996 from $4.15 to $4.75 an hour and an increase in labor
hours to support the increase in sales. Store occupancy costs increased
$1,866,000, or 9.7%, from $19,313,000 to $21,179,000 for the 53 weeks ended
January 3, 1998 compared to the 52 weeks ended December 28, 1996. The increase
in store occupancy costs was primarily attributable to the addition of Pretzel
Time continuing company-owned stores in July 1997, and the opening of three
continuing company-owned stores and acquiring five stores from franchises
during the 53 weeks ended January 3, 1998 coupled with lease renewal increases.

Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $8,272,000, or 34.1%, from $24,246,000 to $15,974,000
for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December
28, 1996. This decrease is primarily the result of closing 73 stores and
franchising seven (net) stores during fiscal year 1997 and the full year effect
of closing 56 stores and franchising seven (net) stores during fiscal year
1996.

Food Cost of Sales. Total food cost of sales decreased $988,000, or 3.4%,
from $29,115,000 to $28,127,000 for the 53 weeks ended January 3, 1998 compared
to the 52 weeks ended December 28, 1996.

Food cost of sales for continuing company-owned stores increased $403,000, or
1.8%, from $22,274,000 to $22,677,000 for the 53 weeks ended January 3, 1998.
This increase is primarily the result of the addition in July 1997 of Pretzel
Time continuing company-owned stores, which stores have a lower food cost of
sales than cookie stores, offset by an aggressive product waste control program
which was uniformly applied to all product lines early in the year.
Additionally, Mrs. Fields re-negotiated certain vendor contracts to capitalize
on Mrs. Fields' economies of scale.

Food cost of sales for stores in the process of being closed or franchised
decreased $1,391,000, or 20.3%, from $6,841,000 to $5,450,000 for the 53 weeks
ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This
decrease is primarily the result of closing 73 stores and franchising seven
(net) stores during fiscal year 1997 and the full year effect of closing 56
stores and franchising seven (net) stores during fiscal year 1996.

General and Administrative Expenses. General and administrative expenses
related to overhead costs at the operating company level decreased $3,827,000,
or 18.6%, from $20,557,000 to $16,730,000 for the 53 weeks ended January 3,
1998 compared to the 52 weeks ended December 28, 1996. The decrease in expenses
related to overhead costs at the operating company level was primarily
attributable to the cost savings achieved by combining the operations of Mrs.
Fields Inc. and subsidiaries, Original Cookie and Hot Sam and Pretzel Time
which resulted in:

(1) reduced headcount with corresponding decreases in
administrative salaries and benefits;

(2) decreased professional service fees, including legal and
accounting services; and

(3) decreased corporate office expenditures, including general
insurance, repairs and maintenance and utilities as a direct
result of closing the Original Cookie and Hot Sam
headquarters in Cleveland, Ohio, the Pretzel Time
headquarters in Harrisburg, Pennsylvania and the H&M
headquarters in Boise, Idaho.

Depreciation and Amortization Expense. Total depreciation and amortization
expense increased by $1,211,000, or 13.2%, from $9,192,000 to $10,403,000 for
the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28,
1996.

Depreciation and amortization expense for continuing company-owned stores
decreased $1,036,000, or 21.0%, from $4,932,000 to $3,896,000 for the 53 weeks
ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The
decrease in depreciation and amortization expense was primarily attributable to
Mrs. Fields recording the acquired assets of Mrs. Fields Inc. and subsidiaries,
Original Cookie and Hot Sam at their fair values at the time of purchase on
September 17, 1996, resulting in an overall reduction to the store asset base
and the corresponding depreciation. This decrease is partially offset by
additional depreciation expense resulting from the addition of Pretzel Time
continuing company-owned stores in July 1997, three newly opened continuing
company-owned stores and five stores acquired from franchises in fiscal year
1997.

Total Operating Costs and Expenses. Total operating costs and expenses
decreased by $5,981,000, or 4.7%, from $128,073,000 to $122,092,000 for the 53
weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996,
for the reasons discussed above.

Interest Expense. Interest expense increased $2,988,000, or 61.7%, from
$4,842,000 to $7,830,000 for the 53 weeks ended January 3, 1998 compared to the
52 weeks ended December 28, 1996. This increase is primarily attributable to an
increase in interest expense as a result of the debt incurred to fund the
purchase of the assets of Mrs. Fields Inc. and subsidiaries, Original Cookie
and Hot Sam on September 17, 1996.

Other Expenses. Other expenses decreased $617,000, or 25.5%, from $2,422,000
to $1,805,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks
ended December 28, 1996. This decrease was primarily attributable to a decrease
in income tax provision, offset in part by an increase in accretion and
dividends on preferred stock of subsidiaries.

Net Loss. The net loss decreased by $5,014,000, or 83.7%, from $5,988,000 to
$974,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended
December 28, 1996. The net loss equaled 0.7% of total revenues during the 53
weeks ended January 3, 1998 compared to 4.6% of total revenues during the 52
weeks ended December 28, 1996. The decrease in net loss is primarily due to
cost savings achieved by combining the operations of Mrs. Fields Inc. and
subsidiaries, Original Cookie and Hot Sam, cost savings associated with the
acquisitions of H&M and Pretzel Time and improved store operations.

Income from Continuing Company-Owned Stores. The income from continuing
company-owned stores increased by $5,819,000, or 27.6%, from $21,066,000 to
$26,885,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks
ended December 28, 1996 due to the combination of the factors described above.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income from stores in the process of being closed or franchised
decreased by $135,000, or 7.0%, from $1,933,000 to $1,798,000 for the 53 weeks
ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The
decrease in negative income was primarily attributable to closing 73 stores and
franchising seven (net) stores during fiscal year 1997 and the full year effect
of closing 56 stores and franchising seven (net) stores during fiscal year
1996.

EBITDA. EBITDA is presented as management believes that certain investors
find it to be a useful tool for measuring the ability to service debt. EBITDA
does not represent net income or cash flows from operations as these terms are
defined by generally accepted accounting principles and does not necessarily
indicate whether cash flows have been or will be sufficient to fund cash needs.
EBITDA increased by $8,491,000, or 82.2%, from $10,327,000 to $18,818,000 for
the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28,
1996, for the reasons described above.

Mrs. Fields generated $919,000 of cash from operating activities during the
53 weeks ended January 3, 1998, primarily from store sales and franchising and
licensing revenues less costs and expenses incurred to generate the store sales
and franchising and licensing revenues. Mrs. Fields utilized $15,505,000 of
cash from investing activities during the 53 weeks ended January 3, 1998,
primarily for the contributions by Mrs. Fields' Holding to Mrs. Fields of the
business of Mrs. Fields' Pretzel Concepts and 54% of the shares of common stock
of Pretzel Time and for capital expenditures relating to store remodels and for
renovations. Mrs. Fields generated $24,164,000 of cash from financing
activities during the 53 weeks ended January 3, 1998, primarily from the
issuance of $108,250,000 in new long term debt, the proceeds of which were used
in part to repay long term debt, accrued interest, debt financing costs and a
cash dividend to Mrs. Fields' Holding.

Fiscal Year Ended December 28, 1996 (Comprised of the Mrs. Fields Inc.,
Original Cookie and Hot Sam Pre-Acquisition Period of December 31, 1995 through
September 17, 1996 and the Mrs. Fields Post-Acquisition Period of September 18,
1996 through December 28, 1996) Compared to the 52 Weeks Ended December 30,
1995 ("Fiscal Year 1995")

Company-owned and Franchised or Licensed Store Activity

As of December 28, 1996, there were 482 company-owned stores and 418
franchised or licensed stores in operation. The store activity for the 52 weeks
ended December 30, 1995 and the 52 weeks ended December 28, 1996 is summarized
as follows:

1995 1996
-------------------- --------------------
Company- Franchised Company- Franchised
owned or Licensed owned or Licensed
-------- ----------- -------- -----------

Stores open as of the beginning of
the fiscal year..................... 669 324 540 415
Stores opened (including
relocations)........................ 4 69 5 118
Stores closed (including
relocations)........................ (51) (60) (39) (122)
Non-continuing company-owned (exit
plan) stores closed (September 18,
1996 forward)....................... -- -- (17) --
Stores sold to franchisees........... (83) 83 (9) 9
Non-continuing company-owned (exit
plan) stores franchised (September
18, 1996 forward)................... -- -- (3) 3
Stores acquired from franchisees..... 1 (1) 5 (5)
--- --- --- ----
Stores open as of the end of the
fiscal year......................... 540 415 482 418
=== === === ====

The activity reflected above resulted in 31,434 and 26,572 company-owned
equivalent store weeks and 19,214 and 21,658 franchisee/licensee equivalent
store weeks during the fiscal years 1995 and 1996, respectively.

Revenues

Net Store Sales. Total net store sales decreased $21,607,000, or 14.8%, from
$145,537,000 to $123,930,000 for fiscal year 1996 compared to fiscal year 1995.

Net store sales from continuing company-owned stores decreased $540,000, or
0.6%, from $93,775,000 to $93,235,000 for fiscal year 1996 compared to fiscal
year 1995. The decrease in net store sales from continuing company-owned stores
was primarily attributable to a decline in customer counts from fiscal year
1995 to fiscal year 1996, partially offset by an increase in the average sales
price resulting from retail pricing increases and aggressive marketing
initiatives.

Based on stores that have been open at least two years, system-wide
continuing company-owned store sales were down 0.7% for fiscal year 1996
compared to fiscal year 1995.

Net store sales from stores in the process of being closed or franchised
decreased $21,067,000, or 40.7%, from $51,762,000 to $30,695,000 for fiscal
year 1996 compared to fiscal year 1995. This decrease is primarily the result
of closing 56 stores and franchising seven (net) stores during the year.

Franchising Revenues. Franchising revenues increased $544,000, or 29.1%, from
$1,870,000 to $2,414,000 for fiscal year 1996 compared to fiscal year 1995. The
increase in franchising revenues was primarily attributable to a full year of
royalty revenues from the 83 stores franchised in 1995, royalties earned from
new franchised stores in 1996 and development fees for new franchised
locations.

Licensing Revenues. Licensing revenues decreased $375,000, or 18.5%, from
$2,031,000 to $1,656,000 for fiscal year 1996 compared to fiscal year 1995. The
decrease in licensing revenue is primarily attributable to licensing fees
earned in fiscal year 1995 that did not recur in fiscal year 1996.

Other Revenue, net. Other revenue, net decreased $884,000, or 42.3%, from
$2,092,000 to $1,208,000 for fiscal year 1996 compared to fiscal year 1995. The
decrease in other revenue, net is primarily attributable to favorable insurance
adjustments in fiscal year 1995 that did not recur in fiscal year 1996.

Total Revenues. Total revenues decreased $22,322,000, or 14.7%, from
$151,530,000 to $129,208,000 for fiscal year 1996 compared to fiscal year 1995,
for the reasons discussed above.

Operating Costs and Expenses

Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $14,788,000, or 17.6%, from $83,997,000 during fiscal year 1995 to
$69,209,000 during fiscal year 1996.

Selling and store occupancy costs for continuing company-owned stores
increased by $468,000, or 1.1%, from $44,495,000 during fiscal year 1995 to
$44,963,000 during fiscal year 1996. Within this overall increase, selling
expenses decreased by $330,000, or 1.3%, from $25,980,000 to $25,650,000 for
fiscal year 1996 compared to fiscal year 1995. Store occupancy costs increased
$792,000, or 4.3%, from $18,521,000 to $19,313,000 for fiscal year 1996
compared to fiscal year 1995. The increase in store occupancy costs was
primarily attributable to the opening of five continuing company-owned stores
and acquiring five stores from franchisees during fiscal year 1996 and renewed
lease rent increases.

Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $15,256,000, or 38.6%, from $39,502,000 to $24,246,000
for fiscal year 1996 compared to fiscal year 1995. This decrease is primarily
the result of closing 56 stores and franchising seven (net) stores during the
period.

Food Cost of Sales. Total food cost of sales decreased $4,254,000, or 12.7%,
from $33,369,000 during fiscal year 1995 to $29,115,000 during fiscal year
1996.

Food cost of sales for continuing company-owned stores increased $571,000, or
2.6%, from $21,703,000 during fiscal year 1995 to $22,274,000 during fiscal
year 1996. The increase was primarily attributable to an increase in the costs
of butter of 40.8% over 1995, and an increase in distribution costs as a result
of Mrs. Fields changing its distribution channels for its Mrs. Fields brand
stores. Additionally, management introduced several product line extensions,
some with higher food costs, in an effort to offset the decline in customer
counts.

Food cost of sales for stores in the process of being closed or franchised
decreased $4,825,000, or 41.4%, from $11,666,000 to $6,841,000 for fiscal year
1996 compared to fiscal year 1995. This decrease is primarily the result of
closing 56 stores and franchising seven (net) stores during the period.

General and Administrative Expenses. General and administrative expenses
decreased $4,271,000, or 17.2%, from $24,828,000 to $20,557,000 for fiscal year
1996 compared to fiscal year 1995. The decrease in general and administrative
expenses was primarily attributable to the cost savings achieved by combining
the operations of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot
Sam which resulted in:

(1) reduced personnel headcount with corresponding decreases in
administrative salaries and benefits;

(2) decreased professional service fees, including legal and accounting
services; and

(3) decreased corporate office expenditures, including general insurance,
repairs and maintenance and utilities as a direct result of closing the
Original Cookie and Hot Sam headquarters building in Cleveland, Ohio.

Depreciation and Amortization Expense. Total depreciation and amortization
expense decreased $1,235,000, or 11.8%, from $10,427,000 during fiscal year
1995 to $9,192,000 during fiscal year 1996.

Depreciation and amortization expense for continuing company-owned stores
decreased $647,000, or 11.6%, from $5,579,000 to $4,932,000 for fiscal year
1996 compared to fiscal year 1995. The decrease in depreciation and
amortization expense was primarily attributable to Mrs. Fields recording the
acquired assets of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot
Sam at their fair values, in accordance with purchase accounting, resulting in
an overall reduction to the store asset base.

Total Operating Costs and Expenses. Total operating costs and expenses
decreased $24,548,000, or 16.1%, from $152,621,000 during fiscal year 1995 to
$128,073,000 during fiscal year 1996, for the reasons described above.

Interest Expense. Interest expense increased $435,000, or 9.9%, from
$4,407,000 to $4,842,000 for fiscal year 1996 compared to fiscal year 1995.
This increase was primarily attributable to an increase in interest expense due
to increased borrowings as a result of the purchase of the assets of Mrs.
Fields Inc. and subsidiaries, Original Cookie and Hot Sam on September 17,
1996.

Other Income (Expenses). Other income (expenses) decreased $3,368,000, or
356.0%, from $946,000 to $(2,422,000) for fiscal year 1996 compared to fiscal
year 1995. This decrease is primarily attributable to the Company recognizing a
loss on the sale of existing company-owned stores to franchisees during the 52
weeks ended December 28, 1996 compared to gain recognized on the sale of
existing company-owned stores to franchisees during 52 weeks ended December 30,
1995. Additionally, the income tax provision increased during the 52 weeks
ended December 28, 1996 primarily due to Mrs. Fields' profitability from the
date Mrs. Fields initiated operations (September 18, 1996) through December 28,
1996.

Net Loss. The net loss increased by $1,524,000, or 34.1%, from $4,464,000 to
$5,988,000 for fiscal year 1996 compared to fiscal year 1995. The net loss
equaled 4.6% of total revenues during 1996 compared to 2.9%

of total revenues during fiscal year 1995. The increase in net loss is in part
due to an increase in interest expense as a result of the increased borrowings
to facilitate the purchase of Mrs. Fields Inc. and subsidiaries, Original
Cookie and Hot Sam, net of a reduction in the income tax provision.

Income from Continuing Company-Owned Stores. The income from continuing
company-owned stores decreased by $932,000, or 4.2%, from $21,998,000 to
$21,066,000 for fiscal year 1996 compared to fiscal year 1995 due to the
combination of the factors described above.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income from stores in the process of being closed or franchised
decreased by $411,000, or 17.5%, from $2,344,000 to $1,933,000 for fiscal year
1996 compared to fiscal year 1995. The decrease in negative income was
primarily attributable to closing 56 stores and franchising seven (net) stores
during the year.

EBITDA. EBITDA is presented as management believes that certain investors
find it to be a useful tool for measuring the ability to service debt. EBITDA
does not represent net income or cash flows from operations as these terms are
defined by generally accepted accounting principles and does not indicate
whether cash flows have been or will be sufficient to fund cash needs. EBITDA
increased by $991,000, or 10.6%, from $9,336,000 to $10,327,000 for fiscal year
1996 compared to fiscal year 1995, for the reasons described above.

Mrs. Fields generated $6,784,000 of cash from operating activities during the
53 weeks ended December 28, 1996, primarily from store sales and franchising
and licensing revenues less costs and expenses incurred to generate the store
sales and franchising and licensing revenues.

Mrs. Fields utilized $22,716,000 of cash from investing activities during the
53 weeks ended December 28, 1996, primarily for the acquisition of the
predecessors and capital expenditures relating to store remodels and for
renovations.

Mrs. Fields generated $18,793,000 of cash from financing activities during
the 53 weeks ended December 28, 1996, primarily from the issuance of common and
preferred stock related to the formation of Mrs. Fields on September 17, 1996.

Liquidity and Capital Resources

General

Mrs. Fields' principal sources of liquidity are cash flows from operations,
cash on hand and available borrowings under Mrs. Fields' existing revolving
credit facilities. At October 3, 1998, Mrs. Fields had $5.1 million of cash and
$12.7 million of available borrowings under its credit facility. It is expected
that Mrs. Fields' principal uses of cash will be to provide working capital,
finance capital expenditures, including acquisitions and store closure costs,
meet debt service requirements and other general corporate purposes. Mrs.
Fields is highly leveraged. Based on current operations and anticipated cost
savings, Mrs. Fields believes that its sources of liquidity will be adequate to
meet its anticipated requirements for working capital, capital expenditures,
including acquisitions and store closure costs, scheduled debt service
requirements and other general corporate purposes. There can be no assurance,
however, that Mrs. Fields' business will continue to generate cash flows at or
above current levels or that cost savings can be achieved.

October 3, 1998 Compared to January 3, 1998

As of October 3, 1998, Mrs. Fields had liquid assets (cash and cash
equivalents and accounts receivable) of $12,658,000, a decrease of 36.7%, or
$7,340,000, from January 3, 1998 when liquid assets were $19,998,000. Cash
decreased $11,141,000, or 68.4%, to $5,146,000 at October 3, 1998 from
$16,287,000 at January 3, 1998. This decrease was primarily the result of cash
used for the acquisition of Great American, Deblan and Chocolate Chip, and
eight additional Great American franchised stores in August and September

1998, capital expenditures of $5,616,000 relating to store remodels and
renovations and interest payments of $6,291,000 primarily relating to the
$100,000,000 high yield notes which were put into place in November 1997,
offset in part, by $530,000 in interest income earned during the period on
excess cash.

Current assets decreased by $4,298,000, or 14.9%, to $24,525,000 at October
3, 1998 from $28,823,000 at January 3, 1998. This decrease was primarily the
result of a decrease in cash of $11,141,000, offset by an increase in accounts
receivable of $3,801,000 and an increase in inventories of $1,690,000.

Long-term assets increased $77,271,000, or 63.9%, to $198,132,000 at October
3, 1998 from $120,861,000 at January 3, 1998. This increase was primarily the
result of an increase in property and equipment and goodwill related to the
acquisition of Great American, Deblan and Chocolate Chip.

Current liabilities increased by $11,111,000, or 70.8%, to $26,801,000 at
October 3, 1998 from $15,690,000 at January 3, 1998. This increase is due to an
increase in accounts payable, accrued interest payable, accrued salaries, wages
and benefits, and accrued liabilities offset by a decrease in store closure
reserves, deferred income and sales taxes payable.

Mrs. Fields' working capital decreased by $15,409,000, or 117.3%, to
($2,276,000) at October 3, 1998 from $13,133,000 at January 3, 1998, for the
reasons described above.

Mrs. Fields utilized $34,315,000 of cash from investing activities during the
39 weeks ended October 3, 1998, primarily for the acquisition of Great
American, Deblan and Chocolate Chip and capital expenditures relating to store
remodels and for renovations.

Mrs. Fields generated $22,498,000 of cash from financing activities during
the 39 weeks ended October 3, 1998, primarily from the issuance of new high
yield notes and a capital contribution from Mrs. Fields Holding net of
principal payments to retire Great American long-term debt and payment of
acquisition costs.

The specialty cookie and pretzel businesses do not require the maintenance of
significant receivables or inventories; however, Mrs. Fields continually
invests in its business by upgrading and remodeling stores and adding new
stores, carts, and kiosks as opportunities arise. Investments in these long-
term assets, which are key to generating current sales, reduce Mrs. Fields'
working capital. During the 39 weeks ended October 3, 1998 and September 27,
1997, Mrs. Fields expended $5,616,000 and $3,216,000, respectively for capital
assets and expects to expend approximately $7,800,000 for all of 1998.
Management anticipates that these expenditures will be funded with cash
generated from operations and short-term borrowings under its credit facility
as needed.

Inflation

The impact of inflation on the earnings of the business has not been
significant in recent years. Most of Mrs. Fields' leases contain escalation
clauses. However, such leases are accounted for on a straight-line basis as
required by generally accepted accounting principles which minimizes
fluctuations in operating income. In addition, many of Mrs. Fields' employees
are paid hourly wages at the Federal minimum wage level. Minimum wage increases
will negatively impact Mrs. Fields' payroll costs in the short term, but
management believes such impact can be offset in the long term through
operational efficiency gains and, if necessary, through product price
increases.

Seasonality

Mrs. Fields' sales and income from store operations are highly seasonal
given the significant impact of its mall-based locations. Mrs. Fields' sales
tend to mirror customer traffic flow trends in malls which increase
significantly during the fourth quarter, primarily between Thanksgiving and the
end of the calendar year. Holiday gift purchases are also a significant factor
in increased sales in the fourth quarter.

The seasonality effect on income from store operations is even more
significant than on sales. The impact on income from store operations is more
significant due to the fixed nature of certain store level costs, such as
occupancy costs and store manager salaries. Once these fixed costs are covered
by store sales, the flow through of sales to income from store operations
becomes greater. Accordingly, the fourth quarter is a key determinant to
overall profitability for the year.

The following table presents certain unaudited historical quarterly financial
data for Mrs. Fields for fiscal years 1995, 1996 and 1997, and through the
third fiscal quarter of 1998.

First Second Third
Quarter Quarter Quarter Fourth
(13 Weeks) (13 Weeks) (13 Weeks) Quarter(1) Total Year
---------- ---------- ---------- ---------- ----------
(dollars in thousands)

Total sales
1997.................. $27,642 $26,198 $29,920 (2) $40,227 (2) $123,987
1996.................. $29,361 $28,640 $29,598 $ 36,331 $123,930
1995.................. $36,819 $34,723 $34,053 $ 39,942 $145,537
% of total store sales
1997.................. 22.3% 21.1% 24.1%(2) 32.5%(2) 100.0%
1996.................. 23.7% 23.1% 23.9% 29.3% 100.0%
1995.................. 25.3% 23.9% 23.4% 27.4% 100.0%
Total store cash
contribution(3)
1997.................. $ 4,854 $ 4,694 $ 6,699 (2) $ 12,781 (2) $ 29,028
1996.................. $ 4,355 $ 4,484 $ 6,830 $ 9,937 $ 25,606
1995.................. $ 5,349 $ 5,692 $ 5,839 $ 11,291 $ 28,171
% of total store
contribution
1997.................. 16.7% 16.2% 23.1%(2) 44.0%(2) 100.0%
1996.................. 17.0% 17.5% 26.7% 38.8% 100.0%
1995.................. 19.0% 20.2% 20.7% 40.1% 100.0%

- --------
(1) Fourth quarter 1995, 1996 and 1997 consists of 13 weeks, 13 weeks and 14
weeks, respectively.

(2) Includes the acquisitions of H&M and Pretzel Time.

(3) Total income from store operations before store depreciation and
amortization.

Consolidated Results of Operations of Cookies USA and Its Wholly Owned
Operating Subsidiary, Great American, Prior to the Great American Acquisition

As Great American is a significant subsidiary of Mrs. Fields, management's
discussion and analysis of financial condition and results of operations is
also included for the consolidated operations of Cookies USA and Great American
for the 52 weeks ended June 28, 1998 compared to the 52 weeks ended June 29,
1997, for the 52 weeks ended June 29, 1997 compared to the 52 weeks ended June
30, 1996, and the 52 weeks ended June 30, 1996 compared to the 52 weeks ended
June 29, 1995. See the historical financial statements and the related notes to
the historical financial statements of Cookies USA, Inc. and subsidiary
contained elsewhere in this prospectus.

References to the beliefs of the management of Great American or Cookies USA
in this discussion are to management prior to the acquisition of Great American
by Mrs. Fields. The factors cited in the following

discussion as contributing to changes in operating results are listed in order
of importance; however, unless otherwise indicated in such discussion, the
quantitative importance of any such factors cannot be determined by Great
American management and have not been stated.

The "forward-looking statements" contained in this section represent Great
American's expectations or beliefs concerning future events, including
statements regarding unit growth and cash requirements. Management cautions
that a number of important factors could, individually or in the aggregate,
cause actual results to differ materially from those stated in the forward-
looking statements including, without limitation, the following:

. consumer spending trends and habits,

. mall traffic trends,

. increased competition among snack retailers,

. economic conditions in the regions where Great American and its
franchisees operate stores,

. the ability to identify and secure suitable locations for new stores,

. the availability of experienced management and hourly employees, and

. the laws and regulations affecting labor and employee benefit costs.

Accounting Period

During the 52 weeks ended June 30, 1996, Great American changed its year end
from the last Thursday in the month of June to the last Sunday in the month of
June. As a result, three days were added to the fifty-two week period ended
Thursday, June 27, 1996 to effectively change Great American's fiscal year end
to Sunday, June 30, 1996. This change does not materially impact the
comparability of the years presented in the accompanying consolidated financial
statements.

52 Weeks Ended June 28, 1998 ("Fiscal Year 1998") Compared to 52 Weeks Ended
June 29, 1997 ("Fiscal Year 1997")

Company and Franchise Store Activity

As of June 28, 1998, there were 77 company-operated stores and 247 franchised
stores in operation. The store activity for fiscal year 1997 and for fiscal
year 1998 is summarized as follows:

Fiscal 1997 Fiscal 1998
------------------- -------------------
Company- Company-
operated Franchised operated Franchised
-------- ---------- -------- ----------

Stores open as of beginning of the
fiscal year.......................... 104 225 91 233
Stores opened (including
relocations)......................... 1 12 3 7
Stores closed (including
relocations)......................... (10) (8) (2) (8)
Stores sold to franchisees............ (12) 12 (15) 15
Stores acquired from franchisees...... 8 (8) 0 0
--- --- --- ---
Stores open as of the end of the
year................................. 91 233 77 247
Satellite locations as of the end of
the year............................. 9 30 4 32
--- --- --- ---
Total outlets as of the end of the
year............................... 100 263 81 279
=== === === ===

The above activity results in 5,161 company-operated equivalent store weeks
and 11,858 franchisee-operated equivalent store weeks during the fiscal year
ended June 29, 1997 compared to 4,288 company-operated equivalent store weeks
and 12,581 franchisee-operated equivalent store weeks during the fiscal year
ended June 28, 1998.

Total Revenue

Total revenue decreased approximately $2,696,000, or 6.7%, during the fiscal
year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. Each
of Great American's revenue sources is discussed below:

. Cookie and beverage sales at company-operated retail stores decreased
approximately $3,521,000, or 15.7%, during the fiscal year ended June 28,
1998 compared to the fiscal year ended June 29, 1997. The decrease in
revenue from company-operated retail stores was attributable to:

(a) a 16.9% decrease in company-operated equivalent store weeks offset
by

(b) a 1.2% increase in the average retail sales volume for company-
operated stores.

Based on those stores which were company-operated during the entire 1998 and
1997 fiscal years, sales volumes did not change.

. Batter sales to franchisees increased approximately $944,000, or 8.4%,
during the fiscal year ended June 28, 1998 compared to the fiscal year
ended June 29, 1997. The increase in batter sales to franchisees was
primarily attributable to

(a) a 6.1% increase in franchisee-operated equivalent store weeks and

(b) a 2.3% increase in the volume of batter sold per franchisee-
operated equivalent store week.

. Franchise royalties increased approximately $538,000, or 11.4%, during
the fiscal year ended June 28, 1998 compared to the fiscal year ended
June 29, 1997. The increase in franchise royalties was attributable to:

(a) a 6.1% increase in franchisee-operated equivalent store weeks and

(b) an increase in the average retail sales volume per franchisee-
operated store of 5.3%.

Based on those stores which were franchisee-operated during the entire 1998
and 1997 fiscal years, management estimates franchisees' sales volumes
increased 3.5%.

. Revenue from franchise license fees decreased approximately $172,000, or
25.5%, during the fiscal year ended June 28, 1998 compared to the fiscal
year ended June 29, 1997. Revenue from selling existing and new stores to
franchisees is summarized as follows (rounded):

Fiscal 1998 Fiscal 1997
----------- -----------

Number of licenses sold to franchisees
--existing stores................................ 15 12
--new stores..................................... 5 12
Cash and notes from sale of existing stores........ $1,980,000 $2,045,000
Less: net book value of existing stores sold....... 1,235,000 818,000
---------- ----------
Revenue from sale of existing stores............... 745,000 1,227,000
---------- ----------
Revenue from license fees for new stores........... 125,000 300,000
Revenue from other fees............................ 3,000 75,000
---------- ----------
Revenue from license fees for new stores and other
fees.............................................. 128,000 375,000
---------- ----------
Total revenue from sale of existing and new stores
to franchisees.................................... 873,000 1,602,000
Less: Gain on sale of existing stores.............. 370,000 927,000
---------- ----------
Revenue from franchise license fees................ $ 503,000 $ 675,000
========== ==========

. Other revenue increased approximately $73,000, or 111.6%, during the
fiscal year ended June 28, 1998 compared to the fiscal year ended June
29, 1997. The increase in other revenue was primarily attributable to:

(a) an increase in construction assistance revenue derived from
construction assistance performed by the company for the benefit of
franchisees and

(b) an increase in sales of miscellaneous supplies to franchise stores,
offset by

(c) an increase in batter discounts given to franchisees as a result of
increased batter sales to franchisees in fiscal 1998.

Cost of Sales

Cost of sales decreased approximately $1,559,000, or 8.4%, during the fiscal
year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The
decrease in cost of sales was primarily attributable to:

(a) a decline in cookie and beverage sales due to less company-operated
equivalent store weeks and

(b) an improvement in batter facility margins, offset by

Retail Store Occupancy

Retail store occupancy costs decreased approximately $1,318,000, or 18.7%,
during the fiscal year ended June 28, 1998 compared to the fiscal year ended
June 29, 1997. The decrease was primarily attributable to a 16.9% decrease in
company-operated equivalent store weeks.

Other Retail Store Expenses

Other retail store expenses decreased approximately $149,000, or 14.6%,
during the fiscal year ended June 28, 1998 compared to the fiscal year ended
June 29, 1997. The decrease in other retail store expenses was primarily
attributable to a 16.9% decrease in company-operated equivalent store weeks.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased approximately
$399,000, or 5.2%, during the fiscal year ended June 28, 1998 compared to the
fiscal year ended June 29, 1997. This decrease was primarily attributable to:

(a) a decrease in development and testing expense,

(b) a decrease in salaries and benefits at the support center, and

(c) a decrease in expenses associated with the franchise convention because
a franchise convention was not held in fiscal 1998, offset by

(d) an increase in marketing expenses and

(e) an increase in the cost of training materials related to the rollout of
a new training program.

In addition, in 1998 Great American revised its estimate of the useful life
of certain computer equipment from five to three years decreasing pre-tax
income by $111,000. Management believes that this revision better reflects the
equipments' economic useful life.

Other Expenses, Net

Other expenses, net, increased approximately $557,000, or 60.0%, during the
fiscal year ended June 28, 1998 compared to the fiscal year ended June 29,
1997. The increase was primarily attributable to a decrease in gains on the
sale of existing stores.

Net Loss

Net loss decreased approximately $544,000, or 72.9%, for the fiscal year
ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The
decrease in net loss was primarily attributable to:

(a) a 12.7% increase in operating income,

(b) a 1.7% decrease in other expenses, net, offset by

52 Weeks Ended June 29, 1997 ("Fiscal Year 1997") Compared to 52 Weeks Ended
June 30, 1996 ("Fiscal Year 1996")

Great American-owned and Franchise Store Activity

As of June 29, 1997, there were 91 Great American-owned stores and 233
franchised stores in operation. The store activity for fiscal year 1996 and for
fiscal year 1997 is summarized as follows:

Fiscal Year 1996 Fiscal Year 1997
-------------------------- --------------------------
Great American- Great American-
owned Franchised owned Franchised
--------------- ---------- --------------- ----------

Stores open as of
beginning of the fiscal
year................... 108 215 104 225
Stores opened (including
relocations)........... 12 14 1 12
Stores closed (including
relocations)........... (10) (10) (10) (8)
Stores sold to
franchisees............ (9) 9 (12) 12
Stores acquired from
franchisees............ 3 (3) 8 (8)
--- --- --- ---
Stores open as of the
end of the year........ 104 225 91 233
Satellite locations as
of the end of the
year................... 11 28 9 30
--- --- --- ---
Total outlets as of the
end of the year........ 115 253 100 263
=== === === ===

The above activity resulted in 5,661 Great American-owned equivalent store
weeks and 11,544 franchised equivalent store weeks during fiscal year 1996
compared to 5,161 Great American-owned equivalent store weeks and 11,858
franchised equivalent store weeks during fiscal year 1997.

Total Revenue

Total revenue decreased approximately $342,000, or 0.9%, during fiscal year
1997 compared to fiscal year 1996. Each of Great American's revenue sources is
discussed below:

Cookie and beverage sales at Great American-owned retail stores decreased
approximately $2,344,000, or 9.5%, during fiscal year 1997 compared to fiscal
year 1996. The decrease in revenue from Great American-owned retail stores was
attributable to:

(a) an 8.8% decrease in Great American-owned equivalent store weeks and

(b) a 0.7% decrease in the average retail sales volume for Great American-
owned stores.

Based on those stores which were Great American-owned during the entire 1996
and 1997 fiscal years, sales volumes increased 1.3%. The change in average
store volume does not equal the change in sales volume from stores that have
been open at least two years due to differences in the stores being compared as
a result of opening, closing, selling, and acquiring stores throughout the
year.

Batter sales to franchisees increased approximately $1,166,000, or 11.5%,
during fiscal year 1997 compared to fiscal year 1996. The increase in batter
sales to franchisees was primarily attributable to:

(a) an 8.8% increase in the volume of batter sold per franchised equivalent
store week and

(b) a 2.7% increase in franchised equivalent store weeks.

Franchise royalties increased approximately $440,000, or 10.3%, during fiscal
year 1997 compared to fiscal year 1996. The increase in franchise royalties was
attributable to:

(a) an increase in the average retail sales volume per franchised store of
7.6% and

(b) a 2.7% increase in franchised equivalent store weeks.

Based on those stores which were franchised during the entire 1996 and 1997
fiscal years, management estimates franchisees' sales volumes increased 5.5%.

Revenue from franchise license fees increased approximately $154,000, or
29.6%, during fiscal year 1997 compared to fiscal year 1996. Revenue from
selling existing and new stores to franchisees is summarized as follows
(rounded):

Fiscal Year Fiscal Year
1996 1997
----------- -----------

Number of licenses sold to franchisees:
Existing stores.................................... 9 12
New stores......................................... 11 12
Cash and notes from sale of existing stores.......... $1,602,000 $2,045,000
Less: net book value of existing stores sold......... (741,000) (818,000)
---------- ----------
Revenue from sales of existing stores................ 861,000 1,227,000
---------- ----------
Revenue from license fees for new stores............. 275,000 300,000
Revenue from other fees.............................. 21,000 75,000
---------- ----------
Revenue from license fees for new stores and other
fees................................................ 296,000 375,000
---------- ----------
Total................................................ 1,157,000 1,602,000
Less: Gain on sale of existing stores................ 636,000 927,000
---------- ----------
Revenue from franchise licensing fees................ $ 521,000 $ 675,000
========== ==========

Other revenue, net decreased approximately $49,000, or 42.6%, during fiscal
year 1997 compared to fiscal year 1996. The decrease in other revenue, net was
primarily attributable to:

(a) a decrease in construction assistance revenue derived from construction
assistance performed by Great American for the franchisees and

(b) an increase in batter discounts given to franchisees as a result of
increased batter sales to franchisees in fiscal year 1997.

Cost of Sales

Cost of sales decreased approximately $908,000, or 4.7%, during fiscal year
1997 compared to fiscal year 1996. The decrease in cost of sales was primarily
attributable to:

(a) a decline in cookie and beverage sales due to less Great American-owned
equivalent store weeks, and

(b) a decrease in the cost of packaging and freight for Great American-
owned retail stores, offset by

Retail Store Occupancy

Retail store occupancy costs decreased approximately $324,000, or 4.4%,
during fiscal year 1997 compared to fiscal year 1996. The decrease was
primarily attributable to an 8.8% decrease in Great American-owned equivalent
store weeks.

Other Retail Store Expenses

Other retail store expenses decreased approximately $297,000, or 22.6%,
during fiscal year 1997 compared to fiscal year 1996. The decrease in other
retail store expenses was primarily attributable to:

(a) a decrease in operating supplies expense within Great American-owned
stores in fiscal year 1997 due to (1) the opening of 11 less Great
American-owned stores in fiscal year 1997 versus fiscal year 1996 and
(2) additional costs incurred in fiscal year 1996 related to the
rollout of a new cookie merchandising program and

(b) an 8.8% decrease in Great American-owned equivalent store weeks, offset
by

Selling, General, and Administrative Expenses

Selling, general and administrative expenses increased approximately
$310,000, or 4.2%, during fiscal year 1997 compared to fiscal year 1996. This
increase was primarily attributable to:

.an increase in professional service fees,

.an increase in point-of-sale marketing expenses on behalf of franchisee-
owned stores, and

.an increase in salaries, offset by

.a decrease in travel expense, and

.a decrease in insurance costs.

Other Expenses, Net

Other expenses, net decreased approximately $484,000, or 8.7%, during fiscal
year 1997 compared to fiscal year 1996. The decrease was primarily
attributable to an increase in gains on the sale of existing stores.

Net Loss

Net loss decreased approximately $615,000, or 45.2%, for fiscal year 1997
compared to fiscal year 1996. The decrease in net loss was primarily
attributable to:

(a) an $877,000 increase in operating income, and

(b) a $193,000 decrease in other expenses, net, offset by

52 Weeks Ended June 30, 1996 ("Fiscal Year 1996") Compared to 52 Weeks Ended
June 29, 1995 ("Fiscal Year 1995")

Great American-owned and Franchise Store Activity

As of June 30, 1996 there were 104 Great American-owned stores and 225
franchised stores in operation. The store activity for fiscal year 1995 and for
fiscal year 1996 is summarized as follows:

Fiscal Year 1995 Fiscal Year 1996
-------------------------- --------------------------
Great American- Great American-
owned Franchised owned Franchised
--------------- ---------- --------------- ----------

Stores open as of
beginning of the
fiscal................. 111 204 108 215
Stores opened (including
relocations)........... 16 11 12 14
Stores closed (including
relocations)........... (8) (11) (10) (10)
Stores sold to
franchisees............ (12) 12 (9) 9
Stores acquired from
franchisees............ 1 (1) 3 (3)
--- --- --- ---
Stores open as of the
end of the fiscal
year................... 108 215 104 225
Satellite locations as
of the end of the
fiscal year............ 12 36 11 28
--- --- --- ---
Total outlets as of the
end of the fiscal
year................... 120 251 115 253
=== === === ===

The activity reflected above resulted in 5,879 and 5,661 Great American-owned
equivalent store weeks and 10,716 and 11,544 franchised equivalent store weeks
during fiscal year 1995 and fiscal year 1996, respectively.

Total Revenue

Total revenue decreased approximately $1,024,000, or 2.5%, during fiscal year
1996 compared to fiscal year 1995, primarily attributable to the following:

Cookie and beverage sales at Great American-owned retail stores decreased
approximately $1,629,000, or 6.2%, during fiscal year 1996 compared to
fiscal year 1995. The decrease in revenue from Great American-owned retail
stores was primarily attributable to:

(a) an approximately 3.7% decrease in Great American-owned equivalent
store weeks and

(b) a decrease in the average retail sales volume for Great American-
owned stores. Specifically, the average retail sales volume for
Great American-owned stores decreased approximately 2.6% per
equivalent store week. Based on those stores which were Great
American-owned during the entire 1995 and 1996 fiscal years, sales
volumes decreased 0.3%.

Batter sales to franchisees increased approximately $729,000, or 7.8%,
during fiscal year 1996 compared to fiscal year 1995. The increase in
batter sales to franchisees was primarily attributable to:

(a) an increase of approximately 7.7% in franchised equivalent store
weeks and

(b) a 0.1% increase in the volume of batter sold per franchised
equivalent store week.

Franchise royalties increased approximately $313,000, or 7.9%, during
fiscal year 1996 compared to fiscal year 1995. The increase in franchise
royalties was primarily attributable to:

(a) an increase of approximately 7.7% in equivalent franchised retail
store weeks and

(b) an increase in the average franchised equivalent store sales volume
of 0.2%.

Based on those stores which were franchised during the entire 1995 and
1996 fiscal years, management estimates that franchisees' sales volumes did
not change materially.

Revenue from franchise license fees decreased approximately $391,000, or
25.3%, during fiscal year 1996 compared to fiscal year 1995. Revenue from
selling existing and new stores to franchisees is summarized below
(rounded):

Fiscal Year Fiscal Year
1995 1996
----------- -----------

Number of licenses sold to franchisees:
Existing stores................................. 12 9
New stores...................................... 11 11
Cash proceeds from sale of existing stores........ $ 2,558,000 $1,602,000
Less: net book value of existing stores sold...... (1,346,000) (741,000)
----------- ----------
Revenue from sales of existing stores............. 1,212,000 861,000
----------- ----------
Revenue from license fees for new stores.......... 280,000 275,000
Revenue from other fees........................... 56,000 21,000
----------- ----------
Revenue from license fees for new stores and other
fees............................................. 336,000 296,000
----------- ----------
Total............................................. 1,548,000 1,157,000
Less: Gain on sale of existing stores............. 912,000 636,000
----------- ----------
Revenue from franchise license fees............... $ 636,000 $ 521,000
=========== ==========

Other revenue, net decreased approximately $46,000, or 28.6%, during fiscal
year 1996 compared to fiscal year 1995. The decrease in other revenue, net is
primarily attributable to:

(a) an increase in batter discounts taken by franchisees, which was
consistent with the increase in batter sales to franchisees, partially
offset by

(b) an increase in sales of miscellaneous supplies to franchise stores.

Cost of Sales

Cost of sales decreased approximately $452,000, or 2.3%, during fiscal year
1996 compared to fiscal year 1995. The decrease was primarily attributable to:

(a) a decline in retail cookie and beverages sales volume in Great
American-owned stores and

(b) an improvement in wholesale batter margins, partially offset by

Retail Store Occupancy

Retail store occupancy costs decreased approximately $209,000, or 2.8%,
during fiscal year 1996 compared to fiscal year 1995. The decrease in retail
store occupancy costs was primarily attributable to:

(a) a decrease of approximately 3.7% in Great American-owned store weeks,
partially offset by

(b) an increase in depreciation due to Great American revising its estimate
of the useful life of certain leasehold improvements.

Great American began amortizing leasehold improvements using accelerated
methods over an average of eight years instead of using the straight-line
method over ten years. The effect of this change in estimate was to increase
fiscal year 1996 pre-tax loss by $214,000. Management believes that this
revision better reflects the leasehold improvements' useful life.

Other Retail Store Expenses

Other retail store expenses decreased approximately $223,000, or 14.5%,
during fiscal year 1996 compared to fiscal year 1995. The decrease in other
retail store expenses was primarily attributable to:

(a) a decrease in marketing expenses and

(b) a decrease in bank charges and supplies expense as a result of cost
containment efforts.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased approximately
$376,000, or 4.9%, during fiscal year 1996 compared to fiscal year 1995. The
decrease in selling, general and administrative expenses was primarily
attributable to:

(a) a reduction in administrative salaries and benefits,

(b) a decrease in professional service fees, including legal and accounting
services, and

(c) a decrease in various home office expenditures, including postage,
supplies, and training materials, partially offset by

(d) an increase in travel costs due to additional review of stores by field
supervisors.

Other Expenses, Net

Other expenses, net increased approximately $231,000, or 4.4%, during fiscal
year 1996 compared to fiscal year 1995. The increase was primarily
attributable to:

(a) decrease gains on the sale of existing stores,

(b) a decrease in interest income due to lower average cash balances, and

Non-Recurring Litigation Charge

During the third quarter of fiscal year 1995, a non-recurring litigation
charge of $439,000 was recorded to cover a potential forthcoming judgment
against Great American in the Haagen-Burbank lawsuit. In June 1993, Great
American won a judgment for breach of written contract to a lease entered into
with a developer, Haagen-Burbank. On appeal, the Court of Appeals of the State
of California Second Appellate District overturned the jury's verdict and
directed the trial court to determine the amount of attorney fees and costs
due to Haagen-Burbank as the prevailing party in the litigation. Haagen-
Burbank had submitted to the court a request for legal fees totaling $439,000;
however, on April 27, 1995, the trial court entered a judgment of $417,985. On
September 15, 1995 Great American paid $395,966 to Haagen-Burbank as
settlement of the judgment against Great American.

Net Loss

Net loss decreased approximately $469,000, or 25.6%, for fiscal year 1996
compared to fiscal year 1995. The decrease in net loss was primarily
attributable to:

(a) a $236,000 increase in operating income, and the occurrence of the non-
recurring litigation charge in fiscal 1995, offset by

(b) a $118,000 decrease in state and federal income tax benefit, and

WHERE YOU CAN FIND MORE INFORMATION

We file reports and other information with the Commission under the Exchange
Act. We have agreed that, whether or not it is required to do so by the rules
and regulations of the Commission, we will deliver to The Bank of New York, as
trustee under the indenture, to each holder of notes and to each prospective
purchaser of notes identified to us by a placement agent for the offering in
August 1998, annual and quarterly financial statements substantially equivalent
to financial statements that would be included in reports filed with the
Commission, if we were subject to the reporting and other informational
requirements of the Exchange Act.

Mrs. Fields and Great American, Mrs. Fields' Brand and Pretzelmaker, the
guarantors of the notes, have filed with the Commission a registration
statement on Form S-4 (in this prospectus, together with all amendments and
exhibits, referred to as the "Registration Statement") under the Securities
Act, with respect to the notes offered hereby. This prospectus, which forms a
part of the Registration Statement, does not contain all of the information in
the Registration Statement and the exhibits to it, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Mrs. Fields, the guarantors and the notes
offered in this prospectus, we refer you to the Registration Statement. With
respect to any statements made in this prospectus concerning the provisions of
certain documents, we refer you to the copy of such document filed as an
exhibit to the Registration Statement otherwise filed with the Commission.

Great American and Pretzelmaker intend to submit separately and Mrs. Fields'
Brand has separately submitted to the staff of the Commission no-action
requests that they not be subject to the informational requirements of the
Exchange Act in connection with the notes offered here. If the Commission
grants these requests, Great American, Mrs. Fields' Brand and Pretzelmaker
would not be required to make such filings but Mrs. Fields, as the issuer of
the notes offered in this prospectus, would be required to include summarized
financial information regarding Great American, Mrs. Fields' Brand and
Pretzelmaker in the periodic reports and certain other documents that Mrs.
Fields files with the Commission. If this request is not granted, Great
American, Mrs. Fields' Brand and Pretzelmaker would be required to file with
the Commission such periodic reports, but would not be required to file proxy
or information statements. You may read and copy the Registration Statement,
the exhibits forming a part of it and the reports and other information filed
by Mrs. Fields with the Commission in accordance with the Exchange Act, at the
Public Reference Section of the Commission located at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10004; and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. You may obtain copies of all or any portion of the material by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Such information may also be
accessed electronically on the Commission's home page on the Internet
(http://www.sec.gov).

If Mrs. Fields is not required to be subject to the reporting requirements of
the Exchange Act in the future, Mrs. Fields will be required under the
indenture to furnish the holders of the notes with

(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
Mrs. Fields were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report thereon by Mrs.
Fields' independent public accountants, and

(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Mrs. Fields were required to file such reports,
in each case, within the time periods specified in the Commission's rules
and regulations.

This prospectus incorporates documents by reference that are not presented in
or delivered with this prospectus. These documents are available upon request
from Michael Ward, Esq., Mrs. Fields' Original Cookies, Inc., 2855 East
Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, (801) 736-5600. In
order to ensure timely delivery, any request should be made by , 1999.

BUSINESS

General

Mrs. Fields is one of the largest retailers in the premium snack-food
industry, with cookies and pretzels as its major product lines. Mrs. Fields is
the largest retailer of baked on-premises cookies and the second largest
retailer of baked on-premises pretzels in the United States. Mrs. Fields is one
of the most widely recognized and respected brand names in the premium cookie
industry. Based on a 1994 study that we commissioned from Corey, Canapary and
Galanis, 94% of customers in the study were aware of the Mrs. Fields brand.
Twenty percent named our brand without prompting, and 74% knew of our brand
when prompted. Mrs. Fields has recently developed a significant presence in the
rapidly growing, health-oriented pretzel segment as a result of the
acquisitions of the pretzel businesses of Hot Sam and H&M, which was formerly
the largest Pretzel Time franchisee, and the common stock of Pretzel Time. As
of October 3, 1998, our retail network consisted of 1,333 locations, of which
1,021 were cookie stores and 312 were pretzel stores. Of the total 1,333
stores, 568 were company-owned and 765 were franchised or licensed. Mrs.
Fields' stores average approximately 600 to 700 square feet in size and are
located predominantly in shopping malls. Mrs. Fields, through licensed
locations, also operates kiosks and carts at airports, universities, stadiums,
hospitals and office building lobbies. Mrs. Fields' objective is to increase
sales and profitability by focusing on its continuing company-owned stores. As
a result, by the end of fiscal year 2000, Mrs. Fields plans to close or
franchise approximately 100 company-owned cookie stores and 33 company-owned
pretzel stores that do not meet certain financial and geographical criteria
established by management after giving effect to the acquisitions of Great
American and the stock and stores of certain of its franchises. For the year
ended January 3, 1998 and the 39 weeks ended October 3, 1998, Mrs. Fields
generated pro forma net revenue and EBITDA of $200.6 million and $32.1 million,
and $132.5 million and $15.8 million, respectively.

We operate and franchise 1,021 retail cookie stores: 573 under the Mrs.
Fields brand, 128 under the Original Cookie brand and 320 under the Great
American brand. As a result of the acquisition of Great American, Mrs. Fields
has cookie stores in 46 states, with Great American stores concentrated in the
southeastern and south central states and Mrs. Fields and Original Cookie
stores strongly represented in the western, midwestern and eastern states.
There is little overlap between Mrs. Fields and Great American stores, with a
dual presence in 31 malls. Management believes that Mrs. Fields is positioned
in the premium quality, baked on-premises segment of the approximately $12
billion U.S. cookie industry. We offer over 50 different types of cookies,
brownies and muffins, which are baked continuously and served fresh throughout
the day. Baked products are made using only high quality ingredients, and all
dough is centrally manufactured and frozen or refrigerated to maintain product
quality and consistency. All products pass strict quality assurance and control
steps at both the manufacturing plants and the stores. In addition, Mrs. Fields
continually creates and tests new products to attract new customers and satisfy
current customers. Product development is currently focused on sugar-free dough
and reduced-fat cookies and brownies.

Mrs. Fields Inc., one of the predecessors of Mrs. Fields, was founded in 1977
by Debbi Fields and, following its initial success, embarked on an aggressive
national expansion program in the early 1980s. By the late 1980s, however, Mrs.
Fields Inc. experienced financial difficulty as a result of excessive debt
levels, certain poor real estate locations, and a recessionary retailing
environment. In connection with a financial restructuring by its lenders, Mrs.
Fields put a new management team into place in mid-1994 under the leadership of
Larry A. Hodges, who has extensive experience in the food and retailing
industries. Mr. Hodges introduced a new strategic plan for Mrs. Fields, which
involved the following key elements:

(1) identifying stores to close or franchise,

(2) introducing company-wide operating procedures to improve store
operating margins,

(3) developing a marketing strategy and promotional calendar to turn
around sales of stores that have been open at least two years, and

(4) improving employee morale through selective new senior hires,
increased training and various incentive plans.

Mrs. Fields reinvested the savings from the improved store operations in
marketing and other measures designed to improve sales from stores that have
been open at least two years.

Mrs. Fields' Original Cookies, Inc. was formed in September 1996 in
connection with the acquisitions of Mrs. Fields Inc., Original Cookie and Hot
Sam by Mrs. Fields' Holding, a subsidiary of Capricorn. As of October 3, 1998,
Capricorn had invested more than $28 million in Mrs. Fields through Mrs.
Fields' Holding. Capricorn retained Mr. Hodges as Chief Executive Officer of
Mrs. Fields. Management believes that Mrs. Fields has a more well-recognized
brand name than Original Cookie and that Mrs. Fields stores have, during fiscal
year 1997 and the 39 weeks ended October 3, 1998, achieved higher average
revenue per continuing company-owned store than Original Cookie stores
($351,000 versus $301,000). As a result, we intend to continue selectively
converting our continuing company-owned and to-be-franchised Original Cookie
stores to Mrs. Fields brand stores. We believe this will result in an increase
in net sales, sales from stores that have been open at least two years, and
income from store operations. We will also test the success of converting
selected Great American company-owned stores to Mrs. Fields brand stores. In
addition, any Great American franchisee will have the option to convert to Mrs.
Fields brand stores, at its sole expense, in areas where there is no overlap
with existing Mrs. Fields brand franchise stores.

Great American, incorporated in 1977, is a leading operator and franchisor of
mall-based specialty retail cookie outlets, including full-size stores and
satellite sites, consisting of carts, wagons and kiosks. As of October 3, 1998,
Great American had 320 in-line stores including 109 Great American-operated and
211 franchised retail units, operating primarily in the southeastern and south
central United States, generating $109.3 million in estimated system-wide
annual sales for the 52-week period ended June 28, 1998. Great American derives
its revenue principally from:

(1) the sale of cookies and beverages at Great American-operated stores,

(2) the sale of proprietary batter to franchised stores and

(3) the receipt of royalty payments based on gross sales of franchisees.

In addition, Great American generates revenues from initial franchise fees
and the sale of existing Great American-operated stores to franchisees.

Great American outlets sell a variety of cookies and brownies, including
"cookie cakes," as well as assorted soft drinks, frozen drinks, coffee and tea.
Cookie cakes are extra-large cookies, decorated with customer-selected
personalized messages, for special occasions. Although cookie sales are
generally the result of impulse buying, we believe that cookie cakes, which are
often purchased as gifts for special occasions, differentiate Great American
from other specialty cookie retailers by making Great American stores
destination outlets.

Pretzels

We operate and franchise 312 retail pretzel stores: 226 under the Pretzel
Time brand and 86 under the Hot Sam brand, which offer "sweet dough" soft
pretzels and "Bavarian" style pretzels with a variety of toppings. Pretzel
Time's primary product is an all-natural, hand-rolled soft pretzel, freshly
baked from scratch at each store location. Pretzel Time stores prepare pretzels
with a variety of flavors and specialty toppings, including cheddar cheese,
cream cheese and pizza sauce. The stores also offer soft drinks and freshly
squeezed lemonade. The Hot Sam pretzel stores specialize in the Bavarian style
pretzel. This product has declined in popularity in recent years as sweet dough
pretzel sales have grown dramatically. In addition, Pretzel Time stores have,
during fiscal year 1997 and the 39 weeks ended October 3, 1998, achieved higher
average revenue for the continuing company-owned stores than Hot Sam stores
($275,000 versus $240,000). As a result, Mrs. Fields

intends to continue converting continuing company-owned and to-be-franchised
Hot Sam stores to Pretzel Time stores, which it believes will result in an
increase in net sales, sales from stores that have been open at least two
years, and income from store operations.

Management believes that retail pretzel stores have similar operating
characteristics to retail cookie stores that will permit us to offer our
products with those of other well-known brand names. In addition, the retail
pretzel business has grown more quickly than the retail cookie business in
recent years. Hot Sam was acquired by Mrs. Fields in connection with the
acquisition of Original Cookie. In order to expand its presence in the retail
pretzel industry, Mrs. Fields recently acquired the business of H&M and the
common stock of Pretzel Time. Pretzel Time is a franchisor of 226 hand-rolled
soft pretzel retail outlets, which are located in shopping malls as well as in
airports, sports arenas, amusement parks and resort areas throughout the United
States and Canada. We operate 95 of Pretzel Time's stores as franchisee and
have rights as developing agent to develop Pretzel Time stores in 18 states,
Mexico, and four provinces in Canada.

BUSINESS STRATEGY

Mrs. Fields' objective is to increase sales and profitability at its
continuing company-owned and franchised stores by implementing the key elements
of its long-term business strategy. The percentage change in sales from stores
that have been open at least two years was (0.9)% for the 39 weeks ended
October 3, 1998 compared to 0.6% for the fiscal year ended January 3, 1998 from
a negative 1.2% for the fiscal year ended December 28, 1996. In addition,
franchising, licensing and other revenues increased by 23.5% for the fiscal
year ended January 3, 1998 over the fiscal year ended December 28, 1996 and by
59.8% for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended
September 27, 1997. The key elements of Mrs. Fields' business strategy are as
follows:

. Enhance Quality of Company-Owned Store Base. Since current management
assumed responsibility in 1994, we have focused on closing and
franchising company-owned stores that do not meet certain financial and
geographical criteria. From June 1994 through October 3, 1998, Mrs.
Fields closed 171 Mrs. Fields brand stores and franchised an additional
135 Mrs. Fields brand stores. We have targeted 135 additional stores that
sell our various products to be either closed or franchised by the end of
2000. Such measures are expected to result in enhanced operating margins,
as unprofitable stores are closed and certain other stores are converted
into franchises, thereby increasing royalty payments and eliminating
overhead costs at the operating company level associated with such
stores.

. Improve Productivity of Continuing Company-Owned Stores. We have embarked
on a program to improve the performance of our continuing company-owned
stores by:

(1) expanding product offerings to include breakfast items, such as
muffins, croissants and bagels, and low-fat cookies, brownies and
muffins,

(2) raising the average sales by tying sales of products together,

(3) promoting catering services by individual stores to corporate
customers,

(4) decreasing store expenses by reducing waste in the cookie baking
process and controlling the cost of ingredients and supplies,

(5) improving merchandising by enhancing product presentation and
refining the selection of products and

(6) increasing training and various incentive programs for management
and sales staff.

. Capitalize on the Strong "Mrs. Fields" Brand Name. Management believes
that the Mrs. Fields brand is the most widely recognized and respected
brand name in the retail premium cookie industry, and that Mrs. Fields
brand stores, for fiscal year 1997 and the 39 weeks ended October 3,
1998, achieved higher average revenue for the continuing company-owned
stores than Original Cookie stores. As a result, we intend to continue
selectively converting our continuing company-owned and to-be-franchised
Original

Cookie stores to Mrs. Fields brand stores, which we believe will result in
an increase in net sales, sales from stores that have been open at least
two years, and income from store operations. We will also test the success
of converting selected Great American company-owned stores to Mrs. Fields
brand stores. In addition, any Great American franchisee will have the
option to convert to Mrs. Fields brand stores, at its sole expense, in
areas where there is no overlap with existing Mrs. Fields brand franchise
stores. Original Cookie stores represent 33% and Great American stores
represent 28% of all company-owned cookie stores. In addition, we intend
to further capitalize on the Mrs. Fields brand name by:

(1) further developing and expanding new channels of distribution
for our products, including kiosks and carts in malls, airports,
convention centers, office buildings, street fronts and sports
complexes,

(2) increasing the emphasis on the mail order business, and

(3) developing and capitalizing on licensing opportunities, such as
linking sales of Mrs. Fields with prominent names in the
retailing and food service industry, expanding licensing
agreements with our existing licensees, entering into new
licensing agreements with food service operators and developing
product line extensions, such as frozen cookie dough and in-
store bakery products to be sold in supermarkets and other
convenient locations.

. Develop Great American Brand. Management believes that the Great American
brand has high consumer awareness in the southeast United States. We
intend to build on the Great American brand by continuing to franchise
additional Great American stores and by testing the success of converting
selected company-owned Original Cookie stores into Great American stores.

. Capitalize on the Strong "Pretzel Time" Brand Name. Through the
acquisition of Pretzel Time, we have obtained the use of the "Pretzel
Time" brand name, one of the leading brand names in pretzel retailing.
Management believes that there are significant opportunities to improve
its existing Hot Sam store operations by continuing to convert our
continuing company-owned and to-be-franchised Hot Sam stores to Pretzel
Time stores. Pretzel Time stores have, during fiscal year 1997, achieved
higher average revenue per continuing company-owned store and store
contribution than Hot Sam stores ($275,000 vs. $240,000). Hot Sam stores
represent 48% of all company-owned pretzel stores. Management believes
that the conversion to the Pretzel Time name will result in an increase
in net sales, sales from stores that have been open at least two years,
and income from store operations for Mrs. Fields' pretzel business. In
addition, we believe there are significant new Pretzel Time franchising
opportunities.

. Develop New Company-Owned and Franchised Stores. We plan to build and
franchise new stores, as well as carts and kiosks, in existing and new
markets. We have identified over 100 mall and non-traditional locations,
such as amusement parks and other entertainment centers, that we believe
would be ideal for cookie and pretzel stores. By the end of fiscal year
2000, we intend to franchise approximately 37 existing cookie and 14
existing pretzel stores. Beginning in fiscal year 1999, we intend to add
approximately 15 new company-owned cookie and 10 new company-owned
pretzel stores per year and to franchise approximately 25 new cookie and
25 new pretzel stores per year. In addition to pursuing new store
development opportunities within the United States, we plan to grow
internationally by expanding our franchise operations. As of October 3,
1998, there were 82 franchised Mrs. Fields brand stores open
internationally.

. Realize Purchasing and Overhead Cost Savings. As a result of the
acquisitions of Great American and the stock and stores of certain of its
franchisees, we expect to realize significant cost savings from the
elimination of duplicative administrative functions, the consolidation of
management information systems and the reduction of the cost of food and
other supplies as a result of our enhanced purchasing power with vendors.
Management believes that incremental pre-tax cost savings would have
totaled approximately $4.1 million for the year ended January 3, 1998.
The savings include $2.2 million of savings on overhead at the operating
company level and $1.9 million of cost savings related to one-time
expenses of eliminating multiple headquarter facilities.

. Pursue Further Strategic Acquisitions of Related Businesses. We intend to
selectively pursue strategic acquisitions, in addition to the
acquisitions of Great American and the stock and stores of certain of its
franchises and other recent acquisitions, in order to expand our
geographic presence and to achieve operating efficiencies. Our management
has demonstrated its ability to identify and integrate new businesses
through its acquisitions of the cookie and pretzel businesses of Original
Cookie and Hot Sam, respectively, in September 1996 and the majority
interest in Pretzel Time and the business of H&M in 1997.

Product Offerings

Our product offerings consist primarily of:

(1) fresh baked cookies, brownies, muffins, and other baked goods and

(2) fresh baked sweet dough and "Bavarian" style pretzels.

During the fiscal year 1997, pro forma for the acquisitions of Great American
and the stock and stores of certain of its franchises, our revenue by product
category consisted of the following:

Cookies and Brownies................................................... 60%
Pretzels............................................................... 20%
Beverages.............................................................. 18%
Other.................................................................. 2%

Cookies. The primary products of our cookie stores are a variety of cookies,
which are baked in view of customers throughout the day. Secondary product
lines include several varieties of brownies, muffins, other baked goods,
gourmet coffees, frozen drinks and other beverages. Mrs. Fields stores,
Original Cookie stores and Great American stores also sell decorated cookies
("cookie cakes") which are extra-large cookies decorated with customer-selected
slogans purchased as gifts for special occasions, such as birthdays,
Valentine's day, Father's day and Easter. Based on pounds of batter shipped,
cookie cakes constitute the second largest volume product of Great American
stores. We plan to utilize Great American's superior expertise in baking and
marketing cookie cakes to enhance sales of the existing cookie cakes products
in Mrs. Fields and Original Cookie stores.

Baked products are made using only pure, high quality, vanilla, chocolate,
raisins, nuts and other ingredients. To maintain product quality and
consistency at both company-owned and franchised stores, Mrs. Fields and
Original Cookie stores use centrally manufactured frozen dough, which is
manufactured by outside suppliers according to proprietary formulas of Mrs.
Fields. Great American stores use refrigerated batter that is shipped daily
from the Atlanta production facility. All products must pass strict quality
assurance and control steps at both the manufacturing plants and the stores.

Pretzels. Through its Hot Sam and Pretzel Time stores, Mrs. Fields offers a
wide variety of fresh-baked pretzels. Pretzels have become a popular snack due
to consumers' attraction to salted snacks and the increased demand for snacks
that are low in fat and cholesterol.

Hot Sam is the largest U.S. retailer of fresh-baked "Bavarian" style
pretzels. Pretzel Time stores offer all natural, hand-rolled sweet dough
pretzels prepared with a variety of flavors and special toppings, including
cheddar cheese, cream cheese and pizza sauce. In addition, Pretzel Time stores
offer specialty pretzels and related products, such as cinnamon pretzels and
cinnamon twists, as well as several recently introduced pretzel products, such
as pretzel dogs, chocolate chip pretzels and caramel crunch pretzels.

Product Development. We maintain a product development department which
continually creates and tests new products to attract new customers and
revitalize the interest of current customers. Once a new product is identified,
we develop prototypes to determine the initial formula. For Mrs. Fields
products, the formula is

then scaled up for test production runs at one or more approved facilities.
Once the product has been successfully produced, ingredient specifications,
formulas, manufacturing processes, finished product specifications, shelf life,
storage and distribution procedures are established. The new product is either
immediately launched throughout the system, as in the case of seasonal items or
simple line extensions, or test marketed in a limited number of stores. After a
trial period to evaluate both consumer response and store operations' ability
to handle the new product, it is fully commercialized, modified or
discontinued. We continually review our selection of products in an effort to
maximize daytime offerings and profitability. For example, new muffin flavors,
bagels, croissants and a revitalized coffee program were recently introduced to
enhance morning offerings, as cookies begin selling primarily after mid-day.

In the cookie business, product development efforts are currently focused on
a fresh-baked, sugar-free cookie dough and other products, such as low-fat
brownies, reduced-fat cookies and seasonal items that are designed to
capitalize on consumer trends and draw interest to our store locations. In the
pretzel business, we have been testing "made-from-scratch" hand rolled
pretzels, which serve as a platform for a variety of other products, such as
jalapeno, cinnamon raisin and garlic pretzels with a sweet dough base, meat and
cheese filled pretzel pockets and pretzelwiches (pretzel bun sandwiches).

Store Operations

Store Base. As of October 3, 1998, Mrs. Fields' store portfolio consisted of
568 company-owned stores, 523 domestic franchised locations, 82 international
franchised locations and 160 licensed locations. By concept, the stores are
distributed as follows:

Company-owned
----------------------------
Continuing
Company- To Be To Be Domestic International
Owned Closed Franchised Franchised Franchised Licensed Total
---------- ------ ---------- ---------- ------------- -------- -----

Mrs. Fields............. 137 6 7 181 82 160 573
Original Cookie......... 98 12 18 -- -- -- 128
Great American.......... 52 46 11 211 -- -- 320
--- --- --- --- --- --- -----
Cookie Subtotal......... 287 64 36 392 82 160 1,021
--- --- --- --- --- --- -----
Pretzel Time............ 85 10 -- 131 -- -- 226
Hot Sam................. 63 9 14 -- -- -- 86
--- --- --- --- --- --- -----
Pretzel Subtotal........ 148 19 14 131 -- -- 312
--- --- --- --- --- --- -----
Totals................ 435 83 50 523 82 160 1,333
=== === === === === === =====

As of October 3, 1998, Mrs. Fields' domestic stores were located in 48
states. The following table represents states with ten or more outlets:

STORE GEOGRAPHY LIST

% of Domestic
Company- Retail
State owned Franchised Licensed Total Outlets
- ----- -------- ---------- -------- ----- -------------

California..................... 83 54 16 153 12.25%
Texas.......................... 48 44 5 97 7.77%
Florida........................ 30 40 14 84 6.75%
New York....................... 39 21 16 76 6.08%
Ohio........................... 53 8 10 71 5.68%
Illinois....................... 33 18 9 60 4.80%
Michigan....................... 35 11 3 49 3.92%
Georgia........................ 17 22 3 42 3.36%
Missouri....................... 8 33 1 42 3.37%
Pennsylvania................... 18 11 12 41 3.28%
Virginia....................... 20 14 3 37 2.96%
New Jersey..................... 12 13 8 33 2.64%
North Carolina................. 3 25 3 31 2.48%
Indiana........................ 14 9 4 27 2.16%
Tennessee...................... 4 20 3 27 2.16%
Arizona........................ 14 9 3 26 2.08%
Colorado....................... 4 12 8 24 1.92%
Connecticut.................... 6 12 5 23 1.84%
Maryland....................... 10 9 4 23 1.84%
Massachusetts.................. 12 6 5 23 1.84%
Wisconsin...................... 20 3 -- 23 1.84%
Louisiana...................... 9 9 2 20 1.60%
Washington..................... 11 9 -- 20 1.60%
Alabama........................ -- 15 3 18 1.44%
South Carolina................. 4 12 2 18 1.44%
Utah........................... 7 9 1 17 1.36%
Minnesota...................... 4 10 -- 14 1.12%
Nevada......................... 3 4 7 14 1.12%
Iowa........................... 4 9 -- 13 1.04%
Oklahoma....................... 5 5 2 12 0.96%
Kansas......................... 5 4 1 10 0.80%
Kentucky....................... 3 6 1 10 0.80%
West Virginia.................. 4 5 1 10 0.80%

Configuration. We have developed a number of retail configurations that have
wide application and adaptability to a variety of retail environments. In
addition to the stores that have been designed for prime mall locations, we
have developed other formats intended to extend our presence within and beyond
mall locations. The introduction of frozen dough technology has led to a number
of new store configurations, expanded product offerings in smaller outlets and
non-traditional formats.

Cookie Stores. All stores are uniformly designed in accordance with the Mrs.
Fields, Original Cookie or Great American prototype, making extensive use of
glass, painted wood, brass, mirrors, lighting and point-of-sale displays
intended to create an upscale, open and inviting look. Stores also attractively
and efficiently display their fresh-baked products using custom-made showcases.
Store size ranges from 350 to 800 square

feet, and the typical company-owned store is about 600 to 700 square feet with
a minimum of about 15 linear feet of counter space. Locational possibilities
for new stores include high traffic regional malls, central downtown shopping
districts and recreational shopping environments.

Mrs. Fields and its franchisees and licensees also operate cookie kiosks and
carts in certain malls on a year-round basis. Kiosks have 100 to 250 square
feet of retail space, supported by off-site storage and preparation space.
Carts range in size from 30 to 92 square feet. Currently only the Great
American kiosks have self-contained baking ovens. Because of their small size,
carts and kiosks do not have baking equipment, and are supplied cookie products
by a fully-equipped store usually located in the same mall. We plan to add
baking equipment to carts and kiosks in malls, airports, convention centers,
office buildings, street fronts and sports complexes, giving these outlets
greater flexibility in the products they can offer. All designs contain retail
display, small freezers and cash registers. We see expansion opportunities from
the use of carts, which create incremental revenue at a relatively low cost in
certain locations.

All of the retail store configurations are executed to include the same high-
quality marketing, merchandising and design features which customers have come
to expect from Mrs. Fields. The store designs are bright with high-profile
trademark identity. All products are baked throughout the day on the premises
with ovens located in full view of the customer to support the "fresh-baked"
image.

Pretzel Stores. Hot Sam stores are uniformly designed in accordance with the
Hot Sam brand, making extensive use of tile, stained wood, lighting and point-
of-sale displays intended to create an upscale, open and inviting look. Stores
also attractively and efficiently display their products using custom-made
showcases. The typical company-owned pretzel store is about 500 square feet.

Pretzel Time outlets have an average size of 700 square feet in both kiosks
and store locations. Pretzel Time stores are designed to enable customers to
enjoy watching the pretzels being rolled, twisted and baked, which underscores
freshness and lends to the concept's growing appeal.

Location and Leasing. Locational possibilities include any high pedestrian
traffic areas, including second locations within malls, airport concourses,
office building lobbies, hospitals, universities, stadiums, and supermarket
foyers. Taking the impulse nature of its business into consideration, Mrs.
Fields tries to locate its outlets in areas of high pedestrian traffic, with
easy proximity to pedestrian traffic flow and at a distance from other food
providers of any kind.

The majority of Mrs. Fields' stores are located in shopping malls, with the
vast majority of Mrs. Fields brand stores in malls falling into the "A" and "B"
classifications, or the better-quality malls in the country. As of October 3,
1998, Mrs. Fields, including franchise locations, has a presence in 90% of the
top 150 (as measured in sales per foot) "A" and "B" malls in the country. Malls
in "A" and "B" classifications generally have the following characteristics:

. Size greater than 700,000 square feet

. Sales per square foot greater than $300

. Population density greater than 150,000 people within a five-mile radius

. Median family income greater than $50,000

. Generally supported by national fashion anchor tenants

. Located to minimize competition from other malls

Great American stores are located primarily in high-traffic "B" malls.

Marketing and Advertising. Mrs. Fields' in-house marketing department and an
outside promotional agency emphase product sampling, local store marketing and
brand name identification.

We advertise at the store level, using the aroma of fresh-baked cookies and the
attractive arrangement of finished products to create a store ambiance that is
conducive to sales. Recently we experimented with an advertising campaign with
nationally televised commercials during peak holiday periods. We cultivate
local customer loyalty by offering regular 20% discounts to employees in malls
where stores are located and occasional other discounts. Historically we have
spent relatively little on paid advertising, relying mainly on in-store
signage, promotions and the public relations of Debbi Fields, who makes store
visits and local media appearances throughout the country and internationally
for Mrs. Fields. In addition to posters and display of products, we promote
products by offering special packaging and selling other promotional items. A
recent promotion for Mrs. Fields' 20th anniversary featured a tie-in with the
popular Peanuts characters from the syndicated comic strip, a sweepstakes, and
gifts with purchases. Mrs. Fields is currently working on developing catered
corporate accounts for both company-owned and franchised stores and will be
building awareness of products geared toward corporate accounts at the store
level for the local market area and through catalogue sales. We also promote
our products as gifts, particularly at holiday time.

Great American's marketing strategy has emphasized strong merchandising of
its products and the use of proactive sales techniques, including the free
sampling of products and other methods intended to increase the size of
customer orders.

Mail Order Business. Our mail order division markets a variety of fresh-baked
and other gift items through its mail order gift catalogue using toll free
telephone numbers, including "1-800-COOKIES." The mail order division had $3.8
million in revenues during fiscal year 1997. We believe that there is
significant potential in the mail order business and is developing this
division by targeting both corporate customers and individuals with a history
of purchases at Mrs. Fields stores. Sales from the mail order division for the
fiscal year 1997 have increased approximately 61% over sales for the prior
fiscal year.

Customer Profile. We believe that our products are best targeted to a
demographic profile which is relatively young, with upper-middle income levels.
At the time of a May 1994 study, 66% of Mrs. Fields' customers were female and
34% were male, the mean age of a customer was 35.1 years of age, and 57% of
customers had a household income of $50,000 or more. We believe that this
demographic profile remains valid.

Seasonality. Our sales and profitability in both the cookie business and the
pretzel business are subject to seasonal fluctuation and are traditionally
higher during the Thanksgiving and Christmas holiday season and other gift-
giving holidays due to increased mall traffic and holiday gift purchases.

Supplies and Distribution

Ingredients and Supplies. We rely primarily on outside suppliers and
distributors for the ingredients used in our products and other items used in
our stores. Mrs. Fields stores receive frozen products, made according to
proprietary recipes of Mrs. Fields, from its primary supplier, Pennant Food
Corp. Pennant uses stringent quality controls in testing ingredients and
manufacturing, and products are not released for distribution unless they pass
all quality control steps, including an evaluation of the finished baked
product. Pennant's contract for making frozen products for Mrs. Fields is
renewable every three years. Pennant supplies the majority of Mrs. Fields and
Original Cookie frozen bakery product. J&J Foods, Inc. supplies the majority of
the frozen pretzel dough to Hot Sam Stores. We have identified alternative
suppliers for frozen dough at Mrs. Fields and Hot Sam. Pretzel Time stores buy
a proprietary dry mix from selected distributors and mix and bake pretzels at
individual stores. Pretzel Time franchisees buy from various distributors.

Most supplies other than dough are ordered from distributors by either Mrs.
Fields or the franchisee and are directly shipped to the store. We sell
exclusively Coca-Cola soft drinks in Mrs. Fields, Original Cookie, Pretzel
Time, Hot Sam and Great American stores under agreements with Coca-Cola USA
Fountain.

Great American stores receive "ready to bake" refrigerated batter from a
batter facility in Atlanta, which Mrs. Fields acquired in the acquisition of
Great American. The batter, which has a shelf life of about 90 days,

is stored at the batter facility for an average of one to three weeks,
depending on demand, before being shipped. Most other supplies are ordered from
third-party vendors by Great American or the franchisee and are shipped
directly to the store.

Distribution. Regional distributors handle distribution of perishable and
non-perishable items to Mrs. Fields and Original Cookie stores weekly. Regional
distributors own and maintain all of the inventory, but are authorized to
purchase inventory items only from authorized vendors at prices that have been
negotiated by Mrs. Fields. Hot Sam distributes perishable and non-perishable
items weekly to stores using seven different regional distribution companies.
Pretzel Time franchisees use a variety of distributors. Mrs. Fields ships
equipment related items, including smallwares equipment and oven parts,
directly from public warehouses. Great American stores receive batter from the
Atlanta batter facility by refrigerated common carrier.

Management Information Systems

We have made a substantial investment in developing our point-of-sale ("POS")
system, which gathers information transmitted daily to corporate headquarters
from most of our Mrs. Fields brand continuing company-owned stores. We plan to
install our upgraded back-office system, along with the POS registers and
Pentium 333 machines, in our continuing company-owned Original Cookie stores,
Hot Sam stores, Pretzel Time stores and certain Great American stores by August
1999.

We are currently replacing our sales collection systems with software and
hardware that is Year 2000 compliant. Replacement of the plant production and
distribution software will take place in the first quarter of 1999 at an
estimated cost of $50,000. For more information on our information technology,
see "Management's Discussion and Analysis of Financial Conditions and Results
of Operations--Year 2000."

Store Management

Management Structure. We monitor all company-owned stores with a regionally
based staff of district sales managers. District sales managers are responsible
for monitoring all cookie and pretzel stores in their territory. Until
recently, a separate staff of regionally based franchise operations consultants
had monitored franchisees. We plan to consolidate the franchise operations
consultants with the district sales managers. As a result, each district sales
manager is responsible for overseeing approximately 30 company-owned or
franchised cookie and pretzel stores within his or her region. Each district
sales manager reports to one of the four regional vice-presidents of store
operations. The field staff is also responsible for introducing new products
and processes to the stores, ensuring proper implementation and quality
control.

Management Incentives. Each store has an on-site management team consisting
of a manager and an assistant manager. The store manager is responsible for
hiring, training and motivating store personnel. Each manager of a company-
owned store is eligible for salary increases and bonuses based upon the
performance of his or her store, including sales, profits and store appearance.
We believe that our incentive and other programs for management have achieved a
strong retention rate for managers. Without giving effect to the acquisition of
Great American, 72% of Mrs. Fields' district sales managers have been with Mrs.
Fields for at least four years (67% for over five years), and 51% of Mrs.
Fields' store managers have been with Mrs. Fields for at least four years (40%
for over five years).

Training. We believe store managers are a critical component in creating an
effective retail environment, and accordingly have developed ongoing programs
to improve the quality and effectiveness of our store

managers and to increase retention rates. New store managers are required to
attend a two-week training program at our Salt Lake City training facility and
ongoing training courses in new products, standards, and procedures are
available throughout the year to all Mrs. Fields personnel. New franchisees and
store managers of Great American are required to attend a one-week training
program at Great American's Atlanta training facility, known as "Cookie
University." In addition, training courses are available throughout the year to
all Great American and franchisee personnel.

Franchise Operations

In accordance with our business strategy, we have been selling, and expect to
continue to sell, selected company-owned stores to franchisees to reduce costs,
increase profitability and provide for liquidity and development of additional
stores in the future. We are also actively seeking to franchise new stores.

Cookie Business. Each franchisee pays Mrs. Fields an initial licensing fee of
$25,000 per Mrs. Fields store location and is responsible for funding the
building-out of the new store and purchasing initial dough inventory and
supplies, at a total cost of approximately $200,000 (including the initial
franchise fee). However, the cost of opening a new store can vary based on
individual operating and location costs. We also charge franchisees a fee to
handle equipment purchases and to provide other assistance in helping the
franchisee to set up operations. After a store is set up, a franchisee pays
royalty fees to us of 6% of the franchised store's annual gross sales, and an
advertising fee of 1% of annual gross sales. We do not currently anticipate
franchising Original Cookie stores.

Franchisees come from a wide variety of business backgrounds and bring with
them different operating styles and business objectives. Among our franchisees
are full-time store operators, passive investors, retired professionals and
people seeking a second source of income. The majority of Mrs. Fields
franchisees own one store. As of October 3, 1998, the five largest Mrs. Fields
franchisees operated 61 stores, and the largest Mrs. Fields franchisee operated
14 stores.

Each Great American franchisee pays an initial licensing fee of $25,000 per
store and is responsible for funding the build-out of the new store and
purchasing initial batter inventory and supplies, at a total cost of
approximately $164,000 (including the initial licensing fee). However, the cost
of opening a new store can be significantly higher for franchisees who purchase
existing company-owned stores and otherwise varies based on individual
operating and location costs. We also charge franchisees a fee to purchase
equipment and to provide other assistance in helping the franchisee to set up
operations.

Pretzel Business. We do not franchise Hot Sam stores. We are a franchisee of
94 Pretzel Time stores, with rights to sub-franchise, if desired. Each
franchisee pays Pretzel Time an initial licensing fee of $25,000 per new
Pretzel Time store location and is responsible for funding the building-out of
the new store and supplies, at a total cost of approximately $190,000 to
$240,000 (including the initial franchise fee). However, the cost of opening a
new store can vary based on individual operating and location costs. Pretzel
Time also charges franchisees a fee to handle equipment purchases and to
provide other assistance in helping the franchisee to set up operations. After
a store is set up, a franchisee pays royalty fees to Pretzel Time of 7% of the
franchised store's annual gross sales, and a marketing fee of 1% of annual
gross sales.

Franchisee Recruiting and Training. We have been successful in recruiting
franchisees and completing franchise transactions and believe we will continue
to realize significant cash flow from franchising by:

(1) emphasizing the use of proprietary dough that minimizes product
quality issues and ensures a consistent product across all outlets,

(2) frequent quality, service and cleanliness evaluations of franchised
stores by operations support staff, and

(3) initial and continuing training of franchisees to improve their
financial and retail sales skills.

We believe our franchisees are a critical component in creating an effective
retail environment, and accordingly we make our ongoing programs available to
franchisees to improve their quality and effectiveness. Franchisees are
required to attend a two-week training program at our Salt Lake City training
facility and ongoing training courses in new products, standards, and
procedures are available throughout the year to all franchisee personnel.

Licensing

In the past few years, we have utilized a "branding" strategy which has
capitalized on the highly-recognized Mrs. Fields brand to build traffic, expand
sales, improve market share, and to increase profits through cultivating
alternative channels of distribution. The following is a comprehensive list of
branding strategies, with examples of current licensees within Mrs. Fields'
system:

Concept Licensing. We have developed a licensing program for non-mall
retail outlets that enables us to enter difficult-to-reach markets and
facilitate brand exposure through "presence" and "prestige" marketing. Our
licensees duplicate the Mrs. Fields store concept and purchase dough from
our various distributors. Several of these licensees are contract
management companies that manage and operate food service in host
locations. Our licensees and their respective distribution channels include
Host Marriott in airports and travel plazas, ARAMark in stadiums and
convention centers and Holiday Inn Worldwide in hotels.

Retail Licensing. We plan to capitalize on our brand awareness and the
perception of quality among consumers to expand the product line to include
products sold in other retail environments, including refrigerated dough,
dry-mix and non-food products, and other applications outside the original
scope of our retail cookie store concept. A current example is Legacy
Brands, which has the exclusive North American rights to retail frozen
dough and offers Mrs. Fields Cookies frozen dough throughout the
supermarket industry. Another licensee is Wham-O, Inc., which has a license
to market the Mrs. Fields Baking Oven for children sold in most toy stores
and through mass merchandisers.

Supply Licensing. We currently have arrangements with United Airlines and
TWA under which our mail order division sells cookies to the airlines and
allows the airlines to promote the Mrs. Fields brand and products to their
first-class customers. We are pursuing similar relationships to compete
with other manufacturers' brands selling in this channel of business.

Competition

We compete for both leasing opportunities and customers with other cookie and
pretzel retailers, as well as other confectionery, sweet snack and specialty
food retailers, including cinnamon rolls, yogurt, ice cream, baked goods and
candy shops. The specialty retail food and snack industry is highly competitive
with respect to price, service, location and food quality, and there are many
well-established competitors with greater resources than those of Mrs. Fields.
We compete with these retailers on the basis of price, quality, location and
service. We face competition from a wide variety of sources, including such
companies as Cinnabon, Inc., TCBY Yogurt Inc., Auntie Anne's Soft Pretzels, and
Baskin-Robbins 31 Flavors.

Properties

As of October 3, 1998, we leased 1,029 retail stores, of which 445 were
subleased to franchisees under terms which cover all obligations of Mrs. Fields
thereunder. Under our franchise agreements, we have certain rights to gain
control of a retail site in the event of default under the lease or the
franchise agreement. Most of our operating leases provide for the payment of
lease rents plus real estate taxes, utilities, insurance, common area charges
and certain other expenses, as well as contingent rents which generally range
from 8% to 10% of net retail store sales in excess of stipulated amounts. See
"Risk Factors--We May Not Be Able to Obtain Leases in the Future" and "--We
Have Continuing Obligations Under Real Estate Leases."

We have a lease for 31,000 square feet of office space in Salt Lake City,
Utah, which we use as our corporate headquarters. We also lease approximately
20,000 square feet of office space in Salt Lake City, Utah for its product
development, training and mail order operations. We own substantially all of
the equipment used in both of these facilities and in company-owned retail
outlets. Great American owned its headquarters and batter production facility,
located in a building of approximately 28,000 square feet in Atlanta, Georgia.
We acquired this facility in the acquisition of Great American. Great
American's headquarters have been transferred to Salt Lake City since the
acquisition of Great American.

Employees

As of January 3, 1999, we had approximately 6,614 employees in company-owned
stores, of whom approximately 943 were store managers and assistant store
managers, 58 were full-time sales assistants and 5,613 were part-time sales
assistants. The typical Mrs. Fields store employs 5 to 13 employees. During the
period from November through February, we may hire as many as 750 additional
part-time employees to handle additional mall traffic. Most employees are paid
on an hourly basis, except store managers. Our employees are not unionized. We
have never experienced any significant work stoppages and believe that our
employee relations are good.

Many of our employees are paid hourly rates based upon the federal minimum
wage. The federal minimum wage increased from $4.75 to $5.15 on September 1,
1997. As of January 3, 1999, 1,636 of our 6,614 employees in company-owned
stores earned the federal minimum wage. The September 1, 1997 minimum wage
increase is expected to negatively impact our labor costs, increasing wages by
approximately $219,000 annually, but management believes this impact can be
negated in the long-term through increased efficiencies in our operations and,
as necessary, through retail price increases.

Trademarks

We are the holder of numerous trademarks that have been federally registered
in the United States and in other countries located throughout the world. We
are a party to disputes with respect to trademarks none of which, in the
opinion of management of Mrs. Fields, is material to our business, financial
condition or results of operations.

Legal Proceedings; Government Regulation

In the ordinary course of business, we are involved in routine litigation,
including franchise disputes and trademark disputes. Except as described below,
we are not a party to any legal proceedings which, in the opinion of management
of Mrs. Fields, after consultation with legal counsel, is material to our
business, financial condition or results of operations.

In connection with the initial discussions relating to the acquisition of
Great American, on or about September 12, 1997, 9 franchisees of Great American
filed an action challenging a possible acquisition of Great American by Mrs.
Fields. Under settlement agreements and waivers with certain Great American
franchisees, such franchisees released all claims with respect to this
litigation. It was a condition of the acquisition of Great American that this
litigation be dismissed with prejudice. A motion dismissing the litigation with
prejudice was filed on August 24, 1998. See "The Transactions--The Great
American Transactions."

Our stores and products are subject to regulation by numerous governmental
authorities, including, without limitation, federal, state and local laws and
regulations governing health, sanitation, environmental protection, safety and
hiring and employment practices.

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding the executive
officers and directors of Mrs. Fields as of January 3, 1999. The directors are
also directors of Mrs. Fields' Holding.

Name Age Title
- ---- --- -----

Larry A. Hodges......... 49 Director, President and Chief Executive Officer
L. Tim Pierce........... 47 Senior Vice President, Chief Financial Officer and Secretary
Pat W. Knotts........... 43 Senior Vice President of Operations
Garry Remington......... 47 Senior Vice President of Real Estate
Michael R. Ward......... 40 Vice President of Administration and Legal Department
Herbert S. Winokur, Jr.. 54 Chairman of the Board of Directors
Richard Ferry........... 61 Director
Debbi Fields............ 42 Director
Nat Gregory............. 50 Director
Walker Lewis............ 54 Director
Peter Mullin............ 57 Director
Gilbert Osnos........... 69 Director

Mr. Hodges has been President and Chief Executive Officer of Mrs. Fields Inc.
and Mrs. Fields since March 1994, and a Director of Mrs. Fields and Mrs. Fields
Holding since April 1993. From 1992 to 1994, Mr. Hodges was the Chief Executive
Officer of Food Barn Stores, Inc. (Kansas City, Missouri). Earlier Mr. Hodges
was a consultant to various manufacturers and retailers. For 25 years, Mr.
Hodges was with American Stores Company where he served as President of two of
its subsidiaries ranging in annual sales from $600 million to $2.3 billion. Mr.
Hodges has over 32 years of experience in the retail field serving as president
of four supermarket chains and consultant and director to large food companies.
Mr. Hodges is a director of Ameristar Casinos, Inc. and Coinstar, Inc.

Mr. Pierce has been Senior Vice President of Mrs. Fields Inc. and Mrs. Fields
since December 1991, and Chief Financial Officer since August 1993. He was
appointed Corporate Secretary in April 1995. Since joining Mrs. Fields Inc. in
1988 and prior to becoming Senior Vice President, Mr. Pierce had served as Vice
President of Finance. He was also an Audit Manager and a Senior Audit Manager
with Price Waterhouse in Salt Lake City, Utah, and New York, New York. Mr.
Pierce is a certified public accountant and has also served on the Board of
Directors of Mountain America Credit Union and currently serves as a Director
of Pretzel Time.

Mr. Knotts has been Senior Vice President of Mrs. Fields since October 1996.
Mr. Knotts' responsibilities include all aspects of store operations and
related support functions. Between January 1992 and October 1996, Mr. Knotts
served as Executive Vice President of Operations for Original Cookie and Hot
Sam, where he was responsible for store operations, marketing, purchasing,
construction and store design. Mr. Knotts also held the position of Regional
Vice President of Stores for Silo Inc., a $1 billion consumer electronics and
major appliance chain.

Mr. Remington has been Senior Vice President of Real Estate of Mrs. Fields
since July 1997. Mr. Remington's responsibilities include all aspects of real
estate, store construction, remodels and lease negotiations. Between October
1996 and July 1997, Mr. Remington served as Vice President of Real Estate for
Sbarro, Inc. From 1994 to 1996, Mr. Remington held the position of Senior Vice
President of Leasing for the Woolworth Corporation, with responsibilities for
Footlocker, Champ Sports, Northern Reflections, Afterthoughts, and seven other
divisions, and from 1992 to 1994, Mr. Remington was Vice President and Director
of Leasing for the Woolworth Corporation, which he joined in 1972.

Mr. Ward has been Vice President of Administration for Mrs. Fields since
September 1996. Mr. Ward's responsibilities include management of the Human
Resources Department, Benefits and the Legal Department.

Between 1991 and 1996, Mr. Ward's responsibilities were overseeing the Legal
Department and the Human Resources Department for Mrs. Fields Inc. He is
admitted to practice law in the State of Utah.

Mr. Winokur has been Chairman of the Board of Directors of Mrs. Fields and
Mrs. Field's Holding since their inception in September 1996. Mr. Winokur is
managing member of Capricorn Holdings, L.L.C., the General Partner of
Capricorn. Mrs. Fields is owned by Mrs. Fields' Holding, a portfolio company of
Capricorn which owns the majority of Mrs. Field's Holding's stock. Mr. Winokur
is President of Winokur Holdings, Inc. (an investment company) and Managing
General Partner of Capricorn Investors, L.P. and Capricorn, private investment
partnerships concentrating on investments in restructure situations, organized
by Mr. Winokur in 1987 and 1994, respectively. Prior to his current
appointment, Mr. Winokur was Senior Executive Vice President and Director of
Penn Central Corporation. Mr. Winokur is also a Director of NAC Re Corporation,
The WMF Group, Ltd., Mrs. Fields Holding, DynCorp., and Enron Corp.

Mr. Ferry has been a Director of Mrs. Fields since its inception in September
1996. Mr. Ferry is co-founder and Chairman of Korn/Ferry International, the
world's leading executive search firm. Mr. Ferry is on the Board of Directors
of Avery Dennison, Dole Food Company and Pacific Life Insurance Company.

Debbi Fields has been a Director of Mrs. Fields since its inception in
September 1996. Debbi Fields founded a predecessor to Mrs. Fields in 1977 and
served as President and Chief Executive Officer until 1993. She currently
serves on the Board of several non-profit organizations and lectures throughout
the United States to Fortune 500 companies. Debbi Fields is a director of
Outback Steakhouse, Inc.

Mr. Gregory has been a Director of Mrs. Fields since its inception in
September 1996. Since 1993, Mr. Gregory has served as Chairman and Chief
Executive Officer of NATCO, an international supplier of oilfield production
equipment, which is a portfolio company of Capricorn. Prior to that he served
as Managing Director of Smith Barney from 1991 to 1993. Mr. Gregory is a member
and managing director of Capricorn Holdings, L.L.C., the General Partner of
Capricorn, and a director of Marine Drilling Companies, Inc.

Mr. Lewis has been a Director of Mrs. Fields since its inception in September
1996. Mr. Lewis is the Chairman of Devon Value Advisers. Mr. Lewis served as
Chairman of Strategic Planning Associates, specializing in shareholder value
strategies. Mr. Lewis was a Senior Advisor at Dillon Read & Co., Inc. and his
company, Devon Value Advisors, continues to act as a consultant to Dillon Read.
He was a Managing Director of Kidder, Peabody & Co., Inc., President of Avon
North America and Executive Vice President of Avon Products, Inc. Mr. Lewis has
served on the Board of Directors of Owens Corning, American Management Systems,
Incorporated, Jostens, Inc., Marakon Associates and London Fog.

Mr. Mullin has been a Director of Mrs. Fields since its inception in
September 1996. Mr. Mullin founded Mullin Consulting, Inc. in Los Angeles in
1969, and serves as its Chairman and Chief Executive Officer. He also co-
founded Strategic Compensation Associates and serves as Chairman of the firm's
Executive Committee. Mr. Mullin is a member of the Board of Directors of Avery
Dennison Corporation, 1st Business Bank, Process Technology Holdings, Inc.,
Golden State Vintners, M Life Insurance Company and the Board of Advisors of
CMS Companies.

Mr. Osnos has been a Director of Mrs. Fields since its inception in September
1996. Mr. Osnos has served since 1992 as Chairman of Osnos & Company, which
provides interim management to companies. He has served as Interim
President/CEO/COO to a large array of companies in manufacturing, distribution,
retailing and service industries. In 1979 he joined the predecessor firm and
became a partner in 1981. He has been Chairman of the Turnaround Management
Association and a member of its Board since prior to 1993. He is also on the
Board of Directors of Furr's/Bishop's, Inc. and Dunham's Athleisure Corp.

Executive Compensation

The following table sets forth information with regard to compensation for
services rendered in all capacities to Mrs. Fields by its Chief Executive
Officer, the four other most highly compensated executive

officers of Mrs. Fields other than the CEO who were serving as executive
officers at the end of the last completed fiscal year and one additional
individual for whom disclosure would have been provided, but for the fact that
the individual was not serving as an executive officer at the end of the last
completed fiscal year. Information set forth in the table reflects compensation
earned by such individuals for services with Mrs. Fields or its subsidiaries.

SUMMARY COMPENSATION TABLE

Long Term Compensation
Annual Compensation Awards
-------------------------------------- ----------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Salary Bonus Compensation Award(s) Options/SARS(7) Compensation
Principal Position Year ($) ($) ($) ($) (#) ($)
------------------ ---- -------- -------- ------------ ---------- --------------- ------------

Larry Hodges 1998 $339,583 $150,000 $4,833 $ -- -- $471,000(8)
President and CEO 1997 300,000 185,412 2,177 50,000(6) -- --
1996 262,834 -- 1,656 -- 229,992 --
L. Tim Pierce 1998 193,430 70,000 2,634 -- -- --
Senior Vice President 1997 175,000 103,607 1,287 -- -- 71,867(8)
and CFO 1996 167,723 -- 1,107 -- 32,856 33,000(1)
Pat Knotts 1998 191,699 70,000 -- -- -- --
Senior Vice President 1997 162,500 27,321 -- -- -- 23,920(3)
Operations 1996 172,490 267,212(2) -- -- 32,856 2,912(4)
Michael Ward 1998 135,385 50.000 1,370 -- -- --
Vice President 1997 109,904 56,393 619 -- -- 39,488(8)
Legal and
Administration 1996 83,020 -- 526 -- 24,642 --
Garry Remington 1998 180,000 33,945 -- -- -- --
Senior Vice President 1997 82,859 -- -- -- 24,642 46,707(5)
Real Estate 1996 -- -- -- -- -- --

- --------

(1) Represents forgiveness of a loan made by Mrs. Fields Inc. in 1993.
(2) Represents payments under retention and employment agreements from Original
Cookie/Hot Sam.
(3) Represents payment of relocation expenses of $20,920 and a grant of $3,000
under the Original Cookie 401(k) plan.
(4) Represents a grant under the Original Cookie 401(k) plan.

(5) Represents payment of relocation expenses.

(6) 50% of the restricted shares vest on January 1, 1999 and the other 50% vest
on January 1, 2000.

(7) The stock options for common stock of Mrs. Fields' Holding have 10-year
terms and were granted as of September 1996, with the exception of Garry
Remington's, which were granted as of July 1997. All options have an
exercise price of $10.00 per share, with the exception of Garry
Remington's, which have an exercise price of $13.00 per share.

(8) Represents payment under Mrs. Field's Inc. Management Value Creation Plan.

Option Grants and Exercises

The Board of Directors of Mrs. Fields' Holding recently approved the
provisions of a director stock option plan (the "Director Stock Option Plan"),
providing for the issuance of common stock, par value $.001 per share, of Mrs.
Fields' Holding to directors of Mrs. Fields' Holding, and an employee stock
option plan (the "Employee Stock Option Plan" and, together with the Director
Stock Option Plan, the "Plans"), providing for the issuance of options to
purchase common stock of Mrs. Fields' Holding to officers and other employees
of Mrs. Fields' Holding and its subsidiaries, including Mrs. Fields. The Plans
provide for the issuance of options to purchase an aggregate of 542,840 shares
of common stock of Mrs. Fields' Holding to directors of Mrs. Field's Holding
and officers and employees of Mrs. Fields' Holding's subsidiaries, including
Mrs. Fields, of which 375,840 shares, representing approximately 10% of the
total common stock of Mrs. Fields' Holding on a

fully diluted basis, after giving effect to the issuance of stock pursuant to
the warrants to purchase common stock of Mrs. Fields' Holding and to issuances
of stock pursuant to options currently issued to directors and employees under
the Plans, have been issued. See "Beneficial Ownership of Capital Stock."

Board Compensation

The Board of Directors of Mrs. Fields meets regularly on a quarterly basis
and more often as required. Board members, other than officers of Mrs. Fields
and Mr. Winokur, Mr. Gregory and Ms. Fields, are compensated for services
rendered annually as follows:

(1) $12,000 cash; and

(2) grants of options to purchase common stock of Mrs. Fields' Holding,
pursuant to the Director Stock Option Plan.

The Board of Directors of Mrs. Fields' Holding recently approved the award of
options under the Director Stock Option Plan to purchase 3,350 shares of common
stock of Mrs. Fields' Holding to each of Messrs. Ferry, Gregory, Lewis, Osnos
and Winokur as of January 1, 1997, at an exercise price of $10.00 per share,
and the award of options to purchase 1,792 shares of common stock of Mrs.
Fields' Holding as of January 1, 1998, at an exercise price of $16.74 to each
of the same directors, with the options of Messrs. Gregory and Winokur being
issued to Capricorn.

The Board members were also offered an opportunity to acquire shares of
common stock of Mrs. Fields' Holding pursuant to a director stock purchase plan
(the "Director Stock Purchase Plan"). Such compensation in shares that would be
payable or issuable to Messrs. Winokur and Gregory will be paid to Capricorn. A
total of 51,667 vested shares of common stock of Mrs. Fields' Holding and
28,333 restricted shares of common stock of Mrs. Fields' Holding have been
issued to directors and officers of Mrs. Fields under the Director Stock
Purchase Plan.

Board Committees

Three functioning committees of the Board have been organized: an Executive
Committee, a Compensation Committee and an Audit Committee. Following is a
brief description of each of these committees.

Executive Committee. The Executive Committee is composed of Messrs. Winokur
(Chairman), Gregory and Hodges. The purpose of this committee is to act on the
behalf of the entire Board of Directors between Board meetings.

Compensation Committee. The Compensation Committee is composed of Messrs.
Gregory (Chairman), Mullin and Lewis. The purpose of this committee is to
ensure that Mrs. Fields has a broad plan of executive compensation that is
competitive and motivating to the degree that it will attract, hold and inspire
performance of managerial and other key personnel of a quality and nature that
will enhance the growth and profitability of Mrs. Fields.

Audit Committee. The Audit Committee is comprised of Messrs. Ferry (Chairman)
and Osnos. The purpose of the Audit Committee is to provide oversight and
review of Mrs. Fields' accounting and financial reporting process in
consultation with Mrs. Fields' independent and internal auditors.

Indemnification and Compensation

Mrs. Fields' By-Laws authorize Mrs. Fields to indemnify its present and
former directors and officers and to pay or reimburse expenses for such
individuals in advance of the final disposition of a proceeding upon receipt of
an undertaking by or on behalf of such individuals to repay such amounts if so
required.

Employment Agreements

All of the executive officers are parties to employment agreements with Mrs.
Fields. Each employment agreement provides for a period of employment of two
years (or three years, in the case of Larry Hodges) from the date of the
agreement, subject to termination provisions and to automatic extension of the
agreement. Each employment agreement permits the employee to participate in any
incentive compensation plan adopted by Mrs. Fields to replace the Fiscal 1994
Incentive Compensation Plan of Mrs. Fields Inc., benefit plans and an equity-
based plan or arrangement. If Mrs. Fields terminates employment for cause or if
the employee terminates employment without good reason, Mrs. Fields has no
further obligation to pay the employee. If Mrs. Fields terminates employment
without cause, or the employee terminates employment with good reason, the
employee can receive in severance pay the amount equal to the product of his or
her then current semi-monthly base salary by the greater of the number of semi-
monthly periods from the notice of termination or 36 semi-monthly periods, plus
a portion of any discretionary bonus that would otherwise have been payable.
The employment agreement prohibits the employee, for a year from the date of
termination of employment under the agreement, from becoming an employee,
owner, officer, agent or director of a firm or person that directly competes
with Mrs. Fields in a line or lines of business of Mrs. Fields' that accounts
for 10% or more of Mrs. Fields' gross sales, revenues or earnings before taxes.
An exception is made for investments of not more than 3% of the equity of a
company listed or traded on a national securities exchange or an over-the-
counter securities exchange. The employment agreements have customary
provisions for vacation, fringe benefits, payment of expenses and automobile
allowances. The employees who have such employment agreements, and their base
salaries, are: Larry Hodges, President and Chief Executive Officer, $350,000,
L. Tim Pierce, Senior Vice President, Chief Financial Officer and Secretary,
$200,000, Pat Knotts, Senior Vice President of Operations, $215,000, Michael
Ward, Vice President of Administration and Assistant Secretary, $140,000 and
Garry Remington, Senior Vice President of Real Estate, $190,000.

BENEFICIAL OWNERSHIP OF CAPITAL STOCK

As of the date of this prospectus, all of the capital stock of Mrs. Fields is
owned by Mrs. Fields' Holding, whose address is 2855 East Cottonwood Parkway,
Suite 400, Salt Lake City, Utah 84121. The following table sets forth certain
information, as of January 2, 1999, believed by us to be accurate based on
information provided to it concerning the beneficial ownership of common stock
by each stockholder who is known by Mrs. Fields to own beneficially in excess
of 5% of the outstanding common stock, and by each director, Mrs. Fields' Chief
Executive Officer, each of Mrs. Fields' other four most highly compensated
executive officers and all officers and directors as a group, as of January 2,
1999. The stockholders listed below are deemed beneficial owners of common
stock of Mrs. Fields as a result of their ownership of common stock of Mrs.
Fields' Holding, the owner of 100% of the capital stock of Mrs. Fields. Except
as otherwise indicated, all persons listed below have (1) sole voting power and
investment power with respect to their shares, except to the extent that
authority is shared by spouses under applicable law, and (2) record and
beneficial ownership with respect to their shares. The shares and percentages
set forth below include shares of common stock which were outstanding or
issuable within 60 days upon the exercise of options outstanding as of January
2, 1999 and give effect to the exercise of the warrants issued by Mrs. Fields'
Holding. See "Management--Option Grants and Exercises" and "--Board
Compensation," As of January 2, 1999, there were eight record holders of common
stock of Mrs. Fields' Holding.

Common Stock
--------------------
Number of Percentage
Title of Class Name of Beneficial Owner Shares of Class
-------------- ------------------------ --------- ----------

Capricorn Investors II,
Common stock, par L.P.(1)(2)(3).................. 3,080,094 86.6%
value $0.001 per share, Larry Hodges(2)(3)............. 75,998 2.1%
of Mrs. Fields' Holding Peter Mullin(2)(3)............. 17,323 0.5%
Richard Ferry(2)(3)............ 12,323 0.3%
Walker Lewis(2)(3)............. 9,823 0.3%
Gilbert Osnos(2)(3)............ 9,823 0.3%
L. Tim Pierce(3)............... 11,500 0.3%
Pat Knotts(3).................. 11,500 0.3%
Michael Ward(3)................ 9,857 0.3%
Garry Remington(3)............. 4,792 0.1%
All executive officers and
directors
as a group (11
persons)(2)(3)(4)............. 3,243,033 91.2%

- --------
(1) The address of Capricorn is 30 East Elm Street, Greenwich, CT 06830.

(2) Larry Hodges, Peter Mullin, Richard Ferry, Walker Lewis and Gilbert Osnos
are directors of the Company. Herbert Winokur and Nat Gregory are managing
member and member, respectively, of Capricorn Holdings, L.L.C., the General
Partner of Capricorn, and are directors of Mrs. Fields. See "Management."

(3) The shares and percentages include shares subject to options granted to
directors and officers of Mrs. Fields that are currently vested as of
January 2, 1999, as follows: Capricorn, 4,246 shares; Mr. Hodges, 45,998
shares; Mr. Mullin, 2,323 shares; Mr. Ferry, 2,323 shares; Mr. Lewis, 2,323
shares; Mr. Osnos, 2,323 shares; Mr. Pierce, 11,500 shares; Mr. Knotts,
11,500 shares; Mr. Ward, 9,857 shares; and Mr. Remington, 4,792 shares; all
executive officers and directors as a group, 97,185.

(4) Includes shares beneficially owned by Capricorn.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Agreements with Debbi Fields and Affiliates. In November 1996, Mrs. Fields
entered into a consulting agreement with Debbi Fields, a director of Mrs.
Fields, under which Debbi Fields travels and performs public relations and
advertising activities on behalf of Mrs. Fields for at least 50 days a year for
a fee of $250,000 per year, with an option to perform 20 additional days a year
for additional pay of $5,000 per day. The compensation increased by 10% a year
beginning on January 1, 1999. The consulting agreement expires on December 31,
1999. Mrs. Fields may terminate the consulting agreement for cause and Debbi
Fields may terminate the consulting agreement at any time. Under the consulting
agreement, Debbi Fields may not disclose any confidential information of Mrs.
Fields, such as recipes and trade secrets, and may not, without the prior
written consent of Mrs. Fields, compete with Mrs. Fields.

In addition, Mrs. Fields has a license agreement with FSG Holdings, Inc., a
Delaware Corporation, under which Debbi Fields has a nonexclusive license to
use certain trademarks, names, service marks and logos of Mrs. Fields in
connection with book and television series projects. Debbi Fields is required
to pay 50 percent of any gross revenues in excess of $200,000 that she receives
from the book and television series projects to Mrs. Fields as a license fee.

Mrs. Fields, until recently, leased certain office space to an entity which
is owned in part by Debbi Fields. Billings to the entity for the period from
inception (September 18, 1996) to December 28, 1996, the fiscal year ended
January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998
totaled approximately $60,000, $274,000, $204,000 and $0, respectively, of
which approximately $29,000, $23,000 and $0 is included in accounts receivable
as of December 28, 1996, January 3, 1998 and October 3, 1998, respectively. The
lease was terminated in the first quarter of fiscal year 1998. Mrs. Fields
believes that the arrangements were on terms that could have been obtained from
an unaffiliated third party.

Arrangements with Walker Lewis. Mr. Lewis, a director of Mrs. Fields, acts as
a consultant and an advisor to Dillon Read. In early 1997, Mrs. Fields paid to
Dillon Read a fee of approximately $707,000 in connection with the
restructuring of Mrs. Fields in September 1996. In addition, Mr. Lewis'
company, Devon Value Advisers, received a fee of $250,000, plus expenses, from
Mrs. Fields in the first quarter of 1998 pursuant to an agreement to provide
advisory acquisition and consulting services to Mrs. Fields. Mrs. Fields
believes that the arrangements were on terms that could have been obtained from
an unaffiliated third party.

Korn/Ferry Agreement. Mrs. Fields has paid fees of approximately $47,000,
$157,000, $147,000 and $47,000 during the period ended December 28, 1996, the
year ended January 3, 1998 and the 39 weeks ended September 27, 1997 and
October 3, 1998, respectively, to Korn/Ferry International, an executive search
firm of which Richard Ferry, a director of Mrs. Fields, is the Chairman, in
connection with the hiring of employees for Mrs. Fields. Mrs. Fields believes
that the arrangements are on terms that could have been obtained from an
unaffiliated third party.

Arrangements With Mrs. Fields' Holding. Mrs. Fields and Mrs. Fields' Holding
expect to enter into a Tax Sharing Agreement as defined in and permitted by the
indenture. See "Description of Notes--Certain Covenants."

As of December 28, 1996, January 3, 1998 and October 3, 1998, Mrs. Fields had
receivables of approximately $39,000, $89,000 and $478,000 due from Mrs.
Fields' Holding and payables of $98,000, $105,000 and $0 due to Mrs. Fields'
Holding, respectively. The receivables stem primarily from goods sold and an
allocation of payroll and other operating expenses. Mrs. Fields believes that
the terms of the sale and allocations are essentially equivalent to the terms
that would have been obtained from an unaffiliated third party in a similar
transaction.

At the time of the offering of notes in November 1997, Mrs. Fields' Holding,
which is majority owned by Capricorn, was the holder of a $4,643,000 principal
amount subordinated note of Mrs. Fields. Mrs. Fields

accrued interest of $130,000 in fiscal year 1996 and $441,000 through November
26, 1997. All accrued interest was paid in fiscal year 1997. The principal
amount of this note was converted into common equity of Mrs. Fields in
connection with the refinancing of certain debt of Mrs. Fields and Mrs. Fields'
Brand. Messrs. Winokur and Gregory, directors of Mrs. Fields' Brand, are,
respectively, the manager and managing director of Capricorn Holdings, the
General Partner of Capricorn.

Arrangements with MIDIAL. At the time of the offering of notes in 1997, a
subsidiary of MIDIAL was the holder of $27,000,000 in total principal amount of
senior notes of Mrs. Fields and $8,400,000 in aggregate principal amount of
subordinated notes of Mrs. Fields as to which Mrs. Fields had accrued or paid
interest of $683,000 in 1996 and of $3,177,000 through November 26, 1997. In
connection with the refinancing of certain debt of Mrs. Fields and Mrs. Fields'
Brand, Mrs. Fields repaid all such notes and related interest. Mr. de
Carbonnel, a former director of Mrs. Fields, serves as Chairman and Chief
Executive Officer of MIDIAL. See "The Transactions."

Incentive Arrangements. Under a senior management value creation plan that
was adopted by Mrs. Fields Inc. and assumed by Mrs. Fields at the time of its
formation in September 1996, the following payments were made in 1998: $471,484
to Mr. Hodges; $71,867 to Mr. Pierce; $39,488 to Mr. Ward; and $71,078 to a
vice president of Mrs. Fields Inc. Mr. Hodges used $250,000, representing
substantially all of this payment after his payment of related taxes, to
purchase 25,000 shares of common stock of Mrs. Fields' Holding at $10.00 per
share.

Director Stock Purchase Plan. Each of the directors of Mrs. Fields was
offered an opportunity to purchase common stock of Mrs. Fields Holding under
the Director Stock Purchase Plan. Under the Director Stock Purchase Plan,
shares of common stock of Mrs. Fields' Holding, either restricted or vested,
can be issued to outside directors of Mrs. Fields' Holding and its
subsidiaries, including Mrs. Fields. Restricted shares vest 50% on January 1,
1999 and 50% on January 1, 2000, or earlier, upon a change of control of Mrs.
Fields' Holding or Mrs. Fields. See "Management--Board Compensation." A total
of 51,667 vested shares of common stock of Mrs. Fields Holding and 28,333
restricted shares of common stock of Mrs. Fields Holding have been issued to
directors and officers of Mrs. Fields under the Director Stock Purchase Plan.

The Plans. Under the Employee Stock Option Plan, a committee of the Board is
authorized to administer the Employee Stock Option Plan and has the power,
among other things, to grant awards to officers and other employees of Mrs.
Fields' Holding and its subsidiaries, including Mrs. Fields, of options for
common stock of Mrs. Fields' Holding. The Employee Stock Option Plan provides
for the issuance of three types of options. Performance vested options are
deemed to be vested 20% for fiscal year 1997 and vest an additional 20% per
year for each subsequent fiscal year in which there is a 10% increase in the
implied valuation of Mrs. Fields, which is equal to the excess of 5.5 times
Adjusted EBITDA for such fiscal year over net debt at the end of such fiscal
year. Time vested options vest 25% per year on the anniversaries of the dates
on which they are granted, and vest in full upon a change of control of Mrs.
Fields' Holding or Mrs. Fields. Upside options vest upon the earlier to occur
of the expiration of such option and a change of control, in accordance with
certain internal rate of return targets:

(1) if the IRR through the vesting date is less than 20%, the option
will not vest;

(2) if the IRR is from 20% to 24.99%, the option will vest one-third;

(3) if the IRR is from 25% to 29.99%, the option will vest two-thirds;
and

(4) if the IRR is at least 30%, the option will vest in full.

IRR means, as of any date, the internal rate of return, determined in
accordance with generally accepted practice, on one share of common stock of
Mrs. Fields' Holding calculated from September 18, 1996, through the date as of
which the determination is being made, using

(1) a value of $10.00 per share at September 18, 1996 (subject to
certain adjustments),

(2) if the relevant date is the date of a change of control, the value
paid pursuant to or implicit in the change of control transaction
(as determined in good faith by a committee of the Board of
Directors), and

(3) if the relevant date of determination is the expiration of such
option, the value determined in good faith based on the implied
valuation for the four most recent fiscal quarters for which
financial statements are available.

An total of 492,840 shares of common stock of Mrs. Fields' Holding have been
reserved for issuance under the Employee Stock Option Plan. Stock issued under
the Employee Stock Option Plan is subject to customary restrictions on
transfer.

Under the Director Stock Option Plan, a committee of the Board is authorized
to administer the Director Stock Option Plan and has the power, among other
things, to grant awards of options for common stock of Mrs. Fields' Holding to
outside directors of Mrs. Fields' Holding and its subsidiaries, including Mrs.
Fields. The Director Stock Option Plan provides for the issuance of time vested
options, which vest 25% per year on the anniversaries of the dates on which
they are granted, and vest in full upon a change of control of Mrs. Fields'
Holding or Mrs. Fields. An aggregate of 50,000 shares of common stock of Mrs.
Fields' Holding are reserved for issuance under the Director Stock Option Plan.
Common stock of Mrs. Fields' Holding issued under the Director Stock Option
Plan is subject to customary restrictions on transfer. Options have been
awarded under the Director Stock Option Plan to each of Messrs. Ferry, Gregory,
Lewis, Osnos and Winokur to purchase 3,350 shares of common stock of Mrs.
Fields' Holding as of January 1, 1997, at an exercise price of $10.00 per
share, and to purchase 1,792 shares of common stock of Mrs. Fields' Holding as
of January 1, 1998, at an exercise price of $16.74 per share, with the options
of Messrs. Gregory and Winokur being issued to Capricorn.

The Stockholders' Agreement. Mrs. Fields' Holding has entered into a
stockholders' agreement with its stockholders. The stockholders' agreement
gives rights of first refusal to Mrs. Fields' Holding if any Mrs. Fields'
Holding stockholder receives an offer to purchase common stock of Mrs. Fields'
Holding and, if Mrs. Fields' Holding does not exercise its rights, gives the
rights of first refusal to other Mrs. Fields' Holding stockholders. In the
event of a sale to a third party approved by Capricorn, Capricorn has the right
to require the other Mrs. Fields' Holding stockholders to sell their common
stock of Mrs. Fields' Holding (the "Drag Along"). If Capricorn sells any common
stock of Mrs. Fields' Holding, the other Mrs. Fields' Holding stockholders will
have the opportunity to sell their common stock of Mrs. Fields' Holding in
proportion to their holdings (the "Tag Along"). The stockholders' agreement
also provides for piggyback registration rights for all Mrs. Fields' Holding
stockholders, and gives one Mrs. Fields' Holding stockholder demand
registration rights. The stockholders' agreement gives Mrs. Fields' Holding the
option to purchase all of the common stock of Mrs. Fields' Holding held by an
officer or director that holds common stock of Mrs. Fields' Holding if such
officer or director is terminated. If an officer or director is terminated
other than for cause, the officer or director has the right to sell shares to
Mrs. Fields' Holding. The stockholders' agreement provides for customary
restrictions on transfer of common stock of Mrs. Fields' Holding. The holders
of warrants to purchase common stock of Mrs. Fields' Holding will be subject to
the Drag Along and benefit from the Tag Along.

DESCRIPTION OF NOTES

You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the word "Mrs.
Fields" refers only to Mrs. Fields' Original Cookies, Inc. and not to any of
its subsidiaries.

We will issue the 10 1/8% Series B Senior Notes due 2004 (the "new notes")
under an indenture among Mrs. Fields, the guarantors and The Bank of New York,
as Trustee. The terms of the new notes being offered in the Exchange Offer
include those stated in the indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The term "old notes" refers to the Series A 10 1/8% Senior Notes due
2004 (the "Series A Notes") and Series C 10 1/8% Senior Notes due 2004 (the
"Series C Notes"). The term "notes" refers to outstanding notes previously
issued under the indenture, including the old notes, and the new notes.

The following description is a summary of the material provisions of the
indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of these notes. We have filed copies of the indenture
and the registration rights agreement as exhibits to the registration statement
which includes this prospectus.

Brief Description of the Notes and the Guarantees

The notes

These notes:

. are general unsecured obligations of Mrs. Fields;

. are senior in right of payment to all subordinated Indebtedness of
Mrs. Fields;

. are equal in right of payment to all existing and future senior
Indebtedness of Mrs. Fields; and

. are unconditionally guaranteed on a senior basis by the guarantors.

As of January 2, 1999, Mrs. Fields had approximately $8.5 million in
Indebtedness other than the notes.

The Guarantees

"guarantors" means each of :

(1)The Mrs. Fields' Brand; and

(2)any other Subsidiary that executes a guarantee in accordance with
the provisions of the indenture

and their respective successors and assigns.

A "Subsidiary" means, with respect to any person,

(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is
at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or
a combination thereof) and

(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or
of one or more Subsidiaries of such Person (or any combination
thereof).

These notes are guaranteed by the following subsidiaries of Mrs. Fields:

The Mrs. Fields' Brand, Inc.

Great American Cookie Company, Inc.

Pretzelmaker Holdings, Inc.

The guarantees of these notes:

. are general unsecured obligations of each guarantor;

. are senior in right of payment to all subordinated Indebtedness of
each guarantor; and

. are equal in right of payment to any existing and future senior
Indebtedness of each guarantor.

As of January 2, 1999, Mrs. Fields' subsidiaries had approximately $900,000
in indebtedness and had preferred stock with a value upon liquidation of $1.3
million, substantially all of which is senior in right of payment to the notes.
The indenture will permit us and the guarantors to incur additional
Indebtedness.

The notes will be guaranteed by any additional guarantors.

Principal, Maturity and Interest

Mrs. Fields can issue up to $200.0 million of notes under the indenture.
Before August 1998, Mrs. Fields had issued $100.0 million of notes under the
indenture. Mrs. Fields issued an additional $40.0 million of Series C Notes on
August 24, 1998.

. Interest on the notes will accrue at the rate of 10 1/8% per annum.

. We will pay interest on the new notes semi-annually in arrears on
June 1 and December 1 of each year, commencing June 1, 1999. We will
make each interest payment to holders of record of the new notes on
the immediately preceding May 15 and November 15.

. Interest on the new notes will accrue from the date it was most
recently paid. We will compute interest on the basis of a 360-day
year comprised of twelve 30-day months.

. Old notes that are accepted for exchange will cease to accrue
interest from and after the date the Exchange Offer is consummated.

. The notes mature on December 1, 2004.

Methods of Receiving Payments on the Notes

If a holder has given wire transfer instructions to us, we will make all
principal, premium and interest and, if any, liquidated damages, payments on
those notes in accordance with those instructions. All payments on the notes
will be made at the office or agency that we maintain within the City and State
of New York unless we elect to make interest payments by check mailed to the
holders at their addresses set forth in the register of holders. Until we
designate otherwise, our office or agency in New York will be the office of the
Trustee.

Transfer and Exchange

A holder may transfer or exchange notes in accordance with the indenture. The
Registrar and the Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and Mrs. Fields may require a
holder to pay any taxes and fees required by law or permitted by the indenture.
We are not required to transfer or exchange any note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.

The registered holder of a note will be treated as the owner of it for all
purposes.

Guarantees

The guarantors will, jointly and severally, unconditionally guarantee Mrs.
Fields' obligations under these notes on a senior unsecured basis. The
obligations of each guarantor under its guarantee will be limited as necessary
to prevent that guarantee from constituting a fraudulent conveyance under
applicable law. See "Risk Factors--Fraudulent Conveyance Risks. Federal and
State Statutes Allow Courts, Under Specific Circumstances, to Void Payments
Under the Notes and Guarantees and Require Noteholders to Return Payments
Received."

A guarantor may not consolidate with or merge with or into (whether or not
such guarantor is the surviving Person), another Person unless:

(1) the Person formed by or surviving any such consolidation or merger
assumes all the obligations of that Guarantor pursuant to a
supplemental indenture satisfactory to the Trustee; or

(2) immediately after giving effect to that transaction, no Default or
Event of Default exists;

(3) such guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth
immediately after giving effect to such transaction equal to or
greater than the Consolidated net Worth of such guarantor
immediately preceding the transaction; and

(4) Mrs. Fields would be permitted by virtue of giving effect to its pro
forma Fixed Charge Coverage Ratio, immediately after giving effect to
such transaction, to incur at lest $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
covenant described below under the caption: "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock."

A Default means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default. Events of Default are listed
under "Event of Default and Remedies" below.

The guarantee of a guarantor will be released:

(1) in connection with any sale or other disposition of all of the
assets of that guarantor (including by way of merger or
consolidation), if Mrs. Fields applies the Net Proceeds of that
sale or other disposition, in accordance with the applicable
provisions of the indenture; or

(2) in connection with any sale of all of the capital stock of a
guarantor (including by way of a merger or consolidation), if Mrs.
Fields applies the Net Proceeds of that sale in accordance with the
applicable provisions of the indenture; or

In the event of a sale or other disposition of all of the assets of a
Guarantor, the corporation acquiring the property will be released.

See "Redemption at the Option of Holders--Asset Sales."

Optional Redemption

Until November 20, 2001, Mrs. Fields may on any one or more occasions redeem
up to 35% of the aggregate principal amount of notes ever issued under the
indenture at a redemption price of 110.125% of the principal amount of such
notes, plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that

(1) at least 65% of the in aggregate principal amount of notes ever
issued under the Indenture remains outstanding immediately after
the occurrence of such redemption; and

(2) the redemption must occur within 60 days of the date of the closing
of such Public Equity Offering.

Except pursuant to the preceding paragraph, the notes will not be redeemable
at Mrs. Fields' option prior to December 1, 2001.

After December 1, 2001, Mrs. Fields may redeem all or a part of these notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and liquidated damages, if any, thereon, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 1 of the years indicated below:

Year Percentage
---- ----------

2001.............................................................. 103.375%
2002.............................................................. 101.688%
2003 and thereafter............................................... 100.000%

Mandatory Redemption

Except as set forth below under the caption "Repurchase at the Option of
Holders," Mrs. Fields is not required to make mandatory redemption or sinking
fund payments with respect to the notes.

Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, each holder of notes will have the right to
require Mrs. Fields to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's notes pursuant to the Change of
Control Offer. In the Change of Control Offer, Mrs. Fields will offer a Change
of Control Payment in cash equal to 101% of the total principal amount of notes
repurchased plus accrued and unpaid interest thereon, if any, and liquidated
damages, if any, to the date of purchase. Within 60 days following any Change
of Control, Mrs. Fields will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes on the Change of Control Payment Date specified in such
notice, pursuant to the procedures required by the indenture and described in
such notice. Mrs. Fields will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control.

On the Change of Control Payment Date, Mrs. Fields will, to the extent
lawful:

(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so
tendered; and

(3) deliver or cause to be delivered to the Trustee the notes so
accepted together with an Officers' Certificate stating the total
principal amount of notes or portions thereof being purchased by
Mrs. Fields.

The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount of $1,000 or an integral multiple thereof. Mrs. Fields will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

The provisions described above that require Mrs. Fields to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indenture are

applicable. Except as described above with respect to a Change of Control, the
indenture does not contain provisions that permit the holders of the notes to
require that Mrs. Fields repurchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.

Indebtedness of Mrs. Fields currently prohibits, and it is expected that
future Indebtedness of Mr. Fields will prohibit, certain events that would
constitute a Change of Control. In addition, the exercise by the holders of
notes of their right to require Mrs. Fields to repurchase the notes, could
cause a default under such Indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchases on Mrs. Fields.
Finally, Mrs. Fields' ability to pay cash to the holders of notes upon a
repurchase may be limited by Mrs. Fields' then existing financial resources.

Mrs. Fields will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by Mrs.
Fields and purchases all notes validly tendered and not withdrawn under such
Change of Control Offer.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Mrs. Fields and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting, the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of notes to require Mrs. Fields to
repurchase such notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of Mrs. Fields and its
Subsidiaries taken as a whole to another Person or group may be uncertain.

Asset Sales

Mrs. Fields will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale unless:

(1) Mrs. Fields (or the Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of;

(2) such fair market value is

(a) evidenced by an Officers' Certificate delivered to the Trustee,
in the case of an Asset Sale or Asset Sales aggregating $10,000
or more; or

(b) determined by Mrs. Fields' Board of Directors and evidenced by a
resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee, in the case of any Asset
Sale having a fair market value or resulting in net proceeds in
excess of $5.0 million; and

(3) at least 75% of the consideration therefor received by Mrs. Fields
or such Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:

(a) any liabilities (as shown on Mrs. Fields' or such Subsidiary's
most recent balance sheet), of Mrs. Fields or any Subsidiary
(other than contingent liabilities and liabilities that are by
their terms subordinated to the notes or any guarantee of the
notes) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases Mrs.
Fields or such Subsidiary from further liability; and

(b) any securities, notes or other obligations received by Mrs.
Fields or any such Subsidiary from such transferee that are
immediately converted by Mrs. Fields or such Subsidiary into cash
(to the extent of the cash received in that conversion).

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
Mrs. Fields may apply such Net Proceeds at its option:

(1) to repay senior Indebtedness of Mrs. Fields or any guarantor;

(2) to make a Permitted Investment;

(3) to make a capital expenditure in a Permitted Business; or

(4) to acquire long-term assets in a Permitted Business.

Pending the final application of any such Net Proceeds, Mrs. Fields may
temporarily reduce Indebtedness under a Credit Facility, including the credit
agreement with La Salle National Bank, or otherwise invest such Net Proceeds in
any manner that is not prohibited by the indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $5.0 million, Mrs. Fields will make
an Asset Sale Offer to all holders of notes to purchase the maximum principal
amount of notes that may be purchased out of the Excess Proceeds. The offer
price in any Asset Sale Offer will be equal to 100% of principal amount plus
accrued and unpaid interest, if any, and liquidated damages, if any, to the
date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, Mrs. Fields may use such Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
notes tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the notes to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.

Selection and Notice

If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption as follows:

(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are
listed; or

(2) if the notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.

No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of notes to be redeemed at its
registered address. Notices of redemption may not be conditional.

If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on
the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.

Certain Covenants

Restricted Payments

Mrs. Fields will not, and will not permit any of its Subsidiaries to,
directly or indirectly:

(1) declare or pay any dividend or make any other payment or
distribution on account of Mrs. Fields' or any of its Subsidiaries'
Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving Mrs. Fields)
or to the direct or indirect

holders of Mrs. Fields' or any of its Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of Mrs.
Fields or dividends or distributions payable to Mrs. Fields or any
Wholly Owned Subsidiary of Mrs. Fields that is a guarantor);

(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving Mrs. Fields) any Equity Interests of Mrs.
Fields or any direct or indirect parent of Mrs. Fields or other
Affiliate of Mrs. Fields (other than such Equity Interests owned by
Mrs. Fields or any Wholly Owned Subsidiary of Mrs. Fields);

(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness
that is subordinated to the notes, except a payment of interest or
principal at the Stated Maturity thereof; or

(4) make any Restricted Investment (all such payments and other actions
(1) through (4) above being collectively referred to as "Restricted
Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof, and

(2) Mrs. Fields would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described below under
the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock"; and

(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Mrs. Fields and its Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by
clauses (2), (3) or (4) of the next succeeding paragraph), is less
than the sum of

(a) 50% of the Consolidated Net Income of Mrs. Fields for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of
Mrs. Fields' most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus

(b) 100% of the aggregate net cash proceeds (other than proceeds
referred to in the proviso to the first sentence of the
definition of "Investments") received by Mrs. Fields since the
Issue Date of Equity Interests of Mrs. Fields (other than
Disqualified Stock, but including the capital contribution from
Mrs. Fields Holding, on August 24, 1998) or Disqualified Stock
or convertible debt securities that have been converted into
such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a
Subsidiary of Mrs. Fields and other than Disqualified Stock or
convertible debt securities that have been converted into
Disqualified Stock), plus

(c) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of

(1) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and

(2) the initial amount of such Restricted Investment.

"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person,
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.

The preceding provisions will not prohibit:

(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the indenture;

(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of
Mrs. Fields in exchange for, or out of the net cash proceeds of,
the substantially concurrent sale (other than to a Subsidiary of
Mrs. Fields) of, other Equity Interests of Mrs. Fields (other than
Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from
clause (3)(b) of the preceding paragraph;

(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;

(4) the payment of any dividend by a Subsidiary of Mrs. Fields to the
holders of any Equity Interests on a pro rata basis; and

(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Mrs. Fields or any Subsidiary of
Mrs. Fields held by any member of Mrs. Fields' (or any of its
Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests shall not exceed, in any twelve-month
period, $250,000, plus the amount of cash proceeds received by Mrs.
Fields from any reissuance of Equity Interests by Mrs. Fields to
members of management of Mrs. Fields or its Subsidiaries during
such period, which aggregate amount shall in no event exceed
$500,000 in any such period, and no Default or Event of Default
shall have occurred and be continuing immediately after such
transaction;

(6) payments to Mrs. Fields Holding pursuant to the Tax Sharing
Agreement;

(7) payments pursuance to the Pretzel Time Employment Agreement and the
Pretzel Time Management Agreement; and

(8) the redemption or repurchase of preferred stock of Pretzel Time
outstanding on the Issue Date.

The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by Mrs. Fields or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $2.0 million. Not later than the date of making any
Restricted Payment, Mrs. Fields shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the indenture.

Incurrence of Indebtedness and Issuance of Preferred Stock

Mrs. Fields will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Indebtedness),
and Mrs. Fields will not issue any Disqualified Stock and will not permit any
of its Subsidiaries to issue any shares of preferred stock; provided that Mrs.
Fields may incur Indebtedness (including Acquired Indebtedness) or issue
Disqualified Stock, if:

(1) the Fixed Charge Coverage Ratio for Mrs. Fields' most recently
ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which

such additional Indebtedness is incurred or such Disqualified Stock
is issued would have been at least (a) From the date of the
indenture to December 31, 1999, 2.25 to 1 and (b) thereafter, 2.5 to
1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter
period; and

(2) the Weighted Average Life to Maturity of such Indebtedness is equal
to or greater than the remaining Weighted Average Life to Maturity
of the notes, provided that this clause (2) shall not apply in the
case of Acquired Indebtedness.

The first paragraph of this covenant will not prohibit the incurrence of any
of the following, items of Indebtedness (collectively, "Permitted
Indebtedness"):

(1) the incurrence by Mrs. Fields and its Subsidiaries of the Existing
Indebtedness other than the notes.

(2) the incurrence by Mrs. Fields and its Subsidiaries on the Issue
Date of Indebtedness represented by the notes in an aggregate
principal amount not to exceed $100.0 million and the guarantees of
such Indebtedness by the guarantors;

(3) the incurrence by Mrs. Fields or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred
for the purpose of improvement of property, plant or equipment used
in the business of Mrs. Fields or such Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at anytime outstanding;

(4) the incurrence by Mrs. Fields or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by the indenture to be incurred;

(5) the incurrence by Mrs. Fields or any of its Subsidiaries of
intercompany Indebtedness between or among Mrs. Fields and any of
its Wholly Owned Restricted Subsidiaries; provided, that:

(a) if Mrs. Fields is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the notes;
and

(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than Mrs. Fields or a Wholly Owned Subsidiary thereof and (ii)
any sale or other transfer of any such Indebtedness to a Person
that is not either Mrs. Fields or a Wholly Owned Subsidiary of
Mrs. Fields shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by Mrs. Fields or such
Subsidiary, as the case may be;

(6) the incurrence by Mrs. Fields of Hedging Obligations in the
ordinary course of business;

(7) the incurrence of Indebtedness in connection with one or more
standby letters of credit, guarantees, performance or surety bonds
or other reimbursement obligations, in each case, issued in the
ordinary course of business and not in connection with the
borrowing of money or the obtaining of advances or credit other
than:

(a) advances or credit on open account, includible in current
liabilities, for goods and services in the ordinary course of
business and on terms and conditions customary in a Permitted
Business and

(b) the extension of credit represented by such letter of credit,
guarantee, bond or other obligation itself,

provided that any draw under or call upon any of the foregoing is
repaid in full within 45 days, and provided further that the
aggregate amount of all Indebtedness incurred pursuant to this
clause (7) shall not exceed $5.0 million at any time outstanding;

(8) the incurrence of Indebtedness arising from agreements of Mrs.
Fields or a Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets
or Subsidiary (other than guarantees of Indebtedness incurred by
any Person acquiring all or a portion of such business, assets or
Subsidiary for the purpose of financing such acquisition), provided
that the maximum aggregate liability of all such Indebtedness shall
at no time exceed 50% of the gross proceeds actually received by
Mrs. Fields or such Subsidiary in connection with such disposition;

(9) the guarantee by Mrs. Fields or any of the guarantors of
Indebtedness of Mrs. Fields or a Subsidiary of Mrs. Fields that is
a guarantor that was permitted to be incurred by another provision
of this covenant;

(10) the incurrence by Pretzel Time of Indebtedness under a working
capital facility, provided that the aggregate principal amount of
all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of
Pretzel Time thereunder) outstanding thereunder after giving
effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (10), does not
exceed an amount equal to $1.0 million;

(11) the incurrence by Mrs. Fields of additional Indebtedness
(including Indebtedness under a Credit Facility) in an aggregate
principal amount (or accreted value, as applicable), including all
Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any other Indebtedness incurred pursuant to this clause
(11), not to exceed $15.0 million at any time outstanding;

(12) the incurrence by Mrs. Fields or any of its subsidiaries of
Acquired Indebtedness in an aggregate amount not to exceed $5.0
million at any time outstanding;

(13) the guarantee by Mrs. Fields or any of its Subsidiaries (other
than Mrs. Fields Brand) of operating store lease obligations of
Mrs. Fields or any of its Subsidiaries or any franchisee of Mrs.
Fields or any of its Subsidiaries in the ordinary course of
business and consistent with past practice;

(14) the guarantee by any Subsidiary of Mrs. Fields of Indebtedness of
the Mrs. Fields under any Credit Facility otherwise permitted to
be incurred under the indenture;

(15) the incurrence by Mrs. Fields of Indebtedness in the form of notes
issued in connection with the repurchase, redemption, acquisition
or retirement of Equity Interests of Mrs. Fields or any Subsidiary
of Mrs. Fields in an amount not to exceed $500,000 at any time
outstanding and subordinated in right of payment to the notes; and

(16) the incurrence by Mrs. Fields of Indebtedness or the guarantee by
Mrs. Fields of Indebtedness incurred by franchisees in connection
with the cost of purchasing a franchise and the cost of equipment
in connection with the set-up of a franchise, provided that such
Indebtedness or guarantee does not exceed $3.0 million at any time
outstanding.

For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, Mrs.
Fields will be permitted to classify such item of Indebtedness on the date of
its incurrence in any manner that complies with this covenant. Accrual of
interest and the accretion of accreted value will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.

Liens

Mrs. Fields will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.

100

Dividend and Other Payment Restrictions Affecting Subsidiaries

Mrs. Fields will not, and will not permit any of its Subsidiaries, directly
or indirectly, to create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock
to Mrs. Fields or any of Mrs. Fields' Subsidiaries, or with respect
to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to Mrs. Fields or any of Mrs.
Fields' Subsidiaries;

(2) make loans or advances to Mrs. Fields or any of Mrs. Fields'
Subsidiaries; or

(3) transfer any of its properties or assets to Mrs. Fields or any of
Mrs. Fields' Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

(1) Existing Indebtedness as in effect on the Issue Date

(2) this indenture and the notes;

(3) applicable law;

(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Mrs. Fields or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the Indenture to be
incurred;

(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;

(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (4) above;

(7) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, than those contained in the
agreements governing the Indebtedness being refinanced;

(8) customary restrictions imposed on the transfer of copyrighted or
patented materials and customary provisions in agreements that
restrict the assignees of such agreements or any rights thereunder;
or

(9) restrictions with respect to a Subsidiary of Mrs. Fields imposed
pursuant to a binding agreement relating to the sale or disposition
of all or substantially all of the Capital Stock or assets of such
Subsidiary.

Merger, Consolidation, or Sale of Assets

Mrs. Fields may not:

(1) consolidate or merge with or into another Person (whether or not
Mrs. Fields is the surviving corporation); or

(2) sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets, in one or more
related transactions, to another Person; unless:

(a) either: (i) Mrs. Fields is the surviving corporation; or (ii)
the Person formed by or surviving any such consolidation or
merger (if other than Mrs. Fields) or the entity to which such
sale,

101

assignment, transfer, conveyance or other disposition shall have
been made is a corporation organized or existing under the laws
of the United States, any state thereof or the District of
Columbia;

(b) the entity or Person formed by or surviving any such
consolidation or merger (if other than Mrs. Fields) or the
entity or Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all
the obligations of Mrs. Fields under the notes and the indenture
pursuant to a supplemental indenture reasonably satisfactory to
the Trustee;

(d) except in the case of a merger of Mrs. Fields with or into a
Wholly Owned Subsidiary of Mrs. Fields, Mrs. Fields or the
Person formed by or surviving any such consolidation or merger
(if other than Mrs. Fields), or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been
made:

(i) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net
Worth of Mrs. Fields immediately preceding the transaction;
and

(ii) will, on the date of such transaction after giving pro
forma effect thereto and any related financing transactions
as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred
Stock."

Transactions with Affiliates

Mrs. Fields will not, and will not permit any of its Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:

(1) such Affiliate Transaction is on terms that are no less favorable
to Mrs. Fields or such Subsidiary than those that would have been
obtained in a comparable transaction by Mrs. Fields or such
Subsidiary with an unrelated Person; and

(2) Mrs. Fields delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and

(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking
firm of national standing.

The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

(1) payments to Mrs. Fields Holding pursuant to the Tax Sharing
Agreement;

(2) any employment agreement entered into by Mrs. Fields or any of its
Subsidiaries in the ordinary course of business and consistent with
the past practice of Mrs. Fields or such Subsidiary;

102

(3) transactions between or among Mrs. Fields and/or its Subsidiaries;

(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "Restricted Payments";

(5) the payment of reasonable fees, expense reimbursements and
customary indemnification, advances and other similar arrangements
to directors and officers of Mrs. Fields and its Subsidiaries; and

(6) reasonable loans or advances to employees of Mrs. Fields and its
Subsidiaries in the ordinary course of business of Mrs. Fields or
such Subsidiary.

Additional Subsidiary Guarantees

If:

(1) Mrs. Fields or any of its Subsidiaries acquires or creates another
domestic wholly owned Subsidiary after the date of the Indenture
having assets (a) with a fair market value in excess of $100,000 or
(b) consisting of one or more stores; or

(2) Mrs. Fields acquires all remaining common stock of Pretzel Time,

then such newly acquired or created Subsidiary or Pretzel Time, as the case may
be, must become a guarantor and execute a supplemental indenture and deliver an
Opinion of Counsel, in accordance with the terms of the indenture.

Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries

Mrs. Fields will not, and will not permit any of its Wholly Owned
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of Mrs. Fields to any Person
(other than Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields), unless:

(1) such transfer, conveyance, sale, lease or other disposition is of
all the Capital Stock of such Wholly Owned Subsidiary; and

(2) the cash Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant
described above under the caption "Repurchase at the Option of
Holders--Asset Sales."

In addition, Mrs. Fields will not permit any Wholly Owned Subsidiary of Mrs.
Fields to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields.

Limitations on Issuances of Guarantees of Indebtedness

Mrs. Fields will not permit any of its Subsidiaries, directly or indirectly,
to guarantee or pledge any assets to secure the payment of (other than as a
result of a Permitted Lien) any other Indebtedness of Mrs. Fields unless such
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the guarantee of the payment of the notes by such Subsidiary,
which guarantee shall be senior to or pari passu with such Subsidiary's
guarantee of or pledge to secure such other Indebtedness.

Notwithstanding the preceding paragraph, any guarantee by a Subsidiary of the
notes will provide by its terms that it will be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of Mrs. Fields, of all of Mrs. Fields' stock in, or
all or substantially all of the assets of, such Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of
the indenture. The form of the guarantee will be attached as an exhibit to the
indenture.

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Business Activities

Mrs. Fields will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to Mrs. Fields and its Subsidiaries taken as a whole.

In addition,

(1) Mrs. Fields will not engage in any Asset Sale involving Mrs.
Fields' Brand,

(2) neither Mrs. Fields nor Mrs. Fields' Brand will engage in any
Asset Sale involving the "Mrs. Fields" or "Pretzel Time" brand
name, and

(3) for so long as Mrs. Fields' Brand is a Subsidiary of Mrs. Fields,
Mrs. Fields' Brand will not incur any Indebtedness (other than its
guarantee of the Notes and any guarantee of Indebtedness under a
Credit Facility).

Payments for Consent

Mrs. Fields will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to all holders of
the notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.

Reports

Whether or not required by the Commission, so long as any notes are
outstanding, Mrs. Fields will furnish to the holders of notes, within the time
periods specified in the Commission's rules and regulations:

(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms
10-Q and 10-K if Mrs. Fields were required to file such Forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the
annual information only, a report on the annual financial
statements by Mrs. Fields' certified independent accountants; and

(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Mrs. Fields were required to file such
reports.

In addition, whether or not required by the Commission, Mrs. Fields will file
a copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.

In addition, Mrs. Fields and the guarantors have agreed that, for so long as
any notes remain outstanding, they will furnish to the holders of notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.

Events of Default and Remedies

Each of the following is an Event of Default:

(1) default for 30 days in the payment when due of interest or liquidated
damages, if any, with respect to the notes;

(2) default in payment when due of the principal of or premium, if any, on
the notes;

(3) failure by Mrs. Fields for 30 days after notice to comply with any of
its other agreements in the indenture or the notes;

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(4) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Mrs. Fields or any of its
Subsidiaries (or the payment of which is guaranteed by Mrs. Fields or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, if that default

(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
Payment Default); or

(b) results in the acceleration of such Indebtedness prior to its
express maturity,

and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated, aggregates
$2.5 million or more;

(5) failure by Mrs. Fields or any of its Subsidiaries to pay final
judgments aggregating in excess of $2.5 million, which judgments are
not paid, discharged or stayed for a period of 60 days;

(6) certain events of bankruptcy or insolvency with respect to Mrs. Fields
or any of its Subsidiaries; and

(7) except as permitted by the indenture, any guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any
guarantor, or any Person acting on behalf of any guarantor, shall
deny or disaffirm its obligations under its guarantee.

In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to Mrs. Fields, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding notes will become due and payable without further
action or notice. If any other Event of Default occurs and is continuing, the
Trustee or the holders of at least 25% in principal amount of the then
outstanding notes may declare all the notes to be due and payable immediately.

Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.

The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the notes.

In the case of any Event of Default occurring by reason of any willful action
or inaction taken or not taken by or on behalf of Mrs. Fields with the
intention of avoiding payment of the premium that Mrs. Fields would have had to
pay if Mrs. Fields then had elected to redeem the notes pursuant to the
optional redemption provisions of the indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the notes. If an Event of Default occurs prior to
December 1, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of Mrs. Fields with the intention of avoiding the
prohibition on redemption of the notes prior to December 1, 2001, then the
premium specified in the indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the notes.

Mrs. Fields is required to deliver to the Trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Mrs. Fields is required to deliver to the Trustee a statement
specifying such Default or Event of Default.

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No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of Mrs. Fields,
as such, shall have any liability for any obligations of Mrs. Fields under the
notes, the indenture, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of notes by accepting a
note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.

Legal Defeasance and Covenant Defeasance

Mrs. Fields may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for:

(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest and
liquidated damages, if any, on such notes when such payments are
due from the trust referred to below;

(2) Mrs. Fields' obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office or
agency for payment and money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee,
and Mrs. Fields' obligations in connection therewith; and

(4) the Legal Defeasance provisions of the Indenture.

In addition, Mrs. Fields may, at its option and at any time, elect to have
the obligations of Mrs. Fields released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or Event
of Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default and
Remedies" will no longer constitute a Default or an Event of Default with
respect to the notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) Mrs. Fields must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and liquidated damages,
if any, on the outstanding notes on the stated maturity or on the
applicable redemption date, as the case may be, and Mrs. Fields
must specify whether the notes are being defeased to maturity or to
a particular redemption date;

(2) in the case of Legal Defeasance, Mrs. Fields shall have delivered
to the Trustee an opinion of counsel reasonably acceptable to the
Trustee confirming that

(a) Mrs. Fields has received from, or there has been published by,
the Internal Revenue Service a ruling or

(b) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the
holders of the outstanding notes will not recognize income,
gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not
occurred;

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(3) in the case of Covenant Defeasance, Mrs. Fields shall have
delivered to the Trustee an opinion of counsel reasonably
acceptable to the Trustee confirming that the holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred;

(4) no Default or Event of Default shall have occurred and be
continuing either:

(a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to
such deposit); or

(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st
day after the date of deposit;

(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which Mrs.
Fields or any of its Subsidiaries is a party or by which Mrs.
Fields or any of its Subsidiaries is bound;

(6) Mrs. Fields must have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;

(7) Mrs. Fields must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by Mrs. Fields with the
intent of preferring the holders of notes over the other creditors
of Mrs. Fields with the intent of defeating, hindering, delaying or
defrauding creditors of Mrs. Fields or others; and

(8) Mrs. Fields must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including consents obtained in connection with a tender
offer or exchange offer for notes).

Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):

(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes
(other than provisions relating to the covenants described above
under the caption "Repurchase at the Option of Holders");

(3) reduce the rate of or change the time for payment of interest on
any note;

(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes (except a rescission
of acceleration of the notes by the holders of at least a majority
in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);

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(5) make any note payable in money other than that stated in the notes;

(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to
receive payments of principal of or premium, if any, or interest on
the notes;

(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the
caption "Repurchase at the Option of Holders"); or

(8) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any holder of notes,
Mrs. Fields and the Trustee may amend or supplement the indenture or the notes:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated notes in addition to or in place of
certificated notes;

(3) to provide for the assumption of Mrs. Fields' obligations to
holders of notes in the case of a merger or consolidation or sale
of all or substantially all of Mrs. Fields' assets;

(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect
the legal rights under the Indenture of any holder; or

(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust
Indenture Act.

Concerning the Trustee

If the Trustee becomes a creditor of Mrs. Fields, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.

The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur (which shall not be cured), the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder of notes, unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.

Book-Entry, Delivery and Form

The new notes exchanged for old notes through the Book-Entry Transfer
Facility will be, represented by a Global Note (the New Global Note). One New
Global Note shall be issued with respect to each $100 million or less in
aggregate principal amount at maturity of the New Global Note. The New Global
Note will be issued on the date of the closing of the Exchange Offer with the
Trustee, as custodian of The Depository Trust Company (the Depository),
pursuant to a FAST Balance Certificate Agreement between the Trustee and DTC
and registered in the name of Cede & Co., as nominee of the Depository (such
nominee being referred to as the Global Holder).

New notes exchanged for old notes which are in the form of registered
definitive certificates (the "Certificated Notes") will be issued in the form
of Certificated Notes. Such Certificated Notes may, unless the New Global Note
has previously been exchanged for Certificated Notes, be exchanged for an
interest in the New Global Note representing the principal amount of new notes
being transferred.

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The Depository has advised us that it is a limited-purchase trust company
that was created to hold securities for its participating organizations
(collectively, the Participants or the Depository's Participants) and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depository's Participants include securities brokers and
dealers (including the placement agents for the old notes), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depository's system is also available to the other entities such as banks,
brokers, dealers and trust companies (collectively, the Indirect Participants
or the Depository's Indirect Participants) that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depository only through the Depository's Participants or the
Depository's Indirect Participants.

We expect that pursuant to procedures established by the Depository:

(1) upon deposit of the New Global Note, the Depository will credit
the accounts of Participants with portions of the New Global Note;
and

(2) ownership of the notes will be shown on, and the transfer of
ownership thereof will be effected only through, records
maintained by the Depository, the Depository's Participants and
the Depository's Indirect Participants.

The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer notes may be limited.

For so long as the Global Holder is the registered owner of any New Global
Notes, the Global Holder will be considered the sole owner of such new notes
represented by such New Global Notes outstanding under the indenture. Except as
provided below, owners of beneficial interests in a New Global Note will not be
entitled to have new notes represented by such New Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
Certificated Notes, and will not be considered the owners or holders thereof
under the indenture for any purpose. As a result, the ability of a person
having a beneficial interest in new notes represented by a New Global Note to
pledge such interest to persons or entities that do not participate in the
Depository's system or to otherwise take actions in respect of such interest,
may be affected by the lack of physical certificate evidencing such interest.
Accordingly, each person owning a beneficial interest in a New Global Note must
rely on the procedures of the Depository and, if such person is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a holder
under such New Global Note of the indenture.

Neither Mrs. Fields nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of new
notes by the Depository, or for maintaining, supervising or reviewing any
records of the Depository relating to such new notes.

The Trustee will make payments in respect of the principal of, premium, if
any, interest and liquidated damages, if any, on any new notes registered in
the name of a Global Holder on the applicable record date to or at the
direction of such Global Holder in its capacity as the registered holder under
the indenture. Under the terms of the indenture, Mrs. Fields and the Trustees
may treat the persons in whose name the notes, including the New Global Notes,
are registered as the owners of such notes for the purpose of receiving such
payments and all other purposes.

We expect that the Depository or its nominee, upon receipt of payments of
principal, premium, if any, interest and liquidated damages, if any, on the New
Global Notes, will credit their Participants' or Indirect Participants'
accounts with payments in amounts proportionate to their respective interests
in the principal amount of the New Global Notes as shown on the records of the
Depository. Neither Mrs. Fields nor the Trustee has any responsibility or
liability for such payments. Payments by the Depository's Participants and the

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Depository's Indirect Participants to the beneficial owners of new notes will
be governed by standing instructions and customary practice. Such payments will
be the responsibility of the Depository's Participants or the Depository's
Indirect Participants.

Certificated Securities

If:

(1) Mrs. Fields notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository and Mrs. Fields is
unable to locate a qualified successor within 90 days or

(2) Mrs. Fields, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the New Notes in definitive form
under the Indenture, then, upon surrender by the relevant Global
Holder of its New Global Note, new notes in such form will be
issued to each person that such Global Holder and the Depository
identifies as the beneficial owner of the related new notes.

In addition, subject to certain conditions, any person having a beneficial
interest in the New Global Note may, upon request to the Trustee, exchange such
beneficial interest for Certificated Notes. Upon any such issuance, the Trustee
is required to register such new notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). Such new
notes would be issued in fully registered forms.

Exchange Offer; Registration Rights

Mrs. Fields, Mrs. Fields Brand, Great American and the placement agents for
the Series C Notes entered into the registration rights agreement on August 24,
1998. The registration rights agreement requires Mrs. Fields and the guarantors
to file with the Commission the Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Series C
Notes for the new notes, which will have terms substantially similar in all
material respects to the old notes. Upon the effectiveness of the Registration
Statement, Mrs. Fields will offer to the holders of Transfer Restricted
Securities pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted
Securities for new notes.

If:

(1) Mrs. Fields and the guarantors had not been required to file the
Exchange Offer Registration Statement or are not permitted to
consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy; or

(2) any holder of Transfer Restricted Securities notifies Mrs. Fields
prior to the 20th day following consummation of the Exchange Offer
that:

(a) it is prohibited by law or Commission policy from participating
in the Exchange Offer or

(b) that it may not resell the new notes acquired by it in the
Exchange Offer to the public without delivering a prospectus
and the prospectus contained in the Registration Statement is
not appropriate or available for such resales or

(c) that it is a broker-dealer and owns Series C Notes acquired
directly from Mrs. Fields or an affiliate of Mrs. Fields,

then Mrs. Fields and the guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Series C Notes by the holders
thereof who satisfy certain conditions relating to the provision of

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information in connection with the Shelf Registration Statement. Mrs. Fields
and the guarantors will use their best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For purposes of the preceding, Transfer Restricted Securities means
each note until:

(1) the date on which such note has been exchanged by a person other
than a broker-dealer for a new note in the Exchange Offer,

(2) following the exchange by a broker-dealer in the Exchange Offer of
an old note for a new note, the date on which such new note is sold
to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the
Registration Statement,

(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement or

(4) the date on which such note is distributed to the public pursuant
to Rule 144 under the Securities Act.

The registration rights agreement requires that:

(1) Mrs. Fields and the guarantors must file a Registration Statement
with the Commission on or prior to 90 days after the Closing Date,

(2) Mrs. Fields and the guarantors must use their best efforts to have
the Registration Statement declared effective by the Commission on
or prior to 150 days after the Closing Date,

(3) unless the Exchange Offer would not be permitted by applicable law
or Commission policy, Mrs. Fields will commence the Exchange Offer
and use its best efforts to issue on or prior to 30 business days
after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, new notes in exchange for
all old notes tendered prior thereto in the Exchange Offer, and

(4) if obligated to file the Shelf Registration Statement, Mrs. Fields
and the Guarantors will use their best efforts to file the Shelf
Registration Statement with the Commission on or prior to 90 days
after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior
to 150 days after such obligation arises.

(1) Mrs. Fields and the guarantors fail to file any of the
Registration Statements required by the registration rights
agreement on or before the date specified for such filing,

(2) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such
effectiveness (the Effectiveness Target Date), or

(3) Mrs. Fields fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the
Registration Statement, or

(4) the Shelf Registration Statement or the Registration Statement is
declared effective but thereafter ceases to be effective or usable
in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (1) through (4) above a
"Registration Default"),

then Mrs. Fields and the guarantors will pay liquidated damages to each holder
of old notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Series C Notes held by such holder. The
amount of the liquidated damages will increase by an additional $.05 per week
per $1,000 principal amount of Series C Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages of $.20 per week per $1,000 principal amount of
Series C Notes.

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Mrs. Fields will pay all accrued liquidated damages on each Damages Payment
Date to the Global Note Holder by wire transfer of immediately available funds
or by federal funds check and to holders of Certificated old notes by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of liquidated damages will
cease.

Since the Registration Statement was not effective by January 21, 1999, Mrs.
Fields currently owes liquidated damages of $ to the holders of Series C
Notes.

Holders of old notes will be required to make certain representations to Mrs.
Fields in order to participate in the Exchange Offer and will be required to
deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within
the time periods set forth in the registration rights agreement in order to
have their notes included in the Shelf Registration Statement and benefit from
the provisions regarding liquidated damages described above above.

Certain Definitions

Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

"Accounting Firm" means any of Arthur Andersen LLP, Deloitte & Touche LLP,
Ernst & Young LLP, KPMG Peat Marwick LLP and PricewaterhouseCoopers LLP or any
of their successor firms.

"Acquired Indebtedness" means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such
specified Person, excluding, however, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of
the Voting Stock of a Person shall be deemed to be control. For purposes of
this definition, the terms "controlling," "controlled by" and "under common
control with" shall have correlative meanings.

"Asset Sale" means:

(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and
leaseback), other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the
assets of Mrs. Fields and its Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under
the caption "Change of Control" and/or the provisions described
above under the caption "Merger, Consolidation or Sale of Assets"
and not by the provisions of the Asset Sale covenant; and

(2) the issuance of Equity Interests of any of Mrs. Fields'
Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.

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Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:

(1) any single transaction or series of related transactions that:

(a) involves assets having a fair market value equal to or less
than $1.0 million; or

(b) results in net proceeds equal to or less than $1.0 million;

(2) a transfer of assets between or among Mrs. Fields and its Wholly
Owned Subsidiaries,

(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to
Mrs. Fields or to another Wholly Owned Subsidiary;

(4) a Restricted Payment that is permitted by the covenant described
above under the caption "Restricted Payments";

(5) arrangements providing for the receipt by Mrs. Fields of franchise
and royalty fees but not otherwise involving the sale of assets of
Mrs. Fields or any of its Subsidiaries (other than inventory in the
ordinary course of business); and

(6) a disposition of any Non-Core Stores.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire,
whether such right is currently exercisable or is exercisable only upon, the
occurrence of a subsequent condition.

"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance
with GAAP.

"Capital Stock" means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;

(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
and

(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.

"Cash Equivalents" means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality
thereof having maturities of not more than six months from the date
of acquisition;

(3) marketable direct obligations issued by any State of the United
States or any local government or other political subdivision
thereof rated (at the time of the acquisition of such security) at
least "AA" by Standard & Poor's Rating Service or an equivalent
rating by Moody's Investors Service, Inc. and having maturities of
not more than one year from the acquisition of such security;

(4) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition,
bankers acceptances with maturities of six months or less and
overnight bank

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deposits, in each case, with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of B or better or with any registered broker-dealer whose
commercial paper is rated at least A-1 by Standard & Poor's Rating
Service or an equivalent rating by Moody's Investors Service, Inc.;

(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (4)
above entered into with any financial institution meeting the
qualifications specified in clause (4) above;

(6) commercial paper rated at least A-1 by Standard & Poor's Rating
Service or an equivalent rating by Moody's Investors Service, Inc.
and, in each case, maturing within six months after the date of
acquisition; and

(7) investments in money market funds all of whose assets consist of
securities described in clauses (2) through (6) above.

"Change of Control" means the occurrence of any of the following:

(1) the sale, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Mrs.
Fields and its Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other
than the Principals or their Related Parties;

(2) the adoption of a plan relating to the liquidation or dissolution
of Mrs. Fields;

(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their
Related Parties, becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the Voting Stock of Mrs. Fields,
measured by voting power rather than number of shares; or

(4) the first day on which a majority of the members of the Board of
Directors of Mrs. Fields are not Continuing Directors;

For purposes of this definition, any transfer of an equity interest of an
entity that was formed for the purpose of acquiring Voting Stock of Mrs. Fields
will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of such equity of such entity that has been so
transferred.

"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, to the extent such
losses were deducted in computing such Consolidated Net Income;
plus

(2) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income;
plus

(3) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, pursuant to
Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus

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(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future
period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period
to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net
Income; minus

(5) non-cash items increasing such Consolidated Net Income for such
period, in each case, on a consolidated basis and determined in
accordance with GAAP.

Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the specified Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent and in the same
proportion that the net income of such Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to Mrs. Fields by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.

"Consolidated Net Income" means, with respect to any specified Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that:

(1) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person or
a Wholly Owned Subsidiary thereof that is a guarantor;

(2) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders;

(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded; and

(4) the cumulative effect of a change in accounting principles shall be
excluded.

"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:

(1) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus

(2) the respective amounts reported on such Persons balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid
only out of net earnings in respect of the year of such declaration
and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less

(a) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a
going concern business made within 12 months after the
acquisition of such business) subsequent to the Issue Date
in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person,

115

(b) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries
(except, in each case, Permitted Investments), and

(c) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.

"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of Mrs. Fields who:

(1) was a member of such Board of Directors on the date of the
indenture; or

(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who
were members of such Board at the time of such nomination or
election.

"Credit Facility" means, with respect to Mrs. Fields, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith) providing for
revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed
to borrow from such lenders against such receivables) or letters of credit up
to a maximum aggregate amount of not more than $15.0 million, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the notes mature, provided that a
class of Capital Stock shall not be Disqualified Stock solely as a result of
any maturity or redemption that is conditioned upon, and subject to, compliance
with the covenant described under the caption "Certain Covenants--Restricted
Payments".

"Existing Indebtedness" means Indebtedness of Mrs. Fields and its
Subsidiaries (including preferred stock of Pretzel Time outstanding on the
Issue Date but excluding any Indebtedness of Mrs. Fields or any of its
Subsidiaries under any Credit Facility existing on the Issue Date) in existence
on the Issue Date, until such amounts are repaid.

"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of

(1) the consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers acceptance
financings, and net payments (if any) pursuant to Hedging
Obligations);

(2) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period;

(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Subsidiaries or secured by
a Lien on assets of such Person or one of its Subsidiaries (whether
or not such guarantee or Lien is called upon); and

(4) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of Mrs. Fields, times (b) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and

116

local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.

"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that Mrs.
Fields or any of its Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period.

In addition, for purposes of making the computation referred to above:

(1) acquisitions that have been made by Mrs. Fields or any of its
Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-
quarter reference period or subsequent to such reference period and
on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (3) of the proviso set
forth in the definition of Consolidated Net Income;

(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded,

(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the specified Person or any of
its Subsidiaries following the Calculation Date; and

(4) the financial information of Mrs. Fields with respect to any
portion of the four fiscal quarters prior to the Issue Date may be
adjusted to eliminate certain historical expenses that are not
expected to recur after the consummation of the Pretzel
Contributions so long as such adjustments are not deemed to be
contrary to the requirements of Regulation S-X under the Securities
Act by an Accounting Firm.

In calculating the Fixed Charge Coverage Ratio for any period, to the extent
that the proceeds from the incurrence of any Indebtedness are to be used to
fund the acquisition of Equity Interests or assets in a Permitted Business,
Mrs. Fields may include any pro forma adjustments permitted by Regulation S-X
under the Securities Act in its calculation of the amount of Consolidated Cash
Flow that relate solely to such acquisition, so long as such pro forma
adjustments are not deemed to be contrary to the requirements of Rule 11-02 of
Regulation S-X under the Securities Act in writing by an Accounting Firm.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.

"guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.

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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:

(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and

(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest or foreign currency exchange
rates.

"Indebtedness" means, with respect to any specified Person, any indebtedness
of such Person, whether or not contingent, in respect of:

(1) borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);

(3) banker's acceptances;

(4) representing Capital Lease Obligations;

(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued
expense or trade payable; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the guarantee
by such Person of any Indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date shall be:

(1) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest; and

(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.

"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
provided that an acquisition of assets, Equity Interests or other securities by
Mrs. Fields for consideration consisting of common stock of Mrs. Fields shall
not be deemed to be an Investment. If Mrs. Fields or any Subsidiary of Mrs.
Fields sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of Mrs. Fields such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of Mrs. Fields, Mrs.
Fields shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "Certain
Covenants--Restricted Payments".

"Issue Date" means November 26, 1997.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof,

118

any option or other agreement to sell or give a security interest in and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction), provided that
the definition of Lien shall not include any option, call or similar right
relating to treasury shares of Mrs. Fields to the extent that such option, call
or right is granted:

(1) under any employee stock option plan, employee stock ownership plan
or similar plan or arrangement of Mrs. Fields or its Subsidiaries
or

(2) in connection with the issuance of Indebtedness permitted to be
incurred pursuant to the covenant described under the caption
"Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock".

"Net Income" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however:

(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries; and

(2) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).

"Net Proceeds" means the aggregate cash proceeds received by Mrs. Fields or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale but only as and when received),
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), amounts required
to be applied to the permanent repayment of, or permanent reduction in
availability or commitment under, Indebtedness secured by a Lien on the asset
or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.

"Non-Core Stores" means the stores listed in Exhibit B to the Indenture.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Business" means the same or a similar line of business as Mrs.
Fields and its Subsidiaries were engaged in on the Issue Date, including,
without limitation, the specialty retail snack-food business.

"Permitted Investments" means:

(1) any Investment in Mrs. Fields or in a Wholly Owned Subsidiary of
Mrs. Fields that is a guarantor and that is engaged in a Permitted
Business;

(2) any Investment in Cash Equivalents;

(3) any Investment by Mrs. Fields or any Subsidiary of Mrs. Fields in a
Person, if as a result of such Investment (a) such Person becomes a
Wholly Owned Subsidiary of Mrs. Fields and a guarantor that is
engaged in a Permitted Business or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Mrs.
Fields or a Wholly Owned Subsidiary of Mrs. Fields that is a
guarantor and that is engaged in a Permitted Business;

119

(4) any Restricted Investment made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to and
in compliance with the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales";

(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Mrs. Fields;

(6) any Investments in accounts and notes receivable acquired in the
ordinary course of business;

(7) any Investments in notes of employees, officers, directors and
their transferees and Affiliates issued to Mrs. Fields representing
payment of the exercise price of options to purchase common stock
of Mrs. Fields;

(8) any Investments by Mrs. Fields in Hedging Obligations otherwise
permitted to be incurred under the indenture;

(9) any Investments existing on the Issue Date (including, without
limitation, a $500,000 loan to Martin E. Lisiewski outstanding as
of the Issue Date); and

(10) any purchase of any and all remaining common stock of Pretzel
Time.

"Permitted Liens" means:

(1) Liens securing Indebtedness under a Credit Facility that was
permitted by the terms of the indenture to be incurred;

(2) Liens in favor of Mrs. Fields;

(3) Liens on property of a Person existing at the time such Person is
merged into or consolidated with Mrs. Fields or any Subsidiary of
Mrs. Fields, provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend
to any assets other than those of the Person merged into or
consolidated with Mrs. Fields;

(4) Liens on property existing at the time of acquisition thereof by
Mrs. Fields or any Subsidiary of Mrs. Fields, provided that such
Liens were in existence prior to the contemplation of such
acquisition and do not extend to any assets of Mrs. Fields other
than the property so acquired;

(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;

(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clauses (3) and (10) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness" and Issuance of
Preferred Stock, provided that, in the case of Indebtedness
permitted by such clause (3), covering only the assets acquired
with such Indebtedness;

(7) Liens existing on the Issue Date;

(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made
therefor; and

(9) Liens incurred in the ordinary course of business of Mrs. Fields or
any Subsidiary of Mrs. Fields that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in
the operation of business by Mrs. Fields or such Subsidiary.

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"Permitted Refinancing Indebtedness" means any Indebtedness of Mrs. Fields or
any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Mrs. Fields or any of its Subsidiaries, provided that

(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
notes, such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in
right of payment to, the notes on terms at least as favorable to
the holders of notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and

(4) such Indebtedness is incurred either by Mrs. Fields or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.

"Pretzel Time Employment Agreement" means that certain Employment Agreement,
dated as of September 2, 1997, between Pretzel Time and Martin E. Lisiewski.

"Pretzel Time Management Agreement" means that certain Management Agreement,
dated as of September 2, 1997, between Mrs. Fields and Pretzel Time.

"Principals" means Herbert S. Winokur, Jr. and Capricorn Investors II, L.P.

"Public Equity Offering" means a public offering registered under the
Securities Act (except for any registration pursuant to Form S-8) of common
stock of:

(1) Mrs. Fields or

(2) Mrs. Fields Holding to the extent that the net proceeds thereof are
contributed to Mrs. Fields as a capital contribution, provided that
the aggregate proceeds from any such public offering shall in no
event be less than $20.0 million.

"Related Party" with respect to any Principal means:

(1) any greater than 50% owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or

(2) trust, corporation, general partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding a greater than 50% controlling interest of
which consist, or a limited partnership, the general partner of
which consists, of the Principals and/or such other Persons
referred to in the immediately preceding clause (1).

"Restricted Investment" means an Investment other than a Permitted
Investment.

"Significant Subsidiary" means any Subsidiary that would be a significant
subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the Issue
Date.

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"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

"Tax Sharing Agreement" means any tax allocation agreement between Mrs.
Fields or any of its Subsidiaries with Mrs. Fields or any direct or indirect
shareholder of Mrs. Fields with respect to consolidated or combined tax returns
including Mrs. Fields or any of its Subsidiaries, but, in each case, only to
the extent that amounts payable from time to time by Mrs. Fields or any such
Subsidiary under any such agreement do not exceed the corresponding tax
payments that Mrs. Fields or such Subsidiary would have been required to make
to any relevant taxing authority had Mrs. Fields or such Subsidiary not joined
in such consolidated or combined returns, but instead had filed returns
including only Mrs. Fields and its Subsidiaries.

"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

122

DESCRIPTION OF CERTAIN INDEBTEDNESS

Credit Agreement

Mrs. Fields entered into an Amended and Restated Loan Agreement, dated as of
February 28, 1998, with LaSalle National Bank. Under the agreement, LaSalle
National Bank will provide Mrs. Fields with a revolving loan commitment of up
to $15.0 million until the maturity date of March 31, 2001 or until the
agreement is otherwise terminated or accelerated by LaSalle National Bank.
Principal amounts due on revolving loans made under the agreement bear interest
at Mrs. Fields option at either the Prime rate or LIBOR plus two percent per
annum. Any amount of principal or interest that is not paid when due bears
interest payable on demand at the default rate of interest, which is the
regular interest rate plus two percent. The agreement also provides that
LaSalle National Bank may issue letters of credit on behalf of Mrs. Fields in
an aggregate amount not to exceed $500,000. The aggregate amount of letters of
credit issued plus the aggregate amount of revolving loans outstanding cannot
exceed $15.0 million. Substantially all of the assets of Mrs. Fields have been
pledged to LaSalle National Bank under the agreement. The agreement contains
certain restrictions on, among other things, payments, the incurrence of
indebtedness and liens, which are substantially similar to the restrictions in
the indenture. Currently there are no amounts outstanding under the agreement.
Mrs. Fields is limited to borrowing $12.7 million in accordance with
restrictions of the indenture.

PLAN OF DISTRIBUTION

Each broker-dealer that receives notes issued in the Exchange Offer for its
own account must acknowledge that it will deliver a prospectus in connection
with any resale of such notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of notes received in exchange for outstanding notes where such
outstanding notes were acquired as a result of market-making activities or
other trading activities. Mrs. Fields has agreed that, for a period of 120 days
after the consummation of the Exchange Offer, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1999, all dealers effecting
transactions in the notes issued in the Exchange Offer may be required to
deliver a prospectus.

Mrs. Fields will not receive any proceeds from any sale of notes issued in
the Exchange Offer by broker-dealers. Notes issued in the Exchange Offer
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the notes issued in the Exchange Offer or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or though brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such notes issued in the Exchange Offer. Any
broker-dealer that resells notes that were received by it for its own account
in the Exchange Offer and any broker or dealer that participates in a
distribution of such notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of notes issued
in the Exchange Offer and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.

For a period of 120 days after the consummation of the Exchange Offer, Mrs.
Field will promptly send additional copies of this prospectus and any amendment
or supplement to this prospectus to any broker-dealer that requests such
documents in the letter of transmittal or agent's message. Mrs. Fields has
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the notes in an amount up to
$50,000) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the notes (including any broker-dealer) against
certain liabilities, including liabilities under the Securities Act.

123

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain U.S. Federal income tax
consequences associated with the exchange of the outstanding notes for the
notes issued in the Exchange Offer. The summary is based upon current laws,
regulations, rulings and judicial decisions all of which are subject to change,
possibly with retroactive effect. The discussion below does not address all
aspects of U.S. Federal income taxation that may be relevant to particular
holders of outstanding notes or notes issued in the Exchange Offer. In
addition, the discussion does not address any aspect of state, local or foreign
taxation.

The exchange of the outstanding notes for the notes issued in the Exchange
Offer should not be treated as an "exchange" for U.S. Federal income tax
purposes because the notes issued in the Exchange Offer should not be
considered to differ materially in kind or extent from the outstanding notes.
Rather, the notes issued in the Exchange Offer received by a holder should be
treated as a continuation of the outstanding notes in the hands of such holder.
As a result there should be no U.S. Federal income tax consequences to holders
exchanging the outstanding notes for the notes issued in the Exchange Offer,
and any exchanging holder of outstanding notes should have the same tax basis
and holding period in, and income in respect of, the notes as such holder had
in the outstanding notes immediately prior to the Exchange.

Prospective holders of the notes being issued in the Exchange Offer are being
urged to consult their tax advisors concerning the particular tax consequences
of exchanging such holders' outstanding notes for the notes being issued in the
Exchange Offer including the applicability and effect of any state, local or
foreign income and other tax laws.

LEGAL MATTERS

The validity of the notes and the guarantees offered in this prospectus will
be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
counsel for Mrs. Fields. A partner in Skadden, Arps, Slate, Meagher & Flom LLP
is an investor in Capricorn.

124

EXPERTS

The historical consolidated financial statements of Mrs. Fields' Original
Cookies, Inc. and subsidiaries as of December 28, 1996 and January 3, 1998 and
for the period from inception (September 18, 1996) to December 28, 1996 and for
the year ended January 3, 1998; the historical financial statements of Mrs.
Fields Inc. and subsidiaries as of September 17, 1996 and for the period from
December 31, 1995 to September 17, 1996; the historical combined financial
statements of The Original Cookie Company, Incorporated and the Carved-Out
Portion of Hot Sam Company, Inc. as of September 17, 1996 and for the year
ended December 30, 1995 and for the period ended September 17, 1996; the
historical financial statements of Chocolate Chip Cookies of Texas, Inc. as of
September 30, 1996 and 1997 and for the years ended September 30, 1995, 1996
and 1997; the historical financial statements of the Combined Karp Entities as
of December 31, 1996 and 1997 and for the years ended December 31, 1995, 1996
and 1997 included in this prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.

The financial statements of Mrs. Fields Inc. and subsidiaries for the year
ended December 30, 1995 included in this prospectus, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and is included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.

The financial statements of Deblan Corporation as of December 31, 1996 and
1997, and for the years ended December 31, 1995, 1996 and 1997 included in this
prospectus, have been audited by Weinstein Spira & Company, P.C., independent
auditors, as stated in their report appearing herein.

The financial statements of Cookies USA, Inc. and subsidiary as of June 29,
1997 and June 28, 1998 and for each of the three years in the period ended June
28, 1998 included in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report
appearing herein.

The financial statements of Cookie Conglomerate, Inc. as of December 31, 1997
and 1996, and for the years ended December 31, 1997 and 1996 included in this
prospectus, have been audited by Habif, Arogeti & Wynne, P.C., independent
auditors, as stated in their report appearing herein.

The financial statements of Pretzelmaker Holdings, Inc. and subsidiaries as
of December 31, 1997, and for the year ended December 31, 1997 included in this
prospectus, has been audited by AJ. Robbins, PC, independent public accountants
as stated in their report appearing herein. The financial statements of
Pretzelmaker Holdings, Inc. as of December 31, 1996 and for the years ended
December 31, 1995 and 1996 included in this prospectus, have been audited by
BDO Siedman, LLP, independent public accountants, as stated in their report
appearing herein.

125

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On August 24, 1998, Mrs. Fields sold $40,000,000 in aggregate principal
amount of Series C Senior Notes due 2004. The net proceeds of the Mrs. Field's
offering and the capital contribution of the net proceeds of the offering of
units consisting of notes and warrants of Mrs. Fields' Holding to Mrs. Fields,
together with existing Mrs. Field's cash were used to: (i) finance the
acquisition of all of the outstanding capital stock of Great American; (ii)
finance the tender offer to repurchase all of Great American's $40,000,000
aggregate principal amount of 10 7/8% Senior Secured Notes due 2001, including
accrued but unpaid interest and a premium of $1,600,000; (iii) finance the
repayment of all of Great American's $10,000,000 aggregate principal amount of
12.5% Subordinated Notes, including accrued but unpaid interest; (iv) finance
the retirement of Great American's Senior Redeemable Preferred Stock and Junior
Redeemable Preferred Stock at an aggregate discounted purchase price of
$8,400,000; (v) finance the acquisition of all of the outstanding capital stock
of Deblan and Chocolate Chip, two franchisees of Great American, including the
repayment of assumed debt; and (vi) finance the asset purchase of eight stores
controlled by another Great American franchisee, defined as the Combined Karp
Entities.

On October 5, 1998, Mrs. Fields purchased all of the retail cookie and
related business and operations of Cookie Conglomerate for an aggregate
purchase price of $2,800,000. The Cookie Conglomerate acquisition was funded
with financing provided by T&W Financial Services, L.L.C. and such funding is
secured by the assets of the acquired stores.

The unaudited pro forma condensed combined statements of operations for the
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998 are based
upon the historical financial statements of Mrs. Fields, H&M, Pretzel Time,
Great American, Deblan, Chocolate Chip, the Combined Karp Entities, Cookie
Conglomerate and Pretzelmaker, and should be read in conjunction with the
audited and unaudited financial statements, including the notes thereto, of
these entities included elsewhere in this Registration Statement. The unaudited
pro forma condensed combined financial statements have been prepared using the
purchase method of accounting for the acquisitions of Great American, Deblan,
Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and
Pretzelmaker, as well as the previous acquisitions of H&M and Pretzel Time.
Mrs. Fields, H&M and Pretzel Time operate using a 52/53-week year ending near
December 31. Great American operates using a 52/53-week year ending near June
30. Deblan, Cookie Conglomerate and Pretzelmaker operate using a year ending
December 31, Chocolate Chip operates using a year ending September 30, and the
Combined Karp Entities operate using a year ending December 31. We have recast
the historical financial statements for those entities that did not operate
using a year ending near December 31 to be comparable for the 53 weeks ended
January 3, 1998 and the 39 weeks ended October 3, 1998. None of the revenues
and income (loss) of any entity has been excluded or included more than once in
the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined statements of operations for the
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998 assume
that the above transactions occurred as of December 29, 1996 (the first day of
the most recently completed fiscal year) and combine the historical results of
operations of the entities for those periods with pro forma adjustments to give
effect to Mrs. Field's offerings in November 1997 and August 1998, the capital
contribution of the net proceeds of the offering of units consisting of notes
and warrants of Mrs. Fields' Holding to Mrs. Fields and the acquisitions.
Except for data presented with respect to the Combined Karp Entities, the
unaudited pro forma condensed combined financial

P-1

statements do not give effect to the purchase by Mrs. Fields of a number of
other pretzel and cookie stores, or the purchase of the remaining 30.0% of
common stock of Pretzel Time because those transactions were immaterial to the
pro forma presentation.

The pro forma condensed combined statement of operations for the 53 weeks
ended January 3, 1998 includes data labeled "Mrs. Fields Pre-Acquisition" and
"Mrs. Fields Post-Acquisition". The data included in the section labeled Mrs.
Fields Pre-Acquisition includes the operating results of Mrs. Fields, H&M and
Pretzel Time, including pro forma adjustments that give effect to the
acquisitions of H&M and Pretzel Time that occurred during fiscal year 1997.
This data is subtotaled under the column heading "Pre-Acquisition Pro Forma
Combined" in order to differentiate the effects of the acquisitions that
occurred during fiscal years 1997 and 1998. The data included in the section
labeled Mrs. Fields Post-Acquisition includes the operating results of Great
American, Deblan, Chocolate Chip, Cookie Conglomerate, the Combined Karp
Entities and Pretzelmaker, including pro forma adjustments that give effect to
the acquisitions of those entities during fiscal year 1998. All data for the
pro forma condensed combined statement of operations for the 53 weeks ended
January 3, 1998 is totaled under the column heading "Post-Acquisition Pro Forma
Combined".

The unaudited pro forma condensed combined financial statements included in
this Registration Statement are for illustrative purposes only. Such
information does not purport to be indicative of the results which would
actually have been effected on the date and for the periods indicated, nor is
it indicative of actual or future operating results or financial position that
may occur. See also "Risk Factors" included elsewhere in this Registration
Statement.

P-2

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the 53 Weeks Ended January 3, 1998
(unaudited)

Mrs. Fields
Mrs. Fields Pre-Acquisition Post-Acquisition
---------------------------------------------------------------- -------------------------
Pre-
Pretzel Pro Forma Acquisition Great
H&M Time Adjustments Pro Forma American Deblan
Mrs. Fields (See Note 2) (See Note 3) (See Note 1) Combined (See Note 4) (See Note 5)
----------- ------------ ------------ ------------ ----------- ------------ ------------
(dollars in thousands)

REVENUES:
Net store and batter
sales................. $123,987 $9,328 $ 302 $ -- $133,617 $32,307 $9,503
Franchising, net....... 3,574 -- 2,142 (653)(a) 5,063 5,391 --
Licensing, net......... 2,028 -- -- -- 2,028 -- --
Other, net............. 918 36 181 -- 1,135 167 21
-------- ------ ------ ------- -------- ------- ------
Total revenues......... 130,507 9,364 2,625 (653) 141,843 37,865 9,524
-------- ------ ------ ------- -------- ------- ------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs....... 66,832 6,120 284 (653)(a) 72,583 13,548 5,891
Food cost of sales..... 28,127 1,366 63 -- 29,556 10,578 1,675
General and
administrative........ 16,730 1,326 1,617 (750)(b) 18,923 6,664 1,169
Depreciation and
amortization.......... 10,403 690 118 525(c) 11,736 2,725 255
-------- ------ ------ ------- -------- ------- ------
Total operating costs
and expenses.......... 122,092 9,502 2,082 (878) 132,798 33,515 8,990
-------- ------ ------ ------- -------- ------- ------
Income (loss) from
operations........... 8,415 (138) 543 225 9,045 4,350 534
INTEREST EXPENSE........ (7,830) (370) (120) (2,857)(d) (11,177) (6,219) (73)
INTEREST INCOME......... 246 -- -- -- 246 307 26
OTHER INCOME (EXPENSE),
net.................... (368) -- -- -- (368) 1,264 --
-------- ------ ------ ------- -------- ------- ------
Income (loss) before
provision for income
taxes................. 463 (508) 423 (2,632) (2,254) (298) 487
PROVISION FOR INCOME
TAXES.................. 655 -- -- -- 655 223 195
-------- ------ ------ ------- -------- ------- ------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest..... (192) (508) 423 (2,632) (2,909) (521) 292
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ (644) -- -- -- (644) -- --
MINORITY INTEREST....... (138) -- -- (169)(e) (307) -- --
-------- ------ ------ ------- -------- ------- ------
Net income (loss)...... $ (974) $ (508) $ 423 $(2,801) $ (3,860) $ (521) $ 292
======== ====== ====== ======= ======== ======= ======

See accompanying notes to pro forma condensed combined financial statements.

P-3

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
For the 53 Weeks Ended January 3, 1998
(unaudited)

Mrs. Fields Post-Acquisition
------------------------------------------------------------------------------
Combined Post-
Chocolate Karp Cookie Pro Forma Acquisition
Chip Entities Conglomerate Pretzelmaker Adjustments Pro Forma
(See Note 6) (See Note 7) (See Note 8) (See Note 9) (See Note 1) Combined
------------ ------------ ------------ ------------ ------------ -----------
(dollars in thousands)

REVENUES:
Net store and batter
sales................. $2,789 $2,500 $4,203 $1,819 $(2,886)(g) $183,852
Franchising, net....... -- -- -- 2,804 (1,329)(f) 11,929
Licensing, net......... -- -- -- -- -- 2,028
Other, net............. -- -- -- 1,442 -- 2,765
------ ------ ------ ------ ------- --------
Total revenues......... 2,789 2,500 4,203 6,065 (4,215) 200,574
------ ------ ------ ------ ------- --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs....... 1,396 1,635 2,278 1,816 (1,329)(f) 97,818
Food cost of sales..... 654 683 1,097 921 (2,886)(g) 42,278
General and
administrative........ 510 238 326 3,175 (2,670)(h) 28,335
Depreciation and
amortization.......... 51 121 183 403 3,931 (i) 19,405
------ ------ ------ ------ ------- --------
Total operating costs
and expenses.......... 2,611 2,677 3,884 6,315 (2,954) 187,836
------ ------ ------ ------ ------- --------
Income (loss) from
operations........... 178 (177) 319 (250) (1,261) 12,738
INTEREST EXPENSE........ (5) (18) (40) (224) 1,659 (j) (16,097)
INTEREST INCOME......... 5 -- -- -- -- 584
OTHER INCOME (EXPENSE),
net.................... -- -- -- -- -- 896
------ ------ ------ ------ ------- --------
Income (loss) before
provision for income
taxes................. 178 (195) 279 (474) 398 (1,879)
PROVISION FOR INCOME
TAXES.................. 43 15 -- -- (323)(k) 808
------ ------ ------ ------ ------- --------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest..... 135 (210) 279 (474) 721 (2,687)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- -- -- -- -- (644)
MINORITY INTEREST....... -- -- -- -- -- (307)
------ ------ ------ ------ ------- --------
Net income (loss) ..... $ 135 $ (210) $ 279 $ (474) $ 721 $ (3,638)
====== ====== ====== ====== ======= ========

See accompanying notes to pro forma condensed combined financial statements.

P-4

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the 39 Weeks Ended October 3, 1998
(unaudited)

Combined
Great Chocolate Karp
American Deblan Chip Entities
Mrs. Fields (See Note 4) (See Note 5) (See Note 6) (See Note 7)
----------- ------------ ------------ ------------ ------------
(dollars in thousands)

REVENUES:
Net store and batter
sales................ $89,938 $18,932 $6,370 $1,873 $1,489
Franchising, net...... 3,884 3,449 -- -- --
Licensing, net........ 1,081 -- -- -- --
Other, net............ 1,056 82 -- -- --
------- ------- ------ ------ ------
Total revenues...... 95,959 22,463 6,370 1,873 1,489
------- ------- ------ ------ ------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 52,357 7,645 3,523 1,000 914
Food cost of sales.... 21,588 6,428 1,108 454 373
General and
administrative....... 12,621 5,288 1,067 421 141
Depreciation and
amortization......... 9,707 1,510 182 22 82
------- ------- ------ ------ ------
Total operating
costs and
expenses........... 96,273 20,871 5,880 1,897 1,510
------- ------- ------ ------ ------
Income (loss) from
operations....... (314) 1,592 490 (24) (21)
INTEREST EXPENSE, net... (8,981) (4,077) (43) (2) (8)
INTEREST INCOME......... 530 258 24 4 --
OTHER INCOME (EXPENSE),
net.................... (256) (149) 40 11 --
------- ------- ------ ------ ------
Income (loss) before
provision for income
taxes................ (9,021) (2,376) 511 (11) (29)
PROVISION (BENEFIT) FOR
INCOME TAXES........... 68 (38) 115 27 6
------- ------- ------ ------ ------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest.... (9,089) (2,338) 396 (38) (35)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ (333) -- -- -- --
MINORITY INTEREST....... (268) -- -- -- --
------- ------- ------ ------ ------
Net income (loss)..... $(9,690) $(2,338) $ 396 $ (38) $ (35)
======= ======= ====== ====== ======

See accompanying notes to pro forma condensed combined financial statements.

P-5

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
For the 39 Weeks Ended October 3, 1998
(unaudited)

Pro Forma
Cookie Conglomerate Pretzelmaker Adjustments Pro Forma
(See Note 8) (See Note 9) (See Note 1) Combined
------------------- ------------ ------------ ---------

REVENUES:
Net store and batter
sales................ $2,906 $1,039 $(1,330)(g) $121,217
Franchising, net...... -- 1,724 (606)(f) 8,451
Licensing, net........ -- -- -- 1,081
Other, net............ -- 598 -- 1,736
------ ------ ------- --------
Total revenues...... 2,906 3,361 (1,936) 132,485
------ ------ ------- --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 1,580 992 (606)(f) 67,405
Food cost of sales.... 733 121 (1,330)(g) 29,475
General and
administrative....... 303 1,656 (1,735)(h) 19,762
Depreciation and
amortization......... 118 627 3,077 (i) 15,325
------ ------ ------- --------
Total operating
costs and
expenses........... 2,734 3,396 (594) 131,967
------ ------ ------- --------
Income (loss) from
operations....... 172 (35) (1,342) 518
INTEREST EXPENSE, net... (17) (152) 502 (j) (12,798)
INTEREST INCOME......... -- -- -- 836
OTHER INCOME (EXPENSE),
net.................... 32 -- -- (322)
------ ------ ------- --------
Income (loss) before
provision for income
taxes................ 187 (187) (840) (11,766)
PROVISION (BENEFIT) FOR
INCOME TAXES........... -- -- -- 178
------ ------ ------- --------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest.... 187 (187) (840) (11,944)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- -- -- (333)
MINORITY INTEREST....... -- -- -- (268)
------ ------ ------- --------
Net income (loss)..... $ 187 $ (187) $ (840) $(12,545)
====== ====== ======= ========

See accompanying notes to pro forma condensed combined financial statements.

P-6

MRS. FIELDS

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)

1. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS

Pre-Acquisition

(a) Adjustment to reflect the elimination of franchise fees and related costs
as a result of consolidating H&M and Pretzel Time.

(b) Adjustment to reflect the impact of the reduction in salaries and payroll
expenses related to employees of H&M and Pretzel Time terminated at the date of
the acquisitions assuming that the acquisitions were consummated as of December
29, 1996. The terminations occurred concurrent with and were a direct result of
the acquisitions. These terminations will have a continuing impact, as the
positions occupied by the terminated employees have been eliminated. The
terminated employees will not be replaced as Mrs. Fields has sufficient
resources with existing staff to fulfill the applicable responsibilities. Other
costs will not be incurred that will offset these reductions. The impact is
factually supportable as the employees were terminated at the time of the
acquisitions.

(c) Adjustment to reflect amortization of goodwill, which goodwill totaling
$15,500,000, was recorded in connection with the purchase of the net assets of
H&M and the majority ownership of Pretzel Time. Goodwill is being amortized
over a 15-year period. Also includes adjustment to reflect a reduction in
depreciation expense as a result of reducing H&M's property and equipment to
estimated fair market value in connection with the acquisition. The average
estimated depreciable lives for these assets is seven years.

(d) Adjustment to reflect additional interest expense that would have been
incurred on the $100,000,000 Series A/B Senior Notes. Adjustment also reflects
a reduction in interest expense related to: (i) the retirement of $64,098,000
of Mrs. Fields debt with interest rates ranging from 8.78% to 10.0%; (ii) the
retirement of $8,250,000 of H&M debt with interest rates ranging from 8.0% to
16.0%; (iii) the assumed conversion of $4,643,000 of a Mrs. Fields note payable
with an interest rate of 9.78%; (iv) the additional amortization related to
approximately $5,976,000 of deferred loan costs assumed to be amortized over a
seven-year period; and (v) net of interest income on a $500,000 loan to a
minority stockholder of Pretzel Time with an interest rate of 10.0%.

(e) Adjustment to reflect the recording of the minority interest in Pretzel
Time's income from continuing operations.

Post-Acquisition

(f) Adjustment to reflect the elimination of batter sales and batter cost of
sales as a result of combining Great American, Deblan, Chocolate Chip, the
Combined Karp Entities and Cookie Conglomerate.

(g) Adjustment to reflect the elimination of franchise fees and related costs
as a result of combining Great American, Deblan, Chocolate Chip, the Combined
Karp Entities and Cookie Conglomerate.

(h) Adjustment to reflect the impact of the reduction in salaries and payroll
expenses related to employees of Great American, Deblan, Chocolate Chip, the
Combined Karp Entities, Cookie Conglomerate and Pretzelmaker terminated at the
date of the acquisitions assuming that the acquisitions were consummated at
December 29, 1996. The terminations were a contractual component of the
acquisition agreements and occurred concurrent with and were a direct result of
the acquisitions. These terminations will have a continuing impact, as the
positions occupied by the terminated employees have been eliminated. The
terminated employees will not be replaced as Mrs. Fields has sufficient
resources with existing staff to fulfill the applicable responsibilities. Other
costs will not be incurred that will offset these reductions. The impact is
factually supportable as the employees were terminated at the time of the
acquisitions.

P-7

(i) Adjustment to reflect amortization of goodwill, which goodwill totaling
$77,717,000 (including acquisition costs of $1,003,000), was recorded in
connection with the purchase of the net assets of Great American, Deblan,
Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and
Pretzelmaker. Goodwill is being amortized over a 15-year period. Also includes
adjustment to reflect a reduction in depreciation expense as a result of
reducing Great American, Deblan, Chocolate Chip and the Combined Karp Entities
property and equipment and increasing Cookie Conglomerate's property and
equipment to estimated fair market value in connection with each respective
acquisition. The average estimated depreciable lives for these assets is seven
years.

(j) Adjustment to reflect the reduction in interest expense related to: (i)
the retirement of $40,000,000 of Great American 10.875% Senior Secured Notes;
(ii) the retirement of $10,000,000 of Great American 12.5% Subordinated Notes;
(iii) the elimination of Great American's original issue discount; (iv) the
elimination of Great American's deferred loan costs; (v) net of the additional
interest expense related to approximately $5,007,000 of new deferred loan costs
amortized over a seven-year period; and (vi) net of the additional interest
expense on the $40,000,000 of Series C Senior Notes and amortization of
$600,000 of assumed discount; (vii) net interest expense on $2,800,000 of
financing related to the acquisition of Cookie Conglomerate, and (viii) net
interest expense on $4,682,000 of financing related to the acquisition of
Pretzelmaker.

(k) Adjustment to reflect the change in provision for income taxes due to the
consolidated results of operations of the entities before provision for income
taxes.

2. H&M ACQUISITION

Mrs. Fields Holding acquired the net assets and certain debt of H&M on July
25, 1997, and concurrent with the completion of Mrs. Field's offering in
November 1997 contributed the net assets of H&M and related debt to Mrs.
Fields'. Accordingly, in the accompanying unaudited pro forma condensed
combined statement of operations for the 53 weeks ended January 3, 1998, H&M's
results of operations from December 29, 1996 to July 24, 1997 are included
under the "H&M" column heading. Also, in the accompanying unaudited pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, H&M's results of operations are included under the "Mrs. Fields" column
heading. The purchase price of $13,750,000 paid by Mrs. Fields Holding was
allocated based on the estimated fair values of the net assets acquired, as
presented below:

Current assets acquired............................................ $ 496,000
Fixed assets acquired.............................................. 4,151,000
Other assets acquired.............................................. 1,212,000
Current liabilities acquired....................................... (727,000)
Other liabilities acquired......................................... (1,000,000)
Goodwill acquired.................................................. 9,618,000
-----------
Total purchase price............................................. $13,750,000
===========

3. PRETZEL TIME ACQUISITION

Mrs. Fields Holding acquired 56.0% of the common stock of Pretzel Time, a
$500,000 note receivable from Pretzel Time's founder and contract rights on
September 2, 1997. Concurrent with the completion of Mrs. Field's offering in
November 1997, Mrs. Fields Holding contributed its 56.0% interest to Mrs.
Fields. Accordingly, in the accompanying unaudited pro forma condensed combined
statements of operations for the 53 weeks ended January 3, 1998, Pretzel Time's
results of operations from December 29, 1996 to September 1, 1997 are included
under the "Pretzel Time" column heading. Also, in the accompanying unaudited
pro forma condensed combined statement of operations for the 39 weeks ended
October 3, 1998, Pretzel Time's results of operations are included under the
"Mrs. Fields" column heading.

P-8

Mrs. Fields Holding paid $4,200,000 in cash to acquire 56.0% of the common
stock of Pretzel Time and made a $500,000, five-year maturity loan, with an
interest rate of 10.0%, to a minority stockholder and founder of Pretzel Time.
Of the $4,200,000 paid by Mrs. Fields Holding, $750,000 was paid to Pretzel
Time to be used for working capital purposes. Pretzel Time's stockholders'
deficit of $425,000 at the date of acquisition was eliminated and goodwill of
$5,882,000 was recorded.

4. GREAT AMERICAN ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
and subordinated indebtedness of Great American for an aggregate purchase price
of $18,400,000. The purchase price was allocated based on the estimated fair
values of the net assets acquired, as presented below:

Current assets acquired............................................ $11,798,652
Fixed assets acquired.............................................. 3,021,124
Other assets acquired.............................................. 5,244,371
Current liabilities acquired....................................... (8,352,982)
Other liabilities acquired......................................... (48,944,165)
Goodwill acquired.................................................. 55,633,000
-----------
Total purchase price............................................. $18,400,000
===========

Because Great American operates using a 52/53-week year ending near June 30,
its results of operations for the 52 weeks ended December 28, 1997, which are
included in the accompanying pro forma condensed combined statements of
operations for the 53 weeks ended January 3, 1998, do not agree with Great
American's historical results of operations for either the 52 weeks ended June
29, 1997 or June 28, 1998. Additionally, in the accompanying pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, Great American's results of operations from December 29, 1997 to August
23, 1998 are included under the "Great American" column heading. Great
American's results of operations from August 24, 1998 to October 3, 1998 are
included under the "Mrs. Fields" column heading. None of Great American's
revenues and income (loss) has been excluded from or included more than once in
the pro forma condensed combined statements of operations for the 53 weeks
ended January 3, 1998 and the 39 weeks ended October 3, 1998.

The following data reconciles the key components of Great American's results
of operations in the pro forma condensed combined statement of operations for
the 53 weeks ended January 3, 1998 with the key components of Great American's
results of operations in its historical financial statements for the 52 weeks
ended June 28, 1998:

Less Add
52 Weeks Ended 26 Weeks Ended 26 Weeks Ended 52 Weeks Ended
June 28, 1998 June 28, 1998 June 29, 1997 December 28, 1997
-------------- --------------- --------------- -----------------
(Dollars in thousands)

Net store sales......... $18,854 $8,472 $10,181 $20,563
Batter sales to fran-
chises................. 12,214 6,074 5,604 11,744
Franchising, net........ 5,770 2,886 2,507 5,391
Other, net.............. 139 67 95 167
Operating costs and ex-
penses................. 31,133 15,089 17,471 33,515
Income (loss) from oper-
ations................. 5,844 2,106 612 4,350
Net income (loss)....... (202) (1,384) (1,703) (521)

The following data reconciles the key components of Great American's results
of operations in the pro forma condensed combined statement of operations for
the 39 weeks ended October 3, 1998 with the key components of Great American's
results of operations in its historical financial statements for the 52 weeks
ended June 28, 1998:

P-9

Less Add
52 Weeks Ended 26 Weeks Ended June 29, 1998 To December 29, 1997
June 28, 1998 December 28, 1997 August 23, 1998 To August 23, 1998
-------------- ----------------- ---------------- ------------------
(Dollars in thousands)

Net store sales......... $18,854 $10,382 $2,753 $11,225
Batter sales to franchi-
sees................... 12,214 6,140 1,633 7,707
Franchising, net........ 5,770 2,884 563 3,449
Other, net.............. 139 72 15 82
Operating costs and ex-
penses................. 31,133 16,044 5,782 20,871
Income (loss) from oper-
ations................. 5,844 3,738 (514) 1,592
Net income (loss)....... (202) 1,182 (954) (2,338)

5. DEBLAN ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
of Deblan for an aggregate purchase price of $10,465,000. Accordingly, in the
accompanying pro forma condensed combined statement of operations for the 39
weeks ended October 3, 1998, Deblan's results of operations from January 1,
1998 to August 23, 1998 are included under the "Deblan" column heading.
Deblan's results of operations from August 24, 1998 to October 3, 1998 are
included under the "Mrs. Fields" column heading. The purchase price was
allocated based on the estimated fair values of the net assets acquired, as
presented below:

Current assets acquired............................................ $ 1,241,000
Fixed assets acquired.............................................. 1,649,000
Other assets acquired.............................................. 247,000
Current liabilities acquired....................................... (333,000)
Other liabilities acquired......................................... (565,000)
Goodwill acquired.................................................. 8,226,000
-----------
Total purchase price............................................. $10,465,000
===========

The following data reconciles the key components of Deblan's results of
operations in the pro forma condensed combined statement of operations for the
39 weeks ended October 3, 1998 with the key components of Deblan's results of
operations in its unaudited historical financial statements for the six months
ended June 30, 1998:

Six Months Ended July 1, 1998 To January 1, 1998 To
June 30, 1998 August 23, 1998 August 23, 1998
---------------- --------------- ------------------
(Dollars in thousands)

Net store sales........... $4,768 $1,602 $6,370
Operating costs and ex-
penses................... 4,418 1,462 5,880
Income from operations.... 350 140 490
Net income................ 232 164 396

6. CHOCOLATE CHIP ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
of Chocolate Chip for an aggregate purchase price of $3,965,000. The purchase
price was allocated based on the estimated fair values of the net assets
acquired, as presented below:

Current assets acquired............................................. $ 174,000
Fixed assets acquired............................................... 108,000
Other assets acquired............................................... 46,000
Current liabilities acquired........................................ (111,000)
Goodwill acquired................................................... 3,748,000
----------
Total purchase price.............................................. $3,965,000
==========

P-10

Because Chocolate Chip operates using a year ending September 30, its results
of operations for the year ended December 31, 1997, which are included in the
accompanying pro forma condensed combined statement of operations for the 53
weeks ended January 3, 1998, do not agree with Chocolate Chip's historical
results of operations for the year ended September 30, 1997. Additionally, in
the accompanying pro forma condensed combined statement of operations for the
39 weeks ended October 3, 1998, Chocolate Chip's results of operations from
January 1, 1998 to August 23, 1998 are included under the "Chocolate Chip"
column heading. Chocolate Chip's results of operations from August 24, 1998 to
October 3, 1998 are included under the "Mrs. Fields" column heading. None of
Chocolate Chip's revenues and income (loss) has been excluded or included more
than once in the pro forma condensed combined statements of operations for the
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998.

The following data reconciles the key components of Chocolate Chip's results
of operations in the pro forma condensed combined statement of operations for
the 53 weeks ended January 3, 1998 with the key components of Chocolate Chip's
results of operations in its historical financial statements for the year ended
September 30, 1997:

Less Add
Year Ended Three Months Ended Three Months Ended Year Ended
September 30, 1997 December 31, 1996 December 31, 1997 December 31, 1997
------------------ ------------------- ------------------- ------------------
(Dollars in thousands)

Net store sales......... $2,650 $663 $802 $2,789
Operating costs and ex-
penses................. 2,632 728 707 2,611
Income (loss) from oper-
ations................. 18 (65) 95 178
Net income (loss)....... 11 (67) 57 135

The following data reconciles the key components of Chocolate Chip's results
of operations in the pro forma condensed combined statement of operations for
the 39 weeks ended October 3, 1998 with the key components of Chocolate Chip's
results of operations in its historical financial statements for the nine
months ended June 30, 1998:

Less
Nine Months Three Months Add
Ended Ended July 1, 1998 To January 1, 1998
June 30, 1998 December 31, 1997 August 23, 1998 To August 23, 1998
------------------ ------------------- ------------------- ------------------
(Dollars in thousands)

Net store sales......... $2,266 $803 $410 $1,873
Operating costs and
expenses............... 2,100 646 443 1,897
Income (loss) from
operations............. 166 157 (33) (24)
Net income (loss)....... 116 155 1 (38)

7. COMBINED KARP ENTITIES ACQUISITION

On September 9, 1998, Mrs. Fields acquired the Combined Karp Entities for an
aggregate purchase price of $1,750,000. Accordingly, in the accompanying pro
forma condensed combined statement of operations for the 39 weeks ended October
3, 1998, the Combined Karp Entities' results of operations from January 1, 1998
to September 9, 1998 are included under the "Combined Karp Entities" column
heading. The Combined Karp Entities' results of operations from September 10,
1998 to October 3, 1998 are included under the "Mrs. Fields" column heading.
The purchase price was allocated based on the estimated fair values of the net
assets acquired, as presented below:

Current assets acquired............................................. $ 64,000
Fixed assets acquired, net.......................................... 1,054,000
Goodwill acquired................................................... 780,000
----------
Total purchase price.............................................. $1,898,000
==========

P-11

The following data reconciles the key components of the Combined Karp
Entities' results of operations in the pro forma condensed combined statement
of operations for the 39 weeks ended October 3, 1998 with the key components of
the Combined Karp Entities' results of operations in its historical financial
statements for the six months ended June 30, 1998:

Six Months Ended July 1, 1998 To January 1, 1998 To
June 30, 1998 September 9, 1998 September 9, 1998
---------------- ----------------- ------------------
(Dollars in thousands)

Net store sales......... $1,181 $308 $1,489
Operating costs and
expenses............... 1,259 251 1,510
Income (loss) from
operations............. (78) 57 (21)
Net income (loss)....... (91) 56 (35)

8. COOKIE CONGLOMERATE ACQUISITION

On October 5, 1998, Mrs. Fields acquired Cookie Conglomerate for an aggregate
purchase price of $2,800,000. Accordingly, in the accompanying pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, Cookie Conglomerate's results of operations from Januay 1, 1998 to
September 30, 1998 are included under the "Cookie Conglomerate" column heading.
The purchase price was allocated based on the estimated fair values of the net
assets acquired, as presented below:

Fixed assets acquired................................................ $ 801,000
Goodwill acquired.................................................... 1,999,000
----------
Total purchase price............................................... $2,800,000
==========

9. PRETZELMAKER ACQUISITION

On November 19, 1998, Mrs. Fields acquired all of the outstanding capital
stock of Pretzelmaker for $5,739,000, including $5,419,000 related to
outstanding capital stock and $320,000 related to severance payments in lieu of
outstanding stock options. Mrs. Fields paid $1,100,000 in cash upon closing of
the acquisition and signed a promissory note for the remaining $4,639,000,
which was paid in three installments through January 4, 1999. Accordingly, in
the accompanying pro forma condensed combined financial statements of
operations for the 39 weeks ended October 3, 1998, Pretzelmaker's results of
operations from January 1, 1998 to September 30, 1998 are included under the
"Pretzelmaker" column heading. The purchase price was allocated based on the
estimated fair values of the net assets (liabilities) acquired, as presented
below:

Current assets acquired............................................ $ 822,000
Fixed assets acquired.............................................. 566,000
Other assets acquired.............................................. 184,000
Current liabilities acquired....................................... (1,430,000)
Other liabilities acquired......................................... (901,000)
Goodwill acquired.................................................. 6,498,000
-----------
Total purchase price............................................. $ 5,739,000
===========

P-12

INDEX TO HISTORICAL FINANCIAL STATEMENTS

Page
----

Mrs. Fields' Original Cookies, Inc. and Subsidiaries
Report of Independent Public Accountants.................................. F-4
Consolidated Balance Sheets as of December 28, 1996, January 3, 1998 and
October 3, 1998 (unaudited).............................................. F-5
Consolidated Statements of Operations for the period from inception
(September 18, 1996) to December 28, 1996, for the year ended January 3,
1998 and for the 39 weeks ended September 27, 1997 (unaudited) and
October 3, 1998 (unaudited).............................................. F-7
Consolidated Statements of Stockholder's Equity for the period from
inception (September 18, 1996) to December 28, 1996, for the year ended
January 3, 1998 and for the 39 weeks ended October 3, 1998 (unaudited)... F-8
Consolidated Statements of Cash Flows for the period from inception
(September 18, 1996) to December 28, 1996, for the year ended January 3,
1998 and for the 39 weeks ended September 27, 1997 (unaudited) and
October 3, 1998 (unaudited).............................................. F-9
Notes to Consolidated Financial Statements................................ F-13
Mrs. Fields Inc. and Subsidiaries
Report of Independent Public Accountants (Arthur Andersen LLP)............ F-49
Independent Auditors' Report (Deloitte & Touche LLP)...................... F-50
Consolidated Balance Sheet as of September 17, 1996....................... F-51
Consolidated Statements of Operations for the year ended December 30, 1995
and for the period ended September 17, 1996.............................. F-53
Consolidated Statements of Stockholders' Deficit for the year ended
December 30, 1995 and for the period ended September 17, 1996............ F-54
Consolidated Statements of Cash Flows for the year ended December 30, 1995
and for the period ended September 17, 1996.............................. F-55
Notes to Consolidated Financial Statements................................ F-57
The Original Cookie Company, Incorporated and the Carved-out Portion of
Hot Sam Company, Inc. (Combined)
Report of Independent Public Accountants.................................. F-65
Combined Balance Sheet as of September 17, 1996........................... F-66
Combined Statements of Operations for the year ended December 30, 1995 and
for the period ended September 17, 1996.................................. F-68
Combined Statements of Stockholders' Equity for the year ended December
30, 1995 and for the period ended September 17, 1996..................... F-69
Combined Statements of Cash Flows for the year ended December 30, 1995 and
for the period ended September 17, 1996.................................. F-70
Notes to Combined Financial Statements.................................... F-71
Cookies USA, Inc. and Subsidiary
Report of Independent Accountants......................................... F-75
Consolidated Balance Sheets as of June 29, 1997 and June 28, 1998......... F-76
Consolidated Statements of Operations for the fifty-two week periods ended
June 30, 1996, June 29, 1997 and June 28, 1998........................... F-78
Consolidated Statements of Changes in Stockholders' Deficit for the fifty-
two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998.... F-79
Consolidated Statements of Cash Flows for the fifty-two week periods ended
June 30, 1996, June 29, 1997 and June 28, 1998........................... F-80
Notes to Consolidated Financial Statements................................ F-82

F-1

INDEX TO HISTORICAL FINANCIAL STATEMENTS--(Continued)

Page
-----

Deblan Corporation
Independent Auditors' Report............................................ F-94
Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998
(unaudited)............................................................ F-95
Statements of Earnings for the years ended December 31, 1995, 1996 and
1997 and for the six months ended June 30, 1997 (unaudited) and 1998
(unaudited)............................................................ F-97
Statements of Shareholders' Equity for the years ended December 31,
1995, 1996 and 1997 and for the six months ended June 30, 1998
(unaudited)............................................................ F-98
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and for the six months ended June 30, 1997(unaudited) and 1998
(unaudited)............................................................ F-99
Notes to Financial Statements........................................... F-101
Chocolate Chip Cookies of Texas, Inc.
Report of Independent Public Accountants................................ F-107
Balance Sheets as of September 30, 1996 and 1997 and June 30, 1998
(unaudited)............................................................ F-108
Statements of Operations for the years ended September 30, 1995, 1996
and 1997 and for the nine months ended June 30, 1997 (unaudited) and
1998 (unaudited)....................................................... F-110
Statements of Stockholders' Equity for the years ended September 30,
1995, 1996, and 1997 and for the nine months ended June 30, 1998
(unaudited)............................................................ F-111
Statements of Cash Flows for the years ended September 30, 1995, 1996
and 1997 and for the nine months ended June 30, 1997 (unaudited) and
1998 (unaudited)....................................................... F-112
Notes to Financial Statements........................................... F-114
The Combined Karp Entities
Report of Independent Public Accountants................................ F-119
Combined Balance Sheets as of December 31, 1996 and 1997 and June 30,
1998 (unaudited)....................................................... F-120
Combined Statements of Operations for the years ended December 31, 1995,
1996 and 1997 and for the six months ended June 30, 1997 (unaudited)
and 1998 (unaudited)................................................... F-122
Combined Statements of Stockholders' Equity for the years ended December
31, 1995, 1996, and 1997 and for the six months ended June 30, 1998
(unaudited)............................................................ F-123
Combined Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997 and for the six months ended June 30, 1997 (unaudited)
and 1998 (unaudited)................................................... F-124
Notes to Combined Financial Statements.................................. F-126
The Cookie Conglomerate
Independent Auditors' Report............................................ F-133
Combined Balance Sheets as of December 31, 1997 and 1996................ F-134
Combined Statements of Operations for the years ended December 31, 1997
and 1996............................................................... F-136
Combined Statements of Changes in Stockholders' Deficit and Partners'
Capital (Deficit)...................................................... F-137
Combined Statements of Cash Flows for the years ended December 31, 1997
and 1996............................................................... F-138
Notes to the Consolidated Financial Statements.......................... F-139
Combined Balance Sheet as of September 30, 1998 (unaudited)............. F-143
Combined Statements of Operations for the nine month periods ended
September 30, 1998 and 1997 (unaudited)................................ F-144
Combined Statements of Cash Flows for the nine month periods ended
September 30, 1998 and 1997 (unaudited)................................ F-145
Notes to the Consolidated Financial Statements.......................... F-146
Pretzelmaker Holdings, Inc.
Report of Independent Certified Public Accountants (AJ. Robbins, PC).... F-147
Report of Independent Certified Public Accountants (BDO Seidman, LLP)... F-148
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998 (unaudited)......................................... F-149

F-2

INDEX TO HISTORICAL FINANCIAL STATEMENTS--(Continued)

Page
-----

Consolidated Statements of Operations For the Period from February 24
(Inception) to December 31, 1995 and the Years Ended December 31, 1996
and 1997 and the Nine Months Ended September 30, 1997 (unaudited) and
1998 (unaudited)........................................................ F-151
Consolidated Statements of Stockholders' Equity For the Period from
February 24 (Inception) to December 31, 1995 and the Years Ended
December 31, 1996 and 1997 and the Nine Months Ended September 30, 1998
(unaudited)............................................................. F-152
Consolidated Statements of Cash Flows For the Period from February 24
(Inception) to December 31, 1995 and the Years Ended December 31, 1996
and 1997 and the Nine Months Ended September 30, 1997 (unaudited) and
1998 (unaudited)........................................................ F-153
Notes to the Consolidated Financial Statements........................... F-154

F-3

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Mrs. Fields' Original Cookies, Inc.:

We have audited the accompanying consolidated balance sheets of Mrs. Fields'
Original Cookies, Inc. (a Delaware corporation) and subsidiaries as of December
28, 1996 and January 3, 1998, and the related consolidated statements of
operations, stockholder's equity and cash flows for the period from inception
(September 18, 1996) to December 28, 1996 and for the year ended January 3,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of December 28, 1996
and January 3, 1998, and the consolidated results of their operations and their
cash flows for the period from inception (September 18, 1996) to December 28,
1996 and for the year ended January 3, 1998 in conformity with generally
accepted accounting principles.

Arthur Andersen LLP

Salt Lake City, Utah
June 10, 1998

F-4

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

ASSETS

January
December 28, 3, October 3,
1996 1998 1998
------------ -------- -----------
(Unaudited)

CURRENT ASSETS:
Cash and cash equivalents................. $ 6,709 $ 16,287 $ 5,146
Accounts receivable, net of allowance for
doubtful accounts
of $55, $32 and $40, respectively........ 1,200 1,535 1,896
Amounts due from franchisees and
licensees, net of allowance for doubtful
accounts of $320, $582 and $979,
respectively............................. 1,524 2,176 5,616
Inventories............................... 3,043 3,100 4,790
Prepaid rent and other.................... 1,324 2,960 4,312
Deferred income tax assets................ 2,092 2,765 2,765
-------- -------- --------
Total current assets.................... 15,892 28,823 24,525
-------- -------- --------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements.................... 16,704 21,099 32,856
Equipment and fixtures.................... 10,427 14,100 18,143
Land...................................... 128 128 368
-------- -------- --------
27,259 35,327 51,367
Less accumulated depreciation and
amortization............................. (1,054) (6,125) (16,364)
-------- -------- --------
Net property and equipment.............. 26,205 29,202 35,003
-------- -------- --------
DEFERRED INCOME TAX ASSETS.................. 917 734 734
-------- -------- --------
GOODWILL, net of accumulated amortization of
$966, $4,980 and $9,233, respectively...... 50,005 68,501 134,531
-------- -------- --------
TRADEMARKS AND OTHER INTANGIBLES, net of
accumulated amortization of $324, $1,409
and $2,027, respectively................... 16,327 15,193 14,625
-------- -------- --------
DEFERRED LOAN COSTS, net of accumulated
amortization of
$0, $70 and $720, respectively............. -- 5,906 10,263
-------- -------- --------
OTHER ASSETS................................ 709 1,325 2,976
-------- -------- --------
$110,055 $149,684 $222,657
======== ======== ========

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-5

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands, except per share data)

LIABILITIES AND STOCKHOLDER'S EQUITY

January
December 28, 3, October 3,
1996 1998 1998
------------ -------- -----------
(Unaudited)

CURRENT LIABILITIES:
Current portion of long-term debt......... $ 2,450 $ 472 $ 384
Current portion of capital lease
obligations.............................. -- 142 174
Accounts payable.......................... 6,201 3,805 8,669
Current portion of accrued liabilities.... 3,202 2,826 6,365
Current portion of store closure reserve.. 2,450 3,664 2,475
Accrued salaries, wages and benefits...... 1,811 1,891 3,045
Accrued interest payable.................. 1,668 1,082 4,859
Sales taxes payable....................... 676 937 512
Current portion of deferred credits....... 323 871 318
-------- -------- --------
Total current liabilities............... 18,781 15,690 26,801
LONG-TERM DEBT, net of current portion and
discount................................... 65,113 100,284 139,465
STORE CLOSURE RESERVE, net of current
portion.................................... 2,305 1,802 4,648
CAPITAL LEASE OBLIGATIONS, net of current
portion.................................... -- 183 133
ACCRUED LIABILITIES, net of current
portion.................................... 2,207 -- --
DEFERRED CREDITS, net of current portion.... 1,091 -- --
-------- -------- --------
Total liabilities....................... 89,497 117,959 171,047
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 3, 7, 8
and 10)
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK of PTI (a majority owned subsidiary),
aggregate liquidation preference of $0,
$1,437 and $1,481, respectively............ -- 902 1,171
-------- -------- --------
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK of MFB (a wholly owned subsidiary),
aggregate liquidation preference of $3,597
in 1996.................................... 3,597 -- --
-------- -------- --------
MINORITY INTEREST........................... -- 58 308
-------- -------- --------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000 shares
authorized and 400 shares outstanding
(pledged as collateral for parent company
debt).................................... -- -- --
Additional paid-in capital................ 15,000 30,843 59,899
Retained earnings (accumulated deficit)... 1,961 (78) (9,768)
-------- -------- --------
Total stockholder's equity.............. 16,961 30,765 50,131
-------- -------- --------
$110,055 $149,684 $222,657
======== ======== ========

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-6

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)

Inception 39 39
(September 18, Weeks Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
1996 1998 1997 1998
-------------- ---------- ------------- -----------
(Unaudited) (Unaudited)

REVENUES:
Net store and batter
sales................... $39,890 $123,987 $83,759 $89,938
Franchising, net......... 621 3,574 2,201 3,884
Licensing, net........... 764 2,028 1,215 1,081
Other, net............... 107 918 351 1,056
------- -------- ------- -------
Total revenues......... 41,382 130,507 87,526 95,959
------- -------- ------- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs......... 19,492 66,832 48,200 52,357
Food cost of sales....... 9,862 28,127 19,549 21,588
General and
administrative.......... 4,035 16,730 10,803 12,621
Depreciation and
amortization............ 2,344 10,403 6,596 9,707
------- -------- ------- -------
Total operating costs
and expenses.......... 35,733 122,092 85,148 96,273
------- -------- ------- -------
Income (loss) from
operations.......... 5,649 8,415 2,378 (314)
------- -------- ------- -------
OTHER INCOME (EXPENSE),
net:
Interest expense......... (1,867) (7,830) (5,070) (8,981)
Interest income.......... 74 246 153 530
Other expense............ -- (368) (228) (256)
------- -------- ------- -------
Total other expense,
net................... (1,793) (7,952) (5,145) (8,707)
------- -------- ------- -------
Income (loss) before
provision for income
taxes, preferred stock
accretion and dividends
of subsidiaries and
minority interest....... 3,856 463 (2,767) (9,021)
PROVISION FOR INCOME
TAXES..................... (1,798) (655) (179) (68)
------- -------- ------- -------
Income (loss) before
preferred stock
accretion and dividends
of subsidiaries and
minority interest....... 2,058 (192) (2,946) (9,089)
PREFERRED STOCK ACCRETION
AND DIVIDENDS OF
SUBSIDIARIES.............. (97) (644) (276) (333)
MINORITY INTEREST.......... -- (138) (2) (268)
------- -------- ------- -------
Net income (loss)...... $ 1,961 $ (974) $(3,224) $(9,690)
======= ======== ======= =======

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

F-7

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands)

Retained
Common Stock Additional Earnings
------------- Paid-in (Accumulated
Shares Amount Capital Deficit) Total
------ ------ ---------- ------------ -------

BALANCE, September 18, 1996..... -- $ -- $ -- $ -- $ --
Issuance of common stock for
cash......................... 400 -- 15,000 -- 15,000
Net income.................... -- -- -- 1,961 1,961
--- ----- ------- ------- -------
BALANCE, December 28, 1996...... 400 -- 15,000 1,961 16,961
Parent contribution of
investment in PTI............ -- -- 4,200 -- 4,200
Parent contribution of note
receivable due from PTI's
minority stockholder and
founder...................... -- -- 500 -- 500
Parent contribution of
investment in MFB............ -- -- 6,500 -- 6,500
Conversion to equity of note
payable to parent............ -- -- 4,643 -- 4,643
Dividend paid to parent....... -- -- -- (1,065) (1,065)
Net loss...................... -- -- -- (974) (974)
--- ----- ------- ------- -------
BALANCE, January 3, 1998........ 400 -- 30,843 (78) 30,765
Parent equity infusion
(unaudited).................. -- -- 29,056 -- 29,056
Net loss (unaudited).......... -- -- -- (9,690) (9,690)
--- ----- ------- ------- -------
BALANCE, October 3, 1998
(unaudited).................... 400 $ -- $59,899 $(9,768) $50,131
=== ===== ======= ======= =======

The accompanying notes to consolidated financial statements
are an integral part of these statements

F-8

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Inception
(September 18, 39 Weeks 39 Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
1996 1998 1997 1998
-------------- ---------- ------------- -----------
(Unaudited) (Unaudited)

INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)......... $ 1,961 $ (974) $(3,224) $(9,690)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities, net
of effects from
acquisitions:
Depreciation and
amortization............. 2,344 10,403 6,596 9,707
Amortization of discount
on notes................. -- -- -- 8
Amortization of deferred
loan costs............... -- -- -- 650
Loss on sale of assets.... -- 368 228 256
Deferred income taxes..... 1,511 210 -- --
In-kind interest expense
on note payable to
stockholder.............. 97 338 276 --
Preferred stock accretion
and dividends of
subsidiaries............. 97 644 276 333
Minority interest......... -- 234 2 268
Changes in assets and
liabilities, net of
effects from
acquisitions:
Accounts receivable...... (294) (353) -- (361)
Amounts due from
franchisees and
licensees............... (339) (514) 371 (1,624)
Inventories.............. (159) 136 (23) (127)
Prepaid rent and other... (31) (895) 512 1,306
Other assets............. 39 427 -- (207)
Accounts payable and
accrued liabilities..... 239 (6,651) (773) 356
Store closure reserve.... (305) (1,666) (1,927) (1,892)
Accrued salaries, wages
and benefits............ 212 80 (841) (110)
Accrued interest
payable................. 1,668 (586) (67) 2,886
Sales taxes payable...... 542 261 (297) (530)
Deferred credits......... 27 (543) (318) (553)
------- ------- ------- -------
Net cash provided by
operating activities... 7,609 919 791 676
------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash paid for
acquisitions and related
expenses................. (19,508) (10,949) -- (28,699)
Purchase of property and
equipment, net of effects
from acquisitions........ (1,638) (4,678) (3,216) (5,616)
Proceeds from the sale of
assets................... 15 122 -- --
------- ------- ------- -------
Net cash used in
investing activities... (21,131) (15,505) (3,216) (34,315)
------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
long-term debt........... -- 108,250 -- 39,400
Principal payments on
long-term debt........... (1,769) (77,009) (98) (40,838)
Payment of debt financing
costs.................... -- (5,976) -- (5,007)
Cash advance from MFH..... -- 1,500 -- --
Repayment of cash advance
to MFH................... -- (1,500) -- --
Payment of cash dividend
to MFH................... -- (1,065) -- --
Equity infusion from MFH.. -- -- -- 29,056
Principal payments on
capital lease
obligations.............. -- (36) -- (49)
Proceeds from the issuance
of common stock.......... 15,000 -- -- --
Proceeds from the issuance
of mandatorily redeemable
cumulative preferred
stock of subsidiary...... 3,500 -- -- --
Reduction in preferred
stock of PTI............. -- -- -- (64)
Proceeds from the issuance
of note payable to
related party............ 3,500 -- -- --
------- ------- ------- -------
Net cash provided by
(used in) financing
activities............. 20,231 24,164 (98) 22,498
------- ------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............... 6,709 9,578 (2,523) (11,141)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE
PERIOD.................... -- 6,709 6,709 16,287
------- ------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD...... $ 6,709 $16,287 $ 4,186 $ 5,146
======= ======= ======= =======

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

F-9

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest was approximately $28, $8,416, $3,890 (unaudited) and
$6,291 (unaudited) for the period ended December 28, 1996, the year ended
January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998,
respectively.

Cash paid for income taxes was approximately $0, $217, $80 (unaudited) and
$42 (unaudited) for the period ended December 28, 1996, the year ended January
3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998,
respectively.

Supplemental Disclosure of Noncash Investing and Financing Activities:

On September 18, 1996, the Company acquired certain assets and assumed
certain liabilities of Mrs. Fields Inc., Mrs. Fields Development Corporation,
Mrs. Fields Cookies, The Original Cookie Company, Incorporated and Hot Sam
Company, Inc. In conjunction with the acquisitions, net liabilities were
assumed as follows:

Fair value of assets acquired...................................... $ 93,494
Net cash paid...................................................... (19,508)
Notes payable issued............................................... (65,735)
--------
Liabilities assumed.............................................. $ 8,251
========

In connection with the purchase accounting, the Company recorded certain
other accruals totaling $11,300 and provided reserves totaling $10,900 for
impaired property and equipment at Company-owned stores the Company intends to
exit through closing or franchising. The accruals consisted of $5,060 for
obligations incident to store closures, $2,450 for contingent legal and lease
obligations that were firmed up before year end, $3,135 for transaction and
finders' fees and $655 for severance and related costs. In connection with
these accruals and impairment reserves, the Company recorded an additional
$17,680 of goodwill and established deferred income tax assets (net of
valuation allowances) totaling $4,520.

In October 1996, the Company received property in payment of $128 in accounts
receivable due from a customer.

On March 18, 1997, a certain convertible subordinated note issued in
connection with the previously described business combination was not repaid as
scheduled. The noteholder exercised its option to receive an additional note of
$1,000 due to the delayed payment. At the time of the consummation of the
business combination, management assessed the likelihood of this contingency of
delayed payment being reasonably possible, therefore the Company recorded the
note and additional goodwill as a subsequent component of the business
combination accounting.

During the period ended December 28, 1996 and the year ended January 3, 1998,
The Mrs. Fields' Brand, Inc. ("MFB") increased its mandatorily redeemable
cumulative preferred stock liquidation preference by approximately $97 and
$338, respectively, in lieu of paying cash dividends. On November 26, 1997,
Mrs. Fields' Holding Company, Inc. ("MFH") converted to common equity of the
Company $4,643 aggregate principal amount of convertible subordinated notes and
contributed to the Company all of the common equity of MFB after converting its
preferred stock interests totaling $3,935 to common equity (see Note 6).

F-10

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)

On July 25, 1997, certain assets were acquired and certain liabilities were
assumed of H & M Concepts Ltd. Co. by Mrs. Fields' Pretzel Concepts, Inc.
("MFPC") as follows (see Note 1):

Fair value of assets acquired....................................... $15,780
Net cash paid....................................................... (5,750)
Notes payable issued................................................ (8,000)
-------
Liabilities assumed............................................... $ 2,030
=======

In connection with the purchase accounting for this acquisition, MFPC accrued
$1,000 for estimated obligations incident to certain store closures. The
Company also recorded a reserve totaling approximately $2,500 for impaired
property and equipment at stores the Company intends to close. In connection
with these accruals and reserves, the Company recorded $2,800 of goodwill and
established deferred income tax assets (net of valuation allowances) totaling
$700.

On September 2, 1997, 56 percent of the shares of common stock of Pretzel
Time, Inc. ("PTI") were acquired by MFH as follows (see Note 1):

Fair value of assets acquired....................................... $ 8,311
Net cash paid....................................................... (4,200)
-------
Liabilities assumed............................................... $ 4,111
=======

In connection with the purchase accounting for this acquisition, MFH accrued
$500 for estimated obligations incident to certain store closures. In
connection with these accruals, MFH recorded $400 of goodwill and established
deferred income tax assets (net of valuation allowances) totaling $100.

On November 26, 1997, MFH contributed all of the assets and liabilities of
MFPC, MFH's 56 percent of the shares of common stock of PTI and the $500 note
receivable from PTI's founder and minority stockholder to the Company.
Additionally, on November 26, 1997, MFH contributed all of the common stock of
MFB to the Company.

During the period from the acquisition of the majority ownership of PTI
(September 2, 1997) to January 3, 1998 and for the 39 weeks ended October 3,
1998, PTI increased its mandatorily redeemable cumulative preferred stock
liquidation preference by approximately $68 and $108 (unaudited), respectively,
in lieu of paying cash dividends. In addition, for the same periods, PTI's
mandatorily redeemable cumulative preferred stock was increased by
approximately $238 and $225 (unaudited), respectively, for the accretion
required over time to amortize the original issue discount.

In August 1998, the Company acquired all of the outstanding capital stock and
subordinated indebtedness of Cookies USA, Inc. ("Cookies USA") for an aggregate
purchase price of approximately $18,400 (unaudited). During August and
September 1998, the Company also entered into agreements with three franchisees
of Cookies USA (the "Great American Franchisees") pursuant to which the Company
purchased a total of 37 Great American Cookies franchises for an aggregate
purchase price of $16,328 (unaudited). The aggregate purchase price for all of
these acquisitions of $34,728 (unaudited) was allocated, on a preliminary
basis, as follows (see Note 1):

Fair value of assets acquired (unaudited).......................... $ 79,865
Net cash paid (unaudited).......................................... (27,771)
--------
Liabilities assumed (unaudited).................................. $ 52,094
========

F-11

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)

The Company has formulated a plan to exit certain acquired stores that do not
meet management's established financial and geographical criteria. In
connection with the purchase accounting for these acquisitions, the Company
accrued $3,548 (unaudited) for estimated obligations incident to certain store
closures. The Company also recorded a reserve totaling approximately $2,150
(unaudited) for impaired property and equipment at stores the Company intends
to close. In connection with these accruals and reserves, the Company recorded
$5,698 (unaudited) of goodwill. Valuation allowances were recorded for all
deferred tax assets established during purchase accounting.

F-12

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1997 and October 3, 1998 is Unaudited)

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

Mrs. Fields' Original Cookies, Inc. (the "Company"), a Delaware corporation,
is a wholly owned subsidiary of Mrs. Fields' Holding Company, Inc. ("MFH" or
the "Parent"). MFH is a majority owned subsidiary of Capricorn Investors II,
L.P. ("Capricorn'). The Company has five wholly owned operating subsidiaries;
namely, Great American Cookie Company, Inc. ("GACC"), The Mrs. Fields' Brand,
Inc. ("MFB"), Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada)
Ltd. and H & M Canada; and four partially owned subsidiaries, the largest of
which is Pretzel Time, Inc. ("PTI") of which the Company owned 60 percent of
the common stock as of January 3, 1998. In June 1998, the Company purchased an
additional ten percent of the common stock of PTI, increasing the Company's
ownership interest to 70 percent. GACC was acquired by the Company in August
1998.

The Company primarily operates retail stores which sell freshly baked
cookies, brownies, pretzels and other food products through four specialty
retail chains. As of October 3, 1998, the Company owned and operated 150 "Mrs.
Fields Cookies" stores, 128 "Original Cookie Company" stores, 86 "Hot Sam
Pretzels' stores, 93 "Pretzel Time" stores, 109 "Great American Cookies" stores
in the United States and two "Pretzel Time" stores in Canada. Additionally, the
Company has franchised or licensed 683 stores in the United States and 82
stores in several other countries. As of October 3, 1998, the Company owned and
operated 435 core stores and 133 stores which are in the process of being sold
or franchised. All of the stores in the process of being closed or franchised
are expected to be closed or franchised by the end of fiscal year 2000.

The Company also holds legal title to certain trademarks for the "Mrs.
Fields" name and logo and licenses the uses of these trademarks to third
parties for the establishment and operation of Mrs. Fields' cookie and bakery
operations and other merchandising activities. In connection with these
licensing activities, the Company authorizes third-party licensees to use
certain business formats, systems, methods, procedures, designs, layouts,
specifications, trade names and trademarks in the United States and other
countries. Additionally, the Company markets and distributes its products
through catalogs, other print media and mail order.

The Company's business follows seasonal trends and is also affected by
climate and weather conditions. The Company experiences its highest revenues in
the fourth quarter. Because the Company's stores are heavily concentrated in
shopping malls, the Company's sales performance is significantly dependent on
the performance of those malls.

Business Combinations

MFI and Affiliates and OCC and Affiliates

The Company began operations on September 18, 1996, following the completion
of two simultaneous but separate asset purchase transactions wherein the
Company (i) acquired certain assets and assumed certain liabilities of Mrs.
Fields Inc., Mrs. Fields Development Corporation and Mrs. Fields Cookies in
accordance with two Asset Purchase Agreements dated August 7, 1996, among these
parties and Capricorn, and (ii) acquired certain assets and assumed certain
liabilities of The Original Cookie Company, Incorporated and Hot Sam Company,
Inc. in accordance with an Asset Purchase Agreement dated August 7, 1996, as
amended by the First Amendment dated as of September 17, 1996, among these
parties and Capricorn.

The combined purchase price for the acquired net assets was approximately
$85,243,000. The Company paid net cash of $19,508,000 and issued approximately
$65,735,000 in senior and subordinated notes to the

F-13

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

selling shareholders. The acquisitions were accounted for as purchases. The
total purchase price was allocated to the net assets acquired, based on their
estimated fair values. The organization of the Company and the acquisitions
resulted in the recording of intangible assets of approximately $49,942,000
principally made up of goodwill, trademarks and organization costs. An
additional $17,680,000 of goodwill and $4,520,000 of deferred income tax assets
(net of valuation allowances) were recorded in connection with the Company
recording certain other accruals totaling $11,300,000 and providing reserves
totaling $10,921,000 for impaired property and equipment (see Note 5) at
Company-owned stores the Company intends to exit through closing or
franchising. Goodwill and trademarks are amortized using the straight-line
method over 15 years. The $11,300,000 of accruals established at the date of
the acquisitions consisted of $5,060,000 for obligations incident to store
closures (see Note 5), $2,450,000 for contingent legal and lease obligations
that were firmed up before December 28, 1996, $3,135,000 for transaction and
finders' fees and $655,000 for severance and related costs. The Company
terminated all of the OCC and Affiliates corporate employees as planned.

As of January 3, 1998 and October 3, 1998, approximately $1,643,000 and
$2,053,000, respectively, of the $2,450,000 accrual for legal and lease
obligations has been utilized. The remaining amount as of October 3, 1998 of
approximately $397,000 is expected to be utilized by the end of 1999. As of
January 3, 1998, all of the $3,135,000 accrual established for transaction and
finders' fees and the $655,000 accrual for severance and related costs
associated with the acquisitions were fully utilized for the purposes intended.

H & M Concepts Ltd. Co.

On July 25, 1997, Mrs. Fields' Pretzel Concepts, Inc. ("MFPC"), a wholly
owned subsidiary of MFH, acquired substantially all of the assets and assumed
certain liabilities of H & M Concepts Ltd. Co. and subsidiaries ("H & M"). H &
M owned and operated stores which engage in retail sales of pretzels, toppings
and beverages under a franchise agreement with Pretzel Time, Inc. ("PTI"). The
aggregate consideration of $13,750,000 consisted of (i) $5,750,000 of cash,
financed through an advance from MFH of $1,500,000 and a $4,250,000 bank loan
to MFPC, (ii) a $4,000,000 principal amount bridge note of MFPC and (iii) a
$4,000,000 principal amount subordinated note of MFH retained by the sellers
(all such debt collectively referred to as the "H & M Debt"). The acquisition
was accounted for using the purchase method of accounting (based on the
estimated fair values of the net assets acquired) and resulted in recording
approximately $9,618,000 of goodwill that is being amortized using the
straight-line method over 15 years.

Effective November 26, 1997, MFH contributed all of the assets and
liabilities of MFPC to the Company and, in consideration thereof, the Company
assumed the H & M Debt, including all accrued but unpaid interest. MFPC and the
Company merged on the same date with the Company being the surviving entity.
The contribution was accounted for in a manner similar to that of pooling-of-
interests accounting. There was no step-up in the historical basis of MFPC's
assets or liabilities. Beginning with July 25, 1997, the Company is including
MFPC's results of operations in the Company's consolidated results of
operations.

Pretzel Time, Inc.

On September 2, 1997, MFH acquired 56 percent of the shares of common stock
of PTI for an aggregate cash purchase price of $4,200,000, $750,000 of which
was paid to PTI for working capital purposes, and the balance of which was paid
to the selling shareholders. In connection with the acquisition, MFH extended a
$500,000 loan to the founder of PTI who continued to own 44 percent of the
shares of common stock of PTI. The note bears interest at an annual rate of ten
percent (see Note 8). PTI is a franchisor of hand rolled soft pretzel outlets
located in North America. The outlets are primarily located in shopping malls.
The acquisition was accounted for using the purchase method of accounting
(based on the estimated fair values of the net assets

F-14

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

acquired) and resulted in recording approximately $5,882,000 of goodwill that
is being amortized using the straight-line method over 15 years. The goodwill
recorded was $1,682,000 more than the purchase price as the Company assumed
more liabilities than it acquired in assets at their fair values. Additionally,
severance and legal accruals were established in accordance with EITF 95-3.

Effective November 26, 1997, MFH contributed its 56 percent of the shares of
common stock of PTI to the Company. MFH also contributed to the Company the
$500,000 note due from PTI's founder and minority stockholder. The contribution
was accounted for in a manner similar to that of pooling-of-interests
accounting. There was no step-up in the book basis of PTI's assets or
liabilities. The Company has included 56 percent of PTI's results of operations
with the Company's consolidated results of operations from September 2, 1997 to
January 2, 1998.

On January 2, 1998, the Company purchased an additional four percent of the
shares of common stock of PTI from the founder for $300,000 in cash. The
purchase was accounted for using the purchase method of accounting (based on
the estimated fair values of the net assets acquired) and resulted in recording
approximately $311,000 of goodwill. Beginning with January 2, 1998, the Company
included 60 percent of PTI's results of operations in the Company's
consolidated results of operations. In June 1998, the Company acquired an
additional ten percent of the shares of common stock of PTI from the founder
for $875,000 in cash.

The Mrs. Fields' Brand, Inc.

Prior to November 26, 1997, MFH owned 50.1 percent of the shares of the
common stock of MFB. MFB holds legal title to certain trademarks for the "Mrs.
Fields" name and logo and licenses the use of these trademarks to third parties
for the establishment and operation of Mrs. Fields' cookie and bakery
operations and other merchandising activities. In connection with these
licensing activities, MFB authorizes third-party licensees to use certain
business formats, systems, methods, procedures, designs, layouts,
specifications, trade names and trademarks in the United States and other
countries.

On November 26, 1997, MFH acquired the remaining 49.9 percent of the shares
of the common stock of MFB from Harvard Private Capital Holdings, Inc. for
approximately $2,565,000. The consideration consisted of $1,065,000 in cash and
$1,500,000 in rights to common equity of MFH. MFH's Board of Directors
determined the value of Harvard's rights to the common equity based on a fair
value analysis. This analysis appropriately considered a discount for lack of
controlling interest and marketability as MFH's common equity is not publicly
traded. The acquisition was accounted for using the purchase method of
accounting (based on the estimated fair values of the net assets acquired) and
resulted in recording approximately $2,565,000 of intangible assets (primarily
goodwill) that are being amortized using the straight-line method over 15
years.

Effective November 26, 1997, MFH contributed all of the common stock of MFB
to the Company. As a result of such capital contribution, MFB became a wholly
owned subsidiary of the Company. The contribution was accounted for in a manner
similar to that of pooling-of-interests accounting. There was no step-up in the
book basis of MFB's assets or liabilities. Although the Company owned 50.1
percent of MFB until November 25, 1997, the Company has included 100 percent of
MFB's results of operations with the Company's consolidated results of
operations for all periods presented as a result of MFB incurring net losses
for these periods.

1-800-Cookies

On October 10, 1997, the Company acquired substantially all of the net assets
of R&R Bourbon Street, Inc. dba 1-800-Cookies for $653,000 in cash. The
acquisition was accounted for using the purchase method of

F-15

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

accounting (based on the estimated fair values of the net assets acquired) and
resulted in recording $600,000 of goodwill and $53,000 of other assets. The
goodwill is being amortized using the straight-line method over 15 years.

Subsequent Acquisitions (Unaudited)

On August 24, 1998, the Company acquired all of the outstanding capital stock
and subordinated indebtedness of Cookies USA, Inc. ("Cookies USA"), the sole
stockholder of Great American Cookie Company, Inc. ("GACC"), for an aggregate
purchase price of $18,400,000. GACC is an operator and franchisor of mall-based
specialty retail cookie outlets and manufacturer of cookie batter which is
distributed to GACC-operated retail stores and sold to franchised retail
stores. Concurrently with the acquisition of Cookies USA, the Company entered
into agreements with two GACC franchisees pursuant to which the Company
purchased a total of 29 GACC franchises for an aggregate purchase price of
$14,430,000. The Company acquired the franchises through the acquisition of 100
percent of the capital stock of the two corporations through which the
franchisees operated. On September 9, 1998, the Company acquired eight
additional GACC franchised retail stores from a GACC franchisee, pursuant to an
asset purchase agreement, for an aggregate purchase price of $1,898,000. These
acquisitions will be collectively referred to as the "Great American
Acquisitions."

The Great American Acquisitions have been accounted for using the purchase
method of accounting (based on preliminary estimates of fair values of the net
assets acquired) and resulted in recording approximately $69,390,000 of
goodwill that is being amortized using the straight-line method over 15 years.
Additionally, the Company caused Cookies USA to be merged with and into the
Company and caused the acquired franchisees corporations and/or net assets to
be merged with and into GACC. GACC became a wholly owned subsidiary of the
Company. The acquired entities' results of operations have been included with
those of the Company since the applicable dates of acquisition.

The Great American Acquisitions were financed by (i) the net proceeds from
the Company issuing $40,000,000 series C Senior Notes; (ii) the contribution of
the net proceeds totaling $29,000,000 of an MFH offering to the Company (the
"MFH Equity Infusion"); and (iii) existing cash of the Company.

Pro Forma Acquisition Information (Unaudited)

The following unaudited pro forma information for the period from inception
(September 18, 1996) to December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, presents the results
of operations of the Company assuming the H & M, PTI and MFB acquisitions and
the Refinancing, as defined in Note 3, had occurred at the date of inception
(September 18, 1996) and that the Great American Acquisitions and related
financing had occurred at December 29, 1996. The results of operations give
effect to certain adjustments, including amortization of intangible assets and
interest expense on acquisition debt. The pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of the
results of operations which actually would have resulted or the results which
may occur in the future.

Inception
(September 18, 39 Weeks 39 Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
Unaudited 1996 1998 1997 1998
- --------- -------------- ------------ ------------- ------------

Total revenues.......... $48,090,000 $191,264,000 $134,018,000 $126,937,000
Income from operations.. 6,718,000 12,722,000 3,285,000 463,000
Net income (loss)....... 1,029,000 (3,120,000) (8,448,000) (12,236,000)

F-16

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Periods

The Company operates using a 52/53-week year ending near December 31.

Unaudited Information

The accompanying consolidated financial statements as of October 3, 1998 and
for the 39 weeks ended September 27, 1997 and October 3, 1998 are unaudited and
have been prepared on a substantially equivalent basis with that of the annual
consolidated financial statements. In the opinion of management, the unaudited
information contains all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position and results of operations as of October 3, 1998 for the interim
periods presented herein.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned and majority owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Sources of Supply

The Company currently buys a significant amount of its food products from
four suppliers. Management believes that other suppliers could provide similar
products with comparable terms.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As of October
3, 1998, the Company had demand deposits at various banks in excess of the
$100,000 limit for insurance by the Federal Deposit Insurance Corporation.

Inventories

Inventories consist of food, beverages and supplies and are stated at the
lower of cost (first-in, first-out method) or market value.

Pre-Opening and Organization Costs

Pre-opening costs associated with new Company-owned stores are charged to
expense as incurred. These amounts were not significant for the periods
presented in the accompanying consolidated financial statements. Pre-opening
costs associated with new franchised stores are the responsibility of the
franchisee.

F-17

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The Company expensed all previously capitalized organization costs (which
were not material to the fair presentation of the accompanying consolidated
financial statements taken as a whole) in accordance with Statement of Position
No. 98-5, "Reporting on the Costs of Start-up Activities," during the 39 weeks
ended October 3, 1998.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. Equipment, fixtures and leasehold improvements are depreciated or
amortized over three to seven years using the straight-line method.

Expenditures that materially increase values or capacities or extend useful
lives of property and equipment are capitalized. Routine maintenance, repairs
and renewal costs are expensed as incurred. Gains or losses from the sale or
retirement of property and equipment are recorded in current operations.

Intangible Assets

Intangible assets consist primarily of goodwill and trademarks and are
amortized using the straight-line method over 15 years. Other intangible assets
such as covenants not to compete are not significant and are being amortized
using the straight-line method over three to five years.

Deferred Loan Costs

Deferred loan costs totaling $10,983,000 resulted from the sale of
$100,000,000 aggregate principal amount of 10 1/8 percent Series A Senior Notes
(the "Series A Senior Notes") on November 26, 1997 and the sale of $40,000,000
aggregate principal amount of 10 1/8 percent Series C Senior Notes (the "Series
C Senior Notes") on August 24, 1998, and are being amortized to interest
expense over the approximate seven-year life of the Series A Notes and the
approximate six-year life of the Series C Senior Notes (see Note 3).

Discount on Senior Notes

The Series C Senior Notes were issued at a discount which is being amortized
to interest expense over the approximate six-year life of the related notes.

Long-Lived Assets

The Company assesses and measures for impairment of long-lived assets,
including intangibles, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets be reviewed for impairment when events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
The Company evaluates, at each balance sheet date, whether events and
circumstances have occurred that indicate possible impairment. In accordance
with SFAS No. 121, the Company uses an estimate of future undiscounted net cash
flows of the related asset or group of assets over the remaining life in
measuring whether the assets are recoverable. The Company assesses impairment
of long-lived assets at the store level which the Company believes is the
lowest level for which there are identifiable cash flows that are independent
of other groups of assets. The Company has reserved for those long-lived assets
that are considered to be impaired.

F-18

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

Store Closure Reserve

The Company accrues an estimate for the costs associated with closing a
nonperforming store in the period the determination is made to close the store.
The majority of the costs accrued relate to estimated lease termination costs.

Revenue Recognition

Revenues generated from Company-owned stores are recognized at the point of
sale. Initial franchising and licensing fee revenues are recognized when all
material services or conditions relating to the sale have been substantially
performed or satisfied. Franchise and license royalties, which are based on a
percentage of gross store sales, are recognized as earned.

Leases

The Company has various operating lease commitments on both Company-owned and
franchised store locations and equipment. Expenses of operating leases with
escalating payment terms, including leases underlying subleases with
franchisees, are recognized on a straight-line basis over the lives of the
related leases. The Company accrues contingent rental expense on a monthly
basis for those retail stores where contingent rental expense is probable.

Income Taxes

The Company recognizes deferred income tax assets or liabilities for expected
future tax consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred income tax assets or
liabilities are determined based upon the difference between the financial and
income tax bases of assets and liabilities using enacted tax rates expected to
apply when differences are expected to be settled or realized.

Foreign Currency Translation

The balance sheet accounts of the Company's foreign subsidiaries are
translated into U.S. dollars using the applicable balance sheet date exchange
rates, while revenues and expenses are translated using the average exchange
rates for the periods presented. Translation gains or losses are insignificant
for the periods presented.

Fair Value of Financial Instruments

The Company estimates that the aggregate fair market value of its Series A/B
Senior Notes and Series C Senior Notes (see Note 3) was approximately
$101,250,000 and $122,500,000 as of January 3, 1998 and October 3, 1998,
respectively. These estimates are based on quoted market prices. The book
values of the Company's other financial instruments, including cash, accounts
receivable, accounts payable, accrued liabilities and other long-term debt
obligations, approximate fair values at the respective balance sheet dates.

Recent Accounting Pronouncement

During the 39 weeks ended October 3, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires an "all-inclusive" income presentation approach
which specifies that all revenues, expenses, gains and losses

F-19

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

recognized during the period be reported in income, regardless of whether they
are considered to be results of operations of the period. The adoption of SFAS
No. 130 had no material impact on the Company's financial statement
presentation.

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial statements.
The statement specifies disclosure requirements about the products and services
of a company, the geographic areas in which it operates, and their major
customers. Although the Company has not yet completed its assessment of the
impacts of adopting SFAS No. 131, it will adopt the statement for the year
ending January 2, 1999.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for fiscal years beginning after June 15, 1999
and is not expected to have a material impact on the Company's consolidated
financial statements.

Reclassifications

Certain reclassifications have been made in the prior period consolidated
financial statements to conform with the current period presentation.

F-20

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-Term Debt

Long-term debt consists of the following:

December 28, January 3, October 3,
1996 1998 1998
------------ ------------ ------------
(Unaudited)

Series A/B senior unsecured notes,
interest at 10 1/8 percent payable
semi-annually in arrears on June 1
and December 1, commencing June 1,
1998, due December 1, 2004......... $ -- $100,000,000 $100,000,000
Series C senior unsecured notes,
interest at 10 1/8 percent payable
semi-annually in arrears on June 1
and December 1, commencing December
1, 1998, due December 1, 2004...... -- -- 40,000,000
Discount related to the issuance of
$40,000,000 Series C senior
unsecured notes, net of accumulated
amortization of $0, $0 and $9,000,
respectively....................... -- -- (591,000)
Notes payable to individuals or
corporations with interest terms
ranging from non-interest bearing
to 15 percent, due at various dates
from 1998 through 2001, requiring
monthly payments................... -- 756,000 440,000
Senior notes, interest at six-month
LIBOR rate (5 3/4 percent at
December 28, 1996) plus an interest
margin (three percent at December
28, 1996) payable semi-annually,
secured by essentially all assets
of the Company, repaid in November
1997............................... 41,966,000 -- --
Senior notes, interest at ten
percent payable semi-annually,
secured by essentially all assets
of MFB, principal due quarterly in
varying installments, repaid in
November 1997...................... 10,000,000 -- --
Convertible subordinated notes,
interest at an escalating rate (9
3/4 percent at December 28, 1996)
payable semi-annually, secured by
essentially all assets of the
Company, repaid in November 1997... 7,357,000 -- --
Convertible subordinated note to
stockholder, interest at an
escalating rate (9 3/4 percent at
December 28, 1996) payable semi-
annually, secured by essentially
all assets of the Company,
converted to equity in November
1997............................... 4,643,000 -- --
Senior subordinated note to MFB
minority stockholder, interest at
ten percent compounded quarterly
beginning December 15, 1996,
secured by essentially all assets
of MFB, repaid in November 1997.... 3,597,000 -- --
----------- ------------ ------------
67,563,000 100,756,000 139,849,000
Less current portion................ (2,450,000) (472,000) (384,000)
----------- ------------ ------------
$65,113,000 $100,284,000 $139,465,000
=========== ============ ============

F-21

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

On November 26, 1997, the Company refinanced its existing debt (the
"Refinancing") by issuing $100,000,000 aggregate principal amount of Series A
Senior Notes due December 1, 2004 pursuant to an Indenture, dated as of
November 26, 1997 (the "Indenture"), between the Company and the Bank of New
York. The Series A Senior Notes were issued pursuant to a private transaction
that was not subject to the registration requirements of the Securities Act of
1933 (the "Securities Act"). On June 12, 1998, a majority of the Series A
Senior Notes were exchanged for 10 1/8% Series B Senior Notes (the "Series B
Senior Notes") due December 1, 2004, which were registered under the Securities
Act (the "Exchange Offer"). The terms of the Series A Senior Notes and the
Series B Senior Notes (collectively, the "Series A/B Senior Notes") are
identical in all material respects except (i) that the Series B Senior Notes
have been registered under the Securities Act, (ii) for certain transfer
restrictions and registration rights relating to the Series A Senior Notes and
(iii) that the Series B Senior Notes do not contain certain provisions relating
to additional payments to the prior holders of the Series A Senior Notes under
certain circumstances relating to the timing of the Exchange Offer.

On August 24, 1998, the Company issued $40,000,000 aggregate principal amount
of Series C Senior Notes due December 1, 2004 in connection with the Great
American Acquisitions. The Series C Senior Notes were issued pursuant to the
Indenture which also governs the terms of the Series A/B Senior Notes in a
private transaction that was not subject to the registration requirements of
the Securities Act. The Series A/B Senior Notes and the Series C Senior Notes
will be collectively referred to as the "Senior Notes."

In connection with the issuance of the Series C Senior Notes, the Company
recorded a discount of approximately $600,000. This discount is being amortized
to interest expense over the approximate six-year life of the Series C Senior
Notes.

The Senior Notes are general unsecured obligations of the Company, rank
senior in right of payment to all subordinated indebtedness of the Company and
rank pari passu in right of payment with all existing and future senior
indebtedness of the Company.

The Senior Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 1, 2001 in cash at redemption prices
defined in the Indenture, plus accrued and unpaid interest. In addition, at any
time prior to December 1, 2001, the Company may redeem up to an aggregate of 35
percent of the principal amount at a redemption price equal to 110.125 percent
of the principal amount thereof, plus accrued and unpaid interest.

The Senior Notes contain certain covenants that limit, among other things,
the ability of the Company and its subsidiaries to: (i) declare or pay
dividends or make any other payment or distribution on account of the Company's
or any of its subsidiaries' equity interest (including without limitation, any
payment in connection with any merger or consolidation involving the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving
the Company) any equity interest of the Company or any direct or indirect
parent of the Company or other affiliate of the Company; (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any indebtedness that is subordinated to the Senior Notes,
except as payment of interest or principal at stated maturity; or (iv) make any
restricted investments except under conditions provided for in the Indenture.

Pursuant to the Refinancing, the Company repaid approximately $79,096,000
aggregate principal amount of indebtedness and accrued but unpaid interest.
Such indebtedness consisted of (i) approximately $66,402,000 principal amount
of indebtedness and accrued but unpaid interest of the Company incurred in
connection with

F-22

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

the MFI and affiliates and OCC and affiliates business combinations, (ii)
approximately $12,374,000 principal amount of indebtedness and accrued but
unpaid interest of the H & M Debt, and (iii) $320,000 of prepayment penalties
associated with retiring the existing debt.

As part of the Refinancing, MFH converted to common equity of the Company
$4,643,000 aggregate principal amount of convertible subordinated notes and
contributed to the Company all of the common equity of MFB after converting its
preferred stock interests totaling $3,935,000 to common equity (see Notes 1 and
6). Also as part of the Refinancing, the Company paid a dividend to MFH in the
amount of approximately $1,065,000 and returned a $1,500,000 advance to MFH,
which was a portion of the cash provided by MFH in connection with the
acquisitions of H & M and PTI.

The aggregate amount of principal maturities of debt at January 3, 1998 are
as follows:

Fiscal Year
-----------

1998............................................................ $ 472,000
1999............................................................ 168,000
2000............................................................ 105,000
2001............................................................ 11,000
2002............................................................ --
Thereafter...................................................... 100,000,000
------------
$100,756,000
============

On December 29, 1997, the Company amended its revolving credit agreement (the
"Agreement") with a commercial bank which provided for a maximum commitment of
up to $3,000,000 secured by essentially all of the assets of the Company. The
Agreement, which was extended through February 28, 1998 was terminated. On
February 28, 1998, the Company entered into a new revolving credit agreement
(the "1998 Agreement") with a commercial bank (the "Bank") which provides for a
maximum commitment of up to $15,000,000 secured by essentially all of the
assets of the Company. Borrowings under the 1998 Agreement bear interest, at
the Company's option, at either the Bank's prime rate plus one fourth of one
percent or the one-month LIBOR rate plus three percent, with interest payable
monthly in arrears. As of October 3, 1998, the Company had no outstanding
borrowings under the 1998 Agreement.

Capital Lease Obligations

Future minimum lease payments for equipment held under capital lease
arrangements as of January 3, 1998 are as follows:

Fiscal Year
-----------

1998............................................................ $ 163,000
1999............................................................ 123,000
2000............................................................ 46,000
2001............................................................ 41,000
---------
Total future minimum lease payments............................... 373,000
Less amount representing interest................................. (48,000)
---------
325,000
Less current portion.............................................. (142,000)
---------
$ 183,000
=========

F-23

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

As of December 28, 1996, January 3, 1998 and October 3, 1998, total assets
held under capital lease arrangements were approximately $0, $376,000 and
$376,000 (unaudited) with accumulated amortization of approximately $0, $59,000
and $99,000 (unaudited), respectively.

4. INCOME TAXES

The components of the provision for income taxes for the period ended
December 28, 1996 and the year ended January 3, 1998 are as follows:

December 28, January 3,
1996 1998
------------ ----------

Current:
Federal........................................... $ 207,000 $ 70,000
State............................................. 75,000 228,000
Foreign........................................... 5,000 57,000
Deferred:
Federal........................................... 1,112,000 367,000
State............................................. 277,000 55,000
Change in valuation allowance..................... 122,000 (122,000)
---------- ---------
Total provision for income taxes................ $1,798,000 $ 655,000
========== =========

The differences between income taxes at the statutory federal income tax rate
and income taxes reported in the consolidated statements of operations are as
follows for the period ended December 28, 1996 and the year ended January 3,
1998:

December 28, January 3,
1996 1998
------------ ----------

Federal statutory income tax rate.................... 34.0% 34.0%
Dividends paid by subsidiary....................... -- 34.5
Amortization of non-deductible goodwill............ -- 12.3
Net operating losses utilized...................... -- (3.9)
State income taxes, net of federal benefit......... 5.3 5.3
State franchise minimum taxes...................... -- 44.0
Foreign taxes...................................... -- 12.3
Change in valuation allowance...................... 3.2 (26.3)
Other.............................................. 4.1 29.3
---- -----
Effective income tax rate............................ 46.6% 141.5%
==== =====

F-24

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The significant components of the Company's deferred income tax assets and
liabilities at December 28, 1996 and January 3, 1998 are as follows:

December 28, January 3,
1996 1998
------------ -----------

Deferred income tax assets:
Property and equipment reserve..................... $3,501,000 $ 2,014,000
Store closure reserve.............................. 1,868,000 2,202,000
Transaction cost accrual........................... 789,000 565,000
Net operating loss carryforward.................... 782,000 4,875,000
Legal reserve...................................... 470,000 302,000
Lease accrual...................................... 403,000 92,000
Other reserves..................................... -- 81,000
Accrued expenses................................... 334,000 230,000
Alternative minimum tax credit carryforward........ 207,000 207,000
----------- -----------
Total deferred income tax assets................. 8,354,000 10,568,000
Valuation allowance................................ (4,482,000) (5,160,000)
----------- -----------
Deferred income tax assets net of valuation
allowance....................................... 3,872,000 5,408,000
----------- -----------
Deferred income tax liabilities:
Accumulated depreciation and amortization.......... (850,000) (1,548,000)
Other.............................................. (13,000) (361,000)
----------- -----------
Total deferred income tax liabilities............ (863,000) (1,909,000)
----------- -----------
Net deferred income tax assets................... $3,009,000 $ 3,499,000
=========== ===========

Management has provided valuation allowances on portions of the deferred
income tax assets arising from the Company's business combinations. The
valuation allowances established in accordance with purchase accounting are not
recorded through the provision for income taxes, but rather, as an increase to
goodwill. During the period ended December 28, 1996 and the year ended January
3, 1998, valuation allowances of $4,360,000 and $800,000, respectively, were
recorded in connection with accounting for the business combinations. As of
January 3, 1998, the Company had net operating loss carryforwards for tax
reporting purposes totaling $12,414,000. Of these net operating loss
carryforwards, $1,814,000 expire in 2011 and $10,600,000 expire in 2012.

5. STORE CLOSURE AND PROPERTY AND EQUIPMENT IMPAIRMENT RESERVES

The Company's management reviews the historical and projected operating
performance of its stores on a periodic basis to identify underperforming
stores for impairment of property investment or targeted closing. The Company's
policy is to recognize a loss for that portion of the net property investment
determined to be impaired in accordance with SFAS No. 121 criteria.
Additionally, when a store is identified for targeted closing, the Company's
policy is to provide for the costs of closing the store, which are
predominantly estimated lease termination costs. If and when a reserve that was
established as part of purchase accounting is not fully utilized, the Company
reduces the reserve to zero and goodwill is adjusted for the corresponding
amount.

MFI and Affiliates and OCC and Affiliates

In connection with the MFI and OCC acquisitions (see Note 1), the Company
formulated a plan to exit certain stores that did not meet certain financial
and geographical criteria. The plan entailed closing all stores

F-25

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

that were not profitable and franchising stores that were profitable but
contributed less than $50,000 in store cash contribution for cookie stores and
less than $35,000 in store cash contribution for pretzel stores. Management
identified 138 stores to be closed (13 of these stores were closed prior to the
acquisition but had continuing lease obligations) and 64 stores to be
franchised. As of October 3, 1998, there were 27 stores remaining to be exited,
all of which are expected to be exited by the end of the first quarter of
fiscal 1999. The timing to implement the plan was developed based on
discussions and relationships with major shopping mall developers.

At the date of the acquisitions, in accordance with Emerging Issues Task
Force Issue 95-3, the Company established a store closure reserve of $5,060,000
for the 138 stores the Company intended to close. The reserve was established
to provide for estimated early lease termination costs and penalties. There was
no reserve established related to the 64 stores to be franchised. Management
continued to refine the plan for closing the stores after the date of the
acquisitions which entailed further analysis of lease agreements and meeting
with developers to assess timing and estimated lease termination costs.

Management finalized the store closure plan in early September 1997, within
one year of the date of the acquisitions. At that time, the Company recorded an
additional $1,357,000 to the store closure reserve to reflect the finalized
plan estimates of lease termination costs and adjusted goodwill by a comparable
amount under the provisions of purchase accounting. The increase in the reserve
related solely to the 138 stores originally identified to be closed. The store
closure reserve was also increased by approximately $538,000 for ten core
operating stores that have been closed or targeted for closure due primarily to
leases not being renewed by the lessor. This portion of the store closure
reserve was expensed in the Company's consolidated statement of operations for
the year ended January 3, 1998, as these stores were not identified for closure
in the Company's store closure plan. These ten core operating stores are
included in the 80 MFI and OCC stores closed in the year ended January 3, 1998.
During the 39 weeks ended October 3, 1998, the Company closed 30 stores (nine
of which were core operating stores).

Pursuant to the exit plan, at the date of the acquisitions, the Company
established an impairment reserve of $10,921,000 against the property and
equipment of the stores the Company planned to exit, in order to record those
assets at net realizable value. The property and equipment of 117 of the total
stores to be closed were recorded at net values of zero. The property and
equipment of 54 of the total stores to be franchised were recorded at the
estimated net realizable amount recoverable through a franchise sale. The
property and equipment of the remainder of the stores to be closed or
franchised had already been reduced to net realizable value prior to the
acquisitions. As of October 3, 1998, management has identified 50 existing
stores for sale to franchisees. Management believes that the net proceeds from
the sale of stores to franchisees will exceed the total carrying value of the
store assets as of January 3, 1998 and October 3, 1998.

H&M Concepts Ltd. Co.

In connection with the H&M acquisition (see Note 1), the Company formulated a
plan to exit certain pretzel stores that did not meet certain financial and
geographical criteria. Management identified 11 stores to be closed. All of the
stores identified for closure are planned to be closed by the end of fiscal
1999. The timing to implement the plan was developed based on discussions and
relationships with major shopping mall developers.

At the date of the acquisition, in accordance with Emerging Issues Task Force
Issue 95-3, the Company established a store closure reserve of $1,000,000 for
the 11 stores the Company intended to close. The reserve

F-26

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

was established to provide for estimated early lease termination costs and
penalties. Additionally, the Company established an impairment reserve of
$2,500,000 against the property and equipment of the stores the Company planned
to exit, in order to record those assets at net realizable value.

Pretzel Time, Inc.

In connection with the Pretzel Time acquisition (see Note 1), the Company
formulated a plan to exit certain pretzel stores that did not meet certain
financial and geographical criteria. Management identified four stores to be
closed. All of the stores identified for closure are planned to be closed by
the end of fiscal 1999. The timing to implement the plan was developed based on
discussions and relationships with major shopping mall developers.

At the date of the acquisition, in accordance with Emerging Issues Task Force
Issue 95-3, the Company established a store closure reserve of $500,000 for the
four stores the Company intended to close. The reserve was established to
provide for estimated early lease termination costs and penalties.

Great American

In connection with the Great American Acquisitions (see Note 1), the Company
formulated a plan to exit certain cookie stores that did not meet certain
financial and geographical criteria. Management identified 54 stores to be
closed and 11 stores to be franchised. All of the stores identified for closure
are planned to be closed by the end of fiscal 2000. The timing to implement the
plan was developed based on discussions and relationships with major shopping
mall developers.

At the date of the acquisitions, in accordance with Emerging Issues Task
Force Issue 95-3, the Company established a store closure reserve of $3,548,000
for the 54 stores the Company intended to close. The reserve was established to
provide for estimated early lease termination costs and penalties. There was no
reserve established related to the 11 stores to be franchised. The Company
established an impairment reserve of $2,150,000 against the property and
equipment of the stores the Company planned to exit, in order to record those
assets at net realizable value.

F-27

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

Consolidated Analysis

The following tables present a summary of changes in the store closure
reserve for the periods indicated in amount and number of stores to be closed
and franchised:

MFI and
Affiliates
and
OCC and Pretzel Great
Affiliates H&M Time American Consolidated
---------- --------- -------- ---------- ------------

Inception, September 18,
1996................... $5,060,000 $ -- $ -- $ -- $ 5,060,000
Utilization from
inception (September
18, 1996) to December
28, 1996............... (305,000) -- -- -- (305,000)
---------- --------- -------- ---------- -----------
Balance, December 28,
1996................... 4,755,000 -- -- -- 4,755,000
To record obligations
related to stores
identified for closure
upon acquisition, July
25, 1997............... -- 1,000,000 -- -- 1,000,000
To record obligations
related to stores
identified for closure
upon acquisition,
September 2, 1997...... -- -- 500,000 -- 500,000
Finalization of store
closure plan for
obligations related to
stores originally
identified............. 1,357,000 -- -- -- 1,357,000
Provision for ten core
operating stores
targeted for closure... 538,000 -- -- -- 538,000
Utilization from
December 28, 1996 to
January 3, 1998........ (2,683,000) -- (1,000) -- (2,684,000)
---------- --------- -------- ---------- -----------
Balance, January 3,
1998................... 3,967,000 1,000,000 499,000 -- 5,466,000
To record obligations
related to stores
identified for closure
upon acquisition,
August 24, 1998........ -- -- -- 3,548,000 3,548,000
Utilization for the 39
weeks ended October 3,
1998 (unaudited)....... (1,752,000) (13,000) (2,000) (124,000) (1,891,000)
---------- --------- -------- ---------- -----------
Balance, October 3, 1998
(unaudited)............ $2,215,000 $ 987,000 $497,000 $3,424,000 $ 7,123,000
========== ========= ======== ========== ===========

F-28

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

MFI and
Affiliates and
OCC and
Affiliates H&M Pretzel Time Great American Consolidated
----------------- ----------------- ----------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------

Stores identified for
closure or franchise at
inception, September
18, 1996............... 138 64 -- -- -- -- -- -- 138 64
Stores closed prior to
inception.............. (13) -- -- -- -- -- -- -- (13) --
Stores closed or
franchised from
inception (September
18, 1996) to December
28, 1996............... (17) (3) -- -- -- -- -- -- (17) (3)
--- --- --- --- --- --- --- --- --- ---
Balance, December 28,
1996................... 108 61 -- -- -- -- -- -- 108 61
Stores identified for
closure or franchise
upon acquisition, July
25, 1997............... -- -- 11 -- -- -- -- -- 11 --
Stores identified for
closure or franchise
upon acquisition,
September 2, 1997...... -- -- -- -- 4 -- -- -- 4 --
Stores closed or
franchised from
December 28, 1996 to
January 3, 1998........ (70) (9) (3) -- -- -- -- -- (73) (9)
--- --- --- --- --- --- --- --- --- ---
Balance, January 3,
1998................... 38 52 8 -- 4 -- -- -- 50 52
Stores identified for
closure or franchise
upon acquisition,
August 24, 1998........ -- -- -- -- -- -- 54 11 54 11
Stores closed or
franchised for the 39
weeks ended October 3,
1998 (unaudited)....... (11) (13) (1) -- (1) -- (8) -- (21) (13)
--- --- --- --- --- --- --- --- --- ---
Balance, October 3, 1998
(unaudited)............ 27 39 7 -- 3 -- 46 11 83 50
=== === === === === === === === === ===

During the period from inception to December 28, 1996, the year ended January
3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998, the net
store sales and store contribution for stores in the process of being closed
totaled $5,777,000 and $121,000, $10,599,000 and $2,038,000, $6,380,000 and
$(2,082,000) and $3,038,000 and $(1,311,000), respectively.

F-29

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

The following tables present a summary of changes in the property and
equipment impairment reserve in amount and the number of stores to be closed
and franchised:

MFI and
Affiliates
and OCC and Pretzel Great
Affiliates H&M Time American Consolidated
----------- ---------- ------- ---------- ------------

Inception, September 18,
1996................... $10,921,000 $ -- $-- $ -- $10,921,000
Utilization from
inception (September
18, 1996) to December
28, 1996 related to
stores to be closed.... (854,000) -- -- -- (854,000)
Utilization from
inception (September
18, 1996) to December
28, 1996 related to
stores to be
franchised............. (215,000) -- -- -- (215,000)
----------- ---------- ---- ---------- -----------
Balance, December 28,
1996................... 9,852,000 -- -- -- 9,852,000
To record property and
equipment impairment
upon acquisition, July
25, 1997............... -- 2,500,000 -- -- 2,500,000
To record property and
equipment impairment
upon acquisition,
September 2, 1997...... -- -- -- --
Utilization from
December 28, 1996 to
January 3, 1998 related
to stores to be
closed................. (3,299,000) (208,000) -- -- (3,507,000)
Utilization from
December 28, 1996 to
January 3, 1998 related
to stores to be
franchised............. (492,000) -- -- (492,000)
----------- ---------- ---- ---------- -----------
Balance, January 3,
1998................... 6,061,000 2,292,000 -- -- 8,353,000
To record property and
equipment impairment
upon acquisition,
August 24, 1998........ -- -- -- 2,150,000 2,150,000
Utilization for the 39
weeks ended October 3,
1998 (unaudited)
related to stores to be
closed................. (1,436,000) (93,000) -- (250,000) (1,779,000)
Utilization for the 39
weeks ended October 3,
1998 (unaudited)
related to stores to be
franchised............. (313,000) (363,000) -- -- (676,000)
----------- ---------- ---- ---------- -----------
Balance, October 3, 1998
(unaudited)............ $ 4,312,000 $1,836,000 $-- $1,900,000 $ 8,048,000
=========== ========== ==== ========== ===========

F-30

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

MFI and
Affiliates and
OCC and
Affiliates H&M Great American Consolidated
----------------- ----------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ---------- ------ ----------

Stores identified for
closure or franchise at
inception, September
18, 1996............... 117 54 -- -- -- -- 117 54
Stores closed or
franchised from
inception (September
18, 1996) to December
28, 1996............... (17) (3) -- -- -- -- (17) (3)
--- --- --- --- --- --- --- ---
Balance, December 28,
1996................... 100 51 -- -- -- -- 100 51
Stores identified for
closure or franchise
upon acquisition, July
25, 1997............... -- -- 11 14 -- -- 11 14
Stores closed or
franchised from
December 28, 1996 to
January 3, 1998........ (64) (9) (3) -- -- -- (67) (9)
--- --- --- --- --- --- --- ---
Balance, January 3,
1998................... 36 42 8 14 -- -- 44 56
Stores identified for
closure or franchise
upon acquisition,
August 24, 1998........ -- -- -- -- 54 11 54 11
Stores closed or
franchised for the 39
weeks ended October 3,
1998 (unaudited)....... (11) (8) (1) (4) (8) -- (20) (12)
--- --- --- --- --- --- --- ---
Balance, October 3, 1998
(unaudited)............ 25 34 7 10 46 11 78 55
=== === === === === === === ===

F-31

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

6. MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCKS OF SUBSIDIARIES

In connection with the MFI and affiliates and OCC and affiliates business
combinations discussed in Note 1, MFB issued 100 shares of mandatorily
redeemable cumulative preferred stock (the "MFB Preferred Stock") which had an
initial liquidation preference of $35,000 per share and a cumulative annual
dividend rate of 10 percent compounded quarterly. During the period ended
December 28, 1996 and the year ended January 3, 1998, MFB elected to add the
dividends to the liquidation preference. As part of the Refinancing, MFH
converted the $3,500,000 face amount of the MFB Preferred Stock together with
accrued but unpaid dividends of approximately $435,000 to common equity and the
related preferred stock was cancelled.

The mandatorily redeemable cumulative preferred stock of PTI (the "PTI
Preferred Stock") is nonvoting and the preferred stockholders are entitled to
cumulative preferred dividends of ten percent for three years, accrued and
payable upon redemption. The PTI Preferred Stock must be redeemed at $10,000
per share, plus unpaid and accumulated dividends, on September 1, 1999. The
excess of the redemption price over the carrying value is being accreted over
the period from issuance to September 1, 1999, using the effective interest
method and is being charged to the accumulated deficit of PTI. In the event of
a liquidation or sale of PTI, the preferred stockholders are entitled to
receive payment of $10,000 per share, plus accumulated dividends.

During the period from the acquisition of a majority ownership in PTI
(September 2, 1997) to January 3, 1998 and for the 39 weeks ended October 3,
1998, PTI increased the liquidation preference of the PTI Preferred Stock by
$68,000 and $108,000, respectively, in lieu of paying cash dividends. In
addition, the PTI Preferred Stock was increased by $238,000 and $225,000,
respectively, for the accretion required over time to amortize the original
issue discount incurred at the time of issuance. As of January 3, 1998 and
October 3, 1998, accrued dividends of $195,000 and $303,000, respectively, were
unpaid.

During the period from September 2, 1997 to January 3, 1998, PTI repurchased
17.5 shares of the PTI Preferred Stock for an aggregate of $175,000 in cash, or
$10,000 per share, plus accrued dividends totaling approximately $20,200. As of
January 3, 1998 and October 3, 1998, there are 127 shares of PTI Preferred
Stock issued and outstanding with an aggregate liquidation preference of
approximately $1,437,000 and $1,481,000, respectively.

7. COMMITMENTS AND CONTINGENCIES

Stock Pledged as Collateral

MFH has pledged all of the Company's capital stock as collateral for MFH's 14
percent Senior Secured Discount Notes due December 1, 2005 (the "MFH Discount
Notes"). MFH issued the MFH Discount Notes on August 24, 1998, in connection
with the Great American Acquisitions and the MFH Equity Infusion (see Note 1).
In connection with the issuance of the $55,000,000 principal amount at maturity
of MFH Discount Notes, MFH recorded an aggregate original issue discount of
approximately $24,136,000. The principal amount of the MFH Discount Notes will
accrete at a rate of 14 percent compounded semi-annually to an aggregate
principal amount of $55,000,000 at December 1, 2002. Thereafter, the MFH
Discount Notes will accrue interest at the annual rate of 14 percent, payable
semi-annually on June 1 and December 1 of each year, commencing June 1, 2003.

MFH is a holding company and does not have separate operations from which it
can generate cash flows. Under the circumstances, MFH would likely be dependent
on its owners' and the Company's cash flows to make principal and interest
payments when due. Interest payments totaling $7,700,000 per year will commence

F-32

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

in 2003. The Company has not guaranteed, nor is it obligated to make principal
or interest payments related to the MFH Discount Notes. However, in accordance
with the Company's Indenture, the Company may pay dividends to MFH, in order
for MFH to service the debt, if no default or event of default occurs under the
Indenture and certain fixed charge coverage ratios and consolidated net income
tests are met. The MFH Discount Notes are effectively subordinated to the
Company's Senior Notes.

Legal Matters

The Company is the subject of certain legal actions, which it considers
routine to its business activities. Management, after consultation with legal
counsel, believes that the potential liability to the Company under any such
actions is adequately accrued for or will not materially affect the Company's
consolidated financial position or results of operations.

Operating Leases

The Company leases retail store facilities, office space and equipment under
long-term noncancelable operating lease agreements with remaining terms of one
to ten years. Certain of the retail store leases provide for contingent rentals
based on gross revenues. Additionally, as part of the Company's franchising
program, certain locations have been subleased to franchisees.

For the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, rent expense is as
follows:

Minimum rentals.......... $ 8,216,000 $30,654,000 $18,938,000 $23,076,000
Contingent rentals....... 105,000 432,000 324,000 522,000
Sub-lease rentals........ (2,220,000) (8,756,000) (3,189,000) (5,837,000)
----------- ----------- ----------- -----------
$ 6,101,000 $22,330,000 $16,073,000 $17,761,000
=========== =========== =========== ===========

As of January 3, 1998, the future minimum lease payments due under operating
leases (including future minimum lease payments for stores in the process of
being closed or franchised), which include required lease payments for those
stores that have been subleased, are as follows:

Fiscal Year
-----------

1998............................................................ $ 30,605,000
1999............................................................ 26,968,000
2000............................................................ 21,948,000
2001............................................................ 18,283,000
2002............................................................ 15,673,000
Thereafter...................................................... 24,374,000
------------
$137,851,000
============

F-33

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

As of January 3, 1998, the future minimum sublease payments due to the
Company under these leases are as follows:

Fiscal Year
-----------

1998............................................................. $ 9,959,000
1999............................................................. 9,067,000
2000............................................................. 7,506,000
2001............................................................. 6,497,000
2002............................................................. 6,190,000
Thereafter....................................................... 10,481,000
-----------
$49,700,000
===========

In January 1998, the Company entered into an operating lease agreement for
corporate office facilities totaling 31,000 square feet. The lease commenced on
May 1, 1998 and will expire April 30, 2008. The lease includes escalating
monthly rental payments totaling $6,900,000 over the life of the lease, or
approximately $57,500 per month on a straight-line basis. These commitments are
not included in the preceding commitment presentation.

Contractual Arrangements

The Company has entered into a supply agreement to buy frozen dough products
through 1998. The agreement stipulates minimum annual purchase commitments of
not less than 22,000,000 pounds of the products during fiscal year 1998. The
terms of the agreement include certain volume incentives and penalties. The
Company and the supplier may terminate the supply agreement if the other party
defaults on any of the performance covenants.

The Company has assumed an agreement with a third-party lender to provide
financing to franchisees for the purchase of existing Company stores. Under the
terms of the agreement, a maximum of $5,000,000 may be borrowed from the lender
by franchisees of which the Company has agreed to guarantee a maximum of
$2,000,000. Outstanding franchisee borrowings guaranteed by the Company under
this agreement at January 3, 1998 and October 3, 1998 were approximately
$550,000 and $328,000, respectively. Under the terms of the agreement, the
Company is required to assume any franchisee obligations which are in default
as defined. As of January 3, 1998 and October 3, 1998, the Company has assumed
obligations totaling approximately $203,000 and $113,000 (unaudited),
respectively, which are included in capital lease obligations.

The Company recorded deferred credits of approximately $1,204,000 as of
September 18, 1996. The deferred credits represent volume rebates associated
with the assumption of a long-term marketing and supply agreement with a
supplier in connection with the MFI and affiliates and OCC and affiliates
business combinations discussed in Note 1. Under terms of the agreement, the
Company is obligated to purchase a minimum amount of product from the supplier.
The supplier periodically prepays rebates to the Company for anticipated
purchases. The Company records the prepayments as deferred credits and
amortizes them ratably as purchases are made from the supplier. This agreement
was amended in January 1997 and an additional $600,000 in deferred credits were
recorded. The amended agreement expires on the later of December 31, 2003 or
when the Company has met its revised purchase commitment. In conjunction with
this amendment, certain minimum commitments from the previous agreement were
carried forward and others were forgiven. Additionally, in November 1997, PTI
entered into a long-term marketing and supply agreement with a supplier. Under
terms of the agreement, the Company is

F-34

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

obligated to purchase a minimum amount of product from the supplier. An
additional $437,000 in deferred credits were recorded pursuant to this
agreement. The termination date of this agreement will be the later of December
31, 2003 or when PTI has met its purchase commitment. Under these agreements,
the Company recognized approximately $64,000, $1,393,000, $721,000 (unaudited)
and $672,000 (unaudited) as a reduction primarily to food cost of sales during
the period ended December 28, 1996, the year ended January 3, 1998 and the 39
weeks ended September 27, 1997 and October 3, 1998, respectively.

In November 1996, the Company entered into a consulting agreement (the
"Consulting Agreement") with Debbi Fields, a director of the Company, under
which Debbi Fields travels and performs public relations and advertising
activities on behalf of the Company for at least 50 days a year for a fee of
$250,000 per year, with an option to perform these services for 20 additional
days a year for additional pay of $5,000 per day. The compensation increases by
10 percent a year beginning on January 1, 1999. The Consulting Agreement
expires on December 31, 1999. The Company may terminate the Consulting
Agreement for cause and Debbi Fields may terminate the Consulting Agreement at
any time. Under the Consulting Agreement, Debbi Fields may not disclose any
confidential information of the Company, such as recipes and trade secrets, and
may not, without the prior written consent of the Company, compete with the
Company.

The Company has a license agreement with FSG Holdings, Inc., a Delaware
corporation, under which Debbi Fields has a nonexclusive license to use certain
trademarks, names, service marks and logos of the Company in connection with
book and television series projects. Debbi Fields is required to pay 50 percent
of any gross revenues in excess of $200,000 that she receives from the book and
television series projects to the Company as a license fee.

In connection with the acquisition of H&M, certain franchise agreements and
an area development agreement with PTI were assigned to the Company. The
franchise agreements provide for the franchise by the Company of the PTI stores
previously franchised by H&M and the payment by the Company to PTI of an annual
franchise royalty equal to seven percent of the annual sales by such stores,
plus an advertising fee of one percent of sales. The franchise agreements also
provide for the conversion, within three years, of the Company's Hot Sam and
Pretzel Oven stores to Pretzel Time franchises on a royalty-free basis for the
first five years following the date of conversion. The area development
agreement provides for the grant by PTI to the Company of area development
rights to open additional Pretzel Time stores in a territory covering 16
states, predominantly in the western United States, four western Canadian
provinces and in Mexico. The additional stores may be opened by the Company as
the franchisee or by third parties as franchisees. Under the area development
agreement, the Company is obligated to pay to PTI a $5,000 franchise fee per
new location within the territory. PTI is obligated under the area development
agreement to pay to the Company an annual royalty of up to two percent with
respect to Pretzel Time franchises opened by parties other than the Company
within the territory.

The Company has entered into employment agreements with five key officers
with terms of two to three years. The agreements are for an aggregate annual
base salary of $1,095,000. If the Company terminates employment without cause,
or the employee terminates employment with good reason, the employee can
receive in severance pay the amount equal to the product of his or her then
current semi-monthly base salary by the greater of the number of semi-monthly
periods from the notice of termination or 36 to 48 semi-monthly periods, plus a
portion of any discretionary bonus that would otherwise have been payable. The
agreements have customary provisions for other benefits and also include
noncompetition clauses.

8. RELATED-PARTY TRANSACTIONS

As of December 28, 1996, January 3, 1998 and October 3, 1998, the Company had
receivables due from franchisees and licensees, primarily related to prepaid
rent which the Company had paid on behalf of

F-35

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

franchisees, totaling approximately $1,524,000, $2,176,000 and $5,616,000
(unaudited), respectively. Such amounts are included in amounts due from
franchisees and affiliates and are net of allowance for doubtful accounts
totaling $320,000, $582,000 and $979,000 (unaudited), respectively.

As of December 28, 1996 and January 3, 1998, the Company had net payables of
approximately $98,000, and $105,000, respectively, due to MFH. As of October 3,
1998, the Company had receivables of approximately $478,000 (unaudited) due
from MFH. The amounts due to or from MFH are recorded in prepaid rent and other
in the accompanying consolidated balance sheets.

During the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended October 3, 1998, the Company accrued approximately $130,000,
$441,000 and $0, respectively, of interest expense due MFH related to the
convertible subordinated notes MFH purchased. As part of the Refinancing, MFH
converted all of the $4,643,000 convertible subordinated notes to equity and
the notes were cancelled (see Note 3).

The Company previously leased certain office space to an entity which is
owned in part by a director of the Company. Billings to the entity during the
period ended December 28, 1996, the year ended January 3, 1998 and the 39 weeks
ended September 27, 1997 and October 3, 1998, totaled approximately $60,000,
$274,000, $204,000 (unaudited) and $0 (unaudited), respectively, of which
approximately $29,000, $23,000 and $0 (unaudited) is included in amounts due
from franchisees and affiliates as of December 28, 1996, January 3, 1998 and
October 3, 1998, respectively. The lease was terminated during the 39 weeks
ended October 3, 1998.

The Company paid fees to Korn/Ferry International ("KFI") totaling
approximately $47,000, $157,000, $147,000 (unaudited) and $47,000 (unaudited)
during the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, respectively. KFI is
an executive search firm of which one of the Company's directors is the
Chairman.

A director of the Company is a consultant and an advisor to Dillon Read &
Co., Inc. ("Dillon Read"). In 1997, the Company paid to Dillon Read a fee of
approximately $707,000 in connection with the restructuring of the Company in
September 1996. In addition, the director's company received a fee of $250,000
(unaudited), plus expenses, from the Company during the 39 weeks ended October
3, 1998 pursuant to an agreement to provide advisory acquisition and consulting
services to the Company. The Company believes that the arrangements were on
terms that could have been obtained from an unaffiliated third party.

As of January 3, 1998 and October 3, 1998, the Company has a loan due from
the founder and minority stockholder of PTI totaling $552,000. The note bears
interest at an annual rate of ten percent and is payable in monthly
installments of principal and interest beginning January 1998 by setoff of, and
to the extent of, the founder's bonus payments and dividends received by the
founder in his PTI stock; provided that in any calendar year no more than
$100,000 may be so offset. In addition, as of October 3, 1998, the Company is
due approximately $462,000 (unaudited) from the founder in connection with
certain lease payments related to the purchase of PTI for which the Company is
indemnified. These amounts are recorded in other assets in the accompanying
consolidated balance sheets.

At the time of the Refinancing, a subsidiary of MIDIAL (the parent company of
OCC and affiliates) was the holder of $27,000,000 in aggregate principal amount
of senior notes of the Company and $8.4 million in aggregate principal amount
of subordinated notes of the Company as to which the Company had accrued or
paid interest of $3,177,000 from the date of inception (September 18, 1996)
through November 26, 1997. In connection with the Refinancing, the Company
repaid all such notes and related interest. The Chairman and Chief Executive
Officer of MIDIAL was a former director of the Company.

F-36

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The Company and MFH expect to enter into a tax-sharing arrangement but as of
the date of these financial statements no such agreement has been finalized.

9. EMPLOYEE BENEFIT PLAN

The Company sponsors the Mrs. Fields' Original Cookies, Inc. 401(k)
Retirement Savings Plan (the "Plan") for all eligible employees. Under the
terms of the Plan, employees may make contributions to the Plan, a portion of
which is matched by contributions from the Company. The total Company
contributions to the Plan for the period ended December 28, 1996, the year
ended January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3,
1998 were approximately $6,800, $97,900, $73,111 (unaudited) and $87,000
(unaudited), respectively.

10. SUBSEQUENT EVENT (UNAUDITED)

On September 12, 1997, nine Great American Cookies franchisees filed a
lawsuit against the Company and certain other parties alleging certain
anticipatory breaches of contract and violations of certain state,
franchise and unfair trade practice laws. These allegations were made as a
result of the discussions held between the Company and Cookies USA regarding
the possibility of the Company acquiring all of the outstanding shares of
common stock of Cookies USA. The nine Great American Cookies franchisees have
withdrawn their lawsuit pursuant to Settlement Agreements and Waivers among the
parties. The Settlement Agreements and Waivers provide for a mutual release,
tag-along rights to the franchisees of Great American Cookies if the Company's
ownership is sold in the future and certain other guarantees by the Company to
the franchisees of Great American Cookies. The Settlement Agreements and
Waivers were offered to all of the franchisees of Great American Cookies.

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's obligation related to its $140,000,000 aggregate principal
amount of Senior Notes due 2004 (see Note 3) is fully and unconditionally
guaranteed on a joint and several basis and on a senior basis by two of the
Company's wholly owned subsidiaries (the "Guarantors"). These guarantees are
general unsecured obligations of the Guarantors, rank senior in right of
payment to all subordinated indebtedness of the Guarantors and rank pari passu
in right of payment with all existing and future senior indebtedness of the
Guarantors. There are no restrictions on the Company's ability to obtain cash
dividends or other distributions of funds from the Guarantors, except those
imposed by applicable law. The following supplemental financial information
sets forth, on a condensed consolidating basis, balance sheets, statements of
operations and statements of cash flows for Mrs. Fields' Original Cookies, Inc.
(the "Parent Company"), Great American Cookie Company, Inc. and The Mrs.
Fields' Brand, Inc. (the "Guarantor Subsidiaries") and Mrs. Fields' Cookies
Australia, Mrs. Fields' Cookies (Canada) Ltd. and H & M Canada, and four
partially owned subsidiaries, the largest of which is Pretzel Time, Inc., of
which the Company owns a majority interest (collectively, the "Non-guarantor
Subsidiaries"). The Company has not presented separate financial statements and
other disclosures concerning the Guarantor Subsidiaries because management has
determined that such information is not material to investors.

In the supplemental condensed consolidating financial statements, the
principal elimination entries eliminate the Parent Company's investments in
subsidiaries and intercompany balances and transactions.

F-37

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is (Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 1996
(Dollars in Thousands)

ASSETS

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------

CURRENT ASSETS:
Cash and cash
equivalents.......... $ 6,091 $ 588 $ 30 $ -- $ 6,709
Accounts receivable,
net.................. 1,187 -- 13 -- 1,200
Amounts due from (to)
franchisees and
licensees, net....... 1,309 290 (75) -- 1,524
Inventories........... 3,043 -- -- -- 3,043
Other current assets.. 3,416 -- -- -- 3,416
------- ------- ---- ------- --------
Total current as-
sets............... 15,046 878 (32) -- 15,892
PROPERTY AND EQUIPMENT,
net.................... 26,181 1 23 -- 26,205
INTANGIBLES, net........ 50,047 16,285 -- -- 66,332
INVESTMENTS IN SUBSIDI-
ARIES.................. 3,100 -- -- (3,100) --
OTHER ASSETS............ 1,626 -- -- -- 1,626
------- ------- ---- ------- --------
$96,000 $17,164 $ (9) $(3,100) $110,055
======= ======= ==== ======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Current portion of
long-term debt and
capital lease
obligations.......... $ 1,950 $ 500 $-- $ -- $ 2,450
Accounts payable...... 6,188 6 7 -- 6,201
Accrued liabilities... 9,782 348 -- -- 10,130
------- ------- ---- ------- --------
Total current
liabilities........ 17,920 854 7 -- 18,781
LONG-TERM DEBT AND
CAPITAL LEASE
OBLIGATIONS, net of
current portion........ 52,016 13,097 -- -- 65,113
OTHER ACCRUED
LIABILITIES............ 5,603 -- -- -- 5,603
MANDATORILY REDEEMABLE
CUMULATIVE PREFERRED
STOCK.................. -- 3,597 -- -- 3,597
STOCKHOLDERS' EQUITY
(DEFICIT).............. 20,461 (384) (16) (3,100) 16,961
------- ------- ---- ------- --------
$96,000 $17,164 $ (9) $(3,100) $110,055
======= ======= ==== ======= ========

F-38

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1996) TO DECEMBER 28, 1996
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------

NET REVENUES............ $40,823 $ 559 $-- $-- $41,382
------- ----- ---- ---- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 19,492 -- -- -- 19,492
Food cost of sales.... 9,862 -- -- -- 9,862
General and
administrative....... 3,871 146 18 -- 4,035
Depreciation and
amortization......... 2,027 317 -- -- 2,344
------- ----- ---- ---- -------
Total operating
costs and
expenses........... 35,252 463 18 -- 35,733
------- ----- ---- ---- -------
Income (loss) from
operations......... 5,571 96 (18) -- 5,649
INTEREST EXPENSE AND
OTHER, net............. (1,410) (383) -- -- (1,793)
------- ----- ---- ---- -------
Income (loss) before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... 4,161 (287) (18) -- 3,856
PROVISION FOR INCOME
TAXES.................. (1,798) -- -- -- (1,798)
------- ----- ---- ---- -------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... 2,363 (287) (18) -- 2,058
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- (97) -- -- (97)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES........... (402) -- -- 402 --
------- ----- ---- ---- -------
NET INCOME (LOSS)....... $ 1,961 $(384) $(18) $402 $ 1,961
======= ===== ==== ==== =======

F-39

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1996) TO DECEMBER 28, 1996
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
------- ---------- ------------ ------------ ------------

NET CASH PROVIDED BY
OPERATING ACTIVITIES.. $ 6,990 $ 589 $ 30 $-- $ 7,609
------- ------ ---- ---- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net cash paid for
acquisitions and
related expenses.... (12,508) (7,000) -- -- (19,508)
Purchase of property
and equipment, net.. (1,622) (1) -- -- (1,623)
------- ------ ---- ---- -------
Net cash used in
investing
activities........ (14,130) (7,001) -- -- (21,131)
------- ------ ---- ---- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from the
issuance of common
stock............... 15,000 -- -- -- 15,000
Proceeds from the
issuance of
mandatorily
redeemable
cumulative preferred
stock of
subsidiary.......... -- 3,500 -- -- 3,500
Proceeds from the
issuance of note
payable............. -- 3,500 -- -- 3,500
Principal payments on
long-term debt...... (1,769) -- -- -- (1,769)
------- ------ ---- ---- -------
Net cash provided by
financing
activities.......... 13,231 7,000 -- -- 20,231
------- ------ ---- ---- -------
NET INCREASE IN CASH
AND CASH EQUIVALENTS.. 6,091 588 30 -- 6,709
CASH AND CASH
EQUIVALENTS, beginning
of Period............. -- -- -- -- --
------- ------ ---- ---- -------
CASH AND CASH
EQUIVALENTS, end of
period................ $ 6,091 $ 588 $ 30 $-- $ 6,709
======= ====== ==== ==== =======
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid........ $ 28 $-- $-- $-- $ 28

F-40

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 (is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 3, 1998
(Dollars in Thousands)

ASSETS

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------

CURRENT ASSETS:
Cash and cash
equivalents.......... $ 14,270 $ 725 $1,292 $ -- $ 16,287
Accounts receivable,
net.................. 1,388 -- 147 -- 1,535
Amounts due from (to)
franchisees and
licensees, net....... 1,517 659 -- -- 2,176
Inventories........... 3,094 -- 6 -- 3,100
Other current assets.. 6,593 (615) (253) -- 5,725
-------- ------- ------ -------- --------
Total current
assets............. 26,862 769 1,192 -- 28,823
PROPERTY AND EQUIPMENT,
net.................... 28,907 1 294 -- 29,202
INTANGIBLES, net........ 59,928 17,725 6,041 -- 83,694
INVESTMENT IN
SUBSIDIARIES........... 23,089 -- -- (23,089) --
OTHER ASSETS............ 7,902 -- 63 -- 7,965
-------- ------- ------ -------- --------
$146,688 $18,495 $7,590 $(23,089) $149,684
-------- ------- ------ -------- --------

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Current portion of
long-term debt and
capital lease
obligations.......... $ -- $ -- $ 614 $ -- $ 614
Accounts payable...... 3,621 36 148 -- 3,805
Accrued liabilities... 10,499 25 747 -- 11,271
-------- ------- ------ -------- --------
Total current
liabilities........ 14,120 61 1,509 -- 15,690
LONG-TERM DEBT AND
CAPITAL
LEASE OBLIGATIONS, net
of current portion..... 100,000 -- 467 -- 100,467
OTHER ACCRUED
LIABILITIES............ 1,802 -- -- -- 1,802
MANDATORILY REDEEMABLE
CUMULATIVE PREFERRED
STOCK.................. -- -- 902 -- 902
MINORITY INTEREST....... -- -- -- 58 58
STOCKHOLDER'S EQUITY.... 30,766 18,434 4,712 (23,147) 30,765
-------- ------- ------ -------- --------
$146,688 $18,495 $7,590 $(23,089) $149,684
======== ======= ====== ======== ========

F-41

MRS. FIELDS ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1998
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------

NET REVENUES............ $122,090 $ 2,004 $7,077 $ (664) $130,507
-------- ------- ------ ------ --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 63,765 -- 3,731 (664) 66,832
Food cost of sales.... 27,272 -- 855 -- 28,127
General and
administrative....... 14,753 1,066 911 -- 16,730
Depreciation and
amortization......... 8,745 1,125 533 -- 10,403
-------- ------- ------ ------ --------
Total operating
costs and
expenses........... 114,535 2,191 6,030 (664) 122,092
-------- ------- ------ ------ --------
Income (loss) from
operations......... 7,555 (187) 1,047 -- 8,415
INTEREST EXPENSE AND
OTHER, net............. (6,329) (1,230) (393) -- (7,952)
-------- ------- ------ ------ --------
Income (loss) before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... 1,226 (1,417) 654 -- 463
PROVISION FOR INCOME
TAXES.................. (535) (25) (95) -- (655)
-------- ------- ------ ------ --------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... 691 (1,442) 559 -- (192)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- (338) (306) -- (644)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES........... (1,665) -- -- 1,527 (138)
-------- ------- ------ ------ --------
NET INCOME (LOSS)....... $ (974) $(1,780) $ 253 $1,527 $ (974)
======== ======= ====== ====== ========

F-42

MRS. FIELDS ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1998
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiary Subsidiaries Eliminations Consolidated
-------- ---------- ------------ ------------ ------------

NET CASH (USED IN)
PROVIDED BY OPERATING
ACTIVITIES............. $ (766) $ 387 $1,298 $-- $ 919
-------- ----- ------ ---- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net cash paid for
acquisitions and
related expenses..... (10,949) -- -- -- (10,949)
Purchase of property
and equipment, net... (4,556) -- -- -- (4,556)
-------- ----- ------ ---- --------
Net cash used in
investing
activities......... (15,505) -- -- -- (15,505)
-------- ----- ------ ---- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of long-term debt.... 108,250 -- -- -- 108,250
Principal payments on
long-term debt and
capital lease
obligations.......... (76,759) (250) (36) -- (77,045)
Payment of debt
financing costs...... (5,976) -- -- -- (5,976)
Payment of cash
dividend to MFH...... (1,065) -- -- -- (1,065)
-------- ----- ------ ---- --------
Net cash provided by
(used in) financing
activities......... 24,450 (250) (36) -- 24,164
-------- ----- ------ ---- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS....... 8,179 137 1,262 -- 9,578
CASH AND CASH
EQUIVALENTS, beginning
of year................ 6,091 588 30 -- 6,709
-------- ----- ------ ---- --------
CASH AND CASH
EQUIVALENTS, end of
year................... $ 14,270 $ 725 $1,292 $-- $ 16,287
======== ===== ====== ==== ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid....... $ 7,607 $ 789 $ 20 $-- $ 8,416
Taxes paid.......... 181 25 11 -- 217

F-43

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 39 WEEKS ENDED SEPTEMBER 27, 1997
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------

NET REVENUES............ $86,225 $ 1,215 $ 86 $ -- $87,526
------- ------- ---- ----- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 48,200 -- -- -- 48,200
Food cost of sales.... 19,549 -- -- -- 19,549
General and
administrative....... 10,060 607 136 -- 10,803
Depreciation and
amortization......... 5,766 830 -- -- 6,596
------- ------- ---- ----- -------
Total operating
costs and
expenses........... 83,575 1,437 136 -- 85,148
------- ------- ---- ----- -------
(Loss) income from
operations......... 2,650 (222) (50) -- 2,378
INTEREST EXPENSE AND
OTHER, net............. (4,134) (1,011) -- -- (5,145)
------- ------- ---- ----- -------
(Loss) income before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... (1,484) (1,233) (50) -- (2,767)
PROVISION FOR INCOME
TAXES.................. (179) -- -- -- (179)
------- ------- ---- ----- -------
(Loss) income before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... (1,663) (1,233) (50) -- (2,946)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- (276) -- -- (276)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES........... -- -- -- (2) (2)
------- ------- ---- ----- -------
NET LOSS................ $(1,663) $(1,509) $(50) $ (2) $(3,224)
======= ======= ==== ===== =======

F-44

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 27, 1997
(Dollars in Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------

NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES............ $ 309 $(39) $521 $ -- $ 791
------- ---- ---- ----- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment, net.. (3,216) -- -- -- (3,216)
------- ---- ---- ----- -------
Net cash used in
investing
activities........ (3,216) -- -- -- (3,216)
------- ---- ---- ----- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Principal payments on
long-term debt and
capital lease
obligations......... (98) -- -- -- (98)
------- ---- ---- ----- -------
Net cash used in
financing
activities........ (98) -- -- -- (98)
------- ---- ---- ----- -------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS........... (3,005) (39) 521 -- (2,523)
CASH AND CASH
EQUIVALENTS, beginning
of period............. 6,121 588 -- -- 6,709
------- ---- ---- ----- -------
CASH AND CASH
EQUIVALENTS, end of
period................ $ 3,116 $549 $521 $ -- $ 4,186
======= ==== ==== ===== =======

F-45

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 3, 1998
(Dollars in Thousands)

ASSETS

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------

CURRENT ASSETS:
Cash and cash
equivalents.......... $ (1,378) $ 5,114 $1,410 $ -- $ 5,146
Accounts receivable,
net.................. 1,745 -- 151 -- 1,896
Amounts due from
franchisees and
licensees, net....... 1,537 3,951 128 -- 5,616
Inventories........... 3,862 922 6 -- 4,790
Other current assets
and amounts due from
(to) affiliates,
net.................. 47,017 (39,355) (585) -- 7,077
-------- -------- ------ -------- --------
Total current
assets............. 52,783 (29,368) 1,110 -- 24,525
PROPERTY AND EQUIPMENT,
net.................... 33,313 1,434 256 -- 35,003
INTANGIBLES, net........ 65,491 77,085 6,580 -- 149,156
INVESTMENT IN
SUBSIDIARIES........... 53,650 -- -- (53,650) --
OTHER ASSETS............ 11,921 1,441 611 -- 13,973
-------- -------- ------ -------- --------
$217,158 $ 50,592 $8,557 $(53,650) $222,657
======== ======== ====== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term
debt and capital lease
obligations.................... $ 143 $ 31 $ 384 $ -- $ 558
Accounts payable................ 7,755 865 49 -- 8,669
Accrued liabilities............. 13,622 3,276 676 -- 17,574
-------- -------- ------ -------- --------
Total current liabilities..... 21,520 4,172 1,109 -- 26,801
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, net of current
portion.......................... 139,542 -- 56 -- 139,598
OTHER ACCRUED LIABILITIES......... 4,648 -- -- -- 4,648
MANDATORILY REDEEMABLE CUMULATIVE
PREFERRED STOCK.................. -- -- 1,171 -- 1,171
MINORITY INTEREST................. -- -- 268 40 308
STOCKHOLDERS' EQUITY.............. 51,448 46,420 5,953 (53,690) 50,131
-------- -------- ------ -------- --------
$217,158 $ 50,592 $8,557 $(53,650) $222,657
======== ======== ====== ======== ========

F-46

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE 39 WEEKS ENDED OCTOBER 3, 1998
(Dollars in Thousands)

Non-
Parent Guarantor guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------

NET REVENUES........... $ 91,342 $3,194 $2,842 $(1,419) $95,959
-------- ------ ------ ------- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs..... 53,096 -- 251 (990) 52,357
Food cost of sales... 21,196 748 73 (429) 21,588
General and
administrative...... 10,692 812 1,117 -- 12,621
Depreciation and
amortization........ 8,073 1,285 349 -- 9,707
-------- ------ ------ ------- -------
Total operating
costs and
expenses.......... 93,057 2,845 1,790 (1,419) 96,273
-------- ------ ------ ------- -------
(Loss) income from
operations.......... (1,715) 349 1,052 -- (314)
INTEREST EXPENSE AND
OTHER, net............ (8,733) 18 8 -- (8,707)
-------- ------ ------ ------- -------
(Loss) income before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss
of consolidated
subsidiaries........ (10,448) 367 1,060 -- (9,021)
PROVISION FOR INCOME
TAXES................. (68) -- -- -- (68)
-------- ------ ------ ------- -------
(Loss) income before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss
of consolidated
subsidiaries........ (10,516) 367 1,060 -- (9,089)
PREFERRED STOCK
ACCRETION AND
DIVIDENDS OF
SUBSIDIARIES.......... -- -- (333) -- (333)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES.......... -- -- -- (268) (268)
-------- ------ ------ ------- -------
NET (LOSS) INCOME...... $(10,516) $ 367 $ 727 $ (268) $(9,690)
======== ====== ====== ======= =======

F-47

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The 39 Weeks Ended October 3, 1998
(Dollars In Thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------

NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES............. $(37,783) $ 37,954 $ 505 $ -- $ 676
-------- -------- ------ ----- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net cash paid for
acquisitions and
related expenses..... (35,656) 6,957 -- -- (28,699)
Purchase of property
and equipment, net... (5,609) -- (7) -- (5,616)
-------- -------- ------ ----- --------
Net cash (used in)
provided by
investing
activities......... (41,265) 6,957 (7) -- (34,315)
-------- -------- ------ ----- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-
term debt............ 39,400 -- -- -- 39,400
Payment of debt
financing costs...... (5,007) -- -- -- (5,007)
Equity infusion from
MFH.................. 29,056 -- -- -- 29,056
Principal payments on
long-term debt and
capital lease
obligations.......... (49) (40,522) (316) -- (40,887)
Reduction in preferred
stock of PTI......... -- -- (64) -- (64)
-------- -------- ------ ----- --------
Net cash provided by
(used in) financing
activities......... 63,400 (40,522) (380) -- 22,498
-------- -------- ------ ----- --------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS............ (15,648) 4,389 118 -- (11,141)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 14,270 725 1,292 -- 16,287
-------- -------- ------ ----- --------
CASH AND CASH
EQUIVALENTS, end of
period................. $ (1,378) $ 5,114 $1,410 $ -- $ 5,146
======== ======== ====== ===== ========

F-48

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Mrs. Fields Inc.:

We have audited the accompanying consolidated balance sheet of Mrs. Fields
Inc. (a Delaware corporation) and subsidiaries as of September 17, 1996, and
the related consolidated statements of operations, stockholders' deficit and
cash flows for the period from December 31, 1995 to September 17, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mrs. Fields
Inc. and subsidiaries as of September 17, 1996, and the results of their
operations and their cash flows for the period from December 31, 1995 to
September 17, 1996 in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Salt Lake City, Utah
June 27, 1997

F-49

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Mrs. Fields Inc.

We have audited the accompanying consolidated statements of operations,
stockholders' deficit, and cash flows of Mrs. Fields Inc. and subsidiaries for
the year ended December 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Mrs. Fields Inc.
and subsidiaries for the year ended December 30, 1995 in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP

Salt Lake City, Utah
February 9, 1996

F-50

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)

ASSETS

September 17,
1996
-------------

CURRENT ASSETS:
Cash and cash equivalents...................................... $ 1,883
Accounts receivable, net of allowance for doubtful accounts of
$269.......................................................... 1,611
Inventories.................................................... 1,296
Prepaid rent................................................... 420
Other prepaid expenses......................................... 1,042
--------
Total current assets......................................... 6,252
--------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements......................................... 23,223
Equipment and fixtures......................................... 18,422
--------
41,645
Less accumulated depreciation and amortization................. (29,409)
--------
Net property and equipment................................... 12,236
--------
DEPOSITS......................................................... 656
--------
Total assets..................................................... $ 19,144
========

The accompanying notes to consolidated financial statements
are an integral part of this balance sheet.

F-51

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (CONTINUED)
(Dollars in thousands, except per share data)

LIABILITIES AND STOCKHOLDERS' DEFICIT

September 17,
1996
-------------

CURRENT LIABILITIES:
Notes payable.................................................. $ 18,352
Premium on restructured debt................................... 2,872
Accounts payable............................................... 3,708
Accrued liabilities............................................ 1,329
Current portion of store closure reserve....................... 1,270
Current portion of deferred credits............................ 425
---------
Total current liabilities.................................... 27,956
STORE CLOSURE RESERVE, net of current portion.................... 294
DEFERRED CREDITS, net of current portion......................... 1,212
---------
Total liabilities............................................ 29,462
---------
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, 7 and 8)
MINORITY INTEREST IN MAJORITY OWNED SUBSIDIARY:
20,000,000 cumulative preferred stock; involuntary liquidation
preference of $24,834, including $4,834 of unrecorded
dividends in arrears.......................................... 20,000
---------
STOCKHOLDERS' DEFICIT:
Cumulative preferred stock, $.001 par value; 21,885,000 shares
authorized and issued, involuntary liquidation preference of
$32,085, including $10,200 of unrecorded dividends in
arrears....................................................... 22
Common stock, $.001 par value; 200,000,000 shares authorized
and outstanding............................................... 200
Additional paid-in capital..................................... 83,863
Accumulated deficit............................................ (114,371)
Cumulative translation adjustment.............................. (32)
---------
Total stockholders' deficit.................................. (30,318)
---------
Total liabilities and stockholders' deficit.................. $ 19,144
=========

The accompanying notes to consolidated financial statements
are an integral part of this balance sheet

F-52

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)

Year Ended Period Ended
December 30, September 17,
1995 1996
------------ -------------

REVENUES:
Net store sales.................................... $59,956 $29,674
Net franchising.................................... 1,870 1,793
Net licensing...................................... 2,031 892
Net other.......................................... 2,092 1,101
------- -------
Total revenues................................... 65,949 33,460
------- -------
OPERATING COSTS AND EXPENSES:
Selling and store occupancy costs.................. 36,965 17,782
Food cost of sales................................. 13,373 6,525
General and administrative......................... 12,612 7,984
Depreciation and amortization...................... 3,525 1,911
Provision for store closure costs.................. 3,000 1,000
------- -------
Total operating costs and expenses............... 69,475 35,202
------- -------
Loss from operations............................. (3,526) (1,742)
INTEREST EXPENSE..................................... (51) (80)
(LOSS) GAIN ON SALE OF ASSETS........................ 1,450 (277)
------- -------
Loss before provision for income taxes........... (2,127) (2,099)
PROVISION FOR INCOME TAXES........................... (241) (205)
------- -------
Net loss......................................... $(2,368) $(2,304)
======= =======

The accompany notes to consolidated financial statements are an integral part
of these statements.

F-53

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Dollars in Thousands)

Cumulative
Preferred Stock Common Stock Additional Cumulative
----------------- ------------------ Paid-in Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
---------- ------ ----------- ------ ---------- ----------- ----------- --------

BALANCE, January 1,
1995................... 21,885,000 $22 200,000,000 $200 $83,863 $(109,699) $195 $(25,419)
Foreign currency
translation
adjustment............ -- -- -- -- -- -- (230) (230)
Net loss............... -- -- -- -- -- (2,368) -- (2,368)
---------- --- ----------- ---- ------- --------- ---- --------
BALANCE, December 30,
1995................... 21,885,000 22 200,000,000 200 83,863 (112,067) (35) (28,017)
Foreign currency
translation
adjustment............ -- -- -- -- -- -- 3 3
Net loss............... -- -- -- -- -- (2,304) -- (2,304)
---------- --- ----------- ---- ------- --------- ---- --------
BALANCE, September 17,
1996................... 21,885,000 $22 200,000,000 $200 $83,863 $(114,371) $(32) $(30,318)
========== === =========== ==== ======= ========= ==== ========

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

F-54

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year Ended Period Ended
December 30, September 17,
1995 1996
------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $(2,368) $(2,304)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 3,525 1,911
Amortization of premium on restructured debt.... -- (1,541)
In-kind expense on note payable................. (1,610) 1,598
Provision for store closure costs............... 3,000 1,000
Net loss (gain) on asset sales, disposals and
store closures................................. (1,450) 277
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable.... (163) 2,039
Decrease in inventories....................... 853 267
Increase in prepaid rent...................... -- (420)
Increase in other prepaid expenses............ (337) (673)
Increase in deposits.......................... -- (15)
Decrease in accounts payable and accrued
liabilities.................................. (5,821) (194)
Decrease in store closure reserve............. -- (1,696)
Decrease in deferred credits.................. (107) (696)
------- -------
Net cash used in operating activities....... (4,478) (447)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................ (4,146) (1,054)
Proceeds from the sale of assets.................. 6,672 669
------- -------
Net cash provided by (used in) investing
activities................................. 2,526 (385)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable............... (145) (58)
Payments for debt restructuring................... (40) --
------- -------
Net cash used in financing activities....... (185) (58)
------- -------
EFFECT OF FOREIGN EXCHANGE RATES.................... -- 3
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS........... (2,137) (887)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
PERIOD............................................. 4,907 2,770
------- -------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD...... $ 2,770 $ 1,883
======= =======

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

F-55

MRS. FIELDS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in Thousands)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest was approximately $1,661 and $24 for the year ended
December 30, 1995 and for the period ended September 17, 1996, respectively.

Cash paid for income taxes was approximately $128 and $39 for the year ended
December 30, 1995 and for the period ended September 17, 1996, respectively.

Supplemental Disclosure of Noncash Investing and Financing Activities:

During the year ended December 30, 1995 and the period ended September 17,
1996, the Company, in accordance with the Amended and Restated Restructuring
Agreement, entered into the following noncash financing activities:

. The Company converted accrued interest payable incurred from January 1,
1995 through March 31, 1995 and from July 1, 1994 through December 31,
1994 into approximately $520 and $1,000 of Series A interest deferral
notes, respectively. In addition, the Company amortized approximately
$2,100 of its premium on restructured debt as a reduction to interest
expense during the year ended December 30, 1995.

. The Company converted accrued interest payable from December 31, 1995
through September 17, 1996 into $1,598 of 15 percent interest bearing
Series A interest deferral notes.

During the year ended December 30, 1995 and for the period ended September
17, 1996, the Company entered into the following noncash investing and
financing activities:

. In accordance with the Company's franchise financing arrangement, the
Company assumed long-term debt of franchisees which was in default
totaling approximately $132 and $0 during the year ended December 30,
1995 and the period ended September 17, 1996, respectively.

. In connection with its sale of several cookie stores, the Company
accepted notes receivable in the approximate amount of $305 during the
year ended December 30, 1995. In addition, during the year ended
December 30, 1995 and the period ended September 17, 1996, the Company
charged off approximately $1,960 and $651 of assets against accrued
expenses.

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

F-56

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Mrs. Fields Inc. ("MFI"), a Delaware corporation, was incorporated on May 2,
1986 and is a holding company for its wholly owned subsidiaries Mrs. Fields
Cookies Australia, Mrs. Fields Cookies, Ltd. (Canada) plus other inactive
subsidiaries (collectively termed "Mrs. Fields International") and its majority
owned subsidiary, Mrs. Fields Development Corporation ("MFD") and MFD's wholly
owned subsidiary, Mrs. Fields Cookies ("MFC"). Collectively, these entities are
referred to herein as the "Company".

Nature of Operations

The most significant part of the Company's operations are its retail stores
which sell freshly baked cookies, brownies and other food products. As of
September 17, 1996, the Company operates 147 "Mrs. Fields Cookies" stores all
of which are located in the United States. Additionally, the Company has
franchised approximately 163 stores in the United States and approximately 55
stores in nine other countries.

Additionally, the Company holds legal title to certain trademarks for the
"Mrs. Fields" name and logo, and licenses the use of these trademarks to third
parties for the establishment and operation of Mrs. Fields cookie and bakery
operations and other merchandising activities. In connection with these
licensing activities, the Company authorizes third-party licensees to use
certain business formats, systems, methods, procedures, designs, layouts,
specifications, trade names and trademarks in the United States and other
countries.

The Company's business follows seasonal trends and is also affected by
climate and weather conditions. The Company usually experiences its highest
revenues in the fourth calendar quarter. Because the Company's stores are
heavily concentrated in shopping malls, the Company's sales performance is
somewhat dependent on the performance of those malls. The results for the
period ended September 17, 1996 presented in the accompanying consolidated
financial statements may not be indicative of results that would have been
achieved for an entire calendar year.

Effective September 18, 1996, the Company sold substantially all of its net
assets to Mrs. Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc.
(see Note 11). Subsequently, the Company has been solely involved in
liquidating remaining assets and collecting certain outstanding notes.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company operates using a 52/53-week year ending near December 31.

Principles of Consolidation

The consolidated financial statements include the accounts of MFI, Mrs.
Fields International, MFD and MFC. All significant intercompany balances and
transactions have been eliminated in consolidation.

Sources of Supply

The Company currently buys a significant amount of its food products from
three suppliers. Management believes that other suppliers could provide similar
products with comparable terms.

Use of Estimates

F-57

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As of
September 17, 1996 and at various times during the period then ended, the
Company had demand deposits at various banks in excess of the $100,000 limit
for insurance by the Federal Deposit Insurance Corporation.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Inventory consisted of the following at September 17, 1996:

1996
----------

Food and beverages............................................. $ 792,000
Smallwares..................................................... 504,000
----------
$1,296,000
==========

Property and Equipment

Accounting for the Impairment of Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"). SFAS No. 121 requires that long-lived assets be reviewed for impairment
when events or changes in circumstances indicate that the book value of an
asset may not be recoverable. The Company evaluates, at each balance sheet
date, whether events and circumstances have occurred that indicate possible
impairment. In accordance with SFAS No. 121, the Company uses an estimate of
future undiscounted net cash flows of the related asset over the remaining life
in measuring whether the assets are recoverable. As of September 17, 1996, the
Company has reserved for any of its long-lived assets that are considered to be
impaired.

Revenue Recognition

The Company recognizes franchising and licensing revenues on an accrual basis
as those revenues are earned. Product sales are recognized as the product is
delivered or shipped to the customer.

F-58

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Leases

The Company has various operating lease commitments on both Company-owned and
franchised store locations and equipment. Operating leases with escalating
payment terms, including leases underlying subleases with franchisees, are
expensed on a straight-line basis over the life of the related lease.

Income Taxes

Fair Value of Financial Instruments

The notes payable and cumulative preferred stock (see Note 6) are presented
in the accompanying consolidated balance sheet at a total of $60,237,000 as of
September 17, 1996. All such obligations were subsequently settled in two sales
transactions (see Note 11) for $41,800,000.

Cumulative Foreign Currency Translation Adjustment

The assets and liabilities of foreign operations are translated into United
States dollars using exchange rates in effect at the end of the accounting
period. Revenues and expenses are translated using the average exchange rate
during the period. Differences in exchange rates arising from foreign currency
translation are recorded as a separate component of stockholders' deficit. In
connection with a sale or liquidation of an investment in a foreign subsidiary,
the accumulated translation adjustment attributable to that subsidiary is
transferred from stockholders' deficit and is reported as a gain or loss.

3. NOTES PAYABLE

On June 30, 1994, the Company entered into the Amended and Restated
Restructuring Agreement (the "Restructuring Agreement") with its lenders of
long-term debt (the "Lenders"). In connection with the Restructuring Agreement,
the Lenders exchanged approximately $56,900,000 of existing long-term notes
payable for $15,000,000 of new Series A secured notes, 51,292,000 shares of the
Company's common stock, 21,885,000 shares of cumulative preferred stock of MFI
and 20,000,000 shares of cumulative preferred stock of MFD.

After the issuances of common stock, the Lenders' total ownership interest in
the Company's common stock was approximately 85 percent. Because the total
estimated future cash payments (including interest and principal) required as
of June 30, 1994 under the terms of the new Series A secured notes was less
than the principal amount plus the previous carrying amount of the unamortized
premium on restructured debt by approximately $25,200,000, the Company reduced
the premium on restructured debt by that amount. The remaining unamortized
premium on restructured debt is being amortized over the life of the Series A
secured notes to produce an effective interest rate of zero percent.

F-59

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Notes payable consist of the following as of September 17, 1996:

1996
------------

Series A secured notes, interest at 13 percent, payable
quarterly, secured by all common stock and essentially all
assets of the Company, principal due in varying installments
through March 31, 1998...................................... $ 15,000,000
Series A interest deferral notes, interest at 13 percent,
payable quarterly, secured by all common stock and
essentially all assets of the Company, principal due March
31, 1998.................................................... 1,511,000
Series A interest deferral notes, interest at 15 percent,
secured by all common stock and essentially all assets of
the Company, principal and interest originally due August
15, 1996, subsequently extended through September 20, 1996.. 1,598,000
Other........................................................ 243,000
Premium on restructured debt................................. 2,872,000
21,224,000
Less current portion......................................... (21,224,000)
------------
$ --
============

The Series A secured notes and the Series A interest deferral notes were paid
by the Company on September 20, 1996 in connection with the receipt of proceeds
from two simultaneous but separate asset sale transactions (see Note 11). As a
result, all of the Series A notes referred to above are reflected as current
liabilities in the accompanying September 17, 1996 consolidated balance sheet.

4. INCOME TAXES

The components of the provision (benefit) for income taxes for the year ended
December 30, 1995 and for the period ended September 17, 1996 are as follows:

1995 1996
-------- -----------

Current:
Federal.............................................. $ -- $ --
State................................................ 241,000 205,000
Deferred:
Federal.............................................. -- (1,125,000)
State................................................ -- (109,000)
Change in valuation allowance........................ -- 1,234,000
-------- -----------
Total provision for income taxes................... $241,000 $ 205,000
======== ===========

The Company incurred financial reporting losses for the year ended December
30, 1995 and for the period ended September 17, 1996 for which no benefits have
been recorded in the accompanying consolidated statements of operations due to
appropriate valuation allowances being provided. The provisions for income
taxes are solely related to minimum state income tax requirements.

Current deferred income tax assets relate to temporary differences between
financial statement and income tax recognition of bad debts, unearned revenues,
and the store closure reserve. Long-term deferred income tax assets relate to
temporary differences between financial statement and income tax recognition of
depreciation and write-downs of certain property and equipment, net operating
losses and other income tax credit carryforwards.

F-60

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Management has provided a valuation allowance equal to the amount of the
deferred income tax assets arising from the Company's net operating loss
carryforwards. As of September 17, 1996, the Company had net operating loss
carryforwards for tax reporting purposes totaling approximately $90,900,000.
These net operating loss carryforwards expire as follows:

Fiscal Year
-----------

2001......................................................... $ 214,000
2002......................................................... 4,600,000
2003......................................................... 19,993,000
2004......................................................... 7,693,000
2005......................................................... 9,143,000
Thereafter (through 2011).................................... 49,257,000
-----------
$90,900,000
===========

Subsequent to the sale of substantially all of its assets (see Note 1), the
Company utilized certain of its net operating loss carryforwards to offset the
related gain. The remainder of the net operating loss carryforwards may not be
used.

5. STORE CLOSURE RESERVE

As of December 30, 1995, the Company had a store closure reserve of
approximately $2,510,000 for the anticipated costs to franchise or close 26
stores during 1996. During the period from December 31, 1995 to September 17,
1996, the Company closed 12 stores and provided for additional store closure
expenses totaling $1,000,000. As of September 17, 1996, the remaining store
closure reserve totaled approximately $1,564,000, of which approximately
$1,270,000 is current and approximately $294,000 is long-term. In management's
opinion, the store closure reserve is adequate for stores identified to be
closed.

The Company's management reviews the historic and projected operating
performance of its stores on an annual basis to identify underperforming stores
for impairment of property investment or targeted closing. The Company's policy
is to write-off any net property investment for underperforming stores
identified to have permanent impairment of investment. When a store is
identified for targeted closing, the Company's policy is to provide for the
costs of closing the store, which are predominantly estimated lease settlement
costs.

6. CUMULATIVE PREFERRED STOCK

In connection with the Restructuring Agreement, the Company issued 21,885,000
and 20,000,000 shares of cumulative preferred stock of MFI and MFD,
respectively. The MFD preferred stock is reflected as "minority interest in
majority owned subsidiary" in the accompanying consolidated balance sheet. The
MFI and MFD cumulative preferred stocks have dividend rates of 18 percent and
10 percent, respectively, which accumulate on a semi-annual basis. The
dividends are computed based upon the liquidation preference rates which are
defined in the Restructuring Agreement as $1.00 per share plus any unrecorded
dividends in arrears for each issue and are payable only as declared by the
Board of Directors. As of September 17, 1996, the Board of Directors had not
declared dividends for either series of preferred stock. Accordingly, dividends
in arrears on the MFI and MFD preferred stocks which have not been recorded in
the accompanying consolidated financial statements as of September 17, 1996
totaled $10,200,000 and $4,834,000, respectively.

In the event of liquidation or dissolution of the Company, the holders of the
cumulative preferred stocks of MFI and MFD will be entitled to receive from the
assets of the Company available for distribution prior to any distribution to
common stockholders an amount per share equal to the sum of (i) $1.00 for each
outstanding

F-61

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

preferred share and (ii) an amount equal to all unpaid dividends on such
preferred shares through the distribution date. As of September 17, 1996, the
distribution preference for the MFI and MFD preferred stockholders totaled
$32,085,000 and $24,834,000, respectively. Also, if a change in control of the
Company occurs, preferred stockholders shall have the right to convert all (but
not less than all) of their preferred shares into notes payable in an amount
equal to the liquidation preference value of their preferred shares. The
Company also has the right at any time to redeem shares of the MFI and MFD
preferred stocks at a price of $1.00 per share plus all accrued but unpaid
dividends through the date of redemption.

Subsequent to period end, the Company completed two sales transactions (see
Note 11) wherein all of the cumulative preferred stock was redeemed at a
discount.

7. OPTION AGREEMENT

As part of the Restructuring Agreement, the Lenders granted two directors an
option to acquire common stock from the Lenders which, if the option was
exercised as of September 17, 1996, would constitute approximately 51 percent
of the Company's issued common stock. The option is exercisable through
September 30, 1999 in whole, but not in part, at a price approximating the
amount of debt forgiven by the Lenders plus interest at nine percent from the
date of the grant of the option. In the event the option is exercised, the
directors are also required to offer other minority stockholders the same price
per share for their common stock.

In connection with the two sales transactions described in Note 11, the two
directors waived their options to acquire common stock from the Lenders.

8. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is the subject of certain legal actions, which it considers
routine to its business activities. As of September 17, 1996, management, after
consultation with legal counsel, believes that the potential liability to the
Company under such actions is adequately accrued or insured for, or will not
materially affect the Company's consolidated financial position or results of
operations.

Operating Leases

The Company leases retail store facilities, office space and equipment under
long-term noncancelable operating lease agreements with remaining terms of one
to 10 years. The future minimum lease payments due under these operating
leases, which include required lease payments for those stores that have been
subleased, as of September 17, 1996 are as follows:

Fiscal Year
-----------

1997.......................................................... $12,395,000
1998.......................................................... 10,684,000
1999.......................................................... 8,376,000
2000.......................................................... 5,737,000
2001.......................................................... 3,757,000
Thereafter.................................................... 4,855,000
-----------
$45,804,000
===========

Certain of the leases provide for contingent rentals based on gross revenues.
Total rental expense including contingent rentals and net of sublease rentals
received, under the above operating leases for the year ended

F-62

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 30, 1995 and for the period ended September 17, 1996 was approximately
$13,697,000 and $7,405,000, respectively. As part of the Company's franchising
program, certain leases have been subleased to franchisees. The future minimum
sublease payments due to the Company under these leases as of September 17,
1996 are as follows:

Fiscal Year
-----------

1997.......................................................... $ 3,741,000
1998.......................................................... 3,119,000
1999.......................................................... 2,512,000
2000.......................................................... 1,776,000
2001.......................................................... 1,038,000
Thereafter.................................................... 374,000
-----------
$12,560,000
===========

Contractual Arrangements

The Company has entered into a supply agreement to buy frozen dough products
through 1998. The agreement stipulates minimum annual purchase commitments for
1997 and 1998. The Company and the supplier may terminate the supply agreement
if the other party defaults on any of the performance covenants.

The Company has assumed an agreement with a third-party lender to provide
financing to franchisees for the purchase of existing Company stores. Under the
terms of the agreement, a maximum of $5,000,000 may be borrowed from the lender
by franchisees of which the Company has agreed to guarantee a maximum of
$2,000,000. Outstanding franchisee borrowings guaranteed by the Company under
this agreement at September 17, 1996 were approximately $707,400. Under the
terms of the agreement, the Company is required to assume any franchisee
borrowings which are in default as defined. As of September 17, 1996, the
Company has assumed loans totaling approximately $240,000, which are included
in notes payable.

As of December 30, 1995, the Company had recorded deferred credits,
representing vendor rebates, of approximately $1,486,000 under a long-term
marketing and supply agreement with a supplier. Under the terms of the
agreement, the Company was obligated to purchase a minimum amount of product
from the supplier. The supplier periodically prepays rebates to the Company for
anticipated purchases. The Company records the prepayments as deferred credits
and amortizes them ratably as purchases are made from the supplier. In April
1996, the Company and the supplier renegotiated the agreement whereby the
supplier would reduce the unearned portion of the deferred credits to $504,000
and advance the Company a rebate of $800,000 in exchange for an extension of
the termination date and a modification of the purchase commitment. The
termination date of the renegotiated agreement will be the later of March 31,
2001 or when the Company has met its purchase commitment. The Company reduced
food costs by approximately $1,082,000 during the period ended September 17,
1996 related to this arrangement and its renegotiation. The remaining balance
of approximately $1,204,000 is included in deferred credits as of September 17,
1996.

9. RELATED-PARTY TRANSACTIONS

Under the terms of a licensing agreement with an entity which is owned in
part by a former director of the Company, the Company is required to pay an
annual software maintenance fee. During the year ended December 30, 1995 and
for the period ended September 17, 1996, the Company paid maintenance fees of
approximately $100,000 and $17,000, respectively, which are included in general
and administrative expenses.

F-63

MRS. FIELDS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company leases certain office space to an entity which is owned in part
by a former director of the Company. Billings to the entity during the year
ended December 30, 1995 and the period ended September 17, 1996 totaled
approximately $152,000 and $136,000, respectively, of which approximately
$9,000 is included in accounts receivable as of September 17, 1996.

10. EMPLOYEE BENEFIT PLAN

The Company sponsors the Mrs. Fields 401(k) Plan (the "Plan") for all
eligible employees. Under the terms of the Plan, employees can make
contributions to the Plan, a portion of which is matched by contributions from
the Company. The total Company contributions to the Plan for the year ended
December 30, 1995 and for the period ended September 17, 1996 were
approximately $42,000 and $23,000, respectively.

11. SUBSEQUENT EVENT

On September 17, 1996, the Company completed two simultaneous but separate
asset sale transactions wherein the Company (i) sold certain assets and
relinquished certain liabilities of the Company in accordance with an Asset
Purchase Agreement dated August 7, 1996, among the Company, Mrs. Fields'
Original Cookies, Inc. and Capricorn Investors II, L.P., and (ii) sold certain
assets of the Company in accordance with an Asset Purchase Agreement dated
August 7, 1996, as amended by the First Amendment dated as of September 17,
1996, among the Company, The Mrs. Fields' Brand, Inc. and Capricorn Investors
II, L.P.

The combined sales price for the net assets sold was approximately
$41,800,000. The Company received approximately $12,157,000 in cash and
approximately $29,643,000 in senior and subordinated notes.

The proceeds from these net asset sales were used in part to repay the Series
A notes and the Series A interest deferral notes on September 20, 1996 (see
Note 3).

F-64

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Original Cookie Company, Incorporated and Hot Sam Company, Inc.:

We have audited the accompanying combined balance sheet of The Original
Cookie Company, Incorporated and the carved-out portion of Hot Sam Company,
Inc., both Delaware corporations (subsidiaries of Chocamerican, Inc.), as of
September 17, 1996, and the related combined statements of operations,
stockholders' equity and cash flows for the year ended December 30, 1995, and
for the period December 31, 1995 to September 17, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of The
Original Cookie Company, Incorporated and the carved-out portion of Hot Sam
Company, Inc. as of September 17, 1996, and the results of their operations and
their cash flows for the year ended December 30, 1995, and for the period
December 31, 1995 to September 17, 1996 in conformity with generally accepted
accounting principles.

Arthur Andersen LLP

Cleveland, Ohio
July 11, 1997

F-65

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

COMBINED BALANCE SHEET
(Dollars in Thousands)

September 17,
1996
-------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 655
Accounts receivable........................................... 340
Inventories................................................... 1,728
Prepaids and other............................................ 984
--------
Total current assets........................................ 3,707
--------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements........................................ 31,329
Furniture and fixtures........................................ 7,719
Buildings and improvements.................................... 639
Land.......................................................... 69
--------
39,756
Accumulated depreciation and amortization..................... (22,687)
--------
Net property and equipment.................................. 17,069
--------
OTHER ASSETS, net............................................... 256
--------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS OF PURCHASED
BUSINESS, net of accumulated amortization of $9,092............ 37,992
--------
$ 59,024
========

The accompanying notes to combined financial statements are an integral part of
this combined balance sheet.

F-66

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

COMBINED BALANCE SHEET (CONTINUED)
(Dollars in Thousands)

September 17,
1996
-------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................ $ 1,696
Accrued payroll and related expenses............................ 2,208
Accrued liabilities............................................. 3,443
-------
Total current liabilities..................................... 7,347
-------
LONG-TERM LIABILITIES:
Deferred lease credit........................................... 1,653
Store closure reserve........................................... 1,002
Related-party notes payable..................................... 30,977
Other........................................................... 1,102
-------
Total long-term liabilities................................... 34,734
-------
COMMITMENTS (NOTE 9)
STOCKHOLDERS' EQUITY:
Common stock.................................................... 10,000
Additional paid-in capital...................................... 15,873
Accumulated deficit............................................. (8,930)
-------
Total stockholders' equity.................................... 16,943
-------
Total liabilities and stockholders' equity.................... $59,024
=======

The accompanying notes to combined financial statements are an integral part of
this combined balance sheet.

F-67

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)

December 31,
Year Ended 1995 to
December 30, September 17,
1995 1996
------------ -------------

NET SALES............................................ $85,581 $54,366
------- -------
OPERATING COSTS AND EXPENSES:
Food cost of sales................................. 19,996 12,728
Selling and occupancy expenses..................... 47,032 31,935
General and administrative expenses................ 8,425 5,538
Severance and related expenses..................... -- 2,000
Depreciation and amortization...................... 6,902 4,937
Provision for store closure costs.................. 791 --
------- -------
Total operating costs and expenses............... 83,146 57,138
------- -------
INCOME (LOSS) FROM OPERATIONS........................ 2,435 (2,772)
INTEREST EXPENSE, net................................ (4,268) (2,828)
OTHER EXPENSE........................................ -- (45)
------- -------
LOSS BEFORE INCOME TAXES............................. (1,833) (5,645)
PROVISION FOR INCOME TAXES........................... 263 --
------- -------
NET LOSS............................................. $(2,096) $(5,645)
======= =======

The accompanying notes to combined financial statements are an integral part of
these combined statements.

F-68

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)

Additional Retained Total
Common Paid-in Earnings Stockholders'
Stock Capital (Deficit) Equity
------- ---------- --------- -------------

BALANCE, JANUARY 1, 1995............ $10,000 $15,873 $(1,189) $24,684
Net loss.......................... -- -- (2,096) (2,096)
------- ------- ------- -------
BALANCE, DECEMBER 30, 1995.......... 10,000 15,873 (3,285) 22,588
Net loss.......................... -- -- (5,645) (5,645)
------- ------- ------- -------
BALANCE, SEPTEMBER 17, 1996......... $10,000 $15,873 $(8,930) $16,943
======= ======= ======= =======

The accompanying notes to combined financial statements are an integral part of
these combined statements.

F-69

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

December 31,
Year Ended 1995 to
December 30, September 17,
1995 1996
------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(2,096) $(5,645)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities--
Depreciation and amortization...................... 6,902 4,937
Changes in assets and liabilities--
Increase in accounts receivable.................. (61) (279)
Decrease (increase) in related-party
receivables/payables............................ 18 (169)
Decrease (increase) in inventories............... 461 (65)
Decrease in prepaids and other................... 695 967
Decrease (increase) in other assets.............. 64 (60)
(Decrease) increase in accounts payable.......... (476) 410
Decrease in accrued payroll and related
expenses........................................ (331) (384)
Increase (decrease) in accrued liabilities....... (1,196) 330
Increase in other long-term liabilities.......... 231 73
Increase (decrease) in deferred lease credit..... 38 (111)
Increase (decrease) in store closure reserve..... 202 (382)
------- -------
Net cash provided by (used in) operating
activities.................................... 4,451 (378)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net........... (568) (1,200)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to related party........................ (4,599) (1,380)
------- -------
CASH AND CASH EQUIVALENTS:
Net decrease during the period..................... (716) (2,958)
Balance, beginning of the period................... 4,329 3,613
------- -------
Balance, end of the period......................... $ 3,613 $ 655
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
State and local income taxes paid.................. $ 234 $ 82
======= =======

The accompanying notes to combined financial statements are an integral part of
these combined statements.

F-70

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

The Original Cookie Company, Incorporated ("OCCI") and Hot Sam Company, Inc.
("HSCI") (collectively, the "Companies") are wholly owned subsidiaries of
Chocamerican, Inc., which is a wholly owned subsidiary of Midial S.A., a French
company (collectively, the "Parent"). The Companies operated specialty
retailing outlets providing prepared goods. OCCI operated approximately 240
stores in over 35 states, offering a variety of fresh baked cookies and
brownies and beverages. HSCI operated approximately 190 stores in over 30
states providing a variety of fresh baked pretzels and pretzel sticks, toppings
and beverages.

On September 17, 1996, all of the operations of the Companies including
certain assets and liabilities were sold to a nonrelated party (the "Buyer")
who assumed responsibility for all retail locations as of that date. Except for
approximately $2,000,000 of payments to employees for severance and related
costs which is included in the operating results for the period December 31,
1995 to September 17, 1996, these combined financial statements do not reflect
any effect of such sale.

The Companies traditionally experienced their highest revenues in the fourth
calendar quarter. Because the Companies' stores were heavily concentrated in
shopping malls, the Companies' sales performance was somewhat dependent on the
performance of those malls. Because of such seasonality and the extra payroll
costs noted above, the results for the period December 31, 1995 to September
17, 1996 are not necessarily indicative of results that would have been
achieved for an entire calendar year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Companies' fiscal year ends on the Saturday closest to December 31, which
results in a 52 or 53-week year.

Basis of Presentation

The combined financial statements include the accounts of OCCI and HSCI
except that these statements do not reflect the results of the operations and
the related assets and liabilities of a group of retail food locations owned
and operated by HSCI primarily under the name of Corn Dog. The Corn Dog
operations were sold to a nonrelated entity in April 1996 and the accompanying
combined financial statements exclude these operations and net assets, as well
as the results of the sale. All significant intercompany balances and
transactions have been eliminated.

Use of Estimates

F-71

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Inventories

The Companies' inventories were stated at the lower of cost (first-in, first-
out method) or market value. Inventories consisted of the following at
September 17, 1996:

1996
----------

Food and beverages................................................ $1,215,000
Small wares....................................................... 513,000
----------
$1,728,000
==========

Property and Equipment

The Companies' policy is to provide depreciation using the straight-line
method over a period which is sufficient to amortize the cost of the asset
during its useful life.

The estimated useful lives for depreciation purposes are:

Leasehold improvements........................................ 5 to 10 years
Furniture and fixtures........................................ 3 to 10 years
Buildings and improvements.................................... 10 to 50 years

Intangible Assets

Cost in excess of fair value of net assets of purchased business which was
recorded as part of the acquisition of the Companies by the Parent was
amortized on a straight-line basis over 40 years. Management evaluated the
expected cash flows of such assets periodically and determined no adjustments
were appropriate. Subsequent to September 17, 1996, the Companies expensed all
such intangibles in connection with recording the effects of the sales of the
operations.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Companies consider all
temporary cash investments purchased with an original maturity of three months
or less to be cash equivalents.

Leases

The Companies have various operating lease commitments on their retail store
locations. Operating leases with escalating payment terms are expensed on a
straight-line basis over the life of the related lease.

Asset Impairment

The Companies adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" for the period December 31, 1995 to September 17,
1996. SFAS No. 121 requires the Companies to evaluate the recoverability of
long-lived assets based on expected future cash flows. Prior to the adoption of
SFAS No. 121, the Companies accounted for long-lived operating assets as
discussed both above and in Note 6. The adoption of this standard did not have
a material impact on the Companies' financial position or results of
operations.

Revenue Recognition

Revenues from product sales are recognized at the point of sale to the
customer.

F-72

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Income Taxes

The Companies recognize deferred income tax assets or liabilities for
expected future income tax consequences of events that have been recognized in
the financial statements or income tax returns. Under this method, deferred
income tax assets or liabilities are determined based upon the difference
between the financial and income tax bases of assets and liabilities using
enacted tax rates expected to apply when differences are expected to be settled
or realized.

3. STOCKHOLDERS' EQUITY

The Companies' common stock at December 30, 1995 and September 17, 1996 is
comprised of the following:

OCCI has common stock with a par value $1 per share, 10,000,000 shares
authorized, issued and outstanding.

HSCI has common stock with a par value $1 per share, 10 shares authorized,
issued and outstanding.

4. RELATED-PARTY NOTES PAYABLE

In addition to debt incurred as part of the purchase by the Parent, the
Companies' cash requirements were provided for by the Parent. These amounts
were evidenced by notes, bearing interest rates ranging from 8% to 12%, and
consisted of $30,977,000 as of September 17, 1996. The notes were paid in part
by the Companies subsequent to September 17, 1996 in connection with the
receipt of proceeds from the sale of certain assets and liabilities to the
Buyer.

5. INCOME TAXES

The Companies have been included in the consolidated income tax returns of a
subsidiary of the Parent which was in a cumulative loss carryforward position
during all of the periods presented in the accompanying combined financial
statements.

The Companies incurred financial reporting losses for the year ended December
30, 1995 and the period December 31, 1995 to September 17, 1996 for which no
benefits have been recorded in the accompanying combined statements of
operations due to appropriate valuation allowances being provided. The
provisions for income taxes are solely related to minimum state income tax
requirements.

Deferred income tax assets relate to temporary differences between financial
statement and income tax recognition of depreciation, store closure reserve and
other accrued liabilities. Management has provided a valuation allowance equal
to the amount of the deferred income tax assets.

6. STORE CLOSURE RESERVE

The Companies annually reviewed the historic and projected operating
performance of their stores and identified underperforming stores for
impairment of property investment and/or targeted closing. The Companies'
policy was to write-off any net property investment for underperforming stores
identified to have permanent impairment of investment. Additionally, when a
store was identified for targeted closing, the Companies' policy was to provide
for the costs of closing the store, which are predominantly estimated lease
settlement costs and/or estimated lease payments after the date of the store
closing.

F-73

THE ORIGINAL COOKIE COMPANY, INCORPORATED
AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

An analysis of the activity in the store closure reserve is as follows for
the year ended December 30, 1995 and for the period December 31, 1995 to
September 17, 1996:

1995 1996
---------- ----------

Beginning Balance.................................... $1,182,000 $1,384,000
Provision............................................ 791,000 --
Payments and Other Deductions........................ (589,000) (382,000)
---------- ----------
Ending Balance....................................... $1,384,000 $1,002,000
========== ==========

7. EMPLOYEE BENEFIT PLANS

The Companies' employees participate in a defined contribution saving plan
which was funded by voluntary employee contributions and by contributions from
the Companies. The Companies' expense for the year ended December 30, 1995, and
for the period December 31, 1995 to September 17, 1996 was $143,000 and
$106,000, respectively.

The Companies do not provide for any other post-retirement benefits.

8. RELATED-PARTY TRANSACTIONS

The Parent provides certain services to the Companies, such as human
resources, accounting and legal, among others. Charges to the Companies for
such administrative services totaled $520,000 for the year ended December 30,
1995 and $175,000 for the period December 31, 1995 to September 17, 1996. In
management's opinion, these charges approximate the fair market value of such
services.

9. COMMITMENTS

Operating Leases

The Companies leased all of their retail store locations. These leases
typically had initial terms of up to 10 years. Certain leases provided for
contingent rentals based on store sales. Generally, the Companies were required
to pay taxes and normal expenses of operating the premises under retail store
leases. Total rental expense was approximately $15,038,000 for the year ended
December 30, 1995. Total rental expense for the period ended September 17, 1996
was approximately $11,165,000.

The minimum rentals under operating leases subsequent to September 17, 1996
are as follows:

Fiscal Year
-----------

Remaining 1996................................................... $ 5,346,000
1997............................................................. 15,886,000
1998............................................................. 13,763,000
1999............................................................. 11,691,000
2000............................................................. 9,712,000
Thereafter....................................................... 20,190,000
-----------
$76,588,000
===========

Effective September 17, 1996, the Buyer assumed responsibility for all open
store leases but the Companies remain contingently liable under certain of
these leases. However, management is not aware of any actual or threatened
claims under these leases.

F-74

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Cookies USA, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' deficit, and
of cash flows present fairly, in all material respects, the financial position
of Cookies USA, Inc. and its subsidiary at June 29, 1997 and June 28, 1998, and
the results of their operations and their cash flows for each of the three
fifty-two week periods in the period ended June 28, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PriceWaterhouseCoopers LLP

Atlanta, Georgia
August 24, 1998

F-75

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

June 29, June 28,
1997 1998
-------- --------

ASSETS
Current assets:
Cash and cash equivalents.................................. $ 4,885 $ 8,382
Accounts receivable--trade................................. 1,702 2,042
Inventory (Notes 1 and 2).................................. 1,292 1,212
Prepaid expenses (Note 3).................................. 1,227 1,245
Current deferred income tax benefit (Notes 1 and 10)....... 392 872
Current portion of notes receivable (Note 4)............... 867 88
Other receivables.......................................... 8 8
------- -------
Total current assets..................................... 10,373 13,849
------- -------
Property and equipment, net of accumulated depreciation (Note
5).......................................................... 6,304 4,916
Construction in progress, net of construction deposits
received from franchisees................................... 92 163
------- -------
6,396 5,079
------- -------
Other assets:
Deferred loan costs, net of accumulated amortization of
$2,050 and $2,626, respectively (Note 1).................. 2,050 1,474
Notes receivable, net of current portion (Note 4).......... 302 352
Deferred income tax benefit (Notes 1 and 10)............... 2,372 1,438
Deposits................................................... 50 49
Accrued straight-line minimum rent receivable for subleases
to franchisees (Note 1)................................... 1,267 1,388
------- -------
6,041 4,701
------- -------
Cost in excess of fair value of net assets acquired
(goodwill), net of accumulated amortization of $3,104 and
$3,975, respectively (Note 1)............................... 31,848 30,977
------- -------
$54,658 $54,606
======= =======

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.

F-76

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands, except per share data)

June 29, June 28,
1997 1998
-------- --------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable......................................... $ 376 $ 913
Sales taxes payable...................................... 105 102
Accrued interest payable................................. 2,202 2,202
Accrued expenses (Note 6)................................ 1,568 1,075
Deposits................................................. 673 727
-------- --------
Total current liabilities.............................. 4,924 5,019
-------- --------
Capital lease obligations (Note 9)......................... 62 36
-------- --------
Accrued straight-line minimum rent payable (Note 1)........ 2,113 2,164
-------- --------
Long-term debt (Note 7):
Senior secured notes..................................... 40,000 40,000
Original issue discount, net of accumulated amortization
of $102 and $131, respectively.......................... (98) (69)
Subordinated unsecured notes payable..................... 10,000 10,000
-------- --------
Total long-term debt................................... 49,902 49,931
-------- --------
Commitments and contingencies (Note 9)
Mandatorily redeemable preferred stock (Note 11):
Senior cumulative (6.00%) convertible; $1.00 par value;
10,500 shares authorized, issued and outstanding........ 12,739 13,369
Junior Class A cumulative ($50 per annum); $1.00 par
value; 2,500 shares authorized, issued and outstanding.. 2,944 3,069
Junior Class B cumulative ($50 per annum); $1.00 par
value; 750 shares authorized, issued and outstanding.... 883 921
-------- --------
Total mandatorily redeemable preferred stock........... 16,566 17,359
-------- --------
Common stock and other stockholders' deficit:
Common stock, $.01 par value; 115,000 shares authorized;
82,800 shares issued and outstanding.................... 1 1
Additional paid-in capital............................... 449 449
Excess of purchase price over predecessor basis.......... (10,164) (10,164)
Accumulated deficit...................................... (9,195) (10,189)
-------- --------
Total stockholders' deficit............................ (18,909) (19,903)
-------- --------
$ 54,658 $ 54,606
======== ========

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.

F-77

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)

For the Fifty-Two For the Fifty-Two For the Fifty-Two
Week Period Week Period Week Period
Ended Ended Ended
June 30, 1996 June 29, 1997 June 28, 1998
----------------- ----------------- -----------------

Revenues:
Cookie and beverage
sales................ $24,719 $22,375 $18,854
Batter sales to
franchisees.......... 10,104 11,270 12,214
Franchise royalties... 4,289 4,729 5,267
Franchise license
fees--existing and
new stores........... 521 675 503
Other, net............ 115 66 139
------- ------- -------
Total revenue....... 39,748 39,115 36,977
------- ------- -------
Operating expenses:
Cost of sales......... 19,523 18,615 17,056
Retail store
occupancy............ 7,379 7,055 5,737
Other retail store
expenses............. 1,316 1,019 870
Selling, general and
administrative
expenses............. 7,309 7,619 7,220
Management fee expense
(Note 14)............ 250 250 250
------- ------- -------
Total operating
expenses........... 35,777 34,558 31,133
------- ------- -------
Income from operations.. 3,971 4,557 5,844
------- ------- -------
Other (income) expenses,
net:
Interest income....... (56) (251) (346)
Interest expense...... 5,646 5,634 5,635
Amortization of
deferred loan costs.. 572 586 576
Gain on sale of
existing stores...... (636) (927) (370)
------- ------- -------
Total other
expenses, net...... 5,526 5,042 5,495
------- ------- -------
Income (loss)
before income
taxes............ (1,555) (485) 349
State and federal income
tax expense (benefit)
(Note 10).............. (194) 261 551
------- ------- -------
Net loss.......... $(1,361) $ (746) $ (202)
======= ======= =======

The accompanying notes to consolidated financial statement are an integral part
to these statements.

F-78

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(Dollars in Thousands)

Excess of
Purchase
Common Stock Additional Price Over Total
------------- Paid-in Predecessor Accumulated Stockholders'
Shares Amount Capital Basis Deficit Deficit
------ ------ ---------- ----------- ----------- -------------

Balance at June 29,
1995................... 82,800 $ 1 $449 $(10,164) $ (5,503) $(15,217)
Net loss for the
fifty-two week period
ended June 30, 1996.. -- -- -- -- (1,361) (1,361)
Redeemable preferred
stock accretion...... -- -- -- -- (792) (792)
------ ---- ---- -------- -------- --------
Balance at June 30,
1996................... 82,800 1 449 (10,164) (7,656) (17,370)
Net loss for the
fifty-two week period
ended June 29, 1997.. -- -- -- -- (746) (746)
Redeemable preferred
stock accretion...... -- -- -- -- (793) (793)
------ ---- ---- -------- -------- --------
Balance at June 29,
1997................... 82,800 1 449 (10,164) (9,195) (18,909)
Net loss for the
fifty-two week period
ended June 28, 1998.. -- -- -- -- (202) (202)
Redeemable preferred
stock accretion...... -- -- -- -- (792) (792)
------ ---- ---- -------- -------- --------
Balance at June 28,
1998................... 82,800 $ 1 $449 $(10,164) $(10,189) $(19,903)
====== ==== ==== ======== ======== ========

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

F-79

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

For the Fifty- For the Fifty- For the Fifty-
Two Week Two Week Two Week
Period Ended Period Ended Period Ended
June 30, 1996 June 29, 1997 June 28, 1998
-------------- -------------- --------------

Cash flows from operating
activities:
Net loss......................... $(1,361) $ (746) $ (202)
Adjustments to reconcile net loss
to net cash provided by (used
for) operating activities:
Depreciation..................... 1,854 1,940 1,604
Amortization of cost in excess of
fair value of net assets
acquired (goodwill)............. 870 871 871
Amortization of deferred loan
costs........................... 572 586 576
Amortization of original issue
discount........................ 29 29 29
Net gain on sales and disposals
of property, equipment and
inventory....................... (402) (550) (247)
Net (decrease) increase in
accrued straight-line minimum
rent receivable and payable..... 86 (29) (70)
Changes in assets and
liabilities:
Decrease (increase) in accounts
receivable.................... (550) (195) (340)
Decrease (increase) in
inventory..................... (140) 95 80
Decrease (increase) in prepaid
expenses...................... (100) (52) (18)
Decrease (increase) in current
deferred tax benefit.......... (50) (195) (480)
Decrease (increase) in other
receivables................... 165 56 --
Decrease (increase) in deferred
tax benefit................... (186) 348 934
Decrease (increase) in other
assets........................ (7) 11 1
Increase (decrease) in accounts
payable....................... (462) (456) 538
Increase (decrease) in sales
taxes payable................. 2 (25) (3)
Increase (decrease) in accrued
interest payable.............. -- (3) --
Increase (decrease) in accrued
expenses...................... (913) 172 (493)
Increase (decrease) in
deposits...................... (22) (66) 54
------- ------- -------
Net cash provided by (used
for) operating activities.... (615) 1,791 2,834
------- ------- -------
Cash flows from investing
activities:
Acquisitions of property and
equipment, including net
increase in construction in
progress, net of construction
deposits received from
franchisees..................... (1,913) (1,084) (1,263)
Proceeds from sales and disposals
of property and equipment....... 1,146 453 1,005
Proceeds from collection of notes
receivable...................... 448 474 947
------- ------- -------
Net cash provided by (used
for) investing activities.... (319) (157) 689
------- ------- -------
Cash flows from financing
activities:
Payments of deferred loan costs.. -- (27) --
Principal repayments under
capital lease obligations....... (15) (25) (26)
------- ------- -------
Net cash used for financing
activities................... (15) (52) (26)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents during
period........................... (949) 1,582 3,497
Cash and cash equivalents,
beginning of period.............. 4,252 3,303 4,885
------- ------- -------
Cash and cash equivalents, end of
period........................... $ 3,303 $ 4,885 $ 8,382
======= ======= =======

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

F-80

COOKIES USA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

For the Fifty- For the Fifty- For the Fifty-
Two Week Two Week Two Week
Period Ended Period Ended Period Ended
June 30, 1996 June 29, 1997 June 28, 1998
-------------- -------------- --------------
(Dollars in Thousands)

Cash paid for:
Interest......................... $5,617 $5,609 $5,606
State and federal income taxes... $ 119 $ 91 $ 286

Cash paid for state and federal income taxes represents payments made to
government authorities during the periods presented.

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:

During the fifty-two weeks ended June 30, 1996, June 29,1997 and June 28,
1998, the Company recorded accretion on mandatorily redeemable preferred stock
totaling $792,000, $793,000 and $793,000, respectively.

During the fifty-two weeks ended June 30, 1996, the Company exchanged
accounts receivable from unrelated franchisees totaling $156,000 for fixtures
and equipment and leasehold improvements representing retail cookie stores
previously licensed by franchisees.

During the fifty-two weeks ended June 30, 1996, notes receivable with face
amounts totaling $296,000 were received from unrelated franchisees in
connection with the sale of two Company-operated stores.

During the fifty-two weeks ended June 29, 1997, notes receivable with face
amounts totaling $1,353,000 were received from unrelated franchisees in
connection with the sale of eight Company-operated stores.

During the fifty-two weeks ended June 29, 1997, the Company exchanged
accounts receivable from unrelated franchisees totaling $91,000 for fixtures
and equipment and leasehold improvements representing retail cookie stores
previously licensed by the franchisees.

During the fifty-two weeks ended June 28, 1998, notes receivable with face
amounts totaling $217,000 were received from unrelated franchisees in
connection with the sale of five Company-operated stores.

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

F-81

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

Cookies USA, Inc. ("Cookies USA") was incorporated in December 1993 and was
formed by the Jordan Company to acquire 100% of the common stock of The
Original Great American Chocolate Chip Cookie Company, Inc. ("Great American
Cookies"). Great American Cookies is in the business of franchising cookie
stores and manufacturing cookie batter which is sold to Company-operated and
franchised retail stores. The financial statements include the consolidated
accounts of Cookies USA and Great American Cookies (the "Company").

On December 10, 1993, Cookies USA acquired Great American Cookies in several
transactions. Immediately following the acquisition, Great American Cookies
changed its name from The Original Great American Chocolate Chip Cookie
Company, Inc. to Great American Cookie Company, Inc. Due to the 22% interest
retained by the selling stockholders of Great American Cookies via their common
and convertible preferred stock interest in Cookies USA, the excess of purchase
price over predecessor basis as reflected in the stockholders' deficit section
of the accompanying consolidated balance sheets represents the limitation on
the write-up of the assets acquired.

The Company's business follows seasonal trends and experiences its highest
revenues in the fourth calendar quarter. Because the Company's stores are
heavily concentrated in shopping malls, the Company's sales performance is
significantly dependent on the performance of those malls.

Consolidation

The consolidated financial statements include the accounts of Cookies USA and
its subsidiary, Great American Cookies. All significant intercompany
transactions and accounts have been eliminated in consolidation.

Accounting Periods

During the fiscal year ended June 30, 1996, the Company changed its year end
from the last Thursday in the month of June to the last Sunday in the month of
June. As a result, three days were added to the fifty-two week period ended
Thursday, June 27, 1996 to effectively change the Company's fiscal year end to
Sunday, June 30, 1996. This change does not materially impact the comparability
of the years presented in these financial statements.

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value at the
respective balance sheet dates due to the relatively short period to maturity
of these instruments. The long-term notes payable with fixed interest rates are
recorded at face values of $50.0 million at June 29, 1997 and June 28, 1998;
however, the fair values of such long-term notes, based on quoted market
values, are approximately $50.5 million and $51.4 million at June 29, 1997 and
June 28, 1998, respectively.

F-82

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Revenues from the Company-operated stores are recognized in the period the
related cookies and beverages are sold. Revenues from the sale of batter are
recognized at the time of shipment. Franchise royalties, which are based on a
percentage of franchised store sales, are recognized in the same period related
franchise store revenues are generated. Franchise license fee revenues are
recognized at the time that all Company obligations regarding the franchise
sale have been met. Fees received pursuant to development agreements which
grant the right to develop franchised units in future periods in specific
geographic areas are deferred and recognized as income on a pro rata basis as
the Company's obligations regarding the franchised units subject to the
development agreements are met.

Cash Equivalents

The Company considers all highly liquid, short-term investments with original
maturities of three months or less to be cash equivalents. Cash equivalents at
June 29, 1997 and June 28, 1998 consist of short-term commercial paper. These
investments are stated at cost, which approximates market.

Inventories

Inventories of cookie and brownie products, beverage products, paper and
supplies and smallwares are stated at the lower of cost or market with cost
determined based on the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost. Expenditures for repairs and
maintenance are expensed in the year incurred, while renewals and betterments
that materially extend the life of an asset are capitalized. The cost of assets
sold, retired, or otherwise disposed, and the related accumulated depreciation,
are eliminated from the accounts, and any resulting gain or loss is recognized
in the statement of operations.

Depreciation is provided using straight-line and accelerated methods over the
estimated lives of the assets which are as follows:

Building................ 20 years
Furniture, fixtures and
equipment.............. 3-7 years
Building and leasehold
improvements........... Lesser of 8 years or the life of the related lease

During fiscal year 1996, the Company revised its estimate of the useful life
of certain leasehold improvements. The Company began amortizing leasehold
improvements using accelerated methods over an average of eight years instead
of using the straight-line method over an average of ten years. The effect of
this change in estimate was to increase fiscal year 1996 pre-tax loss by
$214,000.

During fiscal year 1998, the Company revised its estimate of the useful life
of certain computer equipment from five to three years. The effect of this
change in estimate was to decrease fiscal 1998 pre-tax income by $111,000.

Store Opening and Closing Costs

Non-capital expenditures incurred in opening new stores or remodeling
existing stores are expensed in the year incurred. When a store is closed, the
store's unamortized investment in leasehold improvements and fixtures and
equipment is recorded as a loss on store closing.

F-83

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred Loan Costs

Debt issue costs of approximately $4.0 million were incurred in connection
with the issuance of the 10.875% senior secured notes payable due 2001 (see
Note 7). Deferred loan costs are being amortized over the life of the related
notes (85 months), with annual charges to income of approximately $576,000.

Cost in Excess of Fair Value of Net Assets Acquired (Goodwill)

Cost in excess of fair value of net assets acquired (goodwill) is being
amortized over a forty-year period, with annual charges to income of
approximately $870,000.

The carrying value of goodwill is periodically evaluated for indications of
possible impairment. The review is based on comparing the carrying amount to
the undiscounted estimated cash flows from continuing operations over the
remaining amortization period.

Operating Leases

The Company has various operating lease commitments on both Company-operated
and franchised store locations and equipment. Operating leases with escalating
payment terms, including those subleased to franchisees, are recorded on a
straight-line basis over the life of the related lease.

Original Issue Discount

The Company has issued warrants to the holders of the senior secured notes.
The value of the warrants has been accounted for as an original issue discount
and is being amortized over the life of the related notes (85 months), with
annual charges to income of approximately $29,000.

Advertising Costs

Advertising costs are expensed as incurred.

Income Taxes

Concurrent with the acquisition and its termination of the S Corporation
status (see Note 10), the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). In accordance
with the provisions of SFAS 109, deferred income taxes are determined based on
the estimated future tax effects of differences between the financial statement
and tax basis of assets and liabilities given the provisions of the enacted tax
laws.

Earnings Per Share

Earnings per share is not presented, as the Company is a non-public entity
that is closely held.

Reclassifications

Certain reclassifications have been made in the prior period consolidated
financial statements to conform with the current period presentation.

F-84

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2. INVENTORY

The major components of inventory are as follows:

June 29, June 28,
1997 1998
---------- ----------

Raw ingredients...................................... $ 237,000 $ 279,000
Batter, including retail stores...................... 368,000 254,000
Beverage syrup....................................... 56,000 43,000
Paper goods and packaging supplies................... 168,000 149,000
Purchased icing and decorative toppings held for
resale.............................................. 52,000 57,000
Equipment held for resale............................ 75,000 43,000
Marketing and miscellaneous supplies held for
resale.............................................. 336,000 387,000
---------- ----------
$1,292,000 $1,212,000
========== ==========

3. PREPAID EXPENSES

Prepaid expenses consist of the following:

June 29, June 28,
1997 1998
---------- ----------

Rent................................................... $1,158,000 $1,178,000
Other.................................................. 69,000 67,000
---------- ----------
$1,227,000 $1,245,000
========== ==========

4. NOTES RECEIVABLE

Notes receivable consist of the following:

June 29, June 28,
1997 1998
---------- --------

Notes receivable....................................... $1,169,000 $440,000
Less current portion................................... (867,000) (88,000)
---------- --------
Notes receivable, net of current portion............... $ 302,000 $352,000
========== ========

Notes receivable are due from various franchisees and principally result from
the sale of existing Company-operated stores to franchisees. Each note is
guaranteed by the purchaser and collateralized by the assets sold. Short-term
notes generally carry an interest rate of 15% per annum and are intended to
serve as interim financing until the franchisee can secure long-term financing
from a third-party lender. Notes classified as non-current are generally due in
monthly installments of principal and interest, with the interest rates ranging
from between 9% and 12.5% per annum. The aggregate maturities of the notes
receivable are as follows:

Fiscal Year Ending June
1999................................................................. $ 88,000
2000................................................................. 140,000
2001................................................................. 94,000
2002................................................................. 41,000
2003................................................................. 8,000
Thereafter........................................................... 69,000
--------
$440,000
========

F-85

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

June 29, June 28,
1997 1998
----------- -----------

Land................................................ $ 240,000 $ 240,000
Building............................................ 761,000 761,000
Building and leasehold improvements................. 6,829,000 6,189,000
Furniture, fixtures and equipment................... 3,228,000 3,067,000
----------- -----------
11,058,000 10,257,000
Less accumulated depreciation....................... (4,754,000) (5,341,000)
----------- -----------
Property and equipment, net......................... $ 6,304,000 $ 4,916,000
=========== ===========

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

June 29, June 28,
1997 1998
----------- -----------

Employee compensation including payroll taxes....... $ 379,000 $ 388,000
Bonuses payable..................................... 480,000 475,000
Construction expenses............................... 15,000 --
Professional fees................................... 293,000 88,000
Management fees..................................... 188,000 62,000
Other............................................... 213,000 62,000
----------- -----------
$ 1,568,000 $ 1,075,000
=========== ===========

7. LONG-TERM DEBT

Notes payable at June 29, 1997 and June 28, 1998 are described as follows:

June 29, June 28,
1997 1998
----------- -----------

10.875% senior secured notes payable due January
15, 2001, Series B. Interest accrues daily and is
payable semi-annually on January 15 and July 15.
(The notes are secured by certain tangible and
intangible assets, including, but not limited to,
the equipment constituting Great American
Cookies' batter production facility, the capital
stock of all current and future subsidiaries of
Great American Cookies, intellectual property
rights and other intangible assets of Great
American Cookies)................................ $40,000,000 $40,000,000
Original issue discount related to the issuance of
7,200 detachable warrants with the 10.875% senior
secured notes.................................... (98,000) (69,000)
12.5% subordinated unsecured note payable due
October 31, 2003 with initial annual prepayment
thereof due October 31, 2001. Interest accrues
daily and is payable semi-annually on April 30
and October 31................................... 10,000,000 10,000,000
----------- -----------
$49,902,000 $49,931,000
=========== ===========

F-86

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The $10 million of subordinated notes issued by Cookies USA have principal
payments due as follows: $2.5 million due October 31, 2001; $2.5 million due
October 31, 2002; and $5.0 million due October 31, 2003. As Great American
Cookies is the sole operating unit of the consolidated entity, Great American
Cookies is the sole source of any cash to be paid by Cookies USA as interest
and principal payment on such debt. Such payments will be made primarily via
dividends to Cookies USA. Such dividends are subject to certain covenants
provided for under the senior secured notes (see Note 11).

Great American Cookies is subject to certain covenants provided for under the
indenture including limitations on restricted payments, incurrence of
indebtedness and issuances of preferred stock, asset sales, granting of liens,
restrictions on subsidiary dividends, mergers, consolidations, sale of assets,
and on transactions with affiliates, various reporting requirements to the
holders of the senior secured notes and the Securities and Exchange Commission
and maintenance of a fixed charge coverage ratio. If a violation of a covenant
occurs, the holders of at least 25% in principal amount of the then outstanding
senior secured notes may declare all outstanding senior secured notes to be due
and payable immediately (see Note 11).

Upon the occurrence of a change of control as defined in the note agreements,
the Company will be required to (i) offer to repurchase all of the 10.875%
senior secured notes then outstanding at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of repurchase and (ii) repurchase the 12.5% subordinated notes at par
plus accrued and unpaid interest, if any, to the date of repurchase.

8. 401(K) PROFIT-SHARING PLAN

The Company provides a defined contribution profit-sharing plan (the "Plan")
for all employees meeting certain requirements. On February 14, 1997, the
Company amended the Plan to include a pre-tax savings provision in accordance
with Section 401(k) of the Internal Revenue Code.

Under the Plan, eligible employees may contribute as much as 15% of
compensation up to the federal statutory limit, with the Company matching 25%
of the first 6% of compensation contributed by the employee. The Company's
matching portion of the Plan contributions resulted in expense of $9,000 and
$39,000 in fiscal years 1997 and 1998, respectively. During fiscal year 1996,
no amounts were expensed for profit-sharing plan contributions.

9. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has various operating lease commitments on both Company-operated
and franchised store locations. These leases generally contain escalating
rental payments and various provisions for contingent rental payments based on
sales volume. Future minimum lease payments, including scheduled escalating
rental payments, as of June 28, 1998 are as follows:

Subleases to
Leases Franchises Net
----------- ------------ -----------

Fiscal Year Ending June
1999.................................. $ 9,796,000 $ 7,071,000 $ 2,725,000
2000.................................. 8,797,000 6,369,000 2,428,000
2001.................................. 7,586,000 5,589,000 1,997,000
2002.................................. 6,540,000 4,747,000 1,793,000
2003.................................. 5,368,000 3,909,000 1,459,000
Thereafter............................ 9,737,000 7,331,000 2,406,000
----------- ----------- -----------
$47,824,000 $35,016,000 $12,808,000
=========== =========== ===========

F-87

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Operating leases with escalating payment terms, including those subleased to
franchisees, are expensed on a straight-line basis over the life of the related
lease.

For the fifty-two week periods ended June 30, 1996, June 29, 1997 and June
28, 1998, gross rent expense (including mall pass-through charges) was
approximately $13,332,000, $14,135,000 and $13,593,000, respectively, while
sublease income (including mall pass-through charges) was approximately
$9,628,000, $10,533,000 and $10,571,000, respectively.

Capital Leases

The Company leases various office equipment under capital lease agreements
expiring on various dates through 2000. The Company's aggregate future
obligation under these agreements, net of interest expense, is $62,000 as of
June 29, 1997 and $36,000 as of June 28, 1998.

Lease Guarantees

In connection with the sale of existing Company-operated stores to
franchisees, the Company has guaranteed certain lease renewals to the
prospective franchisee. If such leases are not obtained, then predetermined
payments shall be made to the franchisees as follows:

Number
of
Lease Amount of
Renewals Guarantee
-------- ---------

Fiscal Year of Lease Expiration
1999.................................................... 1 $ 75,000
2000.................................................... 1 24,000
2001.................................................... -- --
2002.................................................... 1 60,000
--- --------
$159,000
========

As of June 28, 1998, the Company has not recorded any liability with respect
to these guarantees as these amounts represent loss contingencies which
management believes are not probable.

Purchase Commitments

The Company is committed to purchase certain raw materials from various
suppliers over the next year at fixed prices. As of June 28, 1998, such
purchase commitments totaled approximately $1,750,000.

Employment Agreements

On December 10, 1993, the Company entered into annual renewable employment
agreements with the founders of Great American Cookies ("Founders"), who are
also directors of the Company. Under these employment agreements, each Founder
receives a salary of $150,000 and a payment in connection with an agreement not
to compete of $100,000 per year. Additionally, whether employed or not, each
Founder is also entitled to receive an annual $100,000 bonus if Great American
Cookies advances funds to Cookies USA to permit Cookies USA to pay interest on
its subordinated notes. The Company's employment of the two Founders ended on
December 7, 1995 and December 9, 1996. Under the above agreements, the Company
made aggregate payments to the Founders of $564,000, $285,000 and $200,000,
during the fifty-two week periods ended June 30, 1996, June 29, 1997 and June
28, 1998, respectively. As of June 30, 1996, June 29, 1997 and June 28, 1998,
$200,000 was due to the Founders and included in accrued liabilities in the
accompanying consolidated balance sheets.

F-88

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has entered into employment agreements with its Executive Vice
President of Development, Vice President of Operations and Director of
Production with terms of one to two years. The agreements are for an aggregate
annual base salary of $355,000. The agreements have customary provisions for
benefits and noncompetition.

Incentive and Severance Agreements

In connection with the Company's negotiations (see Note 15) with Mrs. Fields'
Original Cookies, Inc. ("Mrs. Fields"), the Company has entered into agreements
with a number of employees incenting them to assist with the sale process and
to stay until the closing of such sale. In addition, the Company has informed
its home office employees of the severance payments to be paid to them in the
event their employment is terminated without cause subsequent to the closing of
the proposed sale. The aggregate amount of these incentives and severance
payments, as well as any severance payments to employees with employment
agreements, is $1,623,000. These amounts are conditional upon the closing of
the sale and no amounts will be due or paid if a sale to Mrs. Fields does not
occur.

Legal

On September 22, 1997, nine Great American Cookies franchisees filed a
lawsuit against Great American Cookies and certain other parties alleging
certain anticipatory breaches of contract and violations of certain state,
franchise and unfair trade practice laws. These allegations resulted from
discussions held be Cookies USA and Mrs. Fields regarding the possibility of
Mrs Fields acquiring all of the outstanding shares of Common Stock of Cookies
USA, Inc. As of August 14, 1998, a settlement has been reached whereby the
franchisees have been granted certain rights upon the sale of the Company to
Mrs. Fields for a period of three years. In exchange, Cookies USA has been
released from further legal action.

10. INCOME TAXES

Cookies USA and Great American Cookies file consolidated federal income tax
returns. The following information has been determined based upon the
provisions of SFAS 109 for the fifty-two week periods ended June 30, 1996, June
29, 1997 and June 28, 1998.

Fifty-two Fifty-two Fifty-two
Week Period Week Period Week Period
Ended Ended Ended
June 30, 1996 June 29, 1997 June 28, 1998
------------- ------------- -------------

Income tax (benefit) provision:
Current:
Federal......................... -- -- --
State........................... $ 48,000 $107,000 $ 97,000
--------- -------- --------
48,000 107,000 97,000
Deferred:
Federal......................... (217,000) 131,000 386,000
State........................... (25,000) 23,000 68,000
--------- -------- --------
(242,000) 154,000 454,000
--------- -------- --------
Total (benefit) provision for
income taxes................. $(194,000) $261,000 $551,000
========= ======== ========

F-89

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The differences between income taxes at the statutory federal and state
income tax rates and the income tax expense reported in the statements of
operations for the fifty-two week periods ended June 30, 1996, June 29, 1997
and June 28, 1998 are as follows:

Fifty-Two Fifty-Two Fifty-Two
Week Period Week Period Week Period
Ended Ended Ended
June 30, 1996 June 29, 1997 June 28, 1998
------------- ------------- -------------

Federal statutory tax rate....... (34.0)% 34.0% 34.0%
State income taxes, net of
federal benefit................. (4.0)% 4.0% 4.0%
Goodwill amortization and other.. 25.5 % 15.8% 119.9%
----- ---- -----
(12.5)% 53.8% 157.9%
===== ==== =====

Deferred income tax assets are comprised of the following:

June 29, June 28,
1997 1998
---------- ----------

Current:
NOL carryforward..................................... $ 350,000 $ 872,000
Other................................................ 42,000 --
---------- ----------
$ 392,000 $ 872,000
========== ==========
Non-current:
NOL carryforward..................................... $1,079,000 $ --
Depreciation......................................... 841,000 1,191,000
Other................................................ 452,000 247,000
---------- ----------
$2,372,000 $1,438,000
========== ==========

As of June 28, 1998, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $2.2 million, which are
scheduled to expire in varying amounts in the years 2009 to 2011. The Company's
net operating loss carryforwards are limited under Section 382 of the Internal
Revenue Code regarding changes in ownership.

11. PREFERRED STOCK

In connection with Cookies USA's acquisition of Great American Cookies on
December 10, 1993, Cookies USA issued $2.5 million of Junior Class A Preferred
Stock and $750,000 of Junior Class B Preferred Stock. Additionally, Cookies USA
issued $10.5 million of Senior Preferred Stock to the Founders of Great
American Cookies in exchange for a portion of the stock of Great American
Cookies ($3.5 million) and the assets of other entities owned by the Founders
($7.0 million). As Great American Cookies is a wholly owned subsidiary of
Cookies USA and is the sole operating unit of the consolidated entity, Great
American Cookies is the sole source of any cash to be paid by Cookies USA as
dividends on such securities.

The 10,500 shares of $1.00 par Senior Preferred Stock issued by Cookies USA
on December 10, 1993 are 6% cumulative convertible shares. A share of the
Senior Preferred Stock is convertible at any time at the option of the holder
into 1.1308 shares of Cookies USA Common Stock. The holders of Senior Preferred
Stock are entitled to certain antidilution protections to maintain their
percentage of ownership in Cookies USA. Accumulated dividends on the Senior
Preferred Stock have priority over any dividends of "Junior Securities" (Junior
Class A and Class B Preferred and Common Stock), but are subordinate to any
debt payments of

F-90

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Cookies USA or the Company. Such preferred shares may be redeemed at any time
for $1,000 per share plus accrued but unpaid dividends at the option of Cookies
USA; however, all such shares not previously converted or redeemed shall be
redeemed by payment in cash of $1,000 per share plus accrued but unpaid
dividends on November 30, 2003. As of June 28, 1998, Cookies USA has accrued
$2,869,000 for unpaid dividends due to the holders of the Senior Preferred
Stock.

The 2,500 shares of $1.00 par Junior Class A Preferred Stock and the 750
shares of $1.00 par Junior Class B Preferred Stock issued by Cookies USA are
entitled to receive, when legally available and when declared, dividends at the
rate of $50 per share per annum. Such shares may be redeemed by Cookies USA at
any time for $1,000 per share plus all dividends accrued and unpaid; however,
all such shares not previously redeemed shall be redeemed by payment of cash of
$1,000 per share plus all accrued and unpaid dividends on the first business
day of January 2004. The Junior Class A and B Preferred Stock have no
conversion, preemptive, voting or subscription rights. As of June 28, 1998,
Cookies USA has accrued $740,000 for unpaid dividends due to the holders of the
Junior Class A and B Preferred Stock.

Great American Cookies' debt covenants related to the senior secured notes
limit the ability of Great American Cookies to pay dividends. Under the debt
covenants, as outlined in the Indenture pursuant to which the Senior Secured
Notes were issued, Great American Cookies may pay dividends if:

(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof,

(b) immediately after the dividend and after giving effect thereto on a
pro forma basis, the Company could incur at least $1.00 of additional
indebtedness under the provisions of the debt covenants, and

(c) such dividend, together with the aggregate of all other "Restricted
Payments" (as defined in the Indenture) made by Great American Cookies and
its subsidiaries after the date of the Indenture, is less than the sum of
(x) 50% of the Adjusted Consolidated Net Income of Great American Cookies
for the period (taken as one accounting period) from the beginning of the
first quarter commencing immediately after the date of the Indenture to the
end of Great American Cookies' most recently ended first quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Adjusted Consolidated Net Income for such period is a
deficit, 100% of such deficit), plus (y) 100% of the aggregate net cash
proceeds received by Great American Cookies from the issue or sale of
Equity Interest of Great American Cookies (other than Equity Interests sold
to a subsidiary of Great American Cookies and other than Disqualified
Stock) after the date of the Indenture and on or prior to the time of such
Restricted Payment, plus (z) 100% of the net cash proceeds received by
Great American Cookies from the issuance or sale, other than to a
subsidiary of Great American Cookies, of any convertible or exchangeable
debt security of Great American Cookies that has been converted or
exchanged into equity interests of Great American Cookies pursuant to the
terms thereof (other than Disqualified Stock) after the date of the
Indenture and on or prior to the time of such dividend. The foregoing
limitations on Restricted Payments do not prohibit, among other items,
payments to Cookies USA under the Tax Sharing Agreement, payments to
Cookies USA to permit payments of current interest then due on the
Subordinated Debt or for any other purpose provided that certain fixed
coverage ratio tests have been achieved, or making other Restricted
Payments in the aggregate amount not to exceed $1.5 million.

12. STOCK OPTION AGREEMENTS, WARRANTS AND OTHER STOCKHOLDERS' AGREEMENT

As part of its acquisition of Great American Cookies, Cookies USA entered
into Non-Qualified Stock Option Agreements (the "Stock Option Agreements") with
the Founders. Under the Stock Option Agreements, each of the Founders is
granted an option to purchase 5,600 shares of common stock of Cookies USA at an

F-91

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

exercise price of $2.23 per share, which expires on December 10, 2003. The
options will not be vested initially. The options will become vested at the
rate of 20% per year for each fiscal year in which certain operating cash flow
targets are achieved. Notwithstanding the foregoing, if Cookies USA's operating
cash flow targets are achieved on a cumulative basis in subsequent years, then
the options will be vested. As of June 28, 1998, none of the outstanding stock
options were vested.

If the employment with the Company of either of the Founders is terminated,
each Founder will have the right to require Cookies USA to repurchase all of
his shares of Common Stock, and all other securities of Cookies USA convertible
into, exchangeable for or entitling the holder to acquire its Common Stock, at
the appraised fair market value thereof. The purchase price will be paid with a
subordinated note that will bear interest at 8% per annum until the fifth
anniversary of the Stockholders' Agreement dated December 10, 1993 and at the
prime rate plus 2% thereafter. The note will be secured by the Common Stock
purchased by Cookies USA and will be payable in equal installments on each of
the sixth through the tenth anniversaries of the Stockholders' Agreement. As of
June 28, 1998, the employment of both of the Founders has been terminated and
such Founders have not requested Cookies USA to repurchase their shares. At
June 29, 1997 and June 28, 1998, the fair value of these options was de
minimis.

In connection with the issuance of the 10.875% senior secured notes payable
(see Note 7), the Company issued 7,200 warrants to purchase common stock at a
purchase price of $27.78 per warrant. The warrants expire on January 15, 2001
and have an exercise price of $0.01 per share subject to anti-dilution
protection. Additionally, the warrants have certain rights related to the
purchase of shares of common stock to a third party whereby the warrant holder
may require the purchaser to purchase a determined number of warrants at the
common stock purchase price less the exercise price per warrant. If the holders
of at least 75% of the common stock agree to sell their shares to a third
party, the warrants have certain obligations whereby the warrant holders may be
required to sell their warrants for a price equal to the purchase price of the
common stock less the exercise price per warrant.

13. COMPANY AND FRANCHISED STORES

As of June 30, 1996, June 29, 1997 and June 28, 1998 there were 115, 100 and
81 Company-operated outlets and 253, 263 and 279 franchised outlets in
operation, respectively.

During the fifty-two week period ended June 30, 1996, the Company earned
initial license fees of $275,000 from the sale of 11 new in-line stores to
franchisees. Additionally, the Company earned $21,000 from license transfer,
upgrade and other fees.

During the fifty-two week period ended June 29, 1997, the Company earned
initial license fees of $300,000 from the sale of 12 new in-line stores to
franchisees. Additionally, the Company earned $75,000 from license transfer,
upgrade and other fees.

During the fifty-two week period ended June 28, 1998, the Company earned
initial license fees of $125,000 from the sale of five new in-line stores to
franchisees. Additionally, the Company earned $13,000 from license transfer,
upgrade and other fees.

14. RELATED-PARTY TRANSACTIONS

The majority shareholders of the Common Stock of Cookies, USA, Inc. are
affiliated with the holders of the $10 million of Subordinated Notes issued by
Cookies USA. The holders of the Senior Preferred Stock of Cookies USA are also
holders of some of the Common Stock of Cookies USA. The holders of the Junior
Class A and B Preferred Stock of Cookies USA are also affiliated with the
majority of the holders of the Common Stock of Cookies USA (see Note 11).

F-92

COOKIES USA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A franchisee who owns eight franchise outlets is related to one of the
Company's directors. During the fifty-two week periods ended June 30, 1996,
June 29, 1997 and June 28, 1998, the Company had sales of batter and supplies
of approximately $497,000, $476,000 and $419,000, respectively, to this related
party. The Company also received royalty revenues of approximately $202,000,
$199,000 and $186,000 for the fifty-two week periods ended June 30, 1996, June
29, 1997 and June 28, 1998, respectively, from this franchisee. As of June 30,
1996, June 29, 1997 and June 28, 1998, this franchisee owed the Company
approximately $91,000, $34,000 and $47,000, respectively.

During the fifty-two week periods ended June 30, 1996, June 29, 1997 and June
28, 1998, the Company expensed $250,000 for management services provided by TJC
Management Corp. ("TJC"), an affiliate of the majority shareholder of Cookies
USA. Under the agreement with TJC, these fees are not to exceed $300,000 per
year. Amounts due to TJC as of June 30, 1996, June 29, 1997 and June 28, 1998
were $375,000, $188,000 and $63,000, respectively, and are included in accrued
liabilities in the accompanying consolidated balance sheets.

15. SUBSEQUENT EVENTS

On August 24, 1998, Mrs. Fields, acquired 100% of the common stock,
redeemable preferred stock and subordinated indebtedness of Cookies USA, Inc.,
for an aggregate purchase price of approximately $18.4 million, pursuant to a
Securities Purchase Agreement (the "Purchase Agreement"), dated as of August
13, 1998 among Mrs. Fields, Cookies USA, and the individuals and entities
identified as sellers therein. In addition, Mrs Fields assumed all principal
and accrued interest on the senior secured notes totaling approximately $42.4
million. Per the terms of the Purchase Agreement, the Stock Option Agreements
and all other options and warrants, as discussed in Note 12, were cancelled.
Mrs Fields also purchased eight stored from a related party franchise, as
disclosed in Note 14, for a total purchase price of $1.75 million on September
9, 1998. The franchise was also a holder of Cookies USA securities and a party
to the Purchase Agreement.

The foregoing summary should be read in conjunction with and is qualified by
reference to the Purchase Agreement, the stock purchase agreements between Mrs.
Fields and the holders of the capital stock of Deblan and Chocolate Chip, the
merger agreements between each of Deblan and Chocolate Chip, the Indenture, the
First Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields,
The Mrs. Fields Brand, Inc., and The Bank of New York, as trustee, the Second
Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields, The
Mrs. Fields Brand, Inc., and The Bank of New York, as trustee, and the Credit
Agreement, which are set forth as exhibits hereto.

The foregoing summary should be read in conjunction with and is qualified by
reference to the Purchase Agreement, to the stock purchase agreements between
Mrs. Fields and the holders of the capital stock of Deblan and Chocolate Chip,
and to the merger agreements between each of Deblan and Chocolate Chip and the
Company, which are set forth as exhibits to this report.

In connection with the contemplated acquisition of Cookies USA, the Company
commenced a tender offer on August 17, 1998 for all of the outstanding $40.0
million in aggregate principal amount of Great American's 10 7/8% Senior
Secured Notes due 2001 (the "Notes"). On August 24, 1998, the Company purchased
approximately $33.5 million of the Notes that had been tendered through August
20, 1998 and an additional $5.4 million of the Notes that had been tendered
through August 21, 1998. All remaining Notes outstanding were tendered as of
the expiration of the tender offer at Midnight on September 14, 1998, and Mrs.
Fields accepted and paid for the approximately $1.1 million of remaining Notes
on September 16, 1998.

F-93

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
of Deblan Corporation
Houston, Texas

We have audited the accompanying Balance Sheets of Deblan Corporation as of
December 31, 1996 and 1997 and the related Statements of Earnings,
Shareholders' Equity and Cash Flows for the years ended December 31, 1995, 1996
and 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deblan Corporation as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years ended December 31, 1995, 1996 and 1997, in conformity with
generally accepted accounting principles.

Weinstein Spira & Company, P.C.

Houston, Texas
August 17, 1998

F-94

DEBLAN CORPORATION

BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

December 31,
------------- June 30,
1996 1997 1998
------ ------ -----------
(Unaudited)

ASSETS
Current Assets:
Cash and cash equivalents......................... $ 399 $ 689 $ 702
Temporary investment.............................. 50 50 50
Accounts receivable:
Employees....................................... 12 10 12
Other........................................... 12 18 11
Inventory......................................... 161 145 180
Prepaid expenses.................................. 4 2 17
------ ------ ------
Total Current Assets.......................... 638 914 972
------ ------ ------
Property and Equipment:
Machinery and equipment........................... 1,173 1,269 1,339
Furniture and fixtures............................ 62 75 81
Leasehold improvements............................ 1,531 1,721 1,721
Transportation equipment.......................... 21 80 55
------ ------ ------
2,787 3,145 3,196
Less: Accumulated depreciation and amortization... 1,319 1,417 1,520
------ ------ ------
Net Property and Equipment...................... 1,468 1,728 1,676
------ ------ ------
Deferred Federal Income Tax Asset................... 3 2 14
------ ------ ------
Goodwill, net of accumulated amortization of $7, $8
and $8, respectively............................... 13 12 12
------ ------ ------
Intangibles, net of accumulated amortization of
$317, $325 and $347, respectively.................. 275 285 263
------ ------ ------
Other Assets........................................ 185 181 181
------ ------ ------
$2,582 $3,122 $3,118
====== ====== ======

See notes to financial statements.

F-95

DEBLAN CORPORATION

BALANCE SHEETS--(Continued)
(Dollars in Thousands, Except Per Share Data)

December 31,
------------- June 30,
1996 1997 1998
------ ------ -----------
(Unaudited)

LIABILITIES
Current Liabilities:
Current portion of long-term debt................. $ 278 $ 291 $ 244
Accounts payable.................................. 212 232 335
Accrued expenses.................................. 191 230 108
Accrued payroll................................... 143 190 137
Federal income tax payable........................ 95 44 44
------ ------ ------
Total Current Liabilities..................... 919 987 868
Long-Term Debt, net of current portion.............. 299 479 362
------ ------ ------
1,218 1,466 1,230
------ ------ ------
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Common Stock--$.10 par, 110,000 shares authorized,
97,800 shares issued and outstanding............... 10 10 10
Additional Paid-In Capital.......................... 104 104 104
Retained Earnings................................... 1,250 1,542 1,774
------ ------ ------
Total Shareholders' Equity.......................... 1,364 1,656 1,888
------ ------ ------
$2,582 $3,122 $3,118
====== ====== ======

See notes to financial statements

F-96

DEBLAN CORPORATION

STATEMENTS OF EARNINGS
(Dollars in Thousands)

For the Six
For the Year Ended Months Ended
December 31, June 30,
---------------------- --------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
(Unaudited)

Revenues
Store Sales.......................... $8,512 $8,572 $9,503 $4,342 $4,768
------ ------ ------ ------ ------
Operating Costs and Expenses
Selling and store occupancy costs.... 5,465 5,400 5,744 2,570 2,666
Food cost of sales................... 1,518 1,519 1,675 773 831
General and administrative........... 971 1,061 1,169 672 779
Depreciation and amortization........ 266 237 255 138 142
------ ------ ------ ------ ------
Total operating costs and
expenses.......................... 8,220 8,217 8,843 4,153 4,418
------ ------ ------ ------ ------
Earnings From Operations............... 292 355 660 189 350
------ ------ ------ ------ ------
Other Income (Expense)
Interest income...................... 14 19 26 10 17
Gain (loss) on disposition of
property and equipment.............. (124) 32 (147) -- (4)
Interest expense..................... (109) (79) (73) (32) (34)
Other................................ 21 13 21 22 18
------ ------ ------ ------ ------
(198) (15) (173) -- (3)
------ ------ ------ ------ ------
Earnings Before Income Tax............. 94 340 487 189 347
------ ------ ------ ------ ------
Federal and State Income Tax (Recovery)
Current.............................. 52 145 194 82 127
Deferred............................. (9) (9) 1 (10) (12)
------ ------ ------ ------ ------
43 136 195 72 115
------ ------ ------ ------ ------
Net Earnings........................... $ 51 $ 204 $ 292 $ 117 $ 232
====== ====== ====== ====== ======

See notes to financial statements.

F-97

DEBLAN CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1996, 1997 and
For the Six Months Ended June 30, 1998 (Unaudited)
(Dollars in Thousands)

Common Stock Additional
------------- Paid-In Retained
Shares Amount Capital Earnings Total
------ ------ ---------- -------- ------

Balance--December 31, 1994............ 97,800 $10 $104 $ 995 $1,109
Net Earnings........................ -- -- -- 51 51
------ --- ---- ------ ------
Balance--December 31, 1995............ 97,800 10 104 1,046 1,160
Net Earnings........................ -- -- -- 204 204
------ --- ---- ------ ------
Balance--December 31, 1996............ 97,800 10 104 1,250 1,364
Net Earnings........................ -- -- -- 292 292
------ --- ---- ------ ------
Balance--December 31, 1997............ 97,800 10 104 1,542 1,656
Net Earnings (unaudited)............ -- -- -- 232 232
------ --- ---- ------ ------
Balance--June 30, 1998 (unaudited).... 97,800 $10 $104 $1,774 $1,888
====== === ==== ====== ======

See notes to financial statements.

F-98

DEBLAN CORPORATION

STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

For the Six
For the Year Ended Months Ended
December 31, June 30,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(Unaudited)

Cash Flows From Operating
Activities:
Cash received from customers and
employees...................... $ 8,506 $ 8,563 $ 9,500 $ 4,348 $ 4,773
Cash paid to vendors and
employees...................... (7,777) (8,146) (8,442) (4,082) (4,389)
Interest paid................... (109) (79) (73) (32) (34)
Income tax paid................. (100) (9) (245) (165) (127)
Interest received............... 14 19 26 10 17
Other income received........... 21 13 21 22 18
------- ------- ------- ------- -------
Net Cash Provided by Operating
Activities................... 555 361 787 101 258
------- ------- ------- ------- -------
Cash Flows From Investing
Activities:
Purchase of property and
equipment...................... (282) (203) (685) (348) (78)
Purchase of license agreement... -- (59) (75) (50) --
Payment of store start-up
costs.......................... (5) (13) (36) (21) --
Purchase of additional cash
value of life insurance........ (18) (13) (19) (9) (9)
Proceeds from sale of property
and equipment.................. -- 226 125 -- 6
------- ------- ------- ------- -------
Net Cash Used in Investing
Activities................... (305) (62) (690) (428) (81)
------- ------- ------- ------- -------
Cash Flows From Financing
Activities:
Proceeds from long-term
financing...................... 228 -- 482 284 --
Payment of debt................. (323) (306) (289) (147) (164)
------- ------- ------- ------- -------
Net Cash Provided by (Used in)
Financing Activities......... (95) (306) 193 137 (164)
------- ------- ------- ------- -------
Net Increase (Decrease) in Cash
and Cash Equivalents............. 155 (7) 290 (190) 13
Cash and Cash Equivalents--
Beginning of Period.............. 251 406 399 399 689
------- ------- ------- ------- -------
Cash and Cash Equivalents--End of
Period........................... $ 406 $ 399 $ 689 $ 209 $ 702
======= ======= ======= ======= =======

See notes to Financial statements.

F-99

DEBLAN CORPORATION

STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in Thousands)

For the Year For the Six
Ended December Months Ended
31, June 30,
----------------- -------------
1995 1996 1997 1997 1998
---- ----- ---- ------ ------
(Unaudited)

Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities:
Net earnings............................... $ 51 $ 204 $292 $ 117 $ 232
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization............ 266 237 255 138 142
(Gain) Loss on disposition of property
and equipment........................... 124 (32) 147 -- 4
Deferred taxes (recovery)................ (9) (9) 1 (10) (12)
(Increase) Decrease in:
Accounts receivable.................... (5) (9) (4) 6 5
Inventory.............................. 25 (16) 16 (16) (35)
Prepaid expenses....................... (2) 5 2 (11) (15)
Prepaid federal income tax............. (41) 41 -- -- --
Deposits............................... 4 9 23 7 9
Accounts payable....................... 66 (109) 20 37 103
Accrued expenses....................... 84 (55) 86 (82) (175)
Federal income tax payable............. (8) 95 (51) (85) --
---- ----- ---- ----- ------
Net Cash Provided by Operating
Activities.......................... $555 $ 361 $787 $ 101 $ 258
==== ===== ==== ===== ======

See notes to financial statements.

F-100

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

1. ACCOUNTING POLICIES

Doing business as The Great American Chocolate Chip Cookie Company, the
Company operated twenty-three franchise locations at December 31, 1995, 1996
and 1997 and June 30, 1998, in various Texas, Louisiana, Colorado and Florida
shopping malls. The Company maintains its accounts on the accrual method of
accounting in accordance with generally accepted accounting principles.
Accounting principles followed by the Company and the methods of applying those
principles which materially affect the determination of financial position,
results of operations and cash flows are summarized below:

Revenue Recognition

Revenue is recognized at the time sales are made.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of
three months or less to be cash equivalents. At all balance sheet dates, the
Company had deposits in excess of federally insured limits.

Inventory

Inventory consists of packaging materials, beverages and baking ingredients
for use in the ordinary course of business. All inventory is valued at the
lower of cost (first-in, first-out method) or market.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line and accelerated methods over the following estimated useful
lives:

Machinery and equipment.......... 5-7 years
Furniture and fixtures........... 5-7 years
Leasehold improvements........... 10-20 years
Transportation equipment......... 5 years

Temporary Investment

Temporary investment includes certificates of deposit with an original
maturity of greater than three months.

Federal and State Income Tax

Federal and state income tax is provided at current prevailing rates.

The Company records deferred tax liabilities and assets for the anticipated
future tax effects of temporary differences that arise as a result of
differences in the carrying amounts and tax bases of assets and liabilities.

Licenses

Fees paid in connection with obtaining operating licenses are amortized over
the life of the license, ranging from 60 months to 360 months.

F-101

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

Intangibles

Intangibles consist of organization and store start-up costs which are
amortized over a 60-month period, and store license fees which are amortized
over periods ranging from 60 months to 360 months. In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-5 which requires store start-up expenses to be expensed as incurred. This
SOP is effective for financial statements for fiscal years beginning after
December 15, 1998.

Goodwill

Goodwill represents the excess of cost over book value of assets acquired.
The Company amortizes goodwill using the straight-line method over twenty
years.

Use of Estimates

Unaudited Interim Financial Statements

In the opinion of management, the unaudited interim financial statements for
the six months ended June 30, 1997 and 1998, presented herein, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the Company's financial position, results of operations,
shareholders' equity and cash flows for the interim period. The results of
operations and cash flows for the six months ended June 30, 1997 and 1998 are
not necessarily indicative of the results which would be expected for a full
year.

Long-Lived Assets

The Company assesses and measures for impairment of all long-lived assets,
including intangibles, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets be reviewed for impairment when events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
The Company evaluates, at each balance sheet date, whether events and
circumstances have occurred that indicate possible impairment. In accordance
with SFAS No. 121, the Company uses an estimate of future undiscounted net cash
flows of the related asset or group of assets over the remaining life in
measuring whether the assets are recoverable. The Company assesses impairment
of long-lived assets at the store level which the Company believes is the
lowest level for which there are identifiable cash flows that are independent
of other groups of assets. As of December 31, 1996, December 31, 1997 and June
30, 1998, the Company does not consider any of its long-lived assets to be
impaired.

Fair Value of Financial Instruments

The book value of the Company's financial instruments approximates fair
value. The estimated fair values have been determined using appropriate market
information and valuation methodologies.

Recent Accounting Pronouncements

The Company has not yet adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income." The Statement will be effective for
the fiscal year 1998. It establishes standards for reporting and displaying of
comprehensive income and its components (revenues, expenses, gains, and losses)

F-102

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

in a full set of general-purpose financial statements. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required.

The Company has not yet adopted Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information."
The Statement will be effective for the fiscal year 1998. It establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. In the initial year of application,
comparative information for earlier years is to be restated.

The Company believes that adoption of these Statements will not have a
material impact on its financial condition, results of operations or cash
flows.

Reclassifications

Certain reclassifications have been made in the prior years' financial
statements to conform with the presentation as of June 30, 1998.

2. INTANGIBLES

Intangibles consist of the following (in thousands):

December
31,
--------- June 30,
1996 1997 1998
---- ---- -----------
(Unaudited)

License fees (net of accumulated amortization of
$263, $270 and $285, respectively).................. $243 $237 $222
Organization and store start-up costs (net of
accumulated amortization of $54, $55 and $62,
respectively)....................................... 32 48 41
---- ---- ----
$275 $285 $263
==== ==== ====

3. OTHER ASSETS

Other assets consist of the following (in thousands):

December
31,
--------- June 30,
1996 1997 1998
---- ---- -----------
(Unaudited)

Cash value of officer's life insurance............... $ 82 $101 $110
Deposits............................................. 103 80 71
---- ---- ----
$185 $181 $181
==== ==== ====

F-103

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

4. FEDERAL INCOME TAXES

Differences between the effective tax rate and the statutory federal tax rate
are as follows (in thousands):

For the Six
For the Year Months
Ended Ended June
December 31, 30,
---------------- --------------
1995 1996 1997 1997 1998
---- ---- ---- ----- ------
(Unaudited)

Federal income tax expense at the
statutory rate........................... $32 $116 $166 $ 64 $ 118
Increase (Decrease) in:
State income taxes, net of income tax
benefit.................................. 6 4 5 2 1
Officer's life insurance and other
nondeductible expenses................... 17 20 23 7 4
Surtax exemption.......................... (12)
Other..................................... -- (4) 1 (1) (8)
--- ---- ---- ----- ------
$43 $136 $195 $ 72 $ 115
=== ==== ==== ===== ======

The net deferred federal income tax asset results from differences in
depreciation between tax reporting and financial statement reporting, as
follows (in thousands):

December
31,
--------- June 30,
1996 1997 1998
---- ---- -----------
(Unaudited)

Accumulated depreciation.............................. $ 3 $ 2 $ 14
==== ==== ====

5. NOTES PAYABLE

Notes payable are as follows (in thousands):

December
31,
--------- June 30,
1996 1997 1998
---- ---- -----------
(Unaudited)

Notes payable--bank, bearing interest at bank prime
plus 1%, secured by certificate of deposit,
equipment, leasehold improvements, assignment of life
insurance, common stock and guaranty of majority
shareholder, due in aggregate monthly installments of
$6.6, including interest, maturing in 1998........... $ 98 $ 27 $--
Notes payable--bank, bearing interest at bank prime
plus .5%, secured by certificate of deposit,
equipment, leasehold improvements, assignment of life
insurance, common stock and guaranty of majority
shareholder, due in aggregate monthly installments of
$26.5, including interest, maturing in various years
through 2002......................................... 465 686 561
Notes payable--bearing interest at 8.5% to 8.6%,
secured by transportation equipment, due in aggregate
monthly installments of $1.8, including interest,
maturing in various years through 2002............... 14 57 45
---- ---- ----
577 770 606
Less: Current maturities.............................. 278 291 244
---- ---- ----
$299 $479 $362
==== ==== ====

F-104

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

The following is a schedule of future minimum principal payments on debt (in
thousands):

For the Year Ending December 31, Amount
-------------------------------- ------

1998.................................................................. $291
1999.................................................................. 210
2000.................................................................. 113
2001.................................................................. 124
2002.................................................................. 32
----
$770
====

In connection with the notes payable-bank, the Company has entered into a
loan agreement which contains certain restrictive covenants, including
maintenance of certain financial ratios, and limitations on borrowings, capital
expenditures, loans, sale of assets, dividend payments and executive
compensation. At December 31, 1996, December 31, 1997 and June 30, 1998, the
Company was in compliance with the covenants or had obtained waivers for those
covenants for the succeeding 12 months for which it was not in compliance.

6. OPERATING LEASES

The Company leases facilities at various locations from unrelated third
parties. The facility leases expire in years ranging from 1998 through 2005.

Rent expense is composed of the following items (in thousands):

For the Six
Months
For the Year Ended Ended June
December 31, 30,
-------------------- -----------
1995 1996 1997 1997 1998
------ ------ ------ ----- -----
(Unaudited)

Facilities.................................. $ 997 $ 908 $ 953 $ 478 $ 478
Equipment................................... 20 18 8 5 2
Contingent rents............................ 78 101 162 54 54
------ ------ ------ ----- -----
$1,095 $1,027 $1,123 $ 537 $ 534
====== ====== ====== ===== =====

The following is a schedule of future minimum rental payments (in thousands):

For the Year Ending December 31, Facilities Equipment Total
-------------------------------- ---------- --------- ------

1998............................................ $ 805 $ 2 $ 807
1999............................................ 726 -- 726
2000............................................ 624 -- 624
2001............................................ 529 -- 529
2002............................................ 477 -- 477
Thereafter...................................... 1,305 -- 1,305
------ --- ------
$4,466 $ 2 $4,468
====== === ======

F-105

DEBLAN CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information at June 30, 1998 and for the Six Months
Ended June 30, 1997 and June 30, 1998 is Unaudited)

7. PROFIT SHARING PLAN

The Company has a profit sharing plan under Section 401(k) of the Internal
Revenue Code for all eligible employees. All eligible employees are permitted
to defer compensation up to the maximum percentage of annual compensation
allowed by the Internal Revenue Code. The plan provides for a matching 50%
contribution and a discretionary contribution by the Company. The Company
provided contributions of $40,560, $49,974 and $77,877 for the years ended
December 31, 1995, 1996 and 1997, and $14,470 and $25,211 for the six months
ended June 30, 1997 and 1998, respectively.

8. COMMITMENTS

The Company is required to pay its franchisor seven percent of revenues as a
franchise fee.

9. CORPORATE REGISTRATION

In a corporate reorganization in February, 1997, the par value of the common
stock was changed from $1.00 to $.10, followed by a 150-to-1 stock split which
increased the number of issued shares to 97,800. Additionally, the number of
shares authorized was increased to 110,000. The financial statements presented
have been restated to reflect the stock split. Common stock was increased
$3,000, and retained earnings were reduced $3,000.

10. REDEMPTION AGREEMENT

The shareholders of the Company entered into a stock redemption agreement
with the Company in March, 1997. The following is a brief overview of the
general terms:

Upon the death of the majority shareholder, the Company is obligated to
purchase his stock (87,300 shares at December 31, 1997). The price per share
shall be the greater of the proceeds from the redemption of life insurance or
the value of the stock as stipulated by the shareholders, annually. The initial
value stipulated in March, 1997 was $22.75 per share. The Company owns and is
beneficiary of life insurance in the amount of $1,500,000 on the life of the
majority shareholder, the proceeds of which may be used toward this redemption.

Upon the death of the other shareholders, the Company is obligated to
purchase the stock at the above described stipulated value.

11. SUBSEQUENT EVENT

Subsequent to year end, the shareholders of the Company agreed to sell their
shares to Mrs. Fields' Original Cookies, Inc. ("Mrs. Fields") subject to
certain events, including Mrs. Fields obtaining financing through a private
placement of debt securities.

F-106

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Chocolate Chip Cookies of Texas, Inc.:

We have audited the accompanying balance sheets of Chocolate Chip Cookies of
Texas, Inc. (a Texas corporation) as of September 30, 1996 and 1997, and the
related statements of operations, stockholders' equity and cash flows for the
years ended September 30, 1995, 1996 and 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chocolate Chip Cookies of
Texas, Inc. as of September 30, 1996 and 1997, and the results of its
operations and its cash flows for the years ended September 30, 1995, 1996 and
1997 in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Salt Lake City, Utah
July 22, 1998

F-107

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

BALANCE SHEETS
(In Thousands)

ASSETS

September 30, September 30, June 30,
1996 1997 1998
------------- ------------- -----------
(Unaudited)

CURRENT ASSETS:
Cash................................. $ 161 $ 66 $ 173
Accounts receivable.................. -- -- 2
Inventories.......................... 21 22 34
Prepaid assets....................... 4 1 20
----- ----- -----
Total current assets............... 186 89 229
----- ----- -----
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements............... 353 494 496
Equipment and fixtures............... 150 168 168
Vehicles............................. 26 26 26
----- ----- -----
529 688 690
Less accumulated depreciation and
amortization........................ (377) (408) (435)
----- ----- -----
Net property and equipment......... 152 280 255
----- ----- -----
OTHER ASSETS:
Deposits............................. -- -- 13
Intangibles, net of accumulated
amortization of $216, $245 and $257,
respectively........................ 47 43 31
----- ----- -----
Total other assets................. 47 43 44
----- ----- -----
DEFERRED TAX ASSET..................... 2 3 1
----- ----- -----
Total assets....................... $ 387 $ 415 $ 529
===== ===== =====

The accompanying notes to financial statements are an integral part of these
balance sheets.

F-108

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

BALANCE SHEETS--(Continued)
(In Thousands, Except Share and Per Share Data)

LIABILITIES AND STOCKHOLDERS' EQUITY

September 30, September 30, June 30,
1996 1997 1998
------------- ------------- -----------
(Unaudited)

CURRENT LIABILITIES:
Current portion of long-term debt.... $ 31 $ 33 $ --
Accounts payable..................... 73 73 50
Accrued salaries..................... 33 43 94
Accrued liabilities.................. 18 45 50
Deferred rent expense................ 22 31 34
Income taxes payable................. 12 15 57
----- ----- -----
Total current liabilities.......... 189 240 285
LONG-TERM DEBT, net of current
portion............................... 81 47 --
----- ----- -----
Total liabilities.................. 270 287 285
----- ----- -----
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 1,000,000
shares authorized and 250 shares
outstanding......................... -- -- --
Treasury stock, 750 shares at cost... (216) (216) (216)
Retained earnings.................... 333 344 460
----- ----- -----
Total stockholder's equity........... 117 128 244
----- ----- -----
Total liabilities and stockholders'
equity............................ $ 387 $ 415 $ 529
===== ===== =====

The accompanying notes to financial statements are an integral part of these
balance sheets.

F-109

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

STATEMENTS OF OPERATIONS
(In Thousands)

Nine Months Nine Months
Year Ended Year Ended Year Ended Ended Ended
September 30, September 30, September 30, June 30, June 30,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(Unaudited) (Unaudited)

NET STORE SALES......... $2,168 $2,321 $2,650 $1,962 $2,266
------ ------ ------ ------ ------
OPERATING COSTS:
Selling and store
occupancy costs...... 1,197 1,234 1,373 1,005 1,101
Food cost of sales.... 504 603 634 472 531
General and
administrative....... 352 363 565 424 429
Depreciation and
amortization......... 48 49 60 41 39
------ ------ ------ ------ ------
Total operating
costs and
expenses........... 2,101 2,249 2,632 1,942 2,100
------ ------ ------ ------ ------
Income from
operations......... 67 72 18 20 166
------ ------ ------ ------ ------
OTHER INCOME/(EXPENSE):
Interest expense...... (21) (11) (8) (6) (4)
Interest income....... 4 3 6 4 4
------ ------ ------ ------ ------
Income before
provision for
income taxes....... 50 64 16 18 166
PROVISION FOR INCOME
TAXES.................. 12 12 5 6 50
------ ------ ------ ------ ------
NET INCOME.............. $ 38 $ 52 $ 11 $ 12 $ 116
====== ====== ====== ====== ======

The accompanying notes to financial statements are an integral part of these
statements.

F-110

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)

Treasury
Common Stock Stock
------------- ------------- Retained
Shares Amount Shares Amount Earnings Total
------ ------ ------ ------ -------- -----

BALANCE, SEPTEMBER 30, 1994....... 250 $-- 750 $(216) $243 $ 27
Net income...................... -- -- -- -- 38 38
--- ---- --- ----- ---- ----
BALANCE, SEPTEMBER 30, 1995....... 250 -- 750 (216) 281 65
Net income...................... -- -- -- -- 52 52
--- ---- --- ----- ---- ----
BALANCE, SEPTEMBER 30, 1996....... 250 -- 750 (216) 333 117
Net income...................... -- -- -- -- 11 11
--- ---- --- ----- ---- ----
BALANCE, SEPTEMBER 30, 1997....... 250 -- 750 (216) 344 128
Net income (unaudited).......... -- -- -- -- 116 116
--- ---- --- ----- ---- ----
BALANCE, JUNE 30, 1998 (unau-
dited)........................... 250 $-- 750 $(216) $460 $244
=== ==== === ===== ==== ====

The accompanying notes to financial statements are an integral part of these
statements.

F-111

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

STATEMENTS OF CASH FLOWS
(In Thousands)

INCREASE (DECREASE) IN CASH

CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............. $ 38 $ 52 $ 11 $ 12 $116
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 48 49 60 41 39
Changes in assets and
liabilities:
Accounts receivable.. -- -- -- -- (2)
Inventories.......... (11) 9 (1) (13) (12)
Prepaid assets....... (7) 3 3 4 (19)
Deposits............. -- -- -- -- (13)
Deferred tax asset... (1) 1 (1) (2) 2
Accounts payable..... -- (10) -- 4 (23)
Income taxes
payable............. (20) 7 3 4 42
Accrued liabilities,
salaries and
deferred rent
expense............. 28 4 46 121 59
----- ---- ----- ---- ----
Net cash provided by
operating
Activities......... 75 115 121 171 189
----- ---- ----- ---- ----
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of property
and equipment......... (143) (10) (159) (69) (2)
Amounts paid for non-
compete agreements.... (63) -- -- -- --
Amounts paid for
franchise agreements.. (25) -- (25) (26) --
----- ---- ----- ---- ----
Net cash used in
investing
activities......... (231) (10) (184) (95) (2)
----- ---- ----- ---- ----
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of debt............... 160 -- -- -- --
Principal payments on
debt.................. (21) (27) (32) (24) (80)
----- ---- ----- ---- ----
Net cash provided by
(used in) financing
activities......... 139 (27) (32) (24) (80)
----- ---- ----- ---- ----
NET (DECREASE) INCREASE
IN CASH................ (17) 78 (95) 52 107
CASH, beginning of
period................. 100 83 161 161 66
----- ---- ----- ---- ----
CASH, end of period..... $ 83 $161 $ 66 $213 $173
===== ==== ===== ==== ====

The accompanying notes to financial statements are an integral part of these
statements.

F-112

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

STATEMENTS OF CASH FLOWS--(Continued)
(In Thousands)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest was approximately $21, $11, $8, $6 (unaudited) and $4
(unaudited) for the years ended September 30, 1995, 1996 and 1997 and for the
nine months ended June 30, 1997 and 1998, respectively.

Cash paid for income taxes was approximately $17, $2, $1, $1 (unaudited) and
$1 (unaudited) for the years ended September 30, 1995, 1996 and 1997 and for
the nine months ended June 30, 1997 and 1998, respectively.

The accompanying notes to financial statements are an integral part of these
statements.

F-113

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

NOTES TO FINANCIAL STATEMENTS
(Including Notes to Unaudited Periods)

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

Chocolate Chip Cookies of Texas, Inc. (the "Company"), a Texas corporation,
was incorporated in 1981. The Company operates retail stores which sell freshly
baked cookies and other food products. The Company's stores are franchised from
Great American Cookie Company, Inc. ("GACC"). As of June 30, 1998, the Company
owned and operated six stores, of which five are located in Texas and one in
Louisiana.

The Company's business follows seasonal trends and is also affected by
climate and weather conditions. The Company experiences its highest revenues in
the first fiscal quarter. Because the Company's stores are all located in
shopping malls, the Company's sales performance is significantly dependent on
the performance of those malls. As a franchisee of GACC, substantially all of
the Company's sales are derived from products purchased from GACC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts
payable and debt instruments. The carrying value of those instruments reported
in the balance sheets are considered to estimate their respective fair values
due to the short-term nature of such instruments and the current interest rate
environment.

Inventories

Inventories are stated at the lower of cost or market value. Cost is
determined using the FIFO (first-in, first-out) method (see Note 3).

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized over
the lesser of the useful life of the improvement or the remaining term of the
applicable lease. The depreciable lives of equipment, fixtures and vehicles
range from five to ten years.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the
useful lives of existing equipment are capitalized and depreciated. On
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is recognized in the statement of operations.

Intangibles

Intangibles primarily consist of franchise fees paid to GACC and amounts paid
for non-compete agreements between the Company and various other parties.
Intangibles are being amortized on a straight-line

F-114

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

basis over the lives of the agreements, which are generally ten years for
franchise agreements and three years for non-compete agreements.

Income Taxes

Revenue Recognition

Revenues generated from the Company's stores are recognized at the point of
sale.

Sources of Supply

The Company currently buys a significant amount of its food products and
supplies from GACC and an unrelated supplier. In accordance with the franchise
agreement, the Company must buy its food products from GACC (see Note 6).
Management believes that the Company could obtain its supplies from numerous
other suppliers at comparable prices and terms.

Long-Lived Assets

The Company assesses and measures for impairment of long-lived assets,
including intangibles, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets be reviewed for impairment when events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
The Company evaluates, at each balance sheet date, whether events and
circumstances have occurred that indicate possible impairment. In accordance
with SFAS No. 121, the Company uses an estimate of future undiscounted net cash
flows of the related asset or group of assets over the remaining life in
measuring whether assets are recoverable. The Company assesses impairment of
long-lived assets at the store level, which the Company believes is the lowest
level for which there are identifiable cash flows that are independent of other
groups of assets. As of June 30, 1998, the Company does not consider any of its
long-lived assets to be impaired.

Recent Accounting Pronouncements

During the nine months ended June 30, 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
130, "Comprehensive Income", SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", and SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Company does not expect
that these statements will have a significant impact on its financial
statements.

Interim Financial Statements

The financial statements as of and for the nine months ended June 30, 1998,
and for the nine months ended June 30, 1997, are unaudited. In the opinion of
management, these financial statements have been presented on the same basis as
the audited financial statements and include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for these periods. These interim
financial statements are not necessarily indicative of the results that may be
achieved for the full fiscal year.

F-115

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

3. INVENTORIES

The Company's inventories consist of the following as of September 30, 1996
and 1997 and June 30, 1998:

September 30, September 30, June 30,
1996 1997 1998
------------- ------------- -----------
(Unaudited)

Food................................. $12,000 $13,000 $23,000
Beverages............................ 3,000 3,000 4,000
Supplies............................. 6,000 6,000 7,000
------- ------- -------
$21,000 $22,000 $34,000
======= ======= =======

4. LONG-TERM DEBT

As of September 30, 1996 and September 30, 1997, long-term debt consisted of
a promissory note payable to Wells Fargo Bank secured by the property and
equipment of the Company. The note was originally issued by the Company on
October 17, 1994 with a variable interest rate equal to the prime rate. As of
September 30, 1997 the interest rate on the note was 8.50%. During April 1998,
the note was paid in full.

5. INCOME TAXES

The components of the provision for income taxes for the years ended
September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and
1998 are as follows:

September 30, September 30, September 30, June 30, June 30,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(Unaudited) (Unaudited)

Federal:
Current............... $11,000 $11,000 $ 5,000 $ 8,000 $44,000
Deferred.............. (1,000) -- (1,000) (2,000) 2,000
State:
Current............... 2,000 1,000 1,000 -- 4,000
------- ------- ------- ------- -------
Total................... $12,000 $12,000 $ 5,000 $ 6,000 $50,000
======= ======= ======= ======= =======

The differences between income taxes at the statutory income tax rate and
income taxes reported in the statements of operations are as follows for the
years ended September 30, 1995, 1996 and 1997 and the nine months ended June
30, 1997 and 1998:

Nine Months Nine Months
Ended Ended
September 30, September 30, September 30, June 30, June 30,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(Unaudited) (Unaudited)

Federal statutory rate.. 15% 15% 15% 15% 30%
State franchise taxes... 4 2 6 -- 2
Other................... 5 2 10 18 (2)
--- --- --- --- ---
24% 19% 31% 33% 30%
=== === === === ===

F-116

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

The significant components of the Company's deferred income tax assets and
liabilities at September 30, 1996 and 1997 and June 30, 1998 are as follows:

September 30, September 30, June 30,
1996 1997 1998
------------- ------------- -----------
(Unaudited)

Deferred income tax assets:
Deferred rent expense............ $ 3,000 $ 5,000 $ 10,000
Amortization of non-compete
agreements and franchise
agreements...................... 6,000 9,000 20,000
------- -------- --------
Total deferred income tax
assets........................ 9,000 14,000 30,000
Deferred income tax liabilities:
Accumulated depreciation......... (7,000) (11,000) (29,000)
------- -------- --------
Net deferred income tax assets..... $ 2,000 $ 3,000 $ 1,000
======= ======== ========

6. RELATED-PARTY TRANSACTIONS

Related-Party Operating Leases

The Company leases retail store facilities under long-term noncancelable
operating lease agreements with remaining terms of one to nine years from GACC.
The future minimum lease payments due under these operating leases as of
September 30, 1997 are as follows:

Year Ending September 30,
-------------------------

1998........................................................... $ 185,000
1999........................................................... 185,000
2000........................................................... 192,000
2001........................................................... 193,000
2002........................................................... 166,000
Thereafter..................................................... 326,000
----------
$1,247,000
==========

Each of these leases provides for contingent rentals based on gross revenues.
Total rental expense, which has been accounted for on a straight-line basis for
escalating leases included above, for the years ended September 30, 1995, 1996
and 1997 and for the nine months ended June 30, 1997 and 1998 was approximately
$280,000, $299,000, $335,000, $239,000 (unaudited) and $219,000 (unaudited),
respectively.

Franchise Royalties

The Company pays GACC franchise royalties in connection with its franchise
agreements with GACC. Franchise royalties are calculated as 7% of gross
revenues (as defined in the individual agreements). During the years ended
September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and
1998, the Company incurred approximately $152,000, $163,000, $185,000, $132,000
(unaudited) and $158,000 (unaudited), respectively, for franchise royalties,
which are included as part of selling and store occupancy costs in the
accompanying statements of operations. As of September 30, 1996 and 1997 and
June 30, 1998, approximately $13,000, $15,000 and $17,000 (unaudited),
respectively, in franchise royalties were payable to GACC.

F-117

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

6.RELATED PARTY TRANSACTIONS (Continued)

Inventory

The Company, in connection with its franchise agreements with GACC, purchases
the majority of its inventories from GACC. During the years ended September 30,
1995, 1996 and 1997 and the nine months ended June 30, 1997 and 1998, the
Company purchased approximately $311,000, $348,000, $387,000, $298,000
(unaudited) and $327,000 (unaudited), respectively, in inventories from GACC.
As of September 30, 1996 and 1997 and June 30, 1998, approximately $12,000,
$14,000 and $15,000 (unaudited), respectively, were payable to GACC related to
inventory purchases.

7. SUBSEQUENT EVENT

On August 24, 1998, the Company sold 100 percent of its common stock to Mrs.
Fields' Original Cookies, Inc.

F-118

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Combined Karp Entities:

We have audited the accompanying combined balance sheets of the Combined Karp
Entities (the "Company") identified in Note 1 as of December 31, 1996 and 1997,
and the related statements of operations, stockholders' equity and cash flows
for the years ended December 31, 1995, 1996 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Combined Karp
Entities as of December 31, 1996 and 1997, and the results of their operations
and their cash flows for the years ended December 31, 1995, 1996 and 1997 in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Salt Lake City, Utah
October 6, 1998

F-119

THE COMBINED KARP ENTITIES

COMBINED BALANCE SHEETS
(In Thousands)

ASSETS

December 31, December 31, June 30,
1996 1996 1998
------------ ------------ -----------
(Unaudited)

CURRENT ASSETS:
Cash................................... $ 179 $ 176 $ 98
Inventories............................ 57 54 62
Prepaid assets......................... 42 34 31
------ ------ ------
Total current assets................. 278 264 191
------ ------ ------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements................. 803 803 803
Equipment and fixtures................. 460 460 462
------ ------ ------
1,263 1,263 1,265
Less accumulated depreciation.......... (617) (718) (768)
------ ------ ------
Net property and equipment........... 646 545 497
------ ------ ------
OTHER ASSETS:
Deposits............................... 42 37 35
Intangibles, net of accumulated
amortization of $159, $179 and $191,
respectively.......................... 136 121 111
------ ------ ------
Total other assets................... 178 158 146
------ ------ ------
NON-CURRENT DEFERRED TAX ASSET........... 8 20 23
------ ------ ------
Total assets......................... $1,110 $ 987 $ 857
====== ====== ======

The accompanying notes to combined financial statements
are an integral part of these balance sheets.

F-120

THE COMBINED KARP ENTITIES

COMBINED BALANCE SHEETS--(Continued)
(In Thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY

December 30, December 30, June 30,
1996 1997 1998
------------ ------------ -----------
(Unaudited)

CURRENT LIABILITIES:
Accounts payable....................... $ 39 $ 95 $ 63
Accrued salaries....................... 55 52 42
Accrued liabilities.................... 123 121 107
Income taxes payable................... 128 142 147
------ ------ -------
Total current liabilities............ 345 410 359
------ ------ -------
RELATED-PARTY PAYABLES................... 23 23 23
------ ------ -------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Common stock (Note 5).................. 90 90 90
Additional paid-in capital............. 1,324 1,452 1,536
Accumulated deficit.................... (672) (988) (1,151)
------ ------ -------
Total stockholders' equity........... 742 554 475
------ ------ -------
Total liabilities and stockholders'
equity.............................. $1,110 $ 987 $ 857
====== ====== =======

The accompanying notes to combined financial statements
are an integral part of these balance sheets.

F-121

THE COMBINED KARP ENTITIES

COMBINED STATEMENTS OF OPERATIONS
(In Thousands)

Six Months Six Months
Year Ended Year Ended Year Ended Ended Ended
December 31, December 31, December 31, June 30, June 30,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(Unaudited) (Unaudited)

NET STORE SALES......... $2,342 $2,445 $2,500 $1,144 $1,181
------ ------ ------ ------ ------
OPERATING COSTS:
Food cost of sales.... 614 668 683 336 339
Selling and store
occupancy costs...... 1,421 1,488 1,635 788 744
General and
administrative....... 192 199 238 101 114
Depreciation and
amortization......... 104 127 121 59 62
------ ------ ------ ------ ------
Total operating
costs.............. 2,331 2,482 2,677 1,284 1,259
------ ------ ------ ------ ------
Income (loss) from
operations......... 11 (37) (177) (140) (78)
INTEREST EXPENSE........ (54) (30) (18) (9) (7)
------ ------ ------ ------ ------
Loss before
provision for
income taxes....... (43) (67) (195) (149) (85)
PROVISION FOR INCOME
TAXES.................. (26) (19) (15) (4) (6)
------ ------ ------ ------ ------
NET LOSS................ $ (69) $ (86) $ (210) $ (153) $ (91)
====== ====== ====== ====== ======

The accompanying notes to combined financial statements
are an integral part of these statements.

F-122

THE COMBINED KARP ENTITIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)

Additional Accumulated
Common Stock Paid-In Capital Deficit Total
------------ --------------- ----------- -----

BALANCE, DECEMBER 31, 1994..... $90 $ 398 $ (13) $ 475
Distributions................ -- -- (137) (137)
Net loss..................... -- -- (69) (69)
--- ------ ------- -----
BALANCE, DECEMBER 31, 1995..... 90 398 (219) 269
Distributions................ -- -- (367) (367)
Capital contributions........ -- 926 -- 926
Net loss..................... -- -- (86) (86)
--- ------ ------- -----
BALANCE, DECEMBER 31, 1996..... 90 1,324 (672) 742
Distributions................ -- -- (106) (106)
Capital contributions........ -- 128 -- 128
Net loss..................... -- -- (210) (210)
--- ------ ------- -----
BALANCE, DECEMBER 31, 1997..... 90 1,452 (988) 554
Distributions (unaudited).... -- -- (72) (72)
Capital contributions
(unaudited)................. -- 84 -- 84
Net loss (unaudited)......... -- -- (91) (91)
--- ------ ------- -----
BALANCE, JUNE 30, 1998
(unaudited)................... $90 $1,536 $(1,151) $ 475
=== ====== ======= =====

The accompanying notes to combined financial statements
are an integral part of these statements.

F-123

THE COMBINED KARP ENTITIES

COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)

INCREASE (DECREASE) IN CASH

CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $ (69) $ (86) $(210) $(153) $(91)
Adjustments to
reconcile net loss to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization......... 104 127 121 59 62
Changes in assets and
liabilities:
Related-party
receivables......... (79) 143 -- -- --
Inventories.......... -- -- 3 -- (8)
Prepaid assets....... (5) 5 8 11 3
Deposits............. 1 (11) 5 5 2
Deferred taxes....... (2) (9) (12) (7) (3)
Accounts payable..... 38 (52) 56 25 (32)
Accrued salaries..... -- 17 (3) (15) (10)
Accrued liabilities.. 15 13 (2) (21) (14)
Income taxes
payable............. 13 14 14 3 5
Related-party
payables............ 69 (567) -- -- --
----- ----- ----- ----- ----
Net cash provided by
(used in) operating
activities......... 85 (406) (20) (93) (86)
----- ----- ----- ----- ----
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of property
and equipment......... (13) (111) -- -- (2)
Acquisition of
intangibles........... 4 (20) (5) (5) (2)
Distributions.......... (137) (367) (106) (66) (72)
Additional investment.. -- 926 128 62 84
----- ----- ----- ----- ----
Net cash provided by
(used in) investing
activities......... (146) 428 17 (9) 8
----- ----- ----- ----- ----
NET INCREASE (DECREASE)
IN CASH................ (61) 22 (3) (102) (78)
CASH, beginning of
period................. 218 157 179 179 176
----- ----- ----- ----- ----
CASH, end of period..... $ 157 $ 179 $ 176 $ 77 $ 98
===== ===== ===== ===== ====

The accompanying notes to combined financial statements
are an integral part of these statements.

F-124

THE COMBINED KARP ENTITIES

COMBINED STATEMENTS OF CASH FLOWS--(Continued)

SUPPLEMENTAL DISCLOSURE OF COMBINED CASH FLOW INFORMATION:

Cash paid for interest was approximately $40,000, $18,000, $18,000, $9,000
(unaudited) and $7,000 (unaudited) for the years ended December 31, 1995, 1996
and 1997 and for the six months ended June 30, 1997 and 1998, respectively.

Cash paid for income taxes was approximately $18,000, $10,000, $10,000,
$2,000 (unaudited) and $1,000 (unaudited) for the years ended December 31,
1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998,
respectively.

During the year ended December 31, 1996, related-party payables of Hot White
Plains Cookies, Inc, Hot Roosevelt Cookies, Inc. and Hot Rockaway Cookies of
approximately $364,000, $264,000 and $198,000, respectively, were forgiven and
accounted for as capital contributions to these entities.

During the year ended December 31, 1996 and December 31,1997, related party
receivables of Hot Barton and Northpark Cookies, Inc. and Northpark Cookies,
Inc. of approximately $71,000 and $0 and $120,000 and $4,000, respectively,
were distributed to stockholders.

The accompanying notes to combined financial statements
are an integral part of these statements.

F-125

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS
(Including Notes to Unaudited Periods)

1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

The Combined Karp Entities (the "Company") established operations on the
following dates under the laws of the respective states:

Structure of State of State of
Company Inception date Entity Incorporation Operation
------- ------------------ ------------- ------------- ----------

Hot Barton and Northpark
Cookies, Inc........... August 6, 1981 C-corporation Georgia New Jersey
Northpark Cookies,
Inc.................... October 5, 1981 C-corporation Iowa Iowa
Crossroads Cookies,
Inc.................... December 9, 1981 C-corporation Georgia Oklahoma
Quail Springs Cookies,
Inc.................... April 20, 1982 C-corporation Georgia Oklahoma
Westgate Cookies, Inc... August 30, 1982 S-corporation Texas Texas
Hot White Plains
Cookies, Inc........... September 23, 1992 S-corporation Georgia New York
Hot Roosevelt Cookies,
Inc.................... April 7, 1993 S-corporation Georgia New York
Hot Rockaway Cookies.... April 11, 1996 -- Florida New Jersey

Northpark Cookies, Inc.'s status of incorporation became inactive as of
November 25, 1987. The successor in interest is Hot Barton and Northpark
Cookies, Inc.

The ASK & MSK Family Limited Partnership-II(B), Inc. (the "Partnership") was
incorporated in Florida on April 11, 1996. On this date, the Partnership
acquired Hot Roosevelt Cookies, Inc. and Hot White Plains Cookies, Inc. As
these entities share common control, these acquisitions were accounted for in
a manner similar to a pooling of interests. In addition, on April 11, 1996,
the Partnership invested in the Hot Rockaway Cookies store.

The Company operates retail stores that sell freshly baked cookies and other
food products. The retail stores are franchised from Great American Cookie
Company, Inc. ("GACC").

The entities that make up the Company have various fiscal year ends which
have been recast to December 31 for purposes of these combined financial
statements. These fiscal year ends are as follows:

Company Fiscal Year End
------- ---------------

Hot Barton and Northpark Cookies, Inc....................... July 31
Northpark Cookies, Inc...................................... July 31
Crossroads Cookies, Inc..................................... November 30
Quail Springs Cookies, Inc.................................. November 30
Westgate Cookies, Inc....................................... December 31
Hot White Plains Cookies, Inc............................... December 31
Hot Roosevelt Cookies, Inc.................................. December 31
Hot Rockaway Cookies........................................ December 31

F-126

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

The Company's business follows seasonal trends and is affected by climate and
weather conditions. The Company experiences its highest revenues in the fourth
quarter. Because the stores are located in shopping malls, sales performance is
significantly dependent on the performance of those malls. As a franchisee of
GACC, substantially all of the Entities' sales are derived from products
purchased from GACC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The individuals entities included within the combined financial statements
operate under similar ownership and common control. All significant
intercompany balances and transactions have been eliminated in the combination.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts
payable and related-party payables. The carrying value of cash and accounts
payable reported in the combined balance sheets are considered to approximate
their respective fair values due to the short-term nature of such instruments
and the current interest rate environment. The fair value of related-party
payables at prevailing market rates is estimated to be $25,000 as of December
31, 1996, 1997 and June 30, 1998.

Inventories

Inventories are stated at the lower of cost or market value. Cost is
determined using the FIFO (first-in, first-out) method (see Note 3).

Property and Equipment

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments that extend the
useful lives of existing equipment are capitalized and depreciated. On
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is recognized in the statement of operations.

Intangibles

Intangibles consist primarily of franchise fees and store operating lease
costs paid to GACC. Intangibles are being amortized on a straight-line basis
over the lives of the franchise or lease agreements, which are generally ten
years.

F-127

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company recognizes deferred income tax assets or liabilities for expected
future tax consequences of events that have been recognized in the combined
financial statements or tax returns. Under this method, deferred income tax
assets or liabilities are determined based upon the difference between the
financial and income tax bases of assets and liabilities using enacted tax
rates expected to apply when differences are expected to be settled or
realized.

Revenue Recognition

Revenues generated from the combined stores are recognized at the point of
sale.

Sources of Supply

The Company currently buys a significant portion of their food products and
supplies from GACC and an unrelated supplier. In accordance with the franchise
agreements, the Company must buy its food products from GACC (see Note 6).
Management believes that the Company could obtain its supplies from numerous
other suppliers at comparable prices and terms.

Long-Lived Assets

The Company assesses and measures for impairment of long-lived assets,
including intangibles, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long- Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets be reviewed for impairment when events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
The Company evaluates, at each balance sheet date, whether events and
circumstances have occurred that indicate possible impairment. In accordance
with SFAS No. 121, the Company uses an estimate of future undiscounted net cash
flows of the related asset or group of assets over the remaining life in
measuring whether assets are recoverable. The Company assesses impairment of
long-lived assets at the store level, which management believes is the lowest
level for which there are identifiable cash flows that are independent of other
groups of assets. As of June 30, 1998, the Company does not consider any of its
long-lived assets to be impaired.

Recent Accounting Pronouncements

During the six months ended June 30, 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 130,
"Comprehensive Income", SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" and SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Company does not expect the
implementation of these pronouncements will have a significant impact on its
financial statements.

Interim Combined Financial Statements

The combined financial statements as of and for the six months ended June 30,
1998 and for the six months ended June 30, 1997 are unaudited. In the opinion
of management, these combined financial statements have been presented on the
same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the combined financial position and results of operations for
these periods. These combined interim financial statements are not necessarily
indicative of the results that may be achieved for the full fiscal year.

F-128

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

3. INVENTORIES

The Company's inventories consist of the following as of December 31, 1996
and 1997 and June 30, 1998:

December 31, December 31, June 30,
1996 1997 1998
------------ ------------ -----------
(Unaudited)

Food................................... $38,000 $33,000 $40,000
Beverages.............................. 5,000 6,000 7,000
Supplies............................... 14,000 15,000 15,000
------- ------- -------
$57,000 $54,000 $62,000
======= ======= =======

4. INCOME TAXES

The following four entities are not included in income tax calculations due
to their status as S-corporations or as a business operated within a
partnership; Westgate Cookies, Inc., Hot White Plains Cookies, Inc., Hot
Roosevelt Cookies, Inc. and Hot Rockaway Cookies. Had these entities been
taxable entities, on a pro forma basis, an income tax provision (benefit) of
approximately $22,000, $(27,000), $16,000, $(14,000) and $15,000 would have
been provided for the years ended December 31, 1995, 1996, 1997 and the six
months ended June 30, 1997 and 1998, respectively. Income taxes were provided
for all entities with C-corporation status.

The components of the provision for income taxes for the years ended December
31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998 are as
follows:

December 31, December 31, December 31, June 30, June 30,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(Unaudited) (Unaudited)

Federal:
Current.... $10,000 $13,000 $ 9,000 $ 4,000 $ 3,000
Deferred... (2,000) (8,000) (12,000) (7,000) (3,000)
State:
Current.... 18,000 14,000 18,000 7,000 6,000
------- ------- -------- ------- -------
Total........ $26,000 $19,000 $ 15,000 $ 4,000 $ 6,000
======= ======= ======== ======= =======

The differences between income taxes at the statutory income tax rate and
income taxes reported in the statements of operations are the result of
permanent differences.

The significant components of the Entities' deferred income tax assets and
liabilities at December 31, 1996 and 1997 and June 30, 1998 are as follows:

December 31, December 31, June 30,
1996 1997 1998
------------ ------------ -----------
(Unaudited)

Deferred income tax assets:
Accumulated depreciation........... $5,000 $ 9,000 $11,000
Net operating loss carryforwards... 3,000 8,000 9,000
Capital losses in excess of capital
gains............................. -- 3,000 3,000
------ ------- -------
Net deferred income tax assets... $8,000 $20,000 $23,000
====== ======= =======

F-129

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

5. STOCKHOLDERS' EQUITY

Share Data

The individual entities had the following assigned par value, authorized and
outstanding shares at December 31, 1996 and 1997, and June 30, 1998:

Shares Shares
Entity Par Value Authorized Outstanding
------ --------- ---------- -----------

Hot Barton and Northpark Cookies, Inc. ... $0.10 1,000 200
Northpark Cookies, Inc. .................. 0.50 1,000,000 180,000
Crossroads Cookies, Inc. ................. 0.10 2,000 1,000
Quail Springs Cookies, Inc. .............. 0.10 1,000 500
Westgate Cookies, Inc. ................... 0.10 1,000 1,000
Hot White Plains Cookies, Inc. ........... 0.01 10,000 500
Hot Roosevelt Cookies, Inc. .............. 0.01 10,000 500

Capital Contributions

The individual entities received the following capital contributions:

Year Ended Year Ended Six Months
December 31, December 31, Ended
Entity 1996 1997 June 30, 1998
------ ------------ ------------ -------------

Hot Barton and Northpark Cookies,
Inc. ............................ $ -- $ 7,000 $ --
Northpark Cookies, Inc. .......... -- -- 7,000
Crossroads Cookies, Inc. ......... -- -- --
Quail Springs Cookies, Inc. ...... -- -- --
Westgate Cookies, Inc. ........... -- -- --
Hot White Plains Cookies, Inc. ... 428,000 46,000 15,000
Hot Roosevelt Cookies, Inc. ...... 300,000 27,000 12,000
Hot Rockaway Cookies.............. 198,000 48,000 50,000
-------- -------- -------
$926,000 $128,000 $84,000
======== ======== =======

Distributions

The individual entities made the following distributions to stockholders:

Year Ended Year Ended Six Months
December 31, December 31, Ended
Entity 1996 1997 June 30, 1998
------ ------------ ------------ -------------

Hot Barton and Northpark Cookies,
Inc. ............................ $ (71,000) $ -- $ --
Northpark Cookies, Inc. .......... (120,000) (4,000) --
Crossroads Cookies, Inc. ......... (24,000) (3,000) --
Quail Springs Cookies, Inc. ...... (45,000) (45,000) (30,000)
Westgate Cookies, Inc. ........... (107,000) (54,000) (42,000)
Hot White Plains Cookies, Inc. ... -- -- --
Hot Roosevelt Cookies, Inc. ...... -- -- --
Hot Rockaway Cookies.............. -- -- --
--------- --------- --------
$(367,000) $(106,000) $(72,000)
========= ========= ========

F-130

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

6. RELATED-PARTY TRANSACTIONS

Related-party Operating Leases

Year Ending December 31,
------------------------

1998............................................................ $ 370,000
1999............................................................ 347,000
2000............................................................ 240,000
2001............................................................ 222,000
2002............................................................ 110,000
Thereafter...................................................... 152,000
----------
$1,441,000
==========

Each of these leases provides for contingent rentals based upon gross
revenues. Total rental expense, which has been accounted for on a straight-line
basis for escalating leases included above, for the years ended December 31,
1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998 was
approximately $457,000, $486,000, $553,000, $276,000 (unaudited) and $225,000
(unaudited), respectively.

Franchise Royalties

The Company pays GACC franchise royalties in connection with its franchise
agreements with GACC. Franchise royalties are calculated as 7% of gross
revenues (as defined in the individual agreements). During the years ended
December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and
1998, the Company incurred approximately $164,000, $165,000, $175,000, $80,000
(unaudited) and $83,000 (unaudited), respectively, for franchise royalties,
which are included as part of selling and store occupancy costs in the
accompanying combined statements of operations. As of December 31, 1996 and
1997 and June 30, 1998, approximately $21,000, $21,000 and $14,000 (unaudited),
respectively, in franchise royalties were payable to GACC.

Inventory

The Company, in connection with its franchise agreements with GACC, purchases
the majority of its inventory from GACC. During the years ended December 31,
1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998, the
Company purchased approximately $372,000, $406,000, $425,000, $190,000
(unaudited) and $178,000 (unaudited), respectively, in inventory from GACC. As
of December 31, 1996 and 1997 and June 30, 1998, approximately $14,000, $24,000
and $8,000 (unaudited), respectively, were payable to GACC related to inventory
purchases.

Related-party Payables

The related-party payables of $23,000, $23,000 and $23,000 (unaudited) as of
December 31, 1996, December 31, 1997 and June 30, 1998 represent loans from
stockholders to Hot Barton and Northpark Cookies, Inc. These loans are non-
interest bearing and have no specific payment terms or maturity dates.

F-131

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

Management Fees

Each entity was responsible for paying management fees to a company owned by
a related party. For the years ended December 31, 1995, 1996 and 1997 and for
the six months ended June 30, 1997 and 1998, the Entities paid approximately
$24,000, $60,000, $80,000, $40,000 (unaudited) and $40,000 (unaudited),
respectively, in management fees. As of December 31, 1996 and 1997 and June 30,
1998 approximately $5,000, $7,000 and $7,000 (unaudited), respectively, were
payable to a related party for management fees.

7. SUBSEQUENT EVENT

On July 29, 1998, the Entities entered into individual Asset Purchase
Agreements with Mrs. Fields' Original Cookies, Inc. In accordance with these
agreements, Mrs. Fields' Original Cookies, Inc. purchased the following assets
of the entities: leasehold rights and interests, tangible personal property,
such as inventories and property and equipment, certain agreements between the
sellers and GACC, customer and vendor lists, recipes and production techniques,
store petty cash, deposits and prepaid expenses. On September 9, 1998, the
agreements were consummated.

F-132

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Partners
The Cookie Conglomerate, Inc., Cookie Conglomerate, L.L.P.,
and The Cookie Conglomerate of Carolina Place, Inc.

We have audited the accompanying combined balance sheets of THE COOKIE
CONGLOMERATE, INC. AND AFFILIATES (The Cookie Conglomerate, L.L.P. and The
Cookie Conglomerate of Carolina Place, Inc.) as of December 31, 1997 and 1996
and the related combined statements of operations, changes in equity [deficit]
and cash flows for the years then ended. These financial statements are the
responsibility of the Companies' and Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of THE COOKIE
CONGLOMERATE, INC. AND AFFILIATES as of December 31, 1997 and 1996 and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.

Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia

November 12, 1998

F-133

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED BALANCE SHEETS

DECEMBER 31,

ASSETS

1997 1996
----------- ----------

Current assets
- --------------
Cash................................................. $ 227,385 $ 184,963
Advances............................................. 0 0
Inventories.......................................... 52,029 61,909
Prepaid expenses..................................... 26,993 33,064
----------- ----------
Total current assets................................. 306,407 279,936
----------- ----------

Property and equipment, at cost
- -------------------------------
Equipment............................................ 720,050 688,156
Fixtures............................................. 174,103 174,103
Leasehold improvements............................... 679,892 679,892
----------- ----------
1,574,045 1,542,151
Accumulated depreciation............................. (1,099,171) ( 938,942)
----------- ----------
474,874 603,209
----------- ----------

Other assets
- ------------
Deposits............................................. 34,450 34,450
Franchise costs, net of accumulated amortization of
$61,456 for 1997 and $49,122 for 1996............... 73,544 85,936
Organizational costs, net of accumulated amortization
of $4,004 for 1997 and $6,832 for 1996.............. 1,854 3,026
Intangible assets, net of accumulated amortization of
$13,394 for 1997 and $9,474 for 1996................ 45,406 49,326
Loan costs, net of accumulated amortization of $6,999
for 1997 and $1,729 for 1996........................ 4,708 9,978
----------- ----------
159,962 182,716
----------- ----------
$ 941,243 $1,065,861
=========== ==========

See auditors' report and accompanying notes

F-134

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED BALANCE SHEETS

DECEMBER 31,

LIABILITIES AND EQUITY

1997 1996
--------- ----------

Current liabilities
- -------------------
Accounts payable....................................... $ 156,264 $ 191,219
Accrued expenses....................................... 160,482 139,164
Line-of-credit......................................... 40,000 80,000
Current portion of long-term debt...................... 155,107 176,098
--------- ----------
Total current liabilities............................. 511,853 586,481
--------- ----------

Other liabilities
- -----------------
Long-term debt, net of current portion................. 108,671 268,664
Deferred rent payable.................................. 81,998 84,182
--------- ----------
190,669 352,846
--------- ----------

Equity (deficit)
- ----------------
Common stock, $1 par value, 20,000 shares of Class A
(voting) authorized and 10,000 shares of Class B
(nonvoting) authorized; 2,357 shares of Class A issued
and outstanding....................................... 2,357 2,357
Additional paid-in capital............................. 473,643 473,643
Accumulated deficit.................................... (239,117) (330,174)
Partner capital (deficit).............................. 1,838 (19,292)
--------- ----------
238,721 126,534
--------- ----------
$ 941,243 $1,065,861
========= ==========

See auditors' report and accompanying notes

F-135

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,

1997 1996
---------- ----------

Sales.................................................... $4,202,799 $3,651,231
Food cost of sales....................................... 1,097,277 1,042,314
---------- ----------
Gross profit.......................................... 3,105,522 2,608,917
---------- ----------
Selling, general, and administrative expenses............ 2,787,260 2,519,005
---------- ----------
Interest expense......................................... 40,075 56,762
---------- ----------
Net income............................................ $ 278,187 $ 33,150
========== ==========

See auditors' report and accompanying notes

F-136

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Additional Partners'
Common Paid-In Accumulated Capital
Stock Capital Deficit (Deficit) Total
------ ---------- ----------- --------- ---------

Balances,
December 31, 1995.......... $2,357 $473,643 $(255,382) $ (60,217) $ 160,401
Net income (loss)........... (71,792) 104,942 33,150
Dividends paid.............. (3,000) (64,017) (67,017)
------ -------- --------- --------- ---------
Balances,
December 31, 1996.......... 2,357 473,643 (330,174) (19,292) 126,534
Net income.................. 91,057 187,130 278,187
Dividends paid.............. 0 (166,000) (166,000)
------ -------- --------- --------- ---------
Balances,
December 31, 1997.......... $2,357 $473,643 $(239,117) $ 1,838 $ 238,721
====== ======== ========= ========= =========

See auditors' report and accompanying notes

F-137

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

Increase (Decrease) In Cash

1997 1996
--------- ---------

Cash flows from operating activities
Net income............................................... $ 278,187 $ 33,150
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation........................................... 160,229 198,535
Amortization........................................... 22,754 25,882
Changes in assets and liabilities
Decrease in advances.................................. 0 1,600
Decrease in inventories............................... 9,880 10,915
Decrease (Increase) in prepaid expenses............... 6,071 (6,793)
Decrease in deposits.................................. 0 8,767
Decrease in accounts payable.......................... (34,955) (56,024)
Increase in accrued expenses.......................... 21,318 34,500
Increase (Decrease) in deferred rent payable.......... (2,184) 16,830
--------- ---------
Total adjustments................................... 183,113 234,212
--------- ---------
Net cash provided by operating activities............... 461,300 267,362
--------- ---------

Cash flows from investing activities
Acquisition of property and equipment.................... (31,894) (87,109)
Franchise costs reimbursed............................... 0 8,000
Loan costs incurred...................................... 0 (9,462)
--------- ---------
Net cash used by investing activities................... (31,894) (88,571)
--------- ---------

Cash flows from financing activities
Net proceeds from (payments on) line-of-credit........... (40,000) 55,000
Payments on long-term debt............................... (180,984) (161,252)
Dividends paid........................................... (166,000) (67,017)
--------- ---------
Net cash used by financing activities................... (386,984) (173,269)
--------- ---------
Net increase in cash.............................. 42,422 5,522
Cash, beginning of year................................... 184,963 179,441
--------- ---------
Cash, end of year................................. $ 227,385 $ 184,963
--------- ---------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the years for
Interest................................................. $ 36,616 $ 55,347

See auditors' report and accompanying notes

F-138

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Combination Policy

The accompanying combined financial statements include the accounts of The
Cookie Conglomerate Inc., The Cookie Conglomerate, L.L.P., and The Cookie
Conglomerate of Carolina Place, Inc.

Intercompany transactions and balances have been eliminated in the
combination.

Nature of Operations

The Companies and Partnership operate retail cookie stores in North Carolina,
South Carolina, and Ohio. The stores are franchised from Great American Cookie
Company, Inc., now a subsidiary of Mrs. Fields' Original Cookies, Inc.

Inventories

Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out method.

Property and Equipment

Property and equipment is carried at cost. Expenditures for maintenance and
repairs are expensed currently, while renewals and betterments that materially
extend the life of an asset are capitalized. The cost of assets sold, retired,
or otherwise disposed of, and the related allowance for depreciation, are
eliminated from the accounts, and any resulting gain or loss is recognized.

Depreciation is provided using both the straight-line and accelerated methods
over the estimated useful lives of the assets which are as follows:

Equipment.......................................... 5 years
Fixtures........................................... 7 years
Leasehold improvements............................. Life of related lease

Franchise Costs

Franchise costs represent amounts paid to open the stores and for operating
under the name of Great American Cookie Company, Inc., now a subsidiary of Mrs.
Fields' Original Cookies, Inc. These costs are being amortized over eight to
fifteen years using the straight-line method of amortization.

Organizational Costs

Organizational costs are carried at cost. Amortization is provided using the
straight-line method over a period of sixty months.

Intangible Assets:

Intangible assets include goodwill and restrictive convenant fees. Goodwill
represents the excess of the cost of the Carolina Place franchise over the fair
value of its net assets at the date of acquisition. Restrictive convenant fees
represent the costs of a non-compete agreement with the previous owners of the
Carolina Place franchise. These assets are being amortized on the straight-line
method over fifteen years.

Loan Costs

Loan costs represent bank loan and closing fees incurred in connection with
the procurement of long-term debt. These costs are being amortized over the
terms of the related loan agreements, which are two to five years.

F-139

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENT--(Continued)

DECEMBER 31, 1997 AND 1996

A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Cookie Conglomerate, Inc. and The Cookie Conglomerate of Carolina Place,
Inc. elected by unanimous consent of its stockholders to be taxed under the
provisions of subchapter S of the Internal Revenue Code. Under those
provisions, the Companies do not pay corporate income taxes on their taxable
income. Instead, the stockholders are liable for individual income taxes on
their respective shares of the Company's taxable income.

The Cookie Conglomerate, L.L.P. is also not subject to income tax. Income is
taxed directly to its partners. On December 30, 1997, the partners elected to
become a limited liability partnership pursuant to the Georgia Uniform
Partnership Act.

Compensated Absences

Employees of the Companies and Partnership are entitled to paid vacation,
paid sick days and personal days off, depending on job classification, length
of service, and other factors. It is impractical to estimate the amount of
compensation for future absences, and accordingly, no liability has been
recorded in the accompanying financial statements. The Companies' and
Partnership's policy is to recognize the costs of compensated absences when
actually paid to employees.

Estimates

The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.

B.LINES-OF-CREDIT

A summary of the lines-of-credit is as follows:

Collateral 1997 1996
---------- ------- -------

Riverside Bank -- $100,000 Guarantee of Ronald Eichel,
note payable dated Alan Kuehn, and Cookie
September 30, 1996 with Conglomerate, Inc.
interest payable monthly at
prime plus 1%. Principal
payable at maturity on
September 30, 1997. $ 0 $80,000

Riverside Bank -- $100,000 Inventory, accounts
note payable dated November receivable,
4, 1997 with interest equipment, general
payable monthly at prime intangibles,
plus 1%. Principal payable corporate guarantee of Cookie
at maturity on November 4, Conglomerate Partnership,
1998. personal guarantees of Ronald
Eichel, Nancy Eichel, and
Alan
Kuehn. 40,000 0
------- -------
$40,000 $80,000
======= =======

F-140

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS--(Continued)

DECEMBER 31, 1997 AND 1996

C.LONG-TERM DEBT

Long-term debt consists of the following at December 31:

Collateral 1997 1996
---------- -------- --------

Tony Hege - $160,000 note Notes and accounts
payable dated July 18, receivable,
1994. Principal payments inventory, fixtures and
of $1,905 plus interest equipment.
at 9% per annum payable
monthly beginning August
10, 1994 until July 10,
1998 when remaining
principal due. $ 77,778 $104,762

Alan Kuehn (stockholder)-- Notes and accounts
$20,000 note payable at receivable,
9%. Interest only payable inventory, fixtures and
through December of 1995. equipment.
Principal payments of
$417 plus interest due
monthly through July 10,
1998 when remaining
principal due. Interest
expense incurred for each
year totals $3,600. 20,000 20,000

Ron Eichel (stockholder)-- Notes and accounts
$20,000 note payable at receivable,
9%. Interest only payable inventory, fixtures and
through December of 1995. equipment.
Principal payments of
$417 plus interest due
monthly through July 10,
1998 when remaining
principal due. Interest
expense incurred for each
year totals $3,600. 20,000 20,000

Riverside Bank--$106,222 Inventory, equipment,
note payable dated accounts
September 30, 1996 with receivable, general
50 monthly installment intangibles.
payments of principal and Personal guarantees of Ronald
interest of $2,574 Eichel, Nanci Eichel, Alan
beginning on October 30, Kuehn
1996. Interest at 9.25%. and corporate guarantee of
Matures November 30, Cookie
2000. Conglomerate Partnership. 76,000 100,000

Riverside Bank--$196,747 Inventory, equipment,
note payable dated accounts
September 30, 1996 with receivable, general
25 monthly installment intangibles.
payments beginning Personal guarantees of Ronald
October 30, 1996 of Eichel and Alan Kuehn
principal of $7,870 plus and corporate guarantee of
interest at prime plus Cookie
1%. Matures October 30, Conglomerate Partnership.
1998. 70,000 173,000

Riverside Bank--$30,837 Inventory, accounts
note payable dated receiveable,
September 30, 1996 with general intangibles.
25 monthly installment Corporate
payments beginning guarantee of Cookie
October 30, 1996 of Conglomerate
principal of $1,233 plus partnership, personal
interest at 9.25%. guarantees
Matures October 30, 1998. of Ronald Eichel, Nanci
Eichel and
Alan Kuehn. 0 27,000
-------- --------
263,778 444,762
Less: Current maturities 155,107 176,098
-------- --------
$108,671 $268,664
======== ========

F-141

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS--(Continued)

DECEMBER 31, 1997 AND 1996

C.LONG-TERM DEBT (Continued)

Following are maturities of long-term debt for each of the next five years:

December 31,
------------

1998............................................................... $155,107
1999............................................................... 49,907
2000............................................................... 49,557
2001............................................................... 9,207
2002............................................................... 0
--------
$263,778
========

D.COMMITMENTS

The Cookie Conglomerate, Inc. and Affiliates are the lessee of store space in
various malls under sublease arrangements with Great American Cookie Company,
Inc., now a subsidiary of Mrs. Fields' Original Cookies, Inc. Minimum future
lease payments under non-cancelable operating leases having remaining terms in
excess of one year as of December 31, 1997 for each of the next five years and
in aggregate are:

December 31,
------------

1998............................................................ $ 481,036
1999............................................................ 454,143
2000............................................................ 297,246
2001............................................................ 237,789
2002............................................................ 195,536
Thereafter...................................................... 353,804
----------
$2,019,554
==========

Additional rental payments are contingent on sales exceeding certain
breakpoint levels specified in each lease. Rent expense totaled $640,870 for
1997 and $620,355 for 1996.

Franchise agreements provide for the Companies and Partnership to pay annual
service fees equal to 7% of gross sales. The service fees due the franchiser in
connection with these agreements are due on a monthly basis. The franchise
agreements end simultaneously with the termination of the lease of the premises
in which the cookie facilities are located.

E.SUBSEQUENT EVENT

The Cookie Conglomerate of Carolina Place, Inc. effectively merged with The
Cookie Conglomerate, Inc. on January 1, 1998.

The Cookie Conglomerate, Inc. and The Cookie Conglomerate, L.L.P. entered
into an asset purchase agreement on October 5, 1998 with Mrs. Fields' Original
Cookies, Inc. to sell substantially all the assets of the Company and
Partnership.

F-142

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED BALANCE SHEET

SEPTEMBER 30, 1998

(Unaudited)

ASSETS

September 30,
1998
-------------

Current assets
- --------------
Cash............................................................ $135,749
Inventories..................................................... 71,635
Other current assets............................................ 2,011
--------
Total current assets........................................... 209,395
Property and equipment, net...................................... 435,604
Intangibles, net................................................. 111,490
Other assets..................................................... 34,451
--------
$790,940
========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
- -------------------

Accounts payable................................................ $101,243
Accrued expenses................................................ 91,213
Current portion of long-term debt............................... 121,621
--------
Total current liabilities...................................... 314,077

Other liabilities
- -----------------

Long-term debt, net of current portion.......................... 29,366
--------
Total liabilities.............................................. 343,443
--------

Stockholders' equity
- --------------------

Common stock, $1 par value, 20,000 shares of Class A [voting]
authorized and 10,000 Shares of Class B [nonvoting] authorized;
2,357 shares of Class A issued and outstanding................. 2,357
Additional paid-in capital...................................... 473,643
Partner capital................................................. 23,629
Accumulated Deficit............................................. (52,132)
--------
447,497
--------
$790,940
========

See footnote

F-143

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

1998 1997
---------- ----------

Sales...................................................... $2,906,499 $2,926,659
Cost of sales.............................................. 2,313,079 2,388,393
---------- ----------
Gross profit............................................. 593,420 538,266
Selling, general, and administrative expenses.............. 389,462 380,901
Interest expense........................................... 16,972 27,649
---------- ----------
Net income............................................... $ 186,986 $ 129,716
========== ==========

See footnote

F-144

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

Increase (Decrease) In Cash

1998 1997
--------- ---------

Cash flows from operating activities
- ------------------------------------
Net income.............................................. $ 186,985 $ 129,716
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation & amortization............................ 117,584 125,688
Changes in assets and liabilities
Increase (decrease) in inventories.................... (19,606) 7,908
Decrease in prepaid expenses.......................... 24,981 28,124
Decrease in accounts payable & accrued expenses....... (246,288) (212,000)
--------- ---------
Total adjustments.................................... (123,329) (50,280)
--------- ---------
Net cash provided by operating activities........... 63,656 79,436
--------- ---------
Cash flows from investing activities
- ------------------------------------
Acquisition of equipment................................ (64,292) (25,003)
--------- ---------
Net cash used by investing activities.................. (64,292) (25,003)
--------- ---------
Cash flows from financing activities
- ------------------------------------
Dividends paid.......................................... (43,906) (43,365)
Payments on long-term debt and line-of-credit........... (47,095) (76,854)
--------- ---------
Net cash used by financing activities.................. (91,001) (120,219)
--------- ---------
Net decrease in cash.................................. (91,637) (65,786)
Cash, beginning of period............................... 227,385 184,963
--------- ---------
Cash, end of period................................... $ 135,748 $ 119,177
========= =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -------------------------------------------------

1998 1997
--------- ---------

Cash paid during the years for interest................. $ 16,972 $ 27,649

See footnote

F-145

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

(Unaudited)

(1)BASIS OF PRESENTATION

The accompanying interim unaudited combined financial statements have been
prepared by the Company in accordance with the rules and regulations of the
Securities and Exchange Commission, and accordingly, do not include all of the
information and footnotes required by generally accepted accounting principles.
In the opinion of management, these combined financial statements reflect all
adjustments, which consist only of normal recurring adjustments, which are
necessary to present fairly the Company's financial position as of September
30, 1998 and results of operations and cash flows for the nine months ended
September 30, 1998 and September 30, 1997. These interim unaudited combined
financial statements should be read in conjunction with the audited combined
financial statements and notes thereto included in this filing.

F-146

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors

Pretzelmaker Holdings, Inc. and Subsidiaries

Denver, Colorado

We have audited the accompanying consolidated balance sheet of Pretzelmaker
Holdings, Inc. and Subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pretzelmaker
Holdings, Inc. and Subsidiaries at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, during 1997
the Company's subsidiary became non-compliant with the covenants under its bank
debt agreements and the lender has not agreed to provide waivers. Accordingly,
such debt has been reclassified as a current liability since, due to the
covenant default, the lender has the right to accelerate the repayment of the
loans.

AJ. ROBBINS, PC

CERTIFIED PUBLIC ACCOUNTANTS

AND CONSULTANTS

Denver, Colorado

December 11, 1998

F-147

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors

Pretzelmaker Holdings, Inc. and Subsidiaries

Denver, Colorado

We have audited the accompanying consolidated balance sheet of Pretzelmaker
Holdings, Inc. and Subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period from inception (February 24, 1995) to December 31, 1995 and for the
year ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pretzelmaker
Holdings, Inc. and Subsidiaries at December 31, 1996, and the results of its
operations and its cash flows for the period from inception (February 24, 1995)
to December 31, 1995 and for the year ended December 31, 1996 in conformity
with generally accepted accounting principles.

BDO SEIDMAN, LLP

Denver, Colorado

February 7, 1997

F-148

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

(Substantially all pledged)

December 31,
--------------------- September 30,
1996 1997 1998
---------- ---------- -------------
(Unaudited)

CURRENT ASSETS:
Cash...................................... $ 95,914 $ 115,805 $ 216,261
Accounts receivable, net of allowance for
doubtful
accounts of $10,000, $10,000 and
$45,000.................................. 485,002 642,821 510,904
Due from affiliates....................... 77,904 46,129 24,809
Refundable income taxes................... -- 56,524 --
Inventories............................... 31,583 74,226 47,400
Prepaid expenses and supplies............. 14,126 237 22,677
---------- ---------- ----------
Total Current Assets.................... 704,529 935,742 822,051
---------- ---------- ----------
PROPERTY AND EQUIPMENT:
Store fixtures and equipment.............. 719,509 872,864 646,598
Leasehold improvements.................... 336,301 416,631 267,233
Computer equipment........................ 54,346 71,761 70,811
Furniture and fixtures.................... 54,264 54,134 34,959
---------- ---------- ----------
1,164,420 1,415,390 1,019,601
Less accumulated depreciation and
amortization............................. 150,336 341,523 453,193
---------- ---------- ----------
Net Property and Equipment................ 1,014,084 1,073,867 566,408
---------- ---------- ----------
OTHER ASSETS:
Intangible assets, net of accumulated
amortization............................. 1,414,628 1,258,470 1,141,351
Deferred tax asset........................ 62,000 62,000 62,000
Other assets.............................. 122,762 46,880 62,533
Restricted cash........................... -- 64,575 59,112
---------- ---------- ----------
Total Other Assets...................... 1,599,390 1,431,925 1,324,996
---------- ---------- ----------
$3,318,003 $3,441,534 $2,713,455
========== ========== ==========

See accompanying notes to consolidated financial statements

F-149

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

December 31,
---------------------- September 30,
1996 1997 1998
---------- ---------- -------------
(Unaudited)

CURRENT LIABILITIES:
Bank debt............................... $ -- $ 732,916 $ 443,742
9% Notes payable in 1998................ -- 215,587 38,500
Accounts payable........................ 367,904 461,124 330,541
Accruals and other payables............. 47,810 138,065 185,213
Income taxes payable.................... 70,000 23,449 --
Deferred initial franchise fees......... 357,760 151,500 214,950
Current maturities of long-term debt.... 151,797 45,647 49,141
Current portion of non-compete
agreements............................. 130,416 151,418 168,082
---------- ---------- ----------
Total Current Liabilities............. 1,125,687 1,919,706 1,430,169
---------- ---------- ----------
LONG-TERM OBLIGATIONS:
Long-term debt, less current
maturities............................. 288,639 237,130 180,555
Unsecured promissory notes.............. 534,000 540,000 540,000
Non-compete agreements payable.......... 327,221 175,803 --
Deferred revenues....................... -- -- 180,906
---------- ---------- ----------
Total Liabilities..................... 2,275,547 2,872,639 2,331,630
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
(Note 7)
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; shares
authorized 1,000,000;
shares issued and outstanding 135,155.. 135 135 135
Additional paid-in capital.............. 1,070,814 1,070,814 1,070,814
Accumulated deficit..................... (28,493) (502,054) (689,124)
---------- ---------- ----------
Total Stockholders' Equity............ 1,042,456 568,895 381,825
---------- ---------- ----------
$3,318,003 $3,441,534 $2,713,455
========== ========== ==========

See accompanying notes to consolidated financial statements.

F-150

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

February 24 Years Ended December Nine Months Ended
(Inception) to 31, September 30,
December 31, --------------------- -----------------------
1995 1996 1997 1997 1998
-------------- ---------- ---------- ----------- ----------
(Unaudited) (Unaudited)

REVENUES:
Franchising............ $ 706,410 $1,663,846 $2,026,385 $1,415,632 $1,538,486
Net company-owned store
sales................. 254,124 1,061,889 1,818,919 1,222,149 1,038,775
Initial franchise
fees.................. 435,988 893,099 778,294 593,285 186,202
Product and equipment
revenue 329,523 1,795,262 1,441,815 1,322,613 598,068
---------- ---------- ---------- ---------- ----------
Total Revenues........ 1,726,045 5,414,096 6,065,413 4,553,679 3,361,531
---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
General and
administrative
expenses.............. 1,088,763 2,588,832 2,685,646 2,007,944 1,546,513
Company-owned stores
expenses.............. 275,163 1,104,908 1,815,775 1,370,404 992,336
Product and equipment
costs................. 209,910 1,173,866 921,131 895,829 121,254
Losses on store
closings and asset
dispositions.......... -- -- 340,491 153,611 108,858
Litigation settlement.. -- -- 148,702 148,702 --
Depreciation and
amortization.......... 156,382 291,862 402,693 288,566 627,337
Interest expense....... 89,247 157,242 224,536 171,316 152,303
---------- ---------- ---------- ---------- ----------
Total Costs and
Expenses............. 1,819,465 5,316,710 6,538,974 5,036,372 3,548,601
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
TAXES ON INCOME (93,420) 97,386 (473,561) (482,693) (187,070)
TAXES ON INCOME -- 32,459 -- -- --
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (93,420) $ 64,927 $ (473,561) $ (482,693) $ (187,070)
========== ========== ========== ========== ==========

See accompanying notes to consolidated financial statements

F-151

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock Additional
-------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------- ------ ---------- ----------- ----------

Balances at February 24,
1995 (Inception)........... -- $-- $ -- $ -- $ --
Issuance of Capital Stock.. 135,155 135 1,070,814 -- 1,070,949
Net loss for the period.... -- -- -- (93,420) (93,420)
------- ---- ---------- --------- ----------
Balances at December 31,
1995....................... 135,155 135 1,070,814 (93,420) 977,529
Net income for the year.... -- -- -- 64,927 64,927
------- ---- ---------- --------- ----------
Balances at December 31,
1996....................... 135,155 135 1,070,814 (28,493) 1,042,456
Net loss for the year...... -- -- -- (473,561) (473,561)
------- ---- ---------- --------- ----------
Balances at December 31,
1997....................... 135,155 135 1,070,814 (502,054) 568,895
Net loss for the period
(unaudited)............... -- -- -- (187,070) (187,070)
------- ---- ---------- --------- ----------
Balances at September 30,
1998 (unaudited)........... 135,155 $135 $1,070,814 $(689,124) $ 381,825
======= ==== ========== ========= ==========

See accompanying notes to consolidated financial statements

F-152

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

February 24, Years Ended Nine Months Ended
(Inception) to December 31, September 30,
December 31, -------------------- ----------------------
1995 1996 1997 1997 1998
-------------- --------- --------- ----------- ----------
(Unaudited) (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...... $ (93,420) $ 64,927 $(473,561) $(482,693) $(187,070)
Adjustments to
reconcile net income
(loss)
to net cash provided
by (used in)
operating activities:
Depreciation and amor-
tization............. 156,382 291,862 402,693 288,566 627,337
Loss on disposal of
equipment............ -- -- 108,890 6,795 (76,601)
Interest accretion.... 73,637 69,974 51,884 38,904 23,161
Deferred revenues..... -- -- -- -- 180,906
Deferred income tax-
es................... (22,000) (40,000) -- -- --
Accounts receivable
allowance............ 5,000 5,000 -- -- 35,000
Changes in operating
assets and
liabilities:
Accounts receivable.. (172,836) (211,469) (81,319) (52,693) 71,917
Refundable income
taxes............... (23,000) 23,000 (56,524) -- 56,524
Inventories.......... (11,254) (18,779) (42,643) (60,727) 26,826
Due from affiliates.. -- (77,904) 31,775 51,565 21,320
Prepaid expenses and
supplies............ (14,126) -- 13,889 (24,722) (22,440)
Accounts payable..... 147,000 184,788 72,520 255,828 (130,583)
Accruals and other
payables............ 62,995 (86,315) 110,955 52,476 23,699
Income taxes pay-
able................ -- 70,000 (46,551) (70,000) --
Deferred initial
franchise fees...... 90,679 16,561 (206,261) (147,910) 63,450
--------- --------- --------- --------- ---------
Net Cash Provided by
(Used in) Operating
Activities............ 199,057 291,645 (114,253) (144,611) 713,446
--------- --------- --------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment......... (445,612) (665,948) (278,529) (161,209) (75,296)
Proceeds from sale of
property and
equipment............. -- -- 199,564 191,064 166,361
Purchase of business,
net of cash acquired.. (333,784) -- -- -- --
Other assets........... (63,003) (70,451) 80,335 49,972 (7,876)
Restricted cash........ -- -- (64,575) (69,560) 5,463
--------- --------- --------- --------- ---------
Net Cash Provided by
(Used in) Investing
Activities............ (842,399) (736,399) (63,205) 10,267 88,652
--------- --------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of capital stock...... 795,000 -- -- -- --
Proceeds from notes
payable............... 399,000 593,878 518,426 406,728 --
Principal payments on
notes payable......... -- (49,727) (128,928) (84,804) (466,261)
Principal payments on
non-compete
agreements............ (360,000) (182,300) (182,300) (182,300) (182,300)
Principal payments on
capital lease
obligations........... (3,165) (8,676) (9,849) (3,830) (53,081)
--------- --------- --------- --------- ---------
Net Cash Provided by
(Used in) Financing
Activities............ 830,835 353,175 197,349 135,794 (701,642)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE)
IN CASH................ 187,493 (91,579) 19,891 1,450 100,456
CASH BALANCE, beginning
of period.............. -- 187,493 95,914 95,914 115,805
--------- --------- --------- --------- ---------
CASH BALANCE, end of pe-
riod................... $ 187,493 $ 95,914 $ 115,805 $ 97,364 $ 216,261
========= ========= ========= ========= =========

See accompanying notes to consolidated financial statements

F-153

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

Pretzelmaker Holdings, Inc. and Subsidiaries (the Company), was incorporated
on February 24, 1995 and acquired all the issued and outstanding common stock
of Pretzelmaker, Inc. (Pretzelmaker) on March 28, 1995. Pretzelmaker holds
legal title to certain trademarks and recipes for specialty bakery products.
Pretzelmaker licenses use of the trademarks and recipes to qualified third
parties for the establishment and operation of Pretzelmaker stores. In
connection with these licensing activities, Pretzelmaker will require third-
party-licensees to use certain business formats, systems, methods, procedures,
designs, layouts, specifications, tradenames and trademarks. There are licensed
locations located throughout the United States and Canada, as well as Korea.
Pretzelmaker also operates company-owned stores and sports venues for the sale
of its bakery products.

On September 26, 1996, Pretzelmaker Canada, Inc. (Canada) was incorporated.
Pretzelmaker owns all the issued and outstanding stock of Canada. Canada has a
master franchise agreement with Pretzelmaker which covers all locations in
Canada.

Basis of Presentation

The Consolidated financial statements include the accounts of the Company,
Pretzelmaker and Canada, its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The acquisition of
Pretzelmaker has been accounted for as a purchase and accordingly these
consolidated financial statements include the results of Pretzelmaker from the
date of acquisition forward.

Unaudited Information

The accompanying consolidated financial statements as of September 30, 1998
and for the nine months ended September 30, 1997 and 1998 are unaudited and
have been prepared on a substantially equivalent basis with that of the annual
consolidated financial statements. In the opinion of management, the unaudited
information contains all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position and results of operations as of September 30, 1998 and for such
periods.

Use of Estimates

Financial Instruments and Credit Risk Concentration

Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash and accounts receivable. The Company places
its cash in what it believes to be highly rated financial institutions. The
balance in each cash account maintained in the United States is insured by the
Federal Deposit Insurance Corporation up to $100,000. From time to time,
balances in these accounts may exceed the insured limits.

F-154

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations of credit risk with respect to accounts receivable are limited
due to a broad franchisee base and generally short payment terms.

Cash and Equivalents

For the purposes of the statement of cash flows, the Company considers cash
and all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.

Inventories

Inventories consisting of food products, ovens, belts and promotional
materials are stated at the lower of cost or market, cost being determined on a
first-in, first-out basis.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is determined using the straight-line method over the estimated
useful lives of the assets as follows:

Store fixtures and equipment................................. 5-7 years
Leasehold improvements....................................... Term of lease
Computers and equipment...................................... 5 years
Furniture and fixtures....................................... 7 years

Intangible Assets

Intangible assets consist primarily of goodwill and non-compete agreements,
which arose in connection with the acquisition of Pretzelmaker by the Company
in 1995. The goodwill and non-compete agreements are being amortized over
periods of fifteen and nine years, respectively.

Revenue Recognition

Revenues generated from company-owned stores are recognized at the point of
sale. Initial franchise fees are recognized after the Company has completed
performance of its initial license obligations. A portion of the franchise fee
revenue is deferred until commencement of operations of the licensee's
location. Franchise and license royalties, which are based upon a percentage of
gross store sales, are recognized as earned.

Advance payments received from suppliers are recorded as deferred revenues
and recognized as income over the life of the related supply agreement.

Income Taxes

The Company recognizes deferred income tax assets or liabilities for expected
future tax consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred income tax assets or
liabilities are determined based upon the difference between the financial and
income tax basis of assets and liabilities using enacted tax rates expected to
apply when differences are expected to be settled or realized. Valuation
allowances will be established when necessary, to reduce deferred tax assets to
the amount expected to be realized.

F-155

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation

The functional currency for the Company's foreign operations is the
applicable local currency. The translation of the applicable foreign currency
into U.S. dollars is computed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using a weighted average exchange rate during the period. The gains and losses
resulting from such translation are immaterial.

Recent Accounting Pronouncement

During the nine months ended September 30, 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires an "all-inclusive" income
presentation approach which specifies that all revenues, expenses, gains and
losses recognized during the period be reported in income, regardless of
whether they are considered to be results of operations of the period. The
adoption of SFAS No. 130 had no material impact on the Company's financial
statement presentation.

Reclassifications

Certain reclassifications have been made in the prior period consolidated
financial statements to conform with the current period presentation.

Year 2000 Issues

Management of the Company has assessed the year 2000 issue and has determined
that its financial software and related corporate systems and retail sales data
collecting systems are not year 2000 compliant. As a result of the acquisition
of the Company (Note 12) all of the Company's year 2000 non-compliant systems
will be converted to Mrs. Fields' systems by early 1999.

NOTE 2--BANK DEBT

During April 1997, the Company through Pretzelmaker established a $300,000
line-of-credit with a bank and subsequently finalized a term loan facility to
repay then outstanding term debt as well as to provide financing for expansion
equipment and fixtures. Advances under the line-of-credit were made based upon
75% of eligible accounts receivable and 30% of allowable inventories. Advances
under the term loan facility are repayable in 36 monthly installments, plus
interest. Interest on amounts outstanding on the bank debt is computed at the
bank's prime rate plus 1% and the debt is collateralized by the Company's
accounts receivable, inventories, intangibles and property and equipment.

F-156

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the Nine Months Ended September
30, 1997 and 1998 is Unaudited.)

NOTE 2--BANK DEBT (Continued)

The following amounts were outstanding under the bank debt agreements:

December 31, September 30,
1997 1998
------------ -------------
(Unaudited)

Line-of-credit.................................. $300,000 $279,692
Term loans, payable $14,114 monthly, plus
interest....................................... 432,916 164,050
-------- --------
Total......................................... $732,916 $443,742
======== ========

Under the terms of the agreements, the Company is subject to certain debt
covenants, which include, among other items, limitations on capital
expenditures, minimum tangible net worth and debt coverage ratio amounts and
maximum leverage ratio (all as defined under the agreements). As of December
31, 1997 and September 30, 1998 the Company was not in compliance with the
covenant requirements and the lender has not agreed to provide waivers of such
violations. Accordingly, the term debt which by its original terms would have
been classified as a long-term obligation, has been reclassified as a current
liability due to the default, as the lender has the right to accelerate the
repayment of the loans. Subsequent to the acquisition as discussed in Note 12,
Mrs. Fields is in discussions with the lender regarding repayment or
refinancing.

All required payments under the terms of the debt are current and on March 5,
1998, by mutual agreement with the lender, the Company made a $200,000
prepayment on the term loan portion of the debt. Subsequent to December 31,
1997, advances under the line-of-credit were frozen and an agreement was
reached to extend the repayment of the line-of-credit balance to January 31,
1999.

As of December 31, 1996 there was approximately $409,000 outstanding in 10.1%
to 10.25% term loans, payable to a bank in monthly installments through October
1999. Such amounts, which at that time totaled approximately $360,000 were
repaid out of proceeds from the Company's new term loan facility discussed
above.

NOTE 3--STOCKHOLDERS' EQUITY

Preferred Stock

The Company's Articles of Incorporation authorize $0.001 par value, non-
voting preferred stock in series A (300,000 shares authorized) and series B
(800 shares authorized). In connection with the 1995 acquisition of
Pretzelmaker by the Company, there were 275,942 share of series A and 800
shares of series B preferred shares issued. The series A and B shares contained
dividends and liquidation preferences, cumulative dividend rights and were
convertible into common stock of the Company under terms as defined in the
agreements. No dividends were paid on the preferred shares. In connection with
the acquisition of the Company discussed in Note 12, the 275,942 shares of
series A and 800 shares of series B preferred stock were converted into 35,155
shares of common stock. The accompanying financial statements retroactively
reflect the conversion (which has no affect on total stockholders' equity
amounts) for all periods presented.

F-157

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 3--STOCKHOLDERS' EQUITY (Continued)

Stock Options

The Company has 35,000 shares of common stock reserved for issuance under
three stock option plans (Incentive Stock Option Plan, Non-Qualified Stock
Option Plan and Stock Bonus Plan) collectively referred to as the "Plan".
Through December 31, 1997, options to acquire 13,250 shares had been granted at
exercise prices ranging from $13.20 to $25.00 per share. There were no options
granted in 1998. The Company applies APB Opinion No. 25, Accounting for Stock
Issues to Employees, in accounting for its plans. FASB Statement No. 123,
Accounting for Stock-Basis Compensation, requires the Company to provide pro
forma information regarding net income as if compensation cost for the
Company's stock option plans has been determined in accordance with the fair
value based method prescribed in FASB Statement No. 123. Under the accounting
provisions of FASB Statements No. 123 the Company's reported net income (loss)
would not have been materially impacted for the periods presented under FASB
Statement No. 123.

As part of the acquisition of the Company discussed in Note 12, all of the
stock options were cancelled in connection with the consulting, bonus and
service agreements.

NOTE 4--NON-COMPETE AGREEMENTS

In connection with the 1995 acquisition of Pretzelmaker, the Company entered
into non-compete agreements with the two principal former owners of
Pretzelmaker. The non-interest bearing obligations have been recorded as a
liability on a discounted present value basis using an imputed interest rate of
15%. The agreements require annual payments of $182,300 and as of December 31,
1997, future minimum payments under the obligations are summarized as follows:

Years Ending December 31, Amount
------------------------- ---------

1998.............................................................. $ 182,300
1999.............................................................. 182,300
---------
Total Payments.................................................... 364,600
Less: Amounts Representing Interest............................... (37,379)
---------
Present Value of Payments......................................... 327,221
Less: Current Portion............................................. (151,418)
---------
$ 175,803
=========

NOTE 5--UNSECURED PROMISSORY NOTES

During 1995, the Company issued 15% unsecured promissory notes due September
30, 2000 to various parties, who at the time, were also shareholders of the
Company. In addition to the stated interest, which is payable quarterly, the
notes also contain a net profits interest, as defined, in all Pretzelmaker
company-owned stores and sports venues. Through September 30, 1998, there has
been no net profit interest due under the agreements.

In connection with the acquisition of the Company during November 1998 (as
discussed in Note 12), the acquirer has agreed to repay the outstanding
unsecured promissory notes in January, 1999.

F-158

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 6--CAPITAL LEASE OBLIGATIONS

At December 31, 1997 included with long-term debt are capitalized lease
obligations incurred for store equipment, fixtures and improvements. The
obligations bear implicit interest rates of 16.9% to 21.6% and require total
monthly payments of approximately $6,800, decreasing as the leases are paid off
through October 2001.

Total future payments required under the lease obligations at December 31,
1997 are approximately $78,600 in 1998, $76,300 in 1999, $66,800 in 2000 and
$67,300 in 2001.

As of December 31, 1997, property and equipment includes $197,469 acquired
through capital leases. Accumulated depreciation related to these assets was
$19,183.

NOTE 7--COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases retail store facilities and corporate office space under
long-term non-cancelable operating lease agreements requiring monthly payments
over their remaining terms which expire through 2007. Certain of the retail
store leases also provide for contingent rentals based upon gross revenue of
the store as well as adjustments for operating costs. Additionally, as a result
of master franchise agreements in Canada and former company-owned stores which
have been franchised, the Company is contingently liable under lease guarantees
or assignment agreements.

Total rent expense, including lease termination costs for closed company-
owned stores is summarized as follows:

February 24 Nine Months Ended
(Inception) to Years Ended December 31, September 30,
December 31, ------------------------ -------------------
1995 1996 1997 1997 1998
--------------- ------------ ------------ --------- ---------

Rent expense............ $77,100 $256,900 $446,100 $308,700 $256,200
Lease termination
expense................ -- -- 109,200 103,600 186,600
------- ------------ ------------ --------- ---------
$77,100 $256,900 $555,300 $412,300 $442,800
======= ============ ============ ========= =========

As of December 31, 1997, future minimum lease payments due under operating
leases are as follows:

Years Ending December 31, Amount
------------------------- ----------

1998............................................................. $ 242,000
1999............................................................. 248,000
2000............................................................. 216,000
2001............................................................. 151,000
2002............................................................. 130,000
Thereafter....................................................... 356,000
----------
$1,343,000
==========

F-159

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the Nine Months Ended September
30, 1997 and 1998 is Unaudited.)

NOTE 7--COMMITMENTS AND CONTINGENCIES (Continued)

During September 1998, the Company entered into a sub-lease agreement for its
corporate office space providing for sub-rental income to the Company of
approximately $8,000 monthly to July 2000. Such amounts are not reflected in
the table above.

As of December 31, 1997, future minimum amounts due under operating leases
where the Company is contingently liable under lease guarantees or assignment
agreements are as follows:

Years Ended December 31, Amount
------------------------ ----------

1998............................................................ $ 390,000
1999............................................................ 398,000
2000............................................................ 405,000
2001............................................................ 401,000
2002............................................................ 352,000
Thereafter...................................................... 1,262,000
----------
$3,208,000
==========

Approximately 51% of the above amounts relate to franchised locations which
are owned in whole or in part by individuals or entities which were
stockholders of the Company prior to the acquisition discussed in Note 12.

Legal Matters

From time to time the Company is the subject of legal actions or threatened
legal actions, which it considers routine to its business activities.
Management of the Company believes that the potential liability to the Company
under such matters would not have a material affect on the Company's
consolidated financial position, results of operations or cash flows.

NOTE 8--RELATED PARTY TRANSACTIONS

Since 1996, the Company has had business relationships with various entities
owned in whole or in part by its Chairman, President, and Chief Executive
Officer (the "Officer") summarized as follows:

December 31, September 30,
---------------- -------------
1996 1997 1998
-------- ------- -------------

Franchise Fee Income from Related Entities.. $200,000 $ -- $ --
Royalty and Advertising Fees from Related
Entities in Illinois....................... 25,400 55,000 37,765
Account Receivables Outstanding at Period
End form Related Entities.................. 77,904 46,129 24,809

During 1997, Canada received loans totaling approximately $65,000 (U.S.) from
the two largest franchisees in Canada who are related to the Company through
common ownership. The proceeds are invested in a Canadian certificate of
deposit and the debt evidenced by non-interest bearing promissory notes. The
certificate of deposit is presented as restricted cash and the notes are
included with long-term debt. The advances were made to secure a limited loan
guarantee made by Canada on behalf of the franchisees. Subsequent to September
30, 1998, the loan guarantee obligation was transferred to another corporation
affiliated with the franchisees and the certificate of deposit used to
liquidate the related debt obligations, thereby releasing Canada from any
further obligations under the agreements.

F-160

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the

Nine Months Ended September 30, 1997 and 1998 is Unaudited.)

NOTE 9--INCOME TAXES

Income taxes consisted of the following:

December 31,
------------------------
1995 1996 1997
-------- -------- ----

CURRENT:
Federal........................................... $ 19,000 $ 68,507 $--
State............................................. 3,000 3,952 --
-------- -------- ----

22,000 72,459 --

-------- -------- ----
DEFFERED (BENEFIT):
Federal........................................... (20,000) (37,000) --
State............................................. (2,000) (3,000) --
-------- -------- ----
(22,000) (40,000) --
-------- -------- ----
Total........................................... $ -- $ 32,459 $--
======== ======== ====

The components of the net deferred tax assets (liabilities) are summarized as
follows:

December 31,
------------------
1996 1997
------- ---------

Net operating loss carryforward.......................... $ -- $ 55,000
Intangible assets........................................ 65,000 95,000
Accrued expenses......................................... -- 21,000
Accounts receivable allowance............................ 4,000 4,000
Other.................................................... -- 13,000
Accumulated depreciation................................. (7,000) (17,000)
------- ---------
62,000 171,000
Valuation allowance...................................... -- (109,000)
------- ---------
$62,000 $ 62,000
======= =========

As of December 31, 1997, the Company has a net operating loss carryforward
for income tax purposes of approximately $149,000, expiring in 2012.

A reconciliation of the effective tax rates to the federal statutory rate is
summarized as follows:

December 31,
---------------------
1995 1996 1997
----- ----- -----

Federal Statutory Income
Tax Rate (Benefit)..... (34.0)% 34.0 % (34.0)%
Amortization Of Non-
Deductible Goodwill.... 18.2 21.6 12.0
Non-Deductible
Expenses............... -- -- 15.1
Other................... 15.8 (22.3) 6.9
----- ----- -----
Effective Income Tax
Rate................... 0.0 % 33.3 % 0.0 %
===== ===== =====

F-161

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1998 and for the Nine Months Ended September
30, 1997 and 1998 is Unaudited.)

NOTE 10--LITIGATION SETTLEMENT

During 1997, the Company settled a lawsuit, which arose in 1996 in a case in
which the plaintiffs claimed that the Company breached the Franchise Agreement
by failing to grant a specific mall location. The plaintiffs sought damages of
approximately $600,000, plus punitive damages and attorney fees. The cost of
the settlement, including the Company's outside legal fees, was approximately
$149,000.

NOTE 11--SUPPLEMENTAL CASH FLOW INFORMATION

February 24 Years Ended Nine Months Ended
(Inception) to December September 30,
December 31, ---------------- -----------------
1995 1996 1997 1997 1998
--------------- ------- -------- -------- --------

Supplemental Disclosure of
Cash Flow Information:
Cash Paid for:
Interest.................. $ 69,600 $87,900 $157,400 $106,700 $106,800
Income taxes.............. 45,000 4,000 103,800 89,700 8,600
Supplemental Disclosure of
Non-Cash Investing and
Financing Activities:
Preferred Stock Issued in
Pretzelmaker
Acquisition.............. 279,800 -- -- -- --
Equipment Acquired under
Financing Obligations.... 42,100 -- 417,200 297,200 --
Company-owned Stores Sold
with Deferred Terms...... -- -- 76,500 76,500 25,000

NOTE 12--SUBSEQUENT EVENT--ACQUISITION OF COMPANY

During November 1998 the stockholders of the Company sold their shares to
Mrs. Field's Original Cookies, Inc. ("Mrs. Fields"). As a condition to closing,
by mutual agreement among the parties, all preferred shares previously
outstanding were converted to common shares, outstanding stock option
agreements were terminated, and the repayment terms under the non-compete
agreements and unsecured promissory notes were modified so that such
obligations would be repaid by Mrs. Fields by January 1999.

In connection with the acquisition of the Company, Pretzelmaker entered into
various consulting, bonus and severance agreements totaling $327,300 to be paid
during December 1998 and January 1999.

F-162

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

No dealer, sales representative, or other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by Mrs. Fields or the ini-
tial purchasers. This prospectus does not constitute an offer to sell or a so-
licitation of an offer to buy any securities other than the securities to
which it relates, nor does it constitute an offer to sell or the solicitation
of an offer to buy such securities in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlaw-
ful to make such an offer or solicitation. Neither the delivery of this pro-
spectus nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of Mrs. Fields since
the date hereof or that information contained herein is correct as of any time
subsequent to its date.

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

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

$53,725,000

MRS. FIELDS'
ORIGINAL COOKIES, INC.

10 1/8% Series B Senior Notes

Due 2004

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

PROSPECTUS

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

, 1999

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

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.

As authorized by Section 145 of the General Corporation Law of the State of
Delaware, each director and officer of Mrs. Fields' may be indemnified by Mrs.
Fields' against expenses (including attorney's fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed legal
proceedings in which he is involved by reason of the fact that he is or was a
director or officer of Mrs. Fields' if he acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of
Mrs. Fields' and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of Mrs. Fields, the director or
officer may not be indemnified in respect of any claim, issue or matter as to
which he shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to Mrs. Fields' unless a court determines otherwise.

Mrs. Fields' by-laws authorize the Company to indemnify its present and
former directors and officers and to pay or reimburse expenses for individuals
in advance of the final disposition of a proceeding upon receipt of an
undertaking by or on behalf of such individuals to repay such amounts if so
required.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT

1.1 + Purchase Agreement, dated as of August 13, 1998, among Mrs. Fields'
Original Cookies, Inc., The Mrs. Fields Brand Inc., Great American
Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex. Brown
Incorporated

2.1 + Securities Purchase Agreement by and among Cookies USA, Inc., the
Individuals and Entities Identified Therein as The Sellers and Mrs.
Fields' Original Cookies, Inc., dated as of August 13, 1998

2.2 + Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
Buyer, and Jake Tortorice of Chocolate Chip Cookies of Texas, Inc. as
Seller. Filed as Exhibit 2.3 to the 8-K dated September 3, 1998.

2.3 + Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
Buyer, and Lawrence J. Cohen, Mildred S. Cohen, Jerome E. Mouton, Steven
J. Bryan and Jason A. Piltzmaker, holders of all outstanding capital
stock of Deblan Corporation, as Sellers Filed as Exhibit 2.2 to the 8-K
dated September 3, 1998.

EXHIBIT (CONTINUED)

2.4 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and ASK & MSK Family Limited Partnership-II(B), Ltd. Filed as exhibit
2.4 to the 8-K dated September 3, 1998.

2.5 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and Crossroads Cookies, Inc. Filed as exhibit 2.5 to the 8-K dated
September 3, 1998.

2.6 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and Hot Barton and Northpark Cookies, Inc. Filed as exhibit 2.6 to the
8-K dated September 3, 1998.

2.7 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and Northpark Cookies, Inc. Filed as exhibit 2.7 to the 8-K dated
September 3, 1998.

2.8 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and Quail Springs Cookies, Inc. Filed as exhibit 2.8 to the 8-K dated
September 3, 1998.

2.9 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc.
and Westgate Cookies, Inc. Filed as exhibit 2.9 to the 8-K dated
September 3, 1998.

3.1 + Restated Certificate of Incorporation of Mrs. Fields' Original
Cookies, Inc., filed as Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (No. 333-45179) and incorporated by reference
herein

3.2 + Restated Certificate of Incorporation of The Mrs. Fields' Brand, Inc.,
filed as Exhibit 3.2 to the Company's Registration Statement on Form
S-4 (No. 333-45179) and incorporated by reference herein

3.3 + Certificate of Designations of the Mrs. Fields' Brand, Inc., dated as
of September 18, 1996, filed as Exhibit 3.3 to the Company's
Registration Statement on Form S-4 (No. 333-45179) and incorporated by
reference herein

3.4 + Amended and Restated Certificate of Incorporation of Great American
Cookie Company, Inc.

3.5 Articles of Incorporation of Pretzelmaker Holdings, Inc.

3.6 + By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

3.7 + By-Laws of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.5 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

3.8 + By-Laws of Great American Cookie Company, Inc.

3.9 By-Laws of Pretzelmaker Holdings, Inc.

4.1 + Indenture, dated as of November 26, 1997, among Mrs. Fields' Original
Cookies, Inc., The Mrs. Fields' Brand, Inc., and The Bank of New York,
as Trustee, filed as Exhibit 4.1 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein.

4.2 + Form of Notation of Guarantee (included as Exhibit E to Exhibit 4.1)

4.3 + Form of Certificate of Senior Note (included as Exhibit A to Exhibit
4.1)

4.4 + First Supplemental Indenture, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., and The
Bank of New York, as Trustee

4.5 + Second Supplemental Indenture, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great
American Cookie Company, Inc., and The Bank of New York, as trustee

4.6 Third Supplemental Indenture, dated as of November 20, 1998, among
Mrs. Fields' Original Cookies, Inc., Great American Cookie Company,
Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and
the Bank of New York, as a Trustee

4.7 + Registration Rights Agreement, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., Great
American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex.
Brown Incorporated

5.1 * Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP to as
to legality of the New Senior Notes to be issued by Mrs. Fields'
Original Cookies, Inc. and the New Guarantees to be issued by The Mrs.
Fields' Brand, Inc. and Great American Cookie Company, Inc.

10.1 + Asset Purchase Agreement, dated as of August 7, 1996, among Mrs.
Fields Development Corporation, The Mrs. Fields' Brand, Inc. and
Capricorn II, L.P., filed as Exhibit 10.1 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

10.2 + Asset Purchase Agreement, dated as of August 7, 1996, among Mrs.
Fields, Inc., Mrs. Fields' Original Cookies, Inc., and Capricorn
Investors II, L.P., filed as Exhibit 10.11 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

EXHIBIT (CONTINUED)

10.3 + Amended and Restated Marketing Agreement, dated as of January 9, 1997,
between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA
Fountain, filed as Exhibit 10.27 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.4 + Amendment dated December 1, 1997, to Amended and Restated
Marketing Agreement between Mrs. Fields' Original Cookies, Inc. and
Coca-Cola USA Fountain

10.5 + Corollary agreement, dated September 21, 1998, to existing marketing
agreement, dated as of January 9, 1997 and amended on November 13,
1997 and December 1, 1997, between Mrs. Fields' Original Cookies, Inc.
and Coca-Cola USA

10.6 + Employment Agreement, dated as of October 1, 1997, between Michael R.
Ward and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.28
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.7 + Employment Agreement, dated as of October 1, 1997, between Pat Knotts
and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.29 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.8 + Employment Agreement, dated as of October 1, 1997, between L. Tim
Pierce and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.30
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.9 + Employment Agreement, dated as of July 1, 1996, between Lawrence
Hodges and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.31
the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

EXHIBIT (CONTINUED)

10.10 + Employment Agreement, dated as of July 10, 1997, between Garry
Remington and Mrs. Fields' Original Cookies, Inc.

10.11 + Lease Agreement, dated as of February 23, 1993, between The Equitable
Life Assurance Society of the United States and Mrs. Fields Cookies,
filed as Exhibit 10.32 the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.12 + Lease Agreement, dated as of October 10, 1995, between The Equitable
Life Assurance Society of the United States and Mrs. Fields Cookies,
filed as Exhibit 10.33 the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.13 + Letter of Agreement, dated as of October 1, 1992, between United
Airlines, Inc. and Mrs. Fields Development Corporation, filed as
Exhibit 10.34 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.14 + Lease Agreement, dated as of January 18, 1998, between 2855 E.
Cottonwood Parkway, L.C. and Mrs. Fields' Original Cookies, Inc.,
filed as Exhibit 10.35 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.15 + Amendment to Supply Agreement, dated as of June 19, 1995 between Van
Den Bergh Foods Company and Mrs. Fields, Inc., filed as Exhibit 10.37
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.16 + Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc., Pretzel Time, Inc. and Martin E.
Lisiewski, filed as Exhibit 10.39 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.17 + License Agreement, dated as of March 1, 1992, between Mrs. Fields
Development Corporation and Marriott Corporation, filed as Exhibit
10.40 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.18 + License Agreement, dated as of October 28, 1993 between Mrs. Fields
Development Corporation and Marriott Management Services, Corp., filed
as Exhibit 10.41 to the Company's Registration Statement on S-4 (No.
333-45170) and incorporated by reference herein.

10.19 + Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc. Pretzel Time, Inc., and Martin E.
Lisiewski, filed as Exhibit 10.43 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.20 + Franchise Agreement Addendum 2 and Area Development Agreement Addendum
2, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs.
Fields' Original Cookies, Inc., filed as Exhibit 10.44 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.21 + Management Agreement, dated as of September 2, 1997, between Mrs.
Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as
Exhibit 10.45 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.22 + Stock Purchase Agreement, dated as of September 2, 1997, between Mrs.
Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as
Exhibit 10.46 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.23 + Shareholder Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc., Martin E. Lisiewski and Pretzel Time,
Inc., filed as Exhibit 10.47 to the Company's Registration Statement
on S-4 (No. 333-45179) and incorporated by reference herein

10.24 + Employment Agreement, dated as of September 2, 1997, between Pretzel
Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.48 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.25 + Area Development Agreement, dated as of September 2, 1997, between
Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as
Exhibit 10.49 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.26 + $500,000 Promissory Note, dated as of September 2, 1997, between
Martin E. Lisiewski and Mrs. Fields' Holding Company, Inc., filed as
Exhibit 10.50 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

EXHIBIT (CONTINUED)

10.27 + Exchange Agreement, dated September 2, 1997, between Mrs. Fields'
Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.51
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.28 + Registration Rights Agreement, dated September 2, 1997, between Mrs.
Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as
Exhibit 10.52 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.29 + Franchise Development Agreement, dated September 2, 1997, between Mrs.
Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as
Exhibit 10.53 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein.

10.30 + Asset Purchase Agreement, dated July 23, 1997, among Mrs. Fields'
Pretzel Concepts, Inc., H&M Concepts, Inc., and The Managing Members
of H&M Concepts Ltd., Co., filed as Exhibit 10.53 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

10.31 + Exhibit A to the Developing Agent Agreement, dated September 2, 1997,
between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc.,
filed as Exhibit 10.54 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.32 * Uniform Franchise Offering Circular of Pretzel Time, Inc., as amended
on August 24, 1998

10.33 * Uniform Franchise Offering Circular of Great American Cookie Company,
Inc., as amended on August 25, 1998

10.34 + Exhibit B to the Developing Agent Agreement, dated September 2, 1997,
between Pretzel Time, Inc., and Mrs. Fields' Original Cookies, Inc.,
filed as Exhibit 10.57 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein.

10.35 + Assignment of Assets and Assumption of Liabilities Agreement, dated
July 25, 1997, between H&M Concepts Ltd., Co., and Mrs. Fields'
Pretzel Concepts, Inc., filed as Exhibit 10.62 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

10.36 + First Amendment to Operating Agreement for UVEST, LLC, dated July 25,
1997, between Mrs. Fields' Pretzel Concepts, Inc. and NVEST Limited,
filed as Exhibit 10.64 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.37 + First Amendment to Operating Agreement for LV-H&M, L.L.C., Dated July
25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and Jean Jensen,
filed as Exhibit 10.65 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.38 + Lease Agreement, dated March 2, 1995, between Price Development
Company, Limited Partnership and Mrs. Fields Cookies, filed as Exhibit
10.69 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.39 + Consulting Agreement, dated November 26, 1996, between Debra J. Fields
and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.70 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.40 + Mrs. Fields' Holding Company, Inc. Director Stock Option Plan

10.41 + Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan

10.42 + Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan

10.43 + Amended and Restated Loan Agreement, dated as of February 28, 1998,
between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank,
filed as Exhibit 10.73 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.44 + Intellectual Property Security Agreement, dated as of February 28,
1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National
Bank

10.45 + Pledge and Security Agreement, dated as of February 28, 1998, between
Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank

10.46 + Stockholders' Agreement, dated as of July 17, 1998, between Mrs.
Fields' Holding Company, Inc. and its Stockholders

EXHIBIT (CONTINUED)

10.47 + Form of Settlement Agreement and Release, by and among Mrs. Fields'
Original Cookies, Inc., Capricorn Investors II, L.P., a Delaware
limited partnership, Great American Cookie Company, Inc., Cookies USA,
Inc., The Jordan Company, and the Franchisees parties thereto

10.48 + Supply Agreement, dated as of March 30, 1998 between Mrs. Fields'
Original Cookies, Inc. and LBI Acquisition Corp. d/b/a/ Pennant Foods.

12.1 + Computation of ratio of earnings to fixed charges of Mrs. Fields'
Original Cookies, Inc.

21.1 + Subsidiaries of Mrs. Fields' Original Cookies, Inc.

23.1 + Consent of Arthur Andersen LLP

23.2 + Consent of Deloitte & Touche LLP

23.3 + Consent of Weinstein Spira & Company, P.C.

23.4 + Consent of PricewaterhouseCoopers LLP

23.5 * Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)

23.6 Consent of Habif, Arogeti & Wynne, P.C.

23.7 Consent of BDO Siedman, LLP

23.8 Consent of AJ Robbins, P.C.

23.9 Consent of the Prior Management of Great American Cookie Company

24.1 + Power of Attorney of certain officers and directors of the Company,
included in Part II of this Registration Statement

24.2 + Power of Attorney of certain officers and directors of The Mrs.
Fields' Brand, Inc., included in Part II of this Registration
Statement

24.3 + Power of attorney of certain officers and directors of Great American
Cookie Company, Inc., included in Part II of this Registration
Statement

25.1 + Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Indenture

27.1 + Financial Data Schedule (for SEC use only), filed as Exhibit 27 to the
Company's Form 10-Q for the quarter ended October 3, 1998

99.1 * Form of Letter of Transmittal

99.2 * Form of Notice of Guaranteed Delivery

99.3 + Schedule II - Valuation and Qualifying Accounts

99.4 * Guidelines for certification of taxpayer identification number on
substitute Form W-9

99.5 * Letter to Brokers

99.6 * Letter to Clients
________
* To be filed by amendment.
+ Filed previously

ITEM 22. UNDERTAKINGS

The undersigned registrants hereby undertake:

(1) To file, during any period in which offers to sale are being made, a
post-effective amendment to this registration statement; (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement; (iii) to include any material information with respect to the plan of
distribution previously disclosed in the registration statement or any material
change to such information in the registration statement.

(2) That, for the purpose of determining any liabilities under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.

The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired or involved therein, that was not the subject of and included in
the registration statement when it became effective.

Pursuant to the requirements of the Securities Act of 1933, Mrs. Fields'
Original Cookies, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Salt Lake City, State of Utah, on the 16th day of November,
1998.

MRS. FIELDS' ORIGINAL COOKIES, INC.

By /s/Larry A. Hodges
----------------------
Larry A. Hodges
President/CEO

POWER OF ATTORNEY

We, the undersigned directors and officers of Mrs. Fields' Original
Cookies, Inc. and each of us, do hereby constitute and appoint Michael R. Ward
or L. Tim Pierce, our true and lawful attorney and agent, with power of
substitution, to do any and all acts and things in our name and behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated above, which said attorney and
agent may deem necessary or advisable to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with this Registration Statement on Form S-4, and any and all
amendments to said Registration Statement and all instruments necessary or
incidental in connection therewith, including specifically, but without
limitation, power and authority to sign for us or any of us in our names, in the
capacities indicated below, any and all amendments hereto, and to file the same
with the Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the acts of said
attorneys and each of them.

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on __________, 1999.

SIGNATURE TITLE
--------- -----

* President, Chief Executive Officer
------------------------------------ and Director
(Larry A. Hodges)

* Senior Vice President, Chief
------------------------------------ Financial Officer and Secretary
(L. Tim Pierce)

* Chairman of the Board of Directors
------------------------------------
(Herbert S. Winokur)

* Director
------------------------------------
(Richard M. Ferry)

* Director
------------------------------------
(Debbi Fields)

* Director
------------------------------------
(Nathaniel A. Gregory)

* Director
------------------------------------
(Walker Lewis)

* Director
------------------------------------
(Peter W. Mullin)

* Director
------------------------------------
(Gilbert C. Osnos)

* By: /s/ Michael R. Ward
------------------------------------
Michael R. Ward
Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, The Mrs.
Fields' Brand, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Salt Lake City, State of Utah, on the 16th day of November,
1998.

THE MRS. FIELDS' BRAND, INC.

By /s/Larry A. Hodges
---------------------
Larry A. Hodges
President/CEO

POWER OF ATTORNEY

We, the undersigned directors and officers of The Mrs. Fields' Brand, Inc.
and each of us, do hereby constitute and appoint Michael R. Ward or L. Tim
Pierce, our true and lawful attorney and agent, with power of substitution, to
do any and all acts and things in our name and behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated above, which said attorney and agent may deem
necessary or advisable to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission"), in connection with this
Registration Statement on Form S-4, and any and all amendments to said
Registration Statement and all instruments necessary or incidental in connection
therewith, including specifically, but without limitation, power and authority
to sign for us or any of us in our names, in the capacities indicated below, any
and all amendments hereto, and to file the same with the Commission. Said
attorney shall have full power and authority to do and perform in the name and
on behalf of each of the undersigned, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises as fully and to all
intents and purposes as each of the undersigned might or could do in person,
hereby ratifying and approving the acts of said attorneys and each of them.

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on __________, 1999.

SIGNATURE TITLE
--------- -----

* President, Chief Executive Officer
----------------------------------- and Director, Secretary & Treasurer
(Larry A. Hodges)

* Chief Financial Officer
-----------------------------------
(L. Tim Pierce)

* Chairman of the Board of Directors
-----------------------------------
(Herbert S. Winokur)

* Director
-----------------------------------
(Walker Lewis)

* By: /s/ Michael R. Ward
-----------------------------------
Michael R. Ward
Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, Great American
Cookie Company, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Salt Lake City, State of Utah, on the 16th day of
November, 1998.

GREAT AMERICAN COOKIE COMPANY, INC.

By /s/Larry A. Hodges
---------------------
Larry A. Hodges
President/CEO

POWER OF ATTORNEY

We, the undersigned directors and officers of Great American Cookie
Company, Inc. and each of us, do hereby constitute and appoint Michael R. Ward
or L. Tim Pierce, our true and lawful attorney and agent, with power of
substitution, to do any and all acts and things in our name and behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated above, which said attorney and
agent may deem necessary or advisable to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission (the "Commission"), in
connection with this Registration Statement on Form S-4, and any and all
amendments to said Registration Statement and all instruments necessary or
incidental in connection therewith, including specifically, but without
limitation, power and authority to sign for us or any of us in our names, in the
capacities indicated below, any and all amendments hereto, and to file the same
with the Commission. Said attorney shall have full power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the acts of said
attorneys and each of them.

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on __________, 1999.

SIGNATURE TITLE
--------- -----

* Chairman of the Board of Directors
------------------------------------- and President
(Larry A. Hodges)

* Chief Financial Officer
------------------------------------- Secretary and Director
(L. Tim Pierce)

/s/Michael R. Ward Vice President and Director
-------------------------------------
(Michael R. Ward)

* By: /s/ Michael R. Ward
-------------------------------------
Michael R. Ward
Attorney-in-Fact

EXHIBIT INDEX

EXHIBIT

1.1+ Purchase Agreement, dated as of August 13, 1998, among Mrs. Fields'
Original Cookies, Inc., The Mrs. Fields Brand Inc., Jefferies & Company,
Inc. and BT Alex. Brown Incorporated

2.1+ Securities Purchase Agreement by and among Cookies USA, Inc., the
Individuals and Entities Identified Therein as The Sellers and Mrs.
Fields' Original Cookies, Inc., dated as of August 13, 1998

2.2+ Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
Buyer, and Jake Tortorice of Chocolate Chip Cookies of Texas, Inc. as
Seller. Filed as Exhibit 2.3 to the 8-K dated September 3, 1998.

2.3+ Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as
Buyer, and Lawrence J. Cohen, Mildred S. Cohen, Jerome E. Mouton, Steven
J. Bryan and Jason A. Piltzmaker, holders of all outstanding capital
stock of Deblan Corporation, as Sellers Filed as Exhibit 2.2 to the 8-K
dated September 3, 1998.

2.4+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
ASK & MSK Family Limited Partnership-II(B), Ltd. Filed as Exhibit 2.4 to
the 8-K dated September 3, 1998.

2.5+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
Crossroads Cookies, Inc. Filed as Exhibit 2.5 to the 8-K dated September
3, 1998.

2.6+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
Hot Barton and Northpark Cookies, Inc. Filed as Exhibit 2.6 to the 8-K
dated September 3, 1998.

2.7+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
Northpark Cookies, Inc. Filed as Exhibit 2.7 to the 8-K dated September
3, 1998.

2.8+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
Quail Springs Cookies, Inc. Filed as Exhibit 2.8 to the 8-K dated
September 3, 1998.

2.9+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and
Westgate Cookies, Inc. Filed as Exhibit 2.9 to the 8-K dated September 3,
1998.

3.1+ Restated Certificate of Incorporation of Mrs. Fields' Original Cookies,
Inc., filed as Exhibit 3.1 to the Company's Registration Statement on
Form S-4 (No. 333-45179) and incorporated by reference herein

3.2+ Restated Certificate of Incorporation of The Mrs. Fields' Brand, Inc.,
filed as Exhibit 3.2 to the Company's Registration Statement on Form S-4
(No. 333-45179) and incorporated by reference herein

3.3+ Certificate of Designations of the Mrs. Fields' Brand, Inc., dated as of
September 18, 1996, filed as Exhibit 3.3 to the Company's Registration
Statement on Form S-4 (No. 333-45179) and incorporated by reference
herein

3.4+ Amended and Restated Certificate of Incorporation of Great American
Cookie Company, Inc.

3.5 Articles of Incorporation of Pretzelmaker Holdings, Inc.

3.6+ By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4 to
the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

EXHIBIT (CONTINUED)

3.7+ By-Laws of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.5 to the
Company's Registration Statement on S-4 (No. 333-45179) and incorporated
by reference herein
3.8+ By-Laws of Great American Cookie Company, Inc.

3.9 By-Laws of Pretzelmaker Holdings, Inc.

4.1+ Indenture, dated as of November 26, 1997, among Mrs. Fields' Original
Cookies, Inc., The Mrs. Fields' Brand, Inc., and The Bank of New York, as
Trustee, filed as Exhibit 4.1 to the Company's Registration Statement on
S-4 (No. 333-45179) and incorporated by reference herein.

4.2+ Form of Notation of Guarantee (included as Exhibit E to Exhibit 4.1)
4.3+ Form of Certificate of Senior Note (included as Exhibit A to Exhibit 4.1)
4.4+ First Supplemental Indenture, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., and The Bank
of New York, as Trustee

4.5+ Second Supplemental Indenture, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great
American Cookie Company, Inc., and The Bank of New York, as trustee

4.6 Third Supplemental Indenture, dated as of November 20, 1998, among Mrs.
Fields' Original Cookies, Inc., Great American Cookie Company, Inc., The
Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and The Bank of
New York, as a Trustee

4.7+ Registration Rights Agreement, dated as of August 24, 1998, among Mrs.
Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., Great
American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex.
Brown Incorporated

5.1* Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP to as to
legality of the New Senior Notes to be issued by Mrs. Fields' Original
Cookies, Inc. and the New Guarantees to be issued by The Mrs. Fields'
Brand, Inc. and Great American Cookie Company, Inc.

10.1+ Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields
Development Corporation, The Mrs. Fields' Brand, Inc. and Capricorn II,
L.P., filed as Exhibit 10.1 to the Company's Registration Statement on S-
4 (No. 333-45179) and incorporated by reference herein

10.2+ Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields,
Inc., Mrs. Fields' Original Cookies, Inc., and Capricorn Investors II,
L.P., filed as Exhibit 10.11 to the Company's Registration Statement on
S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED)

10.3+ Amended and Restated Marketing Agreement, dated as of January 9, 1997,
between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA Fountain,
filed as Exhibit 10.27 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.4+ Amendment, dated December 1, 1997, to Amended and Restated Marketing
Agreement between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA
Fountain

10.5+ Corollary agreement, dated September 21, 1998, to existing marketing
agreement, dated as of January 9, 1997 and amended on November 13, 1997
and December 1, 1997 between Mrs. Fields' Original Cookies, Inc. and
Coco-Cola USA Fountain.

10.6+ Employment Agreement, dated as of October 1, 1997, between Michael R.
Ward and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.28 to
the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.7+ Employment Agreement, dated as of October 1, 1997, between Pat Knotts
and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.29 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.8+ Employment Agreement, dated as of October 1, 1997, between L. Tim
Pierce and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.30
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.9+ Employment Agreement, dated as of July 1, 1996, between Lawrence Hodges
and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.31 the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.10+ Employment Agreement, dated as of July 10, 1997, between Garry
Remington and Mrs. Fields' Original Cookies, Inc.

10.11+ Lease Agreement, dated as of February 23, 1993, between The Equitable
Life Assurance Society of the United States and Mrs. Fields Cookies,
filed as Exhibit 10.32 the Company's Registration Statement on S-4 (No.
333-45179) and incorporated by reference herein

10.12+ Lease Agreement, dated as of October 10, 1995, between The Equitable
Life Assurance Society of the United States and Mrs. Fields Cookies,
filed as Exhibit 10.33 the Company's Registration Statement on S-4 (No.
333-45179) and incorporated by reference herein

10.13+ Letter of Agreement, dated as of October 1, 1992, between United
Airlines, Inc. and Mrs. Fields Development Corporation, filed as
Exhibit 10.34 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.14+ Lease Agreement, dated as of January 18, 1998, between 2855 E.
Cottonwood Parkway, L.C. and Mrs. Fields' Original Cookies, Inc., filed
as Exhibit 10.35 to the Company's Registration Statement on S-4 (No.
333-45179) and incorporated by reference herein

10.15+ Amendment to Supply Agreement, dated as of June 19, 1995 between Van
Den Bergh Foods Company and Mrs. Fields, Inc., filed as Exhibit 10.37
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.16+ Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc., Pretzel Time, Inc. and Martin E.
Lisiewski, filed as Exhibit 10.39 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.17+ License Agreement, dated as of March 1, 1992, between Mrs. Fields
Development Corporation and Marriott Corporation, filed as Exhibit
10.40 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

EXHIBIT (CONTINUED)

10.18+ License Agreement, dated as of October 28, 1993 between Mrs. Fields
Development Corporation and Marriott Management Services, Corp., filed
as Exhibit 10.41 to the Company's Registration Statement on S-4 (No.
333-45170) and incorporated by reference herein.

10.19+ Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc. Pretzel Time, Inc., and Martin E.
Lisiewski, filed as Exhibit 10.43 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.20+ Franchise Agreement Addendum 2 and Area Development Agreement Addendum
2, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs.
Fields' Original Cookies, Inc., filed as Exhibit 10.44 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

10.21+ Management Agreement, dated as of September 2, 1997, between Mrs.
Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit
10.45 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.22+ Stock Purchase Agreement, dated as of September 2, 1997, between Mrs.
Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit
10.46 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.23+ Shareholder Agreement, dated as of September 2, 1997, among Mrs.
Fields' Holding Company, Inc., Martin E. Lisiewski and Pretzel Time,
Inc., filed as Exhibit 10.47 to the Company's Registration Statement on
S-4 (No. 333-45179) and incorporated by reference herein

10.24+ Employment Agreement, dated as of September 2, 1997, between Pretzel
Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.48 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.25+ Area Development Agreement, dated as of September 2, 1997, between
Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as
Exhibit 10.49 to the Company's Registration Statement on S-4 (No. 333-
45179) and incorporated by reference herein

10.26+ $500,000 Promissory Note, dated as of September 2, 1997, between Martin
E. Lisiewski and Mrs. Fields' Holding Company, Inc., filed as Exhibit
10.50 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.27+ Exchange Agreement, dated September 2, 1997, between Mrs. Fields'
Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.51
to the Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.28+ Registration Rights Agreement, dated September 2, 1997, between Mrs.
Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit
10.52 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.29+ Franchise Development Agreement, dated September 2, 1997, between Mrs.
Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit
10.53 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein.

10.30+ Asset Purchase Agreement, dated July 23, 1997, among Mrs. Fields'
Pretzel Concepts, Inc., H&M Concepts, Inc., and The Managing Members of
H&M Concepts Ltd., Co., filed as Exhibit 10.53 to the Company's
Registration Statement on S-4 (No. 333-45179) and incorporated by
reference herein

10.31+ Exhibit A to the Developing Agent Agreement, dated September 2, 1997,
between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc.,
filed as Exhibit 10.54 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.32* Uniform Franchise Offering Circular of Pretzel Time, Inc., as amended
on August 24, 1998*

10.33* Uniform Franchise Offering Circular of Great American Cookie
Company, Inc., as amended on August 25, 1998*

10.34+ Exhibit B to the Developing Agent Agreement, dated September 2, 1997,
between Pretzel Time, Inc., and Mrs. Fields' Original Cookies, Inc.,
filed as Exhibit 10.57 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein.

10.35+ Assignment of Assets and Assumption of Liabilities Agreement, dated
July 25, 1997, between H&M Concepts Ltd., Co., and Mrs. Fields' Pretzel
Concepts, Inc., filed as Exhibit 10.62 to the Company's Registration
Statement on S-4 (No. 333-45179) and incorporated by reference herein

10.36+ First Amendment to Operating Agreement for UVEST, LLC, dated July 25,
1997, between Mrs. Fields' Pretzel Concepts, Inc. and NVEST Limited,
filed as Exhibit 10.64 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED)

10.37+ First Amendment to Operating Agreement for LV-H&M, L.L.C., Dated July
25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and Jean Jensen,
filed as Exhibit 10.65 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.38+ Lease Agreement, dated March 2, 1995, between Price Development
Company, Limited Partnership and Mrs. Fields Cookies, filed as Exhibit
10.69 to the Company's Registration Statement on S-4 (No. 333-45179)
and incorporated by reference herein

10.39+ Consulting Agreement, dated November 26, 1996, between Debra J. Fields
and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.70 to the
Company's Registration Statement on S-4 (No. 333-45179) and
incorporated by reference herein

10.40+ Mrs. Fields' Holding Company, Inc. Director Stock Option Plan

10.41+ Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan

10.42+ Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan

10.43+ Amended and Restated Loan Agreement, dated as of February 28, 1998,
between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank,
filed as Exhibit 10.73 to the Company's Registration Statement on S-4
(No. 333-45179) and incorporated by reference herein

10.44+ Intellectual Property Security Agreement, dated as of February 28,
1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National
Bank

10.45+ Pledge and Security Agreement, dated as of February 28, 1998, between
Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank

10.46+ Stockholders' Agreement, dated as of July 17, 1998, between Mrs.
Fields' Holding Company, Inc. and its Stockholders

10.47+ Form of Settlement Agreement and Release, by and among Mrs. Fields'
Original Cookies, Inc., Capricorn Investors II, L.P., a Delaware
limited partnership, Great American Cookie Company, Inc., Cookies USA,
Inc., The Jordan Company, and the Franchisees parties thereto

10.48+ Supply Agreement, dated as of March 30, 1998 between Mrs. Fields'
Original Cookies, Inc. and LBI Acquisition Corp. d/b/a Pennant Foods.

12.1+ Computation of ratio of earnings to fixed charges of Mrs. Fields'
Original Cookies, Inc.

21.1+ Subsidiaries of Mrs. Fields' Original Cookies, Inc.

23.1+ Consent of Arthur Andersen LLP

23.2+ Consent of Deloitte & Touche LLP

23.3+ Consent of Weinstein Spira & Company, P.C.

23.4+ Consent of PricewaterhouseCoopers LLP

23.5* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)

23.6 Consent of Habif, Arogeti, & Wynne, P.C.

23.7 Consent of BDO Siedman, LLP

23.8 Consent of AJ Robbins, P.C.

23.9 Consent of Prior Management of Great American Cookie Company

24.1+ Power of Attorney of certain officers and directors of the Company,
included in Part II of this Registration Statement

24.2+ Power of Attorney of certain officers and directors of The Mrs. Fields'
Brand, Inc., included in Part II of this Registration Statement

24.3+ Power of attorney of certain officers and directors of Great American
Cookie Company, Inc., included in Part II of this Registration
Statement

25.1+ Form T-1 Statement of Eligibility of The Bank of New York to act as
trustee under the Indenture

27.1+ Financial Data Schedule (for SEC use only), filed as Exhibit 27 to the
Company's Form 10-Q for the quarter ended October 3, 1998

99.1* Form of Letter of Transmittal

99.2* Form of Notice of Guaranteed Delivery

99.3+ Schedule II - Valuation and Qualifying Accounts

99.4* Guidelines for certification of taxpayer identification number on
substitute Form W-9*

99.5* Letter to Brokers*

99.6* Letter to clients*

________
* To be filed by amendment.
+ Filed previously