UNITEDTable STATESof SECURITIES AND EXCHANGE COMMISSION Contents

~~Washington,~~UNITED ~~D.C.~~STATES ~~20549~~

~~FORM~~SECURITIES ~~10-Q~~AND EXCHANGE COMMISSION

~~(Mark~~Washington, ~~One)~~ D.C. 20549

xFORM ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934~~10-Q

~~For~~(Mark ~~quarterly~~One) ~~period ended June 30, 2002~~

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934

¨For ~~TRANSITION~~quarterly ~~REPORT~~period ~~PURSUANT~~ended TODecember ~~SECTION~~31, ~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2002

~~For~~OR ~~the transition period from to .~~

~~Commission~~¨ ~~file~~TRANSITION ~~number~~REPORT ~~0-25886~~ PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

~~GARDEN~~For ~~FRESH~~the ~~RESTAURANT~~transition ~~CORP~~period from to .

~~(Exact~~Commission ~~name~~file ofnumber ~~registrant~~0-25886 ~~as specified in its charter)~~

Delaware		33-0028786
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employee Identification No.)

GARDEN FRESH RESTAURANT CORP.

~~15822~~(Exact ~~Bernardo~~name ~~Center~~of ~~Drive,~~registrant ~~Suite~~as A,specified ~~San~~in ~~Diego,~~its CAcharter) ~~92127~~

(Address of principal executive offices) (Zip Code)

Delaware		33-0028786
(State or other jurisdiction of incorporation		(I.R.S. Employee
or organization)		Identification No.)

~~(858)~~15822 Bernardo ~~675-1600~~Center Drive, Suite A, San Diego, CA 92127

(~~Registrant’s~~Address ~~telephone~~of ~~number,~~principal ~~including~~executive ~~area code~~offices)(Zip Code)

~~17180~~Registrant’s ~~Bernardo~~telephone ~~Center Drive~~number, ~~San~~including ~~Diego,~~area CAcode: ~~92128~~ (858) 675-1600

Indicate by a check mark whether the registrant (~~Address~~1) has filed all reports required to be filed by Section 13 or 15(d) of ~~former~~the ~~executive~~Securities ~~offices)~~ Exchange Act of 1934 during the preceding 12 months (~~Zip~~or ~~Code~~for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No¨

Indicate by a check mark whether the registrant ~~(1)~~is ~~has~~an ~~filed~~accelerated ~~all~~filer ~~reports required to be filed by Section 13 or 15~~(d)as ofdefined ~~the~~in ~~Securities~~Rule ~~Exchange~~12b-2 ~~Act~~ of ~~1934 during~~ the ~~preceding 12 months (or for such shorter period that the~~ ~~registrant~~Exchange ~~was required to file such reports~~Act),. ~~and~~Yes ~~(2)~~¨ ~~has~~No ~~been~~x ~~subject to such filing requirements for the past 90~~

~~days~~The number of shares of Common Stock, $. ~~Yes x No ¨~~01 par value, outstanding as of January 31, 2003 was 5,783,202. There are no other classes of common stock.

TheTable number of shares of Common Stock, $.01 par value, outstanding as of July 26, 2002 was 5,732,822. There are no other classes of common stock. Contents

GARDEN FRESH RESTAURANT CORP.

FORM 10-Q

INDEX

			PAGE
		Page
Part I—	FINANCIAL INFORMATION
PART I: FINANCIAL INFORMATION
Item 1:	~~Item~~Unaudited 1:Financial Statements	~~Unaudited Financial Statements~~
		Balance Sheets at September 30, 2001 and June 30, 2002	3
	Balance Sheets as of September 30, 2002 and December 31, 2002	3
		Statements of Operations for the three and nine months ended June 30, 2001 and June 30, 2002	4
	Statements of Operations for the three months ended December 31, 2001 and December 31, 2002	4
		Statements of Cash Flows for the nine months ended June 30, 2001 and June 30, 2002	5
	Statements of Cash Flows for the three months ended December 31, 2001 and December 31, 2002	5
	Notes to Unaudited Financial Statements	~~Notes to Unaudited Financial Statements~~6	6
Item 2:	~~Item~~Management’s 2:Discussion and Analysis of Financial Condition and Results of Operations	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~8	8
Item 3:	~~Item~~Quantitative 3:and Qualitative Disclosures About Market Risk	~~Quantitative and Qualitative Disclosures About Market Risk~~19	21
Part II—	OTHER INFORMATION
Item 4:	Controls and Procedures	20
	Item 1:	Legal Proceedings	22
PART II: OTHER INFORMATION
	Item 2:	Changes in Securities	22
Item 1:	Legal Proceedings	21
	Item 3:	Defaults Upon Senior Securities	22
Item 2:	Changes in Securities	21
	Item 4:	Submission of Matters to a Vote of Security Holders	22
Item 3:	Defaults Upon Senior Securities	21
	Item 5:	Other Information	22
Item 4:	Submission of Matters to a Vote of Security Holders	21
	Item 6:	Exhibits and Reports on Form 8-K	22
Item 5:	Other Information	21
Item 6:	Exhibits and Reports on Form 8-K	21

GARDENTable FRESHof RESTAURANT CORP. Contents

GARDEN FRESH RESTAURANT ~~BALANCE~~CORP. ~~SHEETS~~

~~(Dollars~~ BALANCE inSHEETS ~~thousands, except per share amounts)~~

	September 30, 2001		June 30, 2002
			(Unaudited)
ASSETS
Cash and cash equivalents	$	165	$	9,032
Inventories		8,185		9,013
Other current assets		4,030		3,277
Total current assets		12,380		21,322
Property and equipment, net		143,588		130,977
Intangible and other assets		1,928		2,210
TOTAL ASSETS	$	157,896	$	154,509
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	7,862	$	4,048
Revolving line of credit		9,150		—
Current portion of long-term debt		10,296		14,660
Accrued liabilities		10,216		10,560
Total current liabilities		37,524		29,268
Deferred income taxes		5,149		7,547
Long-term debt, net of current portion		37,807		35,679
Other liabilities		3,236		3,459
Shareholders’ equity:
Preferred stock, $.001 par value; 120,000 shares authorized at September 30, 2001 and June 30, 2002, respectively; 0 issued and outstanding at September 30, 2001 and June 30, 2002, respectively		—		—
Common stock, $.01 par value; 12,000,000 shares authorized at September 30, 2001 and June 30, 2002, respectively; 5,675,826 and 5,732,822 issued and outstanding at September 30, 2001 and June 30, 2002, respectively		57		57
Additional paid-in capital		59,665		60,096
Retained earnings		14,458		18,403
Total shareholders’ equity		74,180		78,556
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	157,896	$	154,509

(Dollars in thousands, except par value amounts)

See notes to unaudited financial statements.

	September 30, 2002		December 31, 2002
			(Unaudited)
ASSETS
Cash and cash equivalents	$	5,294	$	2,912
Inventories		9,123		9,632
Other current assets		3,919		4,850

Total current assets		18,336		17,394
Property and equipment, net		132,638		130,712
Intangible and other assets		2,032		2,052

TOTAL ASSETS	$	153,006	$	150,158

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	5,604	$	4,363
Current portion of long-term debt		10,635		10,416
Accrued liabilities		11,743		12,453

Total current liabilities		27,982		27,232
Deferred income taxes		8,336		8,465
Long-term debt, net of current portion		32,970		29,932
Other liabilities		3,485		3,774
Shareholders’ equity:
Preferred stock, $.001 par value; 2,500,000 shares authorized at September 30, 2002 and December 31, 2002 of which 120,000 shares are designated as Series A Preferred Stock; 0 shares issued and outstanding at September 30, 2002 and December 31, 2002, respectively.		—		—
Common stock, $.01 par value; 12,000,000 shares authorized at September 30, 2002 and December 31, 2002, respectively; 5,732,822 and 5,783,101 shares issued and outstanding at September 30, 2002 and December 31, 2002, respectively.		57		58
Additional paid-in capital		60,133		60,448
Retained earnings		20,043		20,249

Total shareholders’ equity		80,233		80,755

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	153,006	$	150,158

3See notes to unaudited financial statements.

~~GARDEN~~3 ~~FRESH RESTAURANT CORP.~~

STATEMENTSTable OFof OPERATIONS Contents

~~(In~~GARDEN ~~thousands,~~FRESH ~~except~~RESTAURANT ~~per~~CORP. ~~share amounts)~~

~~(Unaudited)~~ STATEMENTS OF OPERATIONS

	Three months ended						Nine months ended
	June 30,						June 30,
	2001			2002			2001			2002
Net sales	$	52,103		$	55,713		$	146,784		$	159,540
Costs and expenses:
Costs of sales		12,907			13,526			36,348			39,154
Restaurant operating expenses:
Labor		16,676			17,465			47,675			50,927
Occupancy and other expenses		12,332			13,115			34,635			38,807
General and administrative expenses		3,213			3,237			9,755			9,860
Restaurant opening costs		305			25			1,432			331
Depreciation and amortization		3,241			3,423			9,170			10,171
Total costs and expenses		48,674			50,791			139,015			149,250
Operating income		3,429			4,922			7,769			10,290
Other income (expense):
Interest income		37			22			147			55
Interest expense		(1,299	)		(1,138	)		(3,643	)		(3,470	)
Other income (expense), net		(103	)		(19	)		1,066			(275	)
Income before provision for income taxes		2,064			3,787			5,339			6,600
Provision for income taxes		(805	)		(1,544	)		(2,101	)		(2,655	)
Net income	$	1,259		$	2,243		$	3,238		$	3,945
Basic net income per common share	$	0.22		$	0.39		$	0.57		$	0.69
Shares used in computing basic net income per common share		5,676			5,718			5,668			5,698
Diluted net income per common share	$	0.22		$	0.38		$	0.57		$	0.68
Shares used in computing diluted net income per common share		5,695			5,975			5,683			5,797

(In thousands, except per share amounts)

~~See~~(Unaudited) ~~notes to unaudited financial statements~~

	Three Months Ended
	December 31, 2001			December 31, 2002
Net sales	$	47,879		$	49,685
Costs and expenses:
Costs of sales		12,304			12,341
Restaurant operating expenses:
Labor		16,016			16,105
Occupancy and other expenses		12,656			12,721
General and administrative expenses		3,163			3,566
Restaurant opening costs		205			55
Depreciation and amortization		3,365			3,505

Total costs and expenses		47,709			48,293

Operating income		170			1,392
Other income (expense):
Interest income		21			14
Interest expense		(1,196	)		(970	)
Other income (expense), net		(138	)		(86	)

Income (loss) before income tax benefit (expense)		(1,143	)		350
Income tax benefit (expense)		451			(144	)

Net income (loss)	$	(692	)	$	206

Basic net income (loss) per common share:	$	(0.12	)	$	0.04

Shares used in computing basic net income (loss) per common share		5,688			5,754

Diluted net income (loss) per common share:	$	(0.12	)	$	0.03

Shares used in computing diluted net income (loss) per common share		5,688			5,931

~~GARDEN~~See notes ~~FRESH~~to ~~RESTAURANT~~unaudited ~~CORP~~financial statements.

~~STATEMENTS~~4 ~~OF CASH FLOWS~~

(DollarsTable inof thousands) Contents

~~(Unaudited)~~GARDEN FRESH RESTAURANT CORP.

	Nine months ended
	June 30, 2001			June 30, 2002
Cash flows from operating activities:
Net income	$	3,238		$	3,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,170			10,171
Loss on disposal of property and equipment		243			353
Provision for deferred income taxes		1,886			2,398
Amortization of deferred gain on sale-leaseback of properties		(26	)		(37	)
Changes in operating assets and liabilities:
Inventories		(1,031	)		(828	)
Other current assets		(3,733	)		753
Intangible and other assets		(304	)		(305	)
Accounts payable		498			(3,109	)
Accrued liabilities		2,727			330
Other liabilities		99			1
Net cash provided by operating activities		12,767			13,672
Cash flows from investing activities:
Acquisitions of property and equipment:
New restaurant development		(20,826	)		(2,780	)
Existing restaurant additions and other capital improvements		(6,517	)		(4,287	)
Decrease in construction costs included in accounts payable		(1,458	)		(805	)
Proceeds from sale-leaseback transactions		9,985			9,550
Net cash provided by (used in) investing activities		(18,816	)		1,678
Cash flows from financing activities:
Repayments under line of credit		(3,500	)		(450	)
Proceeds from long-term debt		17,441			7,719
Repayment of short-term loan		—			(5,700	)
Repayment of long-term debt		(8,060	)		(8,483	)
Net proceeds from issuance of common stock		155			431
Net cash provided by (used in) financing activities		6,036			(6,483	)
Net increase (decrease) in cash and cash equivalents		(13	)		8,867
Cash and cash equivalents at beginning of period		2,058			165
Cash and cash equivalents at end of period	$	2,045		$	9,032
Supplemental disclosure of noncash investing and financing transactions:
Property and equipment asset purchases in accounts payable	$	993		$	100
Replacement of line of credit with short-term debt		—		$	8,700

STATEMENTS OF CASH FLOWS

~~See~~(Dollars ~~notes~~in tothousands) ~~unaudited financial statements.~~

5(Unaudited)

GARDEN FRESH RESTAURANT CORP.

	Three Months Ended
	December 31, 2001			December 31, 2002
Cash flows from operating activities:
Net income (loss)	$	(692	)	$	206
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization		3,365			3,505
Loss on disposal of property and equipment		134			85
Provision for deferred income taxes		—			315
Tax benefit from exercise of common stock options		—			51
Amortization of deferred gain on sale-leaseback of properties		(12	)		(15	)
Changes in operating assets and liabilities:
Inventories		(1,393	)		(509	)
Other assets		(958	)		(1,117	)
Intangible and other assets		(271	)		(28	)
Accounts payable		1,151			(686	)
Accrued liabilities		(117	)		(503	)
Other liabilities		190			160

Net cash provided by operating activities		1,397			1,464

Cash flows from investing activities:
Acquisition of property and equipment:
New restaurant development		(556	)		(2,260	)
Existing restaurant additions		(1,172	)		(1,136	)
Decrease in construction costs included in accounts payable		(805	)		(555	)
Proceeds from sale-leaseback transactions		4,922			3,097

Net cash provided by (used in) investing activities		2,389			(854	)

Cash flows from financing activities:
Repayments under line of credit		(450	)		—
Proceeds from long-term debt		2,585			—
Repayment of short-term debt		(550	)		—
Repayment of long-term debt		(2,794	)		(3,257	)
Net proceeds from issuance of common stock		68			265

Net cash used in financing activities		(1,141	)		(2,992	)

Net increase (decrease) in cash and cash equivalents		2,645			(2,382	)
Cash and cash equivalents at beginning of period		165			5,294

Cash and cash equivalents at end of period	$	2,810		$	2,912

Supplemental disclosure of non-cash investing and financing transactions:
Property and equipment asset purchases in accounts payable	$	823		$	1,204
Replacement of line of credit with short-term debt		8,700			—

See ~~NOTES~~notes TOto ~~UNAUDITED~~unaudited ~~FINANCIAL~~financial ~~STATEMENTS~~ statements.

1.5 ~~UNAUDITED FINANCIAL STATEMENTS~~

TheTable accompanying financial statements have been prepared by Garden Fresh Restaurant Corp. (the “Company”) without audit and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission and do not necessarily include certain information and footnote disclosures necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. For further information, refer to the financial statements and notes thereto for the fiscal year ended September 30, 2001 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission. Contents

2.GARDEN ~~NET~~FRESH ~~INCOME~~RESTAURANT CORP. ~~PER COMMON SHARE~~

~~Basic net income per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed based on the weighted~~ ~~average~~NOTES ~~number~~TO ofUNAUDITED ~~common~~FINANCIAL ~~shares~~STATEMENTS and dilutive potential common shares, which includes options under the Company’s stock option plans computed using the treasury stock method and common shares expected to be issued under the Company’s Employee Stock Purchase Plan.

Potential issuances of common stock of 19,000 and 257,000 shares for the three month periods ended June 30, 2001 and 2002, respectively, and 15,000 and 99,000 shares for the nine month periods ended June 30, 2001 and 2002, respectively, were used to calculate diluted net income per common share1. ~~There~~UNAUDITED ~~were~~FINANCIAL no reconciling items in calculating the numerator for basic and diluted net income per common share for either of the periods presented. Shares related to stock options of 1,074,000 and 354,000 for the three month periods ended June 30, 2001 and 2002, respectively, and 944,000 and 430,000 shares for the nine month periods ended June 30, 2001 and 2002, respectively, were excluded from the calculation of diluted net income per common share, as the effect of their inclusion would be anti-dilutive. STATEMENTS

3The accompanying financial statements have been prepared by Garden Fresh Restaurant Corp. ~~SETTLEMENT~~(the OF“Company”) without ~~INSURANCE~~audit ~~CLAIM~~and reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission and do not necessarily include certain information and footnote disclosures necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. For further information, refer to the financial statements and notes thereto for the fiscal year ended September 30, 2002 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission.

~~The~~2. ~~Company~~NET ~~recorded~~INCOME ~~other~~PER ~~income~~COMMON ~~of $1,284,000 during the first quarter of fiscal 2001 related to the settlement of an insurance claim for the loss of assets in a fire at the Company’s Point Loma restaurant in December 1999.~~ SHARE

4Basic net income per common share is computed based on the weighted average number of common shares outstanding during the period. ~~PREPARATION~~Diluted OFnet ~~FINANCIAL~~income ~~STATEMENTS~~per common share is computed based on the weighted average number of common shares and dilutive potential common shares, which includes options under the Company’s stock option plans computed using the treasury stock method and common shares expected to be issued under the Company’s Employee Stock Purchase Plan.

~~The~~Potential ~~preparation~~issuances of ~~financial~~common ~~statements,~~stock inof ~~conformity~~177,000 ~~with~~shares ~~accounting~~for ~~principles~~the ~~generally~~three ~~accepted~~month inperiod ~~the~~ended ~~United~~December ~~States of America~~31, ~~requires~~2002 ~~management~~were used to ~~make~~calculate ~~estimates~~diluted ~~and~~net ~~assumptions~~income ~~that~~per ~~affect~~common ~~the~~share. ~~reported~~There ~~amounts~~were ofno ~~assets~~reconciling ~~and~~items ~~liabilities~~in ~~and~~calculating ~~disclosure~~the ofnumerator ~~contingent~~for ~~assets~~basic and ~~liabilities~~diluted atnet ~~the~~income ~~date~~per common share for either of the ~~financial~~periods ~~statements~~presented. Shares related to stock options of 1,049,000 and 670,000 for the ~~reported~~three ~~amounts~~month ofperiods ~~revenues~~ended December 31, 2001 and ~~expenses~~2002, ~~during~~respectively, were excluded from the ~~reporting~~ ~~period.~~calculation ~~Actual~~of ~~results~~diluted ~~could~~net ~~differ~~income ~~from~~per ~~these~~common ~~estimates~~share, as the effect of their inclusion would be anti-dilutive.

53. ~~SALE~~PREPARATION ~~LEASE-BACK~~OF ~~TRANSACTIONS~~FINANCIAL STATEMENTS

~~During~~The ~~the~~preparation ~~quarter~~of ~~ended~~financial ~~December 31~~statements, ~~2001,~~in ~~the~~conformity ~~Company~~with ~~entered~~accounting ~~into~~principles ~~two~~generally ~~sale-leaseback~~accepted ~~transactions~~in ~~whereby~~ the ~~Company~~United ~~sold~~States of ~~and~~America, ~~leased~~requires ~~back~~management ~~the~~to ~~land~~make estimates and ~~building~~assumptions ~~for~~that ~~two~~affect ~~separate~~the ~~restaurant~~reported ~~sites. The~~amounts ~~Company received net proceeds~~ of ~~$4.9~~assets ~~million~~and ~~for~~liabilities ~~the two transactions~~ and ~~recorded~~disclosure ~~deferred gains~~ of ~~$131,000.~~contingent ~~The~~assets ~~gains~~and ~~are~~liabilities ~~being~~at ~~amortized over~~ the ~~respective~~date ~~lease terms~~ of 20the ~~years.~~financial ~~The~~statements ~~related~~and ~~leases~~the ~~are~~reported ~~being~~amounts ~~accounted for as operating~~of ~~leases.~~revenues ~~There~~and ~~were~~expenses noduring ~~sale~~the ~~lease-back~~reporting ~~transactions~~period. ~~during~~Actual ~~the~~results ~~quarter~~could ~~ended~~differ ~~March~~from ~~31,~~these ~~2002~~estimates.

64. SALE LEASE-BACK TRANSACTIONS

~~GARDEN~~During ~~FRESH~~the ~~RESTAURANT~~quarter ~~CORP~~ended December 31, 2001, the Company entered into two sale-leaseback transactions whereby the Company sold and leased back the land and building for two separate restaurant sites. The Company received net proceeds of $4.9 million for the two transactions and recorded deferred gains of $131,000. The gains are being amortized over the respective lease terms of 20 years. The related leases are being accounted for as operating leases.

~~NOTES~~During TOthe ~~UNAUDITED~~quarter ~~FINANCIAL~~ended ~~STATEMENTS—(Continued)~~December 31, 2002, the Company completed a sale-leaseback transaction whereby the Company sold and leased back the land and building for one restaurant site. The Company received net proceeds of $3,097,000 for the transaction and recorded a deferred gain of $152,000. The gain is being amortized over the lease term of 20 years. The related lease is being accounted for as an operating lease.

During the quarter ended June 30, 2002, the Company entered into two sale-leaseback transactions whereby the Company sold and leased back the land and building for two separate restaurant sites. The Company received net proceeds of $4.6 million for the two transactions and recorded deferred gains of $154,000. The gains are being amortized over the respective lease terms of 20 years. The related leases are being accounted for as operating leases.

6.Table NEWof CREDIT AGREEMENTContents

~~During~~GARDEN ~~the~~FRESH ~~quarter ended December 31, 2001, the Company made repayments of $0.5 million towards its line of credit and converted the remaining balance of $8.7 million to a new credit agreement with the~~RESTAURANT ~~bank consisting of two term loans in the amount of $6~~CORP.0 million due December 31, 2002, and $2.7 million which became due June 30, 2002. The new term loans bear interest at either the prime rate or LIBOR plus 2.0%, and prime rate or LIBOR plus 2.5%, respectively, and are collateralized by equipment and other assets of the Company. As of March 31, 2002, the Company repaid the entire remaining balance of the $2.7 million term loan. During the third quarter of fiscal 2002, the Company made repayments totaling $3.0 million towards the $6.0 million note. According to the terms of the agreement, the Company is required to repay the remaining unpaid balance of $3.0 million under this agreement during the first quarter of fiscal 2003.

7NOTES TO UNAUDITED FINANCIAL STATEMENTS

~~GARDEN~~5. ~~FRESH~~NEW ~~RESTAURANT~~CREDIT ~~CORP.~~ AGREEMENT

~~STATEMENT~~During OFthe ~~OPERATING~~quarter ~~DATA~~ended December 31, 2002, the Company entered into a line of credit agreement (Credit Agreement) with a bank. This credit agreement provides for borrowings up to $6 million under a revolving credit agreement, the proceeds of which shall be used to finance the establishment of restaurants and to finance the Company’s working capital requirements. Outstanding borrowings for working capital purposes shall not at any time exceed $2.0 million. Borrowings are secured by certain equipment and fixtures of the Company. The outstanding principal balance on this line of credit will carry interest at either the prime rate or LIBOR plus 2% with interest payable at the beginning of each month. The Company’s credit agreement contains various financial covenants and restrictions. The credit agreement expires on January 31, 2004. As of December 31, 2002, there is no outstanding balance under this agreement.

~~ITEM~~7 ~~2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

INTRODUCTIONTable of Contents

~~The~~GARDEN ~~statements~~FRESH ~~contained~~RESTAURANT in this Form 10-Q that are not purely historical are forward looking statements, including statements regarding the Company’s expectations, hopes, beliefs, intentions or strategies regarding the futureCORP. Statements which use words such as “expects,” “will,” “may,” “could,” “anticipates,” “believes,” “intends,” “attempts,” and “seeks” are forward looking statements. These forward looking statements, including statements regarding the Company’s (i) plans to open new restaurants, (ii) plans to increase operational efficiency and improve labor utilization, (iii) budgeted capital expenditures for new restaurant openings and improvements at existing sites, (iv) increased efficiencies resulting from its new accounting software program, (v) need to obtain additional financing, (vi) future restaurant sales, (vii) ability to compete against other companies, and (viii) strategic marketing programs and effects of such programs are all based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements. It is important to note that the Company’s actual results could differ materially from those in such forward-looking statements. Among the factors that could cause actual results to differ materially are the factors set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Risks.” In particular, the Company’s expansion efforts and plans to open new restaurants could be affected by the Company’s ability to locate suitable restaurant sites, construct new restaurants in a timely manner and obtain additional funds, while the Company’s plans to increase operational efficiency could be affected by difficulties in assimilating new accounting software as well as escalating costs of both utilities and fuel, as well as increased labor costs for the distribution center.

~~CRITICAL~~ ITEM ~~ACCOUNTING~~2: MANAGEMENT’S ~~POLICIES~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In response to the SEC’s Release Numbers 33-8050 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and 33-8056, “Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our unaudited financial statements. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to impairment of long-lived assets, accruals for workers compensation insurance, and contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions. INTRODUCTION

WeThe ~~believe~~statements contained in this Form 10-Q that are not purely historical are forward looking statements, including statements regarding the ~~following~~Company’s ~~critical~~expectations, hopes, beliefs, intentions or strategies regarding the future. Statements which use words such as “expects,” “will,” “may,” “could,” “anticipates,” “believes,” “intends,” “attempts,” and “seeks” are forward looking statements. These forward looking statements, including statements regarding the Company’s (i) plans to open new restaurants, (ii) plans to increase operational efficiency and improve labor utilization, (iii) budgeted capital expenditures for new restaurant openings and improvements at existing sites, (iv) increased efficiencies resulting from its new accounting ~~policies~~software ~~affect~~program, (v) plans and needs to obtain additional financing, (vi) future restaurant sales, (vii) ability to compete against other companies, and (viii) strategic marketing programs and effects of such programs are all based on information available to the Company ~~more~~on ~~significant~~the ~~judgments~~date hereof, and ~~estimates~~the ~~used~~Company assumes no obligation to update any such forward looking statements. It is important to note that the Company’s actual results could differ materially from those in such forward-looking statements. Among the ~~preparation~~factors that could cause actual results to differ materially are the factors set forth under the heading “Management’s Discussion and Analysis of ~~our~~Financial ~~unaudited~~Condition ~~financial~~and ~~statements:~~Results of Operations—Business Risks.” In particular, the Company’s expansion efforts and plans to open new restaurants could be affected by the Company’s ability to locate suitable restaurant sites, construct new restaurants in a timely manner and obtain additional funds, while the Company’s plans to increase operational efficiency could be affected by difficulties in assimilating new accounting software as well as escalating costs of both utilities and fuel, as well as increased labor costs for the distribution center.

•CRITICAL ACCOUNTING ~~The~~POLICIES Company periodically assesses the impairment of long-lived assets to be held for use based on expectations of future undiscounted cash flows from the related operations, and when circumstances dictate, adjusts the asset to the extent the carrying value exceeds the fair value of the asset. In September 2001, the Company determined that it would close its Slurp! restaurant and its remaining Ladles restaurants due to poor operating performance. The Company recorded an accrual of $204,000 at September 30, 2001, representing the present value of the estimated net future lease payments associated with the planned closures of these restaurants. Of this amount, $80,000 was recorded as accrued liabilities and $124,000 was recorded as other long-term liabilities. Cash payments in the

8In response to the SEC’s Release Numbers 33-8050 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and 33-8056, “Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our unaudited financial statements. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to impairment of long-lived assets, accruals for workers compensation and general liability insurance, and contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

~~amount~~We ofbelieve ~~$77,000~~that ~~were made during~~ the ~~first~~following critical ~~nine~~accounting ~~months~~policies ofaffect ~~fiscal 2002 to reduce~~ the ~~liabilities.~~more ~~Should~~significant ~~the~~judgments ~~Company~~and ~~incur~~estimates ~~unexpected~~used ~~additional~~in ~~expenses related to~~ the ~~exit~~preparation of ~~the~~our ~~leases related~~unaudited tofinancial ~~these~~statements: ~~locations, additional accruals may be required.~~

• The Company maintains anaccruals ~~accrual~~ for workers’ compensation and general liability insurance which isare recorded in the accrued liabilities section of ~~our~~the balance sheets. WeThe ~~determine~~Company determines the adequacy of ~~this~~these ~~accrual~~accruals by evaluating (1) information periodically ~~our~~provided by its carrier regarding the Company’s historical experience and trends relating to insurance claims and payments, and (2) industry experience and trends related to insurance claims and payments. The Company also consults with its carrier regarding the carrier’s expectation of future trends to determine necessary accruals. If such information indicates that ~~our~~the accruals are overstated or understated, wethe Company will adjust the assumptions utilized in ~~our~~its methodologies and reduce or provide for additional accruals as appropriate. An increase or decrease to ~~this~~the workers’ compensation insurance accrual would ~~result~~affect inthe anCompany’s ~~increase~~results orof ~~decrease~~operations toby increasing or decreasing the Company’s employee benefits expense,. ~~respectively,~~An ~~which~~increase or decrease to the general liability insurance accrual would affect the Company’s results of operations by increasing or decreasing the Company’s occupancy and other expense.

• The Company is subject to various claims and legal actions in the ordinary course of business. Some of these matters include landlord disputes, professional liability, employee-related matters, and investigations by governmental agencies regarding ~~our~~ employment practices. The Company is ~~not~~ currently ~~aware~~in oftwo ~~any~~separate ~~such~~disputes ~~pending~~with orone ~~threatened~~landlord ~~litigation~~and ~~that~~one itvendor ~~believes~~and isaccordingly ~~reasonably~~has ~~likely~~recorded ~~to have~~ a ~~material~~liability ~~adverse~~for ~~effect on~~ its ~~results~~estimated oflosses ~~operations.~~under ~~Should~~these ~~the Company become aware of such claims it will evaluate the probability of an adverse outcome and provide accruals for such contingencies as necessary.~~disputes

~~QUARTERLY~~8 ~~RESULTS~~

TheTable following table sets forth the percentage of net sales certain items included in the Company’s statement of operations for the periods indicated. (Unaudited) Contents

	Three Months Ended				Nine Months Ended
	June 30, 2001		June 30, 2002		June 30, 2001		June 30, 2002
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:
Costs of sales	24.8	%	24.3	%	24.8	%	24.5	%
Restaurant operating expenses:
Labor	32.0	%	31.3	%	32.5	%	31.9	%
Occupancy and other expenses	23.7	%	23.5	%	23.6	%	24.3	%
General and administrative expenses	6.2	%	5.9	%	6.6	%	6.2	%
Restaurant opening costs	0.6	%	0.0	%	1.0	%	0.2	%
Depreciation and amortization	6.2	%	6.2	%	6.2	%	6.4	%
Total costs and expenses	93.5	%	91.2	%	94.7	%	93.5	%
Operating income	6.5	%	8.8	%	5.3	%	6.5	%
Interest income	0.1	%	0.0	%	0.1	%	0.0	%
Interest expense	(2.5)	%	(2.0)	%	(2.5)	%	(2.2)	%
Other income (expenses), net	(0.2)	%	(0.0)	%	0.7	%	(0.2)	%
Income before income taxes	3.9	%	6.8	%	3.6	%	4.1	%
Provision for income taxes	(1.5)	%	(2.8)	%	(1.4)	%	(1.7)	%
Net income	2.4	%	4.0	%	2.2	%	2.4	%

totaling $90,000. The Company is not aware of any additional pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations. Should the Company become aware of such claims or should the amounts it is currently disputing change, it will re-evaluate the probability of an adverse outcome and provide new or additional accruals for such contingencies as necessary.

9• The Company periodically assesses the impairment of long-lived assets to be held for use based on expectations of future undiscounted cash flows from the related operations, and when circumstances dictate, adjusts the asset to the extent the carrying value exceeds the fair value of the asset.

~~RESULTS~~9 ~~OF OPERATIONS~~

ThreeTable Monthsof Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 Contents

~~Net Sales. Net~~QUARTERLY ~~sales~~RESULTS for the three months ended June 30, 2002 increased 6.9% to $55.7 million from $52.1 million for the comparable 2001 period. This increase was primarily due to the opening of four restaurants since the comparable 2001 period and the increase in comparable restaurant sales of 2.9%. The same store sales increase is due to increased same store guest counts of 0.3% combined with a 2.6% increase in same store average meal price since the comparable 2001 period. See “Business Risks—Certain Operating Results and Considerations”.

~~Costs~~The ~~of Sales. Costs~~following oftable ~~sales~~sets ~~for~~ forth the three months ended June 30, 2002 increased 4.7% to $13.5 million from $12.9 million for the comparable 2001 period. This increase was due to the addition of four restaurants opened since the comparable 2001 period. As a percentage of net sales, ~~cost~~certain ofitems ~~sales~~included ~~decreased~~in ~~0.5 percentage points to 24.3% from 24.8% since~~ the ~~comparable~~Company’s ~~2001~~statement ~~period. The decrease as a percentage~~ of ~~net~~operations ~~sales~~for is the ~~result~~periods ~~of higher net sales and efficiencies achieved through the utilization of the East Coast distribution center resulting in lower food costs~~indicated. ~~See “Business Risks—Reliance on Key Suppliers and Distributors”.~~

~~Labor Expense. Labor expense for the three months ended June 30, 2002 increased 4.8% to $17.5 million from $16.7 million for the comparable~~(Unaudited) 2001 period. This increase was due primarily to an increase in the minimum wage in California and the addition of four restaurants opened since the comparable 2001 period. As a percentage of net sales, the labor expense decreased 0.7 percentage points to 31.3% from 32.0% since the comparable 2001 period as a result of higher net sales since the third quarter of fiscal 2001 and to programs put in place to better utilize crew labor hours and reduce the number of managers in each store. See “Business Risks—Minimum Wage”.

Occupancy and Other Expenses. Occupancy and other expenses for the three months ended June 30, 2002 increased 6.5% to $13.1 million from $12.3 million for the comparable 2001 period. This increase is due primarily to the opening of four new restaurants since the third quarter of fiscal 2001. Occupancy and other expenses as a percentage of net sales decreased 0.2 percentage points to 23.5% from 23.7% for the comparable 2001 period. The decrease as a percentage of net sales is the result of higher net sales since the third quarter of fiscal 2001 and to reduced spending as a result of programs put in place to better manage other operating expenditures, but was partially offset by higher property insurance costs as a result of increased rate pressure throughout the insurance industry, increases in base rent associated with sale-leasebacks, and repair and maintenance costs for aging restaurants. The Company anticipates occupancy and other expenses will continue to increase as it continues to experience escalating insurance costs. Further, the Company anticipates that it will experience higher repair and maintenance expense related to its aging restaurant base. Such expenses will be partially offset by decreased depreciation expense related to the older assets reaching the end of their useful lives. Should the Company undertake additional sale-leasebacks of existing sites it would incur increases in base rent related to new leases at those sites. See “Business Risks—Planned Operating Expenditures”.

	Three Months Ended
	December 31, 2001		December 31, 2002
Net sales	100.0	%	100.0	%

Costs and expenses:
Costs of sales	25.7	%	24.8	%
Restaurant operating expenses:
Labor	33.5	%	32.4	%
Occupancy and other expenses	26.4	%	25.6	%
General and administrative expenses	6.6	%	7.2	%
Restaurant opening costs	0.4	%	0.1	%
Depreciation and amortization expenses	7.0	%	7.1	%

Total costs and expenses	99.6	%	97.2	%

Operating income:	0.4	%	2.8	%
Interest income	—		—
Interest expense	(2.5	)%	(1.9	)%
Other income (expense), net	(0.3	)%	(0.2	)%

Income (loss) before income tax benefit (expense)	(2.4	)%	0.7	%
Income tax benefit (expense)	0.9	%	(0.3	)%

Net income (loss)	(1.5	)%	0.4	%

~~General~~10 and Administrative Expenses. General and administrative expenses remained consistent at $3.2 million for the three month periods ending June 30, 2002 and 2001. As a percentage of net sales, general and administrative expenses decreased 0.3 percentage points to 5.9% from 6.2% for the comparable 2001 period. The decrease as a percentage of net sales is the result of higher net sales which were attributable to increases in same store sales and as a result of programs put in place to better manage general and administrative expenditures.

RestaurantTable Opening Costs. Restaurant opening costs for the three months ended June 30, 2002 decreased 91.8% to $25,000 from $305,000 for the comparable 2001 period. Restaurant opening costs as a percentage of net sales were less than 0.1% for the quarter ended June 30, 2002 compared to 0.6% for the comparable 2001 Contents

10RESULTS OF OPERATIONS

~~period.~~Three ~~The~~Months ~~decrease~~Ended isDecember ~~consistent with the Company’s reduction in restaurant opening activity for the quarter ended June 30~~31, 2002 ~~compared~~Compared to ~~the~~Three Months ~~quarter~~Ended ~~ended~~December ~~June 30~~31, 2001 ~~(no new restaurants were opened during the 2002 period compared to the opening of three new restaurants during the 2001 period).~~

~~Depreciation and Amortization~~Net Sales. ~~Depreciation~~ ~~and~~Net ~~amortization~~sales for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30,~~2003 ~~2002~~ increased 6.3.8% to $349.47 million from $347.29 million for the comparable ~~2001~~2002 period. ~~Depreciation~~This ~~and amortization~~increase aswas aprimarily ~~percentage~~due to the opening of ~~net~~one ~~sales~~restaurant ~~remained~~since ~~consistent~~the atcomparable ~~6.2%~~2002 ~~for~~period, the ~~three-month~~one restaurant ~~periods~~added ~~ended~~during ~~June~~the ~~30,~~first quarter of fiscal 2002 that was not open for the entire quarter and ~~2001.~~to ~~The~~the increase in ~~expense~~comparable isrestaurant ~~the~~sales ~~result~~ of ~~the~~3.6%. ~~opening~~The ofcomparable ~~four~~restaurant ~~new~~sales ~~restaurants~~increase ~~since~~for the ~~third~~first quarter of fiscal ~~2001~~2003 ~~and to~~is ~~depreciation~~due ~~expense related~~ to decreased ~~the~~same ~~new~~store ~~accounting~~guest ~~software~~counts ~~package,~~of ~~partially~~1.6% offset by ~~decreased~~a ~~depreciation~~5.2% ~~expense~~increase ~~associated~~in ~~with~~same ~~the~~store ~~sale-leaseback~~average ofmeal ~~five~~price ~~restaurant locations~~ since the comparable ~~2001~~2002 period. See “Business Risks—Certain Operating Results and Considerations”.

~~Interest~~Costs ~~Income~~of Sales. ~~Interest~~ ~~income~~Costs of sales remained consistent at $12.3 million for the three months ended ~~June~~December 3031, 2002 and 2001. As a percentage of net sales, cost of sales decreased 400.5%9 percentage points to ~~$22,000~~24.8% from ~~$37,000~~ ~~for~~25.7% since the comparable ~~2001~~2002 period. The decrease as a ~~result~~percentage of ~~lower~~net ~~interest~~sales ~~rates~~is ~~combined~~due to ~~with~~increases ~~decreased~~in ~~investing~~the ~~activity~~average meal price since the comparable fiscal 2002 period and to efficiencies achieved in the Company’s integration of ~~available~~the ~~cash~~Food Management System (FMS) which includes the Company’s purchasing, central kitchens and distribution centers resulting in lower food costs since the comparable 2002 period. See “Business Risks—Certain Operating Results and Considerations”.

~~Interest~~Labor Expense. ~~Interest~~ Labor expense for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30,~~2003 ~~2002~~increased ~~and 2001 decreased 15~~0.46% to $116.1 million from $116.30 million for the comparable ~~2001~~2002 period. This increase was due primarily to an increase in the minimum wage rate in California, the addition of one new restaurant since the comparable 2002 period and the one restaurant added during the fiscal 2002 first quarter that was not open for the entire period. As a percentage of net sales, fiscal 2003 first quarter labor expense decreased 1.1 percentage points to 32.4% from 33.5% since the comparable 2002 period as a result of ~~lower interest~~higher ~~rates~~net sales and to ~~the~~programs ~~reduction~~put in ~~debt~~place ~~balances~~to ~~since~~better utilize crew labor hours and reduce the ~~same~~number ~~period~~of managers in ~~the~~each ~~prior~~store. ~~fiscal~~See ~~year~~“Business Risks—Minimum Wage”.

~~Other Income~~Occupancy ~~(Expense),~~and ~~net.~~ Other ~~income~~Expenses. ~~(expense),~~Occupancy ~~net~~and ~~for~~other expenses remained consistent at $12.7 million for the three months ended ~~June~~December 3031, 2002 and 2001. Occupancy and other expenses as a percentage of net sales decreased 810.6%8 percentage points to ~~($19,000)~~25.6% from ~~($103,000)~~26.4% for the comparable ~~2001~~2002 period. The decrease as a ~~result~~percentage of ~~fewer~~net ~~write-offs~~sales is the result of ~~aging~~higher ~~equipment~~net sales and to reduced spending as a result of programs put in place to better manage other operating expenditures and to reduced marketing expenses resulting from timing shifts in marketing programs scheduled throughout the rest of ~~during~~fiscal 2003. These reductions were partially offset by higher liability and property insurance costs as a result of increased rate pressure throughout the ~~three~~insurance ~~months~~industry, ~~ended~~increases ~~June~~in 30base rent associated with sale-leasebacks, ~~2002~~and ~~compared~~repair and maintenance costs for aging restaurants. The Company anticipates occupancy and other expenses to increase as it continues to experience escalating insurance costs and higher repair and maintenance expenses related to its aging restaurant base. Such expenses will be partially offset by decreased depreciation expense related to the ~~same~~older ~~period~~assets reaching the end of their useful lives. Should the Company undertake additional sale-leasebacks of existing sites it would incur increased base rent related to new leases at those sites but experience a decrease in ~~fiscal~~depreciation ~~2001~~expense related to the sale of those assets. See “Business Risks—Planned Marketing Expenditures” and “Business Risks—Other Operating Expenditures”.

~~Provision~~General ~~for~~and ~~Income Taxes~~Administrative Expenses. ~~Income~~ ~~tax~~General ~~expense~~and administrative for the three months ended ~~June~~December 3031, 2002 increased 8712.5% to $13.56 million ~~compared~~from to $03.82 ~~million~~ for the comparable ~~2001~~fiscal ~~period. This increase is primarily due to increased taxable earnings during the~~ 2002 period ~~combined with an increase in the Company’s effective income tax rate during the same period~~. ~~The~~As ~~Company’s~~a ~~effective~~percentage ~~tax~~of ~~rate~~net ~~for~~sales, general ~~the~~and ~~three~~administrative ~~months~~expenses ~~ended June 30, 2002~~ increased 10.86 percentage points to 407.82% from 39 6.06% for the ~~quarter~~comparable ~~ended~~fiscal ~~June~~2002 ~~30,~~period. ~~2001~~The increase as a ~~result~~percentage of ~~higher~~net ~~apportionment~~sales ofis ~~taxable~~the ~~earnings~~result toof ~~states~~increased ~~such~~rent ~~as California~~ and ~~Illinois~~related ~~that~~expenses ~~have~~for ~~greater~~the ~~marginal~~new ~~income~~corporate ~~tax rates. The Company anticipates that it will continue to experience the~~office ~~effects~~and ofincreased ~~apportionment~~expenses onassociated ~~its~~with ~~taxable~~increased ~~earnings~~staffing ~~should its growth plans result~~ in the ~~expansion~~real ofestate ~~its~~and ~~operations~~marketing ~~into~~departments, ~~states~~which ~~with~~were ~~greater~~only ~~marginal~~partially ~~income~~offset ~~tax~~by ~~rates~~higher net sales.

~~Nine~~Restaurant ~~Months~~Opening ~~Ended~~Costs. ~~June~~Restaurant 30opening costs for the three months ended December 31, 2002 ~~Compared~~decreased 73.2% to ~~Nine~~$55,000 ~~Months~~from $205,000 ~~Ended~~for ~~June~~the comparable period in the prior year. Restaurant opening costs as a percentage of net sales decreased 0.3 percentage points to 0.1% for the first quarter of fiscal 2003 from 0.4% for the comparable 2002 period. The decrease is consistent with the Company’s reduction in restaurant opening activity for the quarter ended December 31, 2002 compared to the quarter ended December 30, 2001 (no new restaurants were opened during the first quarter of fiscal 2003 compared to the opening of one new restaurant during the first quarter of fiscal 2002).

Depreciation ~~Net~~and ~~Sales~~Amortization. ~~Net~~ ~~sales~~Depreciation and amortization for the ~~nine~~three months ended ~~June~~December 3031, 2002 increased 82.79% to $~~159~~3.5 million from $~~146~~3.84 million for the comparable ~~2001~~2002 period. Depreciation ~~This~~and ~~increase~~amortization ~~was~~as ~~primarily~~a ~~due~~percentage ~~to the opening~~ of ~~four~~net ~~restaurants~~sales ~~since~~increased ~~the~~0.1 ~~comparable~~percentage ~~2001~~points ~~period~~to ~~and~~7.1% for the ~~increase~~quarter inended ~~comparable~~December ~~restaurant~~31, ~~sales~~2002 offrom 27.0%. ~~The~~for ~~same~~the ~~store~~comparable ~~sales~~2002 ~~increase~~period. isThese ~~due~~increases toare anthe ~~increase~~result inof ~~same~~additional ~~store~~expense ~~average~~related ~~meal~~to ~~price~~the addition of ~~1.5%~~one ~~combined~~new ~~with~~restaurant ~~increased~~since ~~same~~the ~~store~~comparable ~~guest counts~~2002 ofperiod ~~0.5%~~and ~~versus~~to one restaurant added during the ~~comparable~~first ~~2001~~quarter ~~period.~~of ~~See~~fiscal ~~“Business~~2002 ~~Risks—Certain~~that ~~Operating~~was ~~Results~~not ~~and~~open ~~Considerations”.~~for the entire

11 Costs of Sales. Costs of sales for the nine months ended June 30, 2002 increased 8.0% to $39.2 million from $36.3 million for the comparable 2001 period. This increase was due to the addition of four restaurants since the comparable 2001 period. As a percentage of net sales, costs of sales decreased 0.3 percentage points to 24.5% from 24.8% since the comparable 2001 period as a result of higher net sales and efficiencies achieved through the utilization of the East Coast distribution center during the second quarter of fiscal 2002, partially offset by unfavorable purchase price variances associated with higher than planned prices with our former supplier during the first quarter of fiscal 2002. See “Business Risks—Reliance on Key Suppliers and Distributors”.

11Table of Contents

fiscal ~~Labor Expense. Labor expense for the nine months ended June 30,~~ 2002 ~~increased~~period ~~6.7%~~and to ~~$50.9 million from $47.7 million for~~ the ~~comparable~~depreciation ~~2001~~expense ~~period.~~related ~~This increase was due primarily~~ to anthe ~~increase~~addition inof ~~the~~a ~~minimum~~new ~~wage~~corporate inoffice ~~California~~ and the ~~addition~~amortization of ~~four~~a ~~restaurants~~new ~~opened~~accounting software package since the comparable ~~2001~~ 2002 period. AsThese aincreases ~~percentage~~were ofpartially ~~net~~offset ~~sales,~~by ~~labor expense~~ decreased ~~0.6~~depreciation ~~percentage~~expense ~~points~~associated towith ~~31.9% from 32.5% in~~ the ~~comparable~~sale-leaseback ~~2001 as a result~~ of ~~higher~~three ~~net~~restaurant ~~sales~~locations ~~and~~since ~~to programs put in place to better utilize crew labor hours and reduce~~ the ~~number~~comparable of2002 ~~managers in each restaurant~~period. ~~See “Business Risks—Minimum Wage.”~~

Interest ~~Occupancy~~Income. ~~and Other~~Interest ~~Expenses. Occupancy~~income ~~and other expenses~~ for the ~~nine~~three months ended ~~June~~December 3031, 2002 ~~increased~~decreased 1233.13% to $~~38.8~~14,000 ~~million~~ from $~~34.6~~21,000 ~~million~~ for the comparable ~~2001~~2002 period. ~~This increase is due primarily to increased costs associated with the opening of four new restaurants since the third quarter of fiscal 2001. Occupancy and other expenses~~ as a percentage of net sales increased 0.7 percentage points to 24.3% from 23.6% for the comparable 2001 period. This was due primarily to higher utility costs predominantly in California, higher property insurance costs as a result of ~~increased~~lower ~~rate~~interest ~~pressure~~rates ~~throughout~~combined ~~the insurance industry, increases in base rent associated~~ with sale-leasebacks, and repair and maintenance costs for aging restaurants. The Company anticipates occupancy and other expenses will continue to increase as it continues to experience escalating insurance costs. Further, the Company anticipates that it will experience higher repair and maintenance expense related to its aging restaurant base. Such expenses will be offset by decreased ~~depreciation~~investing ~~expense~~activity ~~related to the older assets reaching the end~~ of ~~their~~available ~~useful lives~~cash. Should the Company undertake additional sale-leasebacks of existing sites it would incur increases in base rent related to new leases at those sites. See “Business Risks—Planned Operating Expenditures”.

Interest ~~General and Administrative Expenses~~Expense. ~~General~~ ~~and~~Interest ~~administrative~~expense ~~expenses~~ for the ~~nine~~three months ended ~~June~~December 3031, 2002 ~~increased~~decreased 116.07% to $91.9 0 million from $91.82 million for the comparable ~~2001~~2002 period. Asas a ~~percentage~~result of ~~net~~both ~~sales,~~lower ~~general~~interest rates and ~~administrative~~reduction ~~expenses~~in ~~decreased~~debt ~~0.4~~balances ~~percentage~~since ~~points to 6.2% from 6.6% for~~ the ~~comparable~~same ~~2001~~ period. ~~The decrease as a percentage of net sales resulted from higher net sales which were attributable to increases~~ in ~~comparable~~the ~~store~~prior ~~sales~~fiscal ~~and reduced spending as a result of programs put in place to better manage general and administrative expenditures~~year.

~~Restaurant~~Other ~~Opening~~Expense, ~~Costs~~net. ~~Restaurant~~ ~~opening~~Other ~~costs~~expense, net for the ~~nine~~ three months ended ~~June~~December 3031, 2002 decreased 7837.67% to $~~0.3~~86,000 ~~million~~ from $~~1.4~~138,000 ~~million~~ for the comparable ~~2001~~2002 period. ~~Restaurant opening costs~~ as a ~~percentage~~result of ~~net~~fewer ~~sales~~asset ~~decreased~~disposals ~~0.8~~during ~~percentage points to 0.2% from 1.0% for~~ the ~~comparable~~three ~~2001~~months ~~period.~~ended ~~These~~December ~~decreases~~31, ~~are the result of fewer new restaurant openings during the fiscal~~ 2002 ~~period~~ compared to the same period in fiscal ~~2001. Two restaurants were opened during the first nine months of fiscal~~ 2002 ~~compared to seven new restaurants and one kitchen facility opened and one existing restaurant re-opened during the first nine months of fiscal 2001~~.

Provision ~~Depreciation~~for ~~and Amortization~~Income Taxes. ~~Depreciation~~ ~~and~~Income ~~amortization~~tax benefit (expense) for the ~~nine~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30,~~2003 ~~2002~~was ~~increased~~an ~~10.9%~~expense toof ($~~10.2~~144,000) ~~million~~compared ~~from~~to a benefit of $9451,000 for the comparable 2002 period.2 ~~million~~This ~~for~~increase is primarily due to increased taxable earnings during the 2002 period combined with an increase in the Company’s effective income tax rate since the same period in the prior fiscal ~~2001~~year. ~~Depreciation~~The ~~and~~Company’s ~~amortization~~effective astax arate ~~percentage~~for ~~of net~~the ~~sales~~three months ended December 31, 2002 increased 01.26 percentage points to 641.41% from 639.25% for the quarter ~~comparable~~ended ~~period~~December in31, 2001~~. These~~ ~~increases~~as ~~were~~a ~~due~~result of higher apportionment of taxable earnings to ~~additional~~states ~~depreciation~~such ~~for~~as ~~the~~California ~~four~~and ~~new~~Illinois ~~restaurants~~that ~~opened~~have ~~since~~greater ~~the~~marginal ~~comparable~~income ~~2001~~tax ~~period,~~rates. ~~partially~~The ~~offset~~Company ~~by decreased~~anticipates ~~depreciation~~that ~~expense~~it ~~associated~~will ~~with~~continue to experience the ~~sale-leaseback~~effects of apportionment ~~five~~on ~~restaurant~~its ~~locations~~taxable ~~since~~earnings should its growth plans result in the ~~comparable~~expansion ~~2001~~of ~~period~~its operations into states with greater marginal income tax rates.

12 Interest Income. Interest income for the nine months ended June 30, 2002 decreased 62.6% to $55,000 from $147,000 for the comparable 2001 period as a result of lower interest rates combined with decreased investing activity of available cash.

Table Interest Expense. Interest expense for the nine months ended June 30, 2002 decreased 2.8% to $3.5 million from $3.6 for the comparable 2001 period as a result of lower interest rates and to the reduction in debt balances since the same period in the prior fiscal year. Contents

12LIQUIDITY AND CAPITAL RESOURCES

The ~~Other~~Company’s ~~Income~~principal capital ~~(Expense),~~requirement ~~net. Other~~has ~~income (expense),~~been ~~net~~both for funding the ~~nine~~development ~~months~~of ~~ended~~new ~~June~~restaurants ~~30,~~and ~~2002~~improving ~~was~~existing ~~($0~~restaurants.3 ~~million)~~The ~~compared~~Company tofinances ~~$1.1~~its ~~million~~cash ~~for~~requirements ~~the~~principally ~~comparable~~from ~~2001~~cash ~~period.~~flows ~~This~~from ~~decrease~~operating ~~resulted~~activities, ~~primarily~~bank ~~from~~debt, ~~the~~mortgage ~~insurance~~financing, equipment ~~settlement~~lease ~~related~~financing, tosale-lease ~~the~~back ~~loss~~of owned properties and sale of ~~assets~~Company instock. aThe ~~fire~~Company atdoes anot ~~restaurant in~~have ~~San~~significant ~~Diego,~~receivables ~~California~~and ~~that~~receives ~~was~~trade ~~recorded~~credit ~~during~~based ~~the~~upon ~~first~~negotiated ~~quarter~~terms ofwhen ~~fiscal~~purchasing ~~2001~~food and supplies.

~~Provision~~Capital ~~for Income~~expenditures ~~Taxes~~totaled $4. ~~Income~~0 ~~tax~~million ~~expense~~during ~~for~~ the ~~nine~~first three months ~~ended~~of ~~June~~fiscal ~~30,~~2003 ~~2002~~and ~~was~~ $2.7 5 million ~~compared~~for tothe comparable period in fiscal 2002. During the first three months of fiscal 2003, the Company made capital expenditures of $2.18 million ~~for~~(including the ~~comparable~~decrease ~~2001~~in ~~period.~~construction ~~This~~costs ~~increase~~included isin accounts ~~primarily~~payable) ~~due~~for toconstruction ~~increased~~of ~~taxable~~future ~~earnings~~restaurants ~~during the~~and ~~2002~~a ~~period~~kitchen ~~combined~~facility ~~with~~(two annew ~~increase~~restaurants inand ~~the~~a ~~Company’s~~stand-alone ~~effective~~kitchen ~~income~~facility ~~tax~~opened ~~rate~~ during the ~~same~~second ~~period.~~quarter ~~The~~of ~~Company’s~~fiscal ~~effective~~2003) ~~tax~~and ~~rate~~$1.1 million for ~~the~~capital ~~nine~~improvements ~~months~~at ~~ended~~existing ~~June~~sites. ~~30,~~For the ~~2002~~first ~~increased~~three ~~0.8~~months ~~percentage~~of ~~points~~fiscal to2002, ~~40.2%~~the ~~from~~Company 39paid $1.4% ~~for the~~million ~~comparable~~(including ~~period~~the decrease in ~~fiscal~~construction ~~2001~~costs asincluded ain ~~result~~accounts ofpayable) ~~higher~~for ~~apportionment~~the opening of ~~taxable~~one ~~earnings~~new torestaurant ~~states~~and ~~such~~construction asof ~~California~~future restaurants, and ~~Illinois~~paid ~~that~~$1.2 ~~have~~million ~~greater~~for capital ~~marginal~~improvements ~~income~~at ~~tax~~existing ~~rates~~restaurants. The ~~Company~~cash ~~anticipates~~investment ~~that~~to itopen ~~will~~a ~~continue~~new torestaurant ~~experience~~excludes restaurant opening costs and typically includes the ~~effects~~ ofpurchase ~~apportionment~~or oninstallation ~~its~~of ~~taxable~~furniture, ~~earnings~~fixtures, ~~should~~equipment ~~its~~and ~~growth~~leasehold ~~plans~~improvements, ~~result~~and in the case ~~expansion~~ of ~~its~~an ~~operations~~owned ~~into~~site, ~~states~~the ~~with~~purchase ~~greater~~of ~~marginal~~land ~~income~~and ~~tax~~a ~~rates~~building.

~~LIQUIDITY~~During ~~AND~~the ~~CAPITAL~~first ~~RESOURCES~~three months of fiscal 2003, the Company generated $1.5 million in cash flows from operating activities, received $0.3 million from the sale of the Company’s Common Stock pursuant to stock option plans and the Company’s Employee Stock Purchase Plan and received proceeds from sale-lease back transactions of $3.1 million. For the first three months of fiscal 2003, the Company made repayments of $3.3 million towards its long-term debt obligations.

The Company’s ~~principal~~ total capital ~~requirement~~budget ~~has~~for fiscal ~~been~~2003 ~~for~~is ~~both~~$12.7 ~~funding~~million, including $6.7 million for the ~~development~~completion of three new restaurants, one stand-alone kitchen facility and ~~improving~~$6.0 million for capital improvements for existing ~~restaurants~~facilities. ~~The~~For ~~Company~~the ~~finances~~three ~~its~~remaining ~~cash~~quarters ~~requirements~~of ~~principally~~fiscal ~~from~~2003 ~~cash~~the Company ~~flows~~has ~~from~~a ~~operating~~residual ~~activities,~~budget ~~bank~~for ~~debt,~~capital ~~mortgage financing,~~expenditures ~~equipment~~in ~~lease~~the ~~financing,~~amount ~~sale-lease~~of ~~back~~$3.9 million related to the opening of ~~owned~~two ~~properties~~new stores and ~~sale~~the ofstand-alone ~~Company~~kitchen ~~stock~~facility and $4.9 ~~The~~million ~~Company~~for ~~does~~capital ~~not~~improvements ~~have~~at ~~significant~~existing ~~receivables~~sites. The development of two new stores and ~~receives~~the ~~trade~~kitchen ~~credit~~facility ~~based~~was ~~upon~~in ~~negotiated~~process ~~terms~~as ~~when~~of ~~purchasing~~December ~~food~~31, 2002 and ~~supplies~~was completed during January 2003. See “Business Risks—Expansion Risks.”

~~Capital~~In ~~expenditures~~addition ~~totaled~~to ~~$7.9~~funds ~~million~~generated ~~during~~from operations, the ~~first~~Company ~~nine~~may ~~months~~need ofto ~~fiscal~~obtain ~~2002~~external ~~and~~financing ~~$28.8 million for the comparable period~~ in ~~fiscal 2001. During~~ the ~~first~~form of ~~nine~~sale-lease ~~months~~back of ~~fiscal~~owned ~~2002,~~properties ~~the~~and ~~Company~~long-term ~~made~~debt ~~capital~~financing ~~expenditures~~to ofcomplete ~~$3.2~~its ~~million~~plans for ~~the~~expansion ~~opening~~ of ~~two~~ new restaurants and ~~the~~improvements ~~construction~~to ofexisting ~~future additional~~ restaurants ~~and $0.4 million~~ for ~~a future~~fiscal ~~stand-alone~~year ~~kitchen~~2003 ~~facility~~and ~~(including~~beyond ~~the~~and ~~decrease~~to inmeet ~~construction~~principal ~~costs~~payments ~~included~~on inits ~~accounts~~existing ~~payable) and $4~~loans.3 There ~~million~~can ~~for~~be ~~capital~~no ~~improvements~~assurance atthat ~~existing~~such ~~sites.~~funds ~~For~~will ~~the~~be ~~first~~available ~~nine~~when ~~months~~needed ofand ~~fiscal~~should ~~2001,~~ the Company ~~paid~~not ~~$22.3~~be ~~million~~able ~~for the~~to ~~opening~~obtain ofsuch ~~seven~~financing ~~new~~it ~~restaurants~~may ~~and~~be ~~the~~forced ~~re-opening~~to ofseverely ~~one~~curtail ~~existing~~the ~~restaurant~~development ~~(including~~of ~~the~~new ~~decrease~~restaurants inat ~~construction~~its ~~costs~~desired ~~included~~pace inor ~~accounts~~at ~~payable),~~all and ~~paid~~to ~~$6.5 million for capital~~ make improvements atto existing restaurants. ~~The~~Additionally, ~~cash investment~~should tothe ~~open~~Company’s aresults ~~new~~of ~~restaurant~~operations ~~excludes~~decrease ~~restaurant~~it ~~opening~~may ~~costs~~not ~~and~~have ~~typically~~the ~~includes~~ability ~~the~~to ~~purchase~~pay orits ~~installation~~debt of ~~furniture,~~$40.3 ~~fixtures,~~million ~~equipment~~outstanding ~~and~~at ~~leasehold~~December ~~improvements~~31, ~~and~~2002. inSee ~~the~~“Business ~~case of an owned site, the purchase of land and a~~Risks—Capital ~~building~~Requirements.”

~~During~~As ~~the first nine months~~ of ~~fiscal~~December ~~2002~~31, the Company obtained $13.7 million in cash flows from operating activities, obtained $7.7 million from long-term equipment and mortgage financing, and received proceeds from sale-lease back transactions of $9.6 million. For the first nine months of fiscal 2002, the Company ~~made~~operated ~~repayments~~95 ~~of $8~~restaurants.~~5 million~~ ~~towards~~The ~~its~~Company ~~long-term~~currently ~~debt~~owns ~~obligations. In addition, during~~ the ~~first~~land ~~quarter~~or ofland ~~fiscal 2002, the Company made repayments of $0.5 million towards its line of credit~~ and ~~converted~~buildings ~~the~~for ~~remaining~~24 ~~balance~~restaurants, ofincluding ~~$8.7 million into a new short-term credit agreement with~~ the ~~bank~~land ~~consisting~~for ofcertain ~~two~~sites ~~term loans in~~ the ~~amounts~~Company ofexpects ~~$6.0~~to ~~million~~open ~~and~~during ~~$2.7~~fiscal ~~million, due December 31, 2002 and June 30 2002, respectively~~2004. AsThe ~~of June 30, 2002 the~~ Company ~~repaid~~did ~~the~~not ~~entire~~open ~~balance~~any ofnew ~~the~~restaurants ~~$2.7~~during ~~million term loan and repaid $3.0 million towards~~ the ~~$6.0~~first ~~million~~three ~~note.~~months ~~The Company is required to repay the remaining unpaid balance~~ of ~~$3.0~~fiscal ~~million by December 31, 2002~~2003.

The Company’s ~~original~~incurred ~~capital~~restaurant ~~budget~~opening ~~for~~costs ~~fiscal~~of ~~2002 totaled~~ $~~17.4~~55,000 ~~million~~during ~~for~~ the ~~completion~~first quarter of ~~four~~fiscal ~~new~~2003 ~~restaurants~~for ~~and~~ the ~~development~~opening of ~~the~~two new ~~corporate~~restaurants ~~office ($9.8 million), capital improvements for existing facilities ($5.8 million)~~ and ~~the~~one ~~development of a~~ stand-alone kitchen facility ~~($1.8~~that ~~million).~~opened ~~During~~during the ~~first~~second ~~nine~~quarter ~~months~~ of fiscal ~~2002,~~2003. ~~the~~For restaurant ~~Company~~sites ~~reduced~~planned ~~the number of stores it plans~~ to open ~~from~~ ~~four~~in tofiscal ~~two,~~2003 ~~reducing~~and 2004 the ~~capital~~Company ~~budget~~has ~~for~~signed ~~new~~two ~~store~~leases, ~~openings~~ and ~~the~~purchased ~~development~~two ~~of the new corporate office by $4~~sites.0 ~~million~~See to“Business ~~$5.8 million. For the one remaining quarter of fiscal 2002 the Company has a residual budget for capital~~

expendituresTable in the amount of $2.6 million related to new store openings and the development of the new corporate office, $1.4 million for the development of the kitchen facility, and $1.5 million for capital improvements at existing sites. The development of the new corporate office was in process as of June 30, 2002 and was completed during July 2002. The Company currently does not have plans to open any additional restaurants in fiscal 2002. See “Business Risks—Expansion Risks.” Contents

InRisks ~~addition~~– toExpansion funds generated from operations, the Company will need to obtain external financing in the form of sale-lease back of owned properties and long-term debt financing to complete its plans for expansion through new restaurants and improvements to existing restaurants for fiscal year 2003 and beyond. There can be no assurance that such funds will be available when needed and should the Company not be able to obtain such financing it may be forced to severely curtail the development of new restaurants at its desired pace or at all and to make improvements to existing restaurants. Additionally, should the Company’s results of operations decrease it may not have the ability to pay the current portion of its debt of $14.7 million, which includes the $3.0 million note balance which is due under the short term credit agreement with the bank at the end of Q1, fiscal 2003. See “Business Risks~~—Capital Requirements~~.”

AsIMPACT ofOF ~~June~~INFLATION 30, 2002, the Company operated 95 restaurants. The Company currently owns the land or land and buildings for 27 restaurants, including the land for certain sites the Company expects to open during the balance of fiscal 2002 and 2003. During the first nine months of fiscal 2002, the Company opened one owned site, one leased site, one leased warehouse facility and completed sale-lease backs for four sites.

The ~~restaurant~~primary ~~opening~~inflationary ~~costs~~factors ~~incurred~~affecting ~~during~~ the ~~first~~Company’s ~~nine~~operations ~~months~~include offood ~~fiscal~~and ~~2002~~beverage ~~for~~and ~~the~~labor ~~opening~~costs. ofMinimum ~~two~~wage ~~new~~increases ~~restaurants,~~have ~~one~~affected ~~warehouse~~earnings ~~facility~~during ~~and~~ the ~~construction~~current offiscal ~~future~~year. ~~additional~~Substantial ~~restaurants~~increases ~~during~~in ~~the~~costs ~~nine~~and ~~month~~expenses, ~~period~~particularly ~~ending~~food, ~~June~~supplies, 30labor, ~~2002~~utilities, ~~was~~operating ~~$0.3~~expenses, ~~million.~~and ~~For~~fuel ~~restaurant~~costs ~~sites~~could ~~planned~~have toa ~~open~~significant inimpact ~~fiscal~~on ~~2002 and 2003~~ the Company’s ~~has~~operating results ~~signed~~to ~~three leases,~~the ~~and~~extent ~~purchased~~that ~~three~~such ~~sites.~~increases ~~See~~cannot ~~“Business~~be ~~Risks—Expansion~~passed ~~Risks~~along to guests.”

~~IMPACT~~OTHER ~~OF INFLATION~~

The ~~primary inflationary factors affecting the~~ Company’s ~~operations~~is ~~include food and beverage and labor costs. Minimum~~not ~~wage~~a ~~increases~~party ~~have~~to ~~affected~~off-balance ~~earnings~~sheet ~~during~~arrangements, ~~the~~does ~~current~~not ~~fiscal~~engage ~~year. Substantial increases~~ in ~~costs~~trading ~~and~~activities ~~expenses,~~involving ~~particularly~~non-exchange ~~food,~~traded ~~supplies~~contracts, ~~labor, utilities,~~ and ~~operating~~is ~~expenses,~~not ~~could have~~ a ~~significant~~party ~~impact~~to onany ~~the~~transaction ~~Company’s~~with ~~operating results~~persons toor ~~the~~activities ~~extent~~ that ~~such~~derive ~~increases~~benefits ~~cannot~~from betheir ~~passed~~non-independent ~~along~~relationships with tothe ~~guests~~Company.

~~OTHER~~NEW ACCOUNTING STANDARDS

~~The~~In ~~Company~~April is2002 ~~not~~the aFASB ~~party~~issued toStatement ~~off-balance~~of ~~sheet~~Financial Accounting ~~arrangements~~Standards No. 145 (SFAS No. 145), ~~does~~“Rescission ~~not~~of ~~engage~~FASB inStatements ~~trading~~No. ~~activities~~4, ~~involving~~44, ~~non-exchange~~and ~~traded~~64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement updates, clarifies and simplifies existing accounting ~~contracts~~pronouncements including: rescinding SFAS No. 4, which required all gains and islosses ~~not~~from aextinguishments ~~party~~of debt to ~~any~~be ~~transaction~~aggregated ~~with~~and, ~~persons~~if ormaterial, ~~activities~~classified as an extraordinary item, net of related income tax effect and amending SFAS No. 13 to require that ~~derive~~certain ~~benefits~~lease ~~from~~modifications ~~their~~that ~~non~~have economic effects similar to sale lease-~~independent~~back ~~relationships~~transactions be accounted for in the same manner as sale lease-back transactions. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002 with early adoption of the provisions related to the rescission of SFAS No. 4 encouraged. The Company adopted the provisions of SFAS No. 145 on October 1, 2002 and does not anticipate that the adoption of SFAS No. 145 will have a material effect on its financial statements.

~~NEW~~In ~~ACCOUNTING~~June ~~STANDARDS~~2002, the FASB issued Statement of Financial Accounting Standards No. 146 (SFAS No. 146), “Accounting for Costs Associated with Exit or Disposal Activities”, which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost was recognized at the date of the company’s commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing any future restructuring costs as well as the amounts recognized. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company will adopt the provisions of SFAS No. 146 on January 1, 2003. The Company does not anticipate that the adoption of SFAS No. 146 will have a material effect on its financial statements.

In ~~July~~October ~~2001~~2002, the ~~Financial Accounting Standards Board (“~~FASB”) issued Statement of Financial Accounting Standards No. ~~141~~147 (SFAS No. ~~141~~147), “~~Business~~Acquisitions ~~Combinations~~of Certain Financial Institutions”, ~~and~~which ~~Statement~~no ~~No.~~longer ~~142~~requires ~~(SFAS No.~~the ~~142),~~separate ~~“Goodwill~~recognition and ~~Other~~subsequent ~~Intangible~~amortization ~~Assets”.~~of ~~SFAS~~goodwill ~~No.~~that ~~141~~was ~~supersedes APB~~originally ~~Opinion~~required ~~No.~~by ~~16, “Business Combinations” and~~ SFAS No. 3872, “Accounting for ~~Preacquisition~~Certain ~~Contingencies~~Acquisitions of ~~Purchased~~Banking ~~Enterprises”~~or ~~and~~Thrift ~~eliminates pooling-of-interests accounting prospectively~~Institutions”. Instead, SFAS No. ~~141~~72 ~~was~~goodwill ~~adopted~~would onbe ~~July~~accounted ~~1, 2001.~~for ~~SFAS~~ in accordance with Statement No. 142 ~~supersedes~~(SFAS ~~APB~~142), ~~Opinion~~Goodwill ~~No.~~and ~~17,~~Other “Intangible Assets” and ~~changes~~would ~~the~~be ~~accounting~~subject ~~for goodwill from an amortization method~~ to an annual impairment~~-only~~ ~~approach~~test. ~~Under~~ SFAS No. ~~142,~~147 ~~goodwill~~also ~~will~~amends beSFAS ~~tested~~No. ~~annually~~144, ~~and~~“Accounting for ~~whenever~~the ~~events~~Impairment or ~~circumstances~~Disposal ~~occur~~of ~~indicating~~Long-Lived ~~that~~Assets”, ~~goodwill~~to ~~might~~include bein ~~impaired.~~its ~~The~~scope ~~provisions~~core ofdeposit ~~SFAS No~~intangibles. ~~142~~Those ~~are~~intangible ~~required~~assets toare benow ~~applied~~subject ~~starting~~to ~~with~~the ~~fiscal~~same ~~years~~recoverability ~~beginning~~and ~~after~~impairment ~~December~~loss ~~15,~~recognition ~~2001.~~provisions ~~Upon~~that ~~adoption of~~ SFAS No. ~~142,~~144 ~~amortization~~requires offor ~~goodwill~~other ~~recorded~~long-lived ~~for~~assets. ~~business~~SFAS ~~combinations~~147 ~~consummated~~was ~~prior~~effective toOctober ~~July~~ 1, ~~2001~~2002. ~~will~~The ~~cease,~~Company ~~and~~does ~~intangible~~not ~~assets~~expect ~~acquired~~the ~~prior~~adoption toof ~~July~~SFAS 1,147 ~~2001~~to ~~that~~have doa ~~not~~material ~~meet~~effect on the ~~criteria~~financial ~~for~~statements. ~~recognition~~

14In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS No. 148), “Accounting for Stock Based Compensation – Transition and Disclosure”, which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of Statement No. 123 (SFAS No. 123) to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Under the provisions of SFAS No. 123, companies that adopted the preferable, fair value based method were required to apply that method prospectively for new stock option awards. This contributed to a “ramp-up” effect on stock-based compensation expense in the first few years following adoption. SFAS No. 148 provides two additional methods of transition that reflect an entity’s full complement of stock-based compensation expense immediately upon adoption, thereby eliminating the ramp-up effect. SFAS No. 148 also improves the clarity and

~~under~~14 SFAS No. 141 will be reclassified to goodwill. The adoption of SFAS No. 141 did not have an impact on the Company’s financial position or results of operations. The Company will adopt SFAS No. 142 on October 1, 2003. At this time, the Company does not anticipate that the adoption of SFAS No. 142 will have a material effect on the Company’s financial statements.

InTable August 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (SFAS No. 143), “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and for the associated asset retirement costs. The standard applies to tangible long-lived assets that have a legal obligation associated with their retirement that results from the acquisition, construction or development or normal use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the remaining life of the asset. The liability is accreted at the end of each period through charges to operating expense. The provisions of SFAS No. 143 are required to be applied during the quarter ending December 31, 2003. To accomplish this, the Company must identify all legal obligations for asset retirement obligations, if any, and determine the fair value of these obligations on the date of adoption. The determination of fair value is complex and will require the Company to gather market information and develop cash flow models. Additionally, the Company will be required to develop processes to track and monitor these obligations. At this time, the Company does not anticipate that the adoption of SFAS No. 143 will have a material effect on the Company’s financial statements. Contents

Inprominence ~~October 2001, the FASB issued Statement~~ of ~~Financial~~disclosures ~~Accounting~~about ~~Standards No. 144 (SFAS No. 144), “Accounting for~~ the ~~Impairment~~pro orforma ~~Disposal~~effects of ~~Long-Lived~~using ~~Assets,” which addresses financial accounting and reporting for~~ the ~~impairment~~fair orvalue ~~disposal~~based method of ~~long-lived assets. While SFAS No. 144 supersedes SFAS No. 121,~~accounting ~~“Accounting~~ for ~~the Impairment of Long~~stock-~~Lived~~based ~~Assets~~compensation ~~and~~ for ~~Long-Lived~~all ~~Assets~~companies—regardless ~~to Be Disposed Of,” it retains many~~ of the ~~fundamental~~accounting ~~provisions~~method ofused—by ~~SFAS~~requiring ~~No.~~that ~~121, including~~ the ~~recognition~~data ~~and measurement of the impairment of long-lived assets to~~ be ~~held~~presented ~~and~~more ~~used,~~prominently and ~~the~~in ~~measurement~~a ofmore ~~long~~user-~~lived~~friendly ~~assets~~format toin bethe ~~disposed~~footnotes ofto ~~by sale. SFAS No. 144 also supersedes~~ the ~~accounting~~financial ~~and reporting provisions of Accounting Principles Board Opinion No~~statements. 30In ~~(APB No. 30)~~addition, ~~“Reporting the~~ ~~Results of Operations—Reporting~~ the ~~Effects~~Statement ofimproves ~~Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for~~ the ~~disposal~~timeliness of athose ~~segment~~disclosures ofby arequiring ~~business.~~that ~~However,~~this itinformation ~~retains~~be ~~the requirement~~included in ~~APB~~interim ~~No.~~as 30well toas ~~report~~annual ~~separately~~financial ~~discontinued~~statements. ~~operations~~The ~~and~~Company ~~extends~~is ~~that~~required ~~reporting~~ to aadopt ~~component~~SFAS of148 anin ~~entity~~the ~~that~~quarter ~~either~~ended ~~has~~March ~~been~~31, ~~disposed~~2003 of (byfiscal ~~sale,~~2003 second ~~abandonment, or in a distribution to owners~~quarter) ~~or is classified as held for sale~~. ~~SFAS~~ ~~No.~~The ~~144 is effective for fiscal years beginning after December 15, 2001. At this time, the~~ Company does not ~~anticipate~~expect ~~that~~ the adoption of SFAS ~~No.~~148 ~~144~~to ~~will~~ have a material effect on the ~~Company’s~~ financial statements.

InBUSINESS ~~April~~RISKS 2002 the FASB issued Statement of Financial Accounting Standards No. 145 (SFAS No. 145), “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement updates, clarifies and simplifies existing accounting pronouncements including: rescinding SFAS No. 4, which required all gains and losses from extinguishments of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect and amending SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale lease-back transactions be accounted for in the same manner as sale lease-back transactions. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002 with early adoption of the provisions related to the rescission of SFAS No. 4 encouraged. The Company does not anticipate that the adoption of SFAS No. 145 will have a material effect on the Company’s financial statements.

~~BUSINESS~~The ~~RISKS~~Company’s business is subject to a number of risks. A comprehensive summary of such risks can be found in the Company’s Form 10-K. In addition to other information in this Form 10-Q, shareholders and prospective investors should consider carefully the following factors in evaluating the Company and its business.

~~The~~Certain ~~Company’s~~Operating ~~business~~Results ~~is subject to a number of risks. A comprehensive summary of such risks can be found in the Company’s Form 10-K. In addition to other information in this Form 10-Q, shareholders~~ and ~~prospective~~Considerations ~~investors should consider carefully the following factors in evaluating the Company and its business.~~

15In fiscal 2001 and 2002 the Company experienced an increase of 3.3% and 2.1%, respectively, in comparable restaurant sales. In the first three months of fiscal 2002 and 2003, the Company’s comparable restaurant sales increased 0.4% and 3.6% respectively. The Company does not believe it has significant latitude to achieve comparable restaurant sales growth through price increases, and, as a result, the Company does not believe that recent comparable restaurant sales are indicative of future trends in such sales. The Company believes that it may from time to time in the future experience declines in comparable restaurant sales, and that any future increases in comparable restaurant sales may be modest. Further, the Company’s newer restaurants have not historically experienced significant increases in guest volume following their initial opening period.

~~Certain~~Expansion ~~Operating~~Risks ~~Results and Considerations~~

InThe Company opened ten restaurants in fiscal ~~2000~~2001 (opening nine new restaurants and ~~2001~~re-opening one existing restaurant), ~~the~~two ~~Company~~in ~~experienced~~fiscal an2002, ~~increase~~and ofhas ~~3.1%~~opened two restaurants and ~~3.3%,~~one ~~respectively,~~stand-alone inkitchen ~~comparable~~facility ~~restaurant~~to ~~sales~~date in fiscal 2003. InBoth restaurants were opened during the ~~first nine~~second ~~months~~quarter of fiscal ~~2001~~2003 ~~and~~in ~~2002,~~an ~~the~~existing region in Southern California. The Company’s ~~comparable~~currently ~~restaurant~~does ~~sales~~not ~~increased~~have ~~4.0%~~plans ~~and~~to ~~2.0%~~open ~~respectively~~any additional restaurants in fiscal 2003. The Company’s ~~restaurants~~ability ~~have~~to ~~not~~achieve ~~historically~~its ~~experienced~~expansion ~~significant~~plans in ~~increases~~the infuture ~~guest~~will ~~volume~~depend ~~following~~on ~~their~~a ~~initial opening~~variety ~~period~~of ~~(15~~factors, ~~months)~~many ~~due~~of towhich may be beyond the ~~fact~~Company’s ~~that~~control, ~~most~~including ~~sites~~the ~~open~~Company’s ~~immediately~~ability atto ~~average~~locate suitable restaurant sites, negotiate acceptable lease or ~~greater~~purchase ~~than~~terms, ~~average~~obtain ~~guest~~required governmental ~~volume.~~approvals, Asconstruct new restaurants in a ~~result~~timely manner, ~~the~~attract, ~~Company~~train ~~does~~and ~~not~~retain ~~believe~~qualified ~~that~~and ~~recent~~experienced ~~comparable~~personnel ~~restaurant~~and ~~sales~~management, ~~are~~operate ~~indicative~~its ofrestaurants ~~future~~profitably ~~trends~~and ~~in comparable~~obtain ~~restaurant~~additional ~~sales.~~capital, ~~The~~as ~~Company~~well ~~believes~~as ~~that~~general iteconomic conditions ~~may~~and ~~from~~the ~~time~~degree toof ~~time~~competition in the ~~future~~particular ~~experience~~region ~~declines~~of inexpansion. ~~comparable~~The ~~restaurant~~Company ~~sales~~has experienced, and ~~that~~expects ~~any~~to ~~future~~continue ~~increases~~to inexperience, ~~comparable~~delays in restaurant ~~sales~~openings ~~would~~from betime ~~modest~~to time.

~~Expansion~~The ~~Risks~~Company incurs substantial costs in opening a new restaurant and, in the Company’s experience, new restaurants experience fluctuating operational levels for some time after opening. In the Company’s experience, operational expenses tend to stabilize over a period of three to fifteen months after a store opens. Additionally, owned restaurants generally require significantly more up–front capital than leased restaurants. As a result, an increase in the percentage of owned restaurant openings as compared to historical practice would increase the capital required to meet the Company’s growth plans.

~~The~~Since ~~Company~~its ~~opened seventeen restaurants in fiscal 2000~~inception, ~~ten~~the inCompany ~~fiscal~~has ~~2001~~closed ~~(opening~~three ~~nine~~non-performing ~~new~~buffet restaurants, ~~and re-opening~~ one ~~existing~~mini restaurant), ~~and has opened~~ two Ladles restaurants toand ~~date~~one inSLURP! ~~fiscal~~restaurant ~~2002,~~due ~~both~~to inpoor anoperating ~~existing region in Southern California~~performance. ~~The~~Given ~~Company~~the number ~~currently~~of ~~does not have plans to open any additional~~ restaurants in ~~fiscal~~current ~~2002.~~operation ~~For~~and ~~fiscal 2003~~ the Company ~~plans to open three restaurants in existing regions. The Company~~’s ~~ability~~projected ~~to achieve its~~ expansion ~~plans will depend on a variety of factors~~rate, ~~many~~there ofcan ~~which may~~ be ~~beyond~~no ~~the~~assurances ~~Company’s~~that ~~control, including~~ the Company’s ~~ability~~will tonot ~~locate~~close ~~suitable~~restaurants ~~restaurant~~in ~~sites,~~the ~~negotiate~~future. ~~acceptable~~Any ~~lease~~closure orcould ~~purchase~~result ~~terms, obtain required governmental approvals, construct new restaurants~~ in a ~~timely~~significant ~~manner,~~write–off ~~attract,~~of ~~train and retain qualified and experienced personnel and management~~assets, ~~operate its restaurants profitably and obtain additional capital, as well as general economic~~ ~~conditions~~which ~~and~~could ~~the~~adversely ~~degree~~affect ~~of competition in~~ the ~~particular region of expansion. The~~ Company’s ~~has experienced~~business, ~~and~~financial ~~expects~~condition toand ~~continue~~results toof ~~experience, delays in restaurant openings from time to time~~operations.

~~Since~~There ~~its~~can ~~inception~~be ~~the~~no ~~Company~~assurance ~~has~~that closed three non-performing restaurants, one mini restaurant, two “Ladles, A Soup and Salad Takery” locations, and its “Slurp! The Soup Experience” location due to poor operating performance. The first Ladles location was closed during the ~~first~~Company ~~quarter~~will ofsuccessfully ~~fiscal~~expand ~~2001~~into ~~and~~new ~~the~~regions ~~second~~or ~~was~~that ~~closed~~new ~~during~~restaurants ~~the~~will ~~first~~be ~~quarter of fiscal 2002~~profitable. The ~~Slurp! restaurant was closed during the second quarter of fiscal 2002. The~~ Company ~~recorded~~has anencountered ~~accrual~~intense ofcompetition ~~$204,000~~for atrestaurant ~~September 30~~sites, ~~2001, representing the present value of the estimated net future lease payments associated with the planned closures of these restaurants. Of this amount, $80,000 was recorded as accrued liabilities~~ and ~~$124,000~~in ~~was~~many ~~recorded~~cases ashas ~~other~~had ~~long-term~~difficulty ~~liabilities.~~buying ~~Cash~~or ~~payments~~leasing indesirable ~~the~~sites ~~amount~~on ofterms ~~$77,000~~that ~~were~~are ~~made~~acceptable ~~during the first nine months of fiscal 2002~~ to ~~reduce~~ the ~~liabilities~~Company. ~~Subsequent~~In tomany ~~June 30~~cases, ~~2002~~ the Company’s ~~negotiated~~competitors aare ~~sub-lease~~willing ~~for~~and ~~the Slurp! location which will remain in effect until the Company is~~ able to ~~exit~~pay ~~the~~more ~~lease~~than ~~according to~~ the ~~original~~Company ~~terms~~for sites. The ~~new~~Company ~~tenant~~expects ~~will~~these ~~pay~~difficulties ~~all rents~~in ~~and~~obtaining ~~related~~desirable ~~charges~~sites ~~under~~to ~~the~~continue ~~lease~~for ~~as stated in~~ the ~~original~~foreseeable ~~lease agreement~~future.

~~Given~~Restaurant ~~the~~Industry ~~number of restaurants in current operation~~ and ~~the~~Competition Company’s projected expansion rate there can be no assurances that the Company will not close restaurants in the future. Any closure could result in a significant write-off of assets, which could adversely affect the Company’s business, financial condition and results of operations.

The ~~Company incurs substantial costs in opening a new~~ restaurant ~~and,~~industry inis ~~the~~highly ~~Company’s experience, new restaurants experience fluctuating operational expenses for some time after opening~~competitive. InKey ~~the~~competitive ~~Company’s~~factors experience, operational expenses tend to stabilize over a period of three to fifteen months after a store opens. Owned restaurants generally require significantly more up-front capital than leased restaurants, as a result of which an increase in the ~~percentage~~industry ofinclude ~~owned restaurant openings as compared to historical practice would increase~~ the ~~overall~~quality capital required to meet the Company’s growth plans. There can be no assurance that the Company will successfully expand or that the Company’s existing or new restaurants will be profitable. The Company has encountered intense competition for restaurant sites, and invalue ~~many~~of cases has had difficulty buying or leasing desirable sites on terms that are acceptable to the Company. In many cases, the Company’s competitors are willing and able to pay more than the Company for sites. The Company expects these difficulties in obtaining desirable sites to continue for the foreseeable future.

1615

RestaurantTable Industryof and Competition Contents

~~The restaurant industry is highly competitive. Key competitive factors in~~ the ~~industry include the quality and value of the~~ food products offered, quality of service, price, dining experience, restaurant location and the ambiance of the facilities. The Company’s primary competitors include mid-priced, full-service casual dining restaurants, as well as traditional self-service buffet and other soup and salad restaurants and healthful and nutrition-oriented restaurants. The Company competes with national and regional chains, as well as individually owned restaurants. The number of buffet and casual restaurants with operations generally similar to the Company’s has grown substantially in the last several years and the Company believes competition among buffet-style and casual restaurants has increased and will continue to increase as the Company’s competitors expand operations in various geographic areas. Such increased competition could increase the Company’s operating costs or adversely affect its revenues. The Company believes it competes favorably in the industry, although many of the Company’s competitors have been in existence longer than the Company, have more established market presence and have substantially greater financial, marketing and other resources than the Company, which may give them certain competitive advantages. In addition, the restaurant industry has few non-economic barriers to entry. Therefore, there can be no assurance that third parties will not be able to successfully imitate and implement the Company’s concept. The Company has encountered intense competition for restaurant sites, and in many cases has had difficulty buying or leasing desirable sites on terms that are acceptable to the Company. In many cases, the Company’s competitors are willing and able to pay more than the Company for sites. The Company expects these difficulties in obtaining desirable sites to continue for the foreseeable future.

Capital Requirements

In addition to funds generated from operations, the Company ~~will~~ may need to obtain external financing in the form of sale-lease back of owned properties and long-term debt financing to complete its plans for expansion through new restaurants and improvements to existing restaurants for fiscal year 2003 and beyond and to meet principal payments on its existing loans. There can be no assurance that such funds will be available when needed and should the Company not be able to obtain such financing it may be forced to severely curtail the development of new restaurants at its desired pace or at all and to make improvements to existing restaurants. Additionally, should the Company’s results of operations decrease it may not have the ability to pay ~~the current portion of~~ its debt of $1440.~~7 million, which includes the remaining $~~3.0 million ~~note balance~~outstanding ~~which is due under the short term credit agreement with the bank~~ at ~~the~~December ~~end of Q1~~31, ~~fiscal 2003~~2002.

Cost ~~Sensitivity~~ Sensitivity

The Company’s profitability is highly sensitive to increases in food, labor and other operating costs. The Company’s dependence on frequent deliveries of fresh produce and groceries subjects it to the risk that shortages or interruptions in supply caused by adverse weather or other conditions could materially adversely affect the availability, quality and cost of ingredients. In addition, unfavorable trends or developments concerning factors such as inflation, food, labor, ~~and~~ employee benefit costs (including increases in hourly wage and minimum unemployment tax rates— – See “Business Risks—Minimum Wage”), rent increases resulting from the rent escalation provisions in the Company’s leases, escalating insurance costs for general liability, property and workers’ compensation coverage, and the availability of experienced management and hourly employees may also adversely affect the Company. There can be no assurance to what extent that these conditions will continue or that the Company will have the ability to control costs in the future. See “Business Risks—Reliance on Key Suppliers and Distributors”.

Minimum Wage

The Company has experienced increases in its labor expenses due to increases in the federal minimum wage rate and in the California minimum wage rate. These increases have resulted in a decrease in the Company’s profitability. The Company could be impacted by increasing wage costs in any of its markets where the minimum wage rate is increased. The Company is exploring strategic ideas on how to better manage labor utilization in order to minimize any potential impact from increasing wage costs. There can be no assurance that the Company will be able to manage and absorb these increases in wage costs in the future.

17Planned Marketing Expenditures

The Company has incurred marketing expenditures during the ~~wage~~first ~~rate~~quarter isof ~~increased~~fiscal 2003 to attempt to increase guest counts. ~~The~~A significant portion of the Company’s isexternal ~~exploring~~marketing ~~strategic~~effort ~~ideas~~consists onof ~~how~~attracting toguests ~~better~~through ~~manage~~the ~~labor~~use ~~utilization~~of infreestanding ~~order~~inserts to(“FSIs”). ~~minimize~~FSIs ~~any~~contain descriptive ~~potential~~information ~~impact~~regarding ~~from~~the ~~increasing~~restaurants, ~~wage~~as ~~costs~~well as in most cases, discount coupons. ~~There~~FSIs ~~can~~are bedistributed ~~no assurance~~by ~~that~~direct mail and through newspapers. In addition, the Company ~~will~~has bea ~~able~~“Business–to–Business” program under which it mails discount cards to ~~manage~~local ~~and~~businesses ~~absorb~~for ~~these~~distribution ~~increases~~to intheir ~~wage~~employees. ~~costs~~The discount cards entitle the employees to a certain price discount on each repeat visit during a specified period. In markets in which the ~~future~~Company has sufficient penetration, the Company uses radio advertising to stimulate demand. In fiscal 2002, the Company used radio

~~Planned~~16 ~~Operating Expenditures~~

TheTable Company has incurred planned marketing expenditures during the first three quarters of fiscal 2002 in order to implement strategic marketing programs designed to benefit the Company in subsequent quarters. Expenditures related to these programs include advertising production costs, media expenses, and research. There can be no assurance these programs will be successful and will benefit the Company by increasing guest counts and revenues in the future. The Company continues to incur marketing expenditures related to the development of future promotional programs designed to enhance the Company’s position in the marketplace. In addition, the Company is expanding the scope of its local store marketing programs. There can be no assurance these programs will be successful and will benefit the Company by increasing guest counts and revenues in the future. Contents

~~Since~~advertising ~~the~~in ~~period~~its ~~ended~~San ~~June~~Diego, 30Phoenix, ~~2001~~and Southeast Florida markets. In addition, the ~~Company~~restaurants ~~has~~often co–sponsor ~~converted~~fund–raising ~~five~~events ~~locations~~in tothe ~~leased~~restaurants ~~from~~for ~~owned~~local ascharitable ~~part~~and ofother acommunity ~~plan~~organizations. toFor ~~reduce~~each ~~debt.~~new ~~Such~~restaurant, ~~conversions~~the ~~result~~Company inconducts ana ~~increase~~pre–opening inawareness ~~store~~program ~~rent~~beginning ~~expense~~approximately ~~(partially~~two ~~offset~~to bythree aweeks ~~decrease~~prior to, inand ~~building~~ending ~~depreciation~~four ~~expense)~~to ~~for~~six weeks after, the ~~converted location.~~opening ~~Should~~of the ~~Company~~restaurant. ~~continue~~There tocan ~~convert~~be ~~owned~~no ~~locations~~assurance tothat ~~leased~~the ~~locations,~~marketing ~~store~~and ~~rent~~promotion ~~expense~~strategies discussed herein will ~~continue~~result toin ~~increase~~higher asnet asales ~~result~~in the future.

~~The~~Other ~~Company~~Operating ~~continues~~Expenditures to experience increased energy costs related to increased utility expenses predominantly in California. Further, the Company may continue to experience increased insurance costs and higher repair and maintenance expenditures in its existing stores. Such increases may affect store profitability. There can be no assurance that the increases in utilities and repair and maintenance will not continue to impact the Company’s ability to control costs in the future.

~~Importance~~Since the period ended December 31, 2001, the Company has converted three locations to leased from owned as part of ~~Key~~a ~~Employees~~plan to reduce debt. Such conversions result in an increase in store rent expense (partially offset by a decrease in building depreciation expense) for the converted location. Should the Company continue to convert owned locations to leased locations, store rent expense will continue to increase as a result.

The Company iscontinues ~~heavily~~to ~~dependent~~experience ~~upon~~increased ~~the~~insurance ~~services~~costs ofand ~~its~~higher ~~officers~~repair and ~~key~~maintenance ~~management~~expenditures ~~personnel involved~~ in ~~restaurant operations, purchasing, expansion and administration. In particular, the Company is dependent upon the management and leadership of~~ its ~~four~~existing ~~executive officers, Michael P~~stores. ~~Mack,~~Such increases ~~David~~may W.affect ~~Qualls,~~store Rprofitability. ~~Gregory~~There ~~Keller~~can ~~and~~be ~~Kenneth~~no J.assurance ~~Keane.~~that ~~The loss of any of these four individuals could have a material adverse effect on~~ the ~~Company’s~~increases ~~business,~~in ~~financial~~repair ~~condition~~ and ~~results~~maintenance ofexpenditures ~~operations.~~will ~~The~~not ~~success~~continue ofto ~~the~~impact ~~Company and its individual restaurants depends upon~~ the Company’s ability to ~~attract~~control ~~and retain~~costs ~~highly motivated, well-qualified restaurant operations and other management personnel. The Company faces significant competition~~ in the ~~recruitment of qualified employees~~future.

~~Computer~~Importance ~~Information~~of ~~System~~Key Employees

The ~~core~~success ~~component~~ of the Company’s ~~cost~~and ~~management~~its ~~program~~individual isrestaurants depends upon the Company’s ~~computer~~ability ~~information~~to ~~system.~~attract ~~The~~and ~~Company~~retain ~~has~~highly ~~developed a proprietary management information system that is fully integrated throughout the Company~~motivated, ~~including in each restaurant. The Company believes that, as compared to off~~well-~~the-shelf~~qualified ~~software applications, this system provides significantly greater access to~~ restaurant ~~operating~~operations ~~data~~ and aother ~~much shorter~~ management ~~reaction time~~personnel. The ~~system~~ isCompany ~~used~~faces assignificant acompetition ~~critical planning tool by corporate and restaurant managers~~ in four primary areas: production, labor, food cost and financial and accounting controls. The system generates forecasts of estimated guest volumes and other predictive data, which assist restaurant managers in developing automated production reports that detail the ~~daily~~recruitment ~~quantity and timing~~ of ~~batch~~qualified ~~production of various menu offerings and food preparation requirements~~employees. The computerized system also acts as a scheduling tool for the general managers, producing automated daily labor reports outlining the restaurant’s staffing needs based on changing trends and guest volume forecasts. Corporate management, through daily information updates, has complete access to restaurant data and can react quickly to changing trends. The Company can quickly analyze the cost of its menu and make corporate-wide menu adjustments to minimize the impact of shifting food prices

18Computer Information System

~~and~~The ~~food~~Restaurant ~~waste~~Computer Information System. ~~Weekly~~The core component of the Company’s cost management information system is the computer system in each restaurant. The Company believes that, as compared to off-~~generated~~the-shelf ~~profit~~software applications, this system provides significantly greater access to restaurant operating data and ~~loss~~a ~~statements~~much shorter management reaction time. The system is used as a critical planning tool by restaurant managers in four primary areas: production, labor, food cost and ~~monthly~~financial and accounting ~~department~~controls. The system generates forecasts of estimated guest volumes and other predictive data, which assist restaurant managers in developing automated production reports that detail the daily quantity and timing of batch production of various menu offerings and food preparation requirements. The computerized system also acts as a scheduling tool for the general managers, producing automated daily labor reports outlining the restaurant’s staffing needs based on changing trends and guest volume forecasts. Corporate management, through daily information updates, has complete access to restaurant data and can react quickly to changing trends. The Company can quickly analyze the cost of its menu and make corporate-wide menu adjustments to minimize the impact of shifting food prices and food waste. Computer-generated profit and loss statements are reviewed at the corporate, regional and restaurant management levels.

The ~~Company~~Corporate ~~began~~Accounting ~~implementing~~and aInformation ~~new~~System. ~~software~~In ~~package~~May ~~for~~2002, the ~~production~~Company ofcompleted ~~formal~~its ~~accounting~~conversion to ~~reports~~new ~~during~~accounting ~~the~~software ~~second~~which ~~quarter~~replaced ofnot ~~fiscal~~only ~~2001 and completed~~ the ~~system~~previous ~~conversion~~software, ~~and~~but ~~began~~also ~~live~~incorporated ~~transaction processing during~~ the ~~third quarter of fiscal 2002. The~~ Company’s ~~intends~~distribution ~~to gain efficiencies in both its inventory tracking~~ and ~~financial reporting~~purchasing ~~processes~~functions ~~through~~into ~~use~~an ofintegrated ~~the new~~ system. ~~However,~~The ~~there~~corporate ~~can~~system bedirectly nointerfaces ~~assurance~~with ~~that~~ the Company ~~will~~restaurant system, bewhich ~~able~~creates ~~to become proficient with the new software such that it will have~~ a ~~positive~~seamless ~~financial~~flow ~~impact~~of oninformation throughout the ~~results of operations~~Company.

~~Seasonality~~There ~~and~~can ~~Quarterly~~be ~~Fluctuations~~no assurance that the Company will experience higher net sales, cost reduction savings or increases in net income in the future through the use of its proprietary restaurant information system or the corporate accounting system.

~~The~~Seasonality ~~Company’s business experiences seasonal fluctuations, as a disproportionate amount of the Company’ net income is generally realized in the second, third~~ and ~~fourth fiscal quarters due to higher average sales and lower average costs.~~ Quarterly ~~results~~Fluctuations have been and are expected to continue to fluctuate as a result of a number of factors, including the timing of new restaurant openings. As a result of these factors, net sales and net income on a quarterly basis may fluctuate and are not necessarily indicative of the results that may be achieved for a full fiscal year.

~~Geographic~~The ~~Concentration:~~Company’s business ~~Restaurant~~experiences ~~Base~~seasonal fluctuations, as a disproportionate amount of the Company’s net income is generally realized in the second, third and fourth fiscal quarters due to higher average sales and lower average costs. Quarterly results have been and are expected to continue to fluctuate as a result of a number of factors, including the timing of new restaurant openings. As a result of these factors, net sales and net income on a quarterly basis may fluctuate and are not necessarily indicative of the results that may be achieved for a full fiscal year.

~~Thirty-eight~~Geographic ofConcentration: ~~the~~Restaurant ~~Company’s~~Base 95 existing restaurants are located in California, and eighteen are located in Florida. Accordingly, the Company is susceptible to fluctuations in its business caused by adverse economic or other conditions in these regions, including natural disasters or other acts of God. In addition, in California, higher utility costs will continue to affect the Company’s profitability in this region. As a result of the Company’s continued concentration in California and Florida, adverse economic or other conditions in either state could have a material adverse effect on the Company’s business. The Company’s significant investment in, and long-term commitment to, each of its restaurant sites limits its ability to respond quickly or effectively to changes in local competitive conditions or other changes that could affect the Company’s operations. In addition, the Company has a small number of restaurants relative to some of its competitors. Consequently, a decline in the profitability of an existing restaurant or the introduction of an unsuccessful concept could have a more significant effect on the Company’s result of operations than would be the case in a company with a larger number of restaurants.

~~Reliance~~Forty onof ~~Key~~the ~~Suppliers~~Company’s 97 existing restaurants are located in California, and ~~Distributors~~eighteen are located in Florida. Accordingly, the Company is susceptible to fluctuations in its business caused by adverse economic or other conditions in these regions, including natural disasters or other acts of God. In addition, in California, higher utility costs will continue to

~~The~~17 Company utilizes sole source suppliers for certain produce and grocery items. In addition, in order to minimize price fluctuations, the Company enters into fixed price supply contracts that typically have terms of two months to one year and generally do not have minimum purchase requirements. However, in the event that the Company’s suppliers are unable to make the required deliveries due to shortages or interruptions caused by adverse weather or other conditions or are relieved of their contract obligations due to an invocation of an act of God provision, the Company would need to renegotiate these contracts or purchase such products and groceries elsewhere. There can be no assurance that the Company’s produce and grocery costs would not as a result be higher, and such higher costs could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company has several local produce distributors and also distributes other grocery items through its own distribution system out of one warehouse on the West Coast and one on the East Coast. All produce and groceries purchased by the Company are channeled from the growers and other suppliers to the Company’s warehouses, restaurants and central kitchen facilities through these distributors. In the event that any of these distributors were to cease distribution on behalf of the Company, the Company would be required to make alternate arrangements for produce. There can be no assurance that the Company’s distribution expense would not be greater under such alternate arrangements. See “Business Risks—Cost Sensitivity”.

19Table of Contents

~~Volatility~~affect the Company’s profitability in this region. As a result of ~~Stock~~the ~~Price~~Company’s continued concentration in California and Florida, adverse economic or other conditions in either state could have a material adverse effect on the Company’s business. The Company’s significant investment in, and long-term commitment to, each of its restaurant sites limits its ability to respond quickly or effectively to changes in local competitive conditions or other changes that could affect the Company’s operations. In addition, the Company has a small number of restaurants relative to some of its competitors. Consequently, a decline in the profitability of an existing restaurant or the introduction of an unsuccessful concept could have a more significant effect on the Company’s result of operations than would be the case in a company with a larger number of restaurants.

~~The~~Reliance ~~market~~on ~~price~~Key ofSuppliers ~~the Company’s common stock has fluctuated since the initial public offering of its common stock in May 1995. Quarterly operating results of the Company~~ and ~~other~~Distributors restaurant companies, daily transactional volume, changes in general conditions in the economy, the financial markets or the restaurant industry, natural disasters or other developments affecting the Company or its competitors could cause the market price of the common stock to fluctuate substantially. In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to the operating performance of these companies.

20The Company utilizes sole source suppliers for certain produce and grocery items. In addition, in order to minimize price fluctuations, the Company enters into fixed price supply contracts that typically have terms of two months to one year and generally do not have minimum purchase requirements. However, in the event that the Company’s suppliers are unable to make the required deliveries due to shortages or interruptions caused by adverse weather or other conditions or are relieved of their contract obligations due to an invocation of an act of God provision, the Company would need to renegotiate these contracts or purchase such products and groceries elsewhere. There can be no assurance that the Company’s produce and grocery costs would not as a result be higher, and such higher costs could have a material adverse effect on the Company’s business, financial conditions and results of operations. The Company has several local produce distributors and also distributes other grocery items through its own distribution system out of one warehouse on the West Coast and one on the East Coast. All produce and groceries purchased by the Company are channeled from the growers and other suppliers to the Company’s warehouses, restaurants and restaurant central kitchens through these distributors. In the event that any of these distributors were to cease distribution on behalf of the Company, the Company would be required to make alternate arrangements for produce. There can be no assurance that the Company’s distribution expense would not be greater under such alternate arrangements. See “Business Risks—Cost Sensitivity”.

~~ITEM~~Volatility ~~3: QUANTITATIVE~~of ~~AND~~Stock ~~QUALITATIVE~~Price ~~DISCLOSURES ABOUT MARKET RISK~~

~~Market~~The ~~risks~~market ~~relating~~price toof the Company’s ~~operations~~common ~~result~~stock ~~primarily~~has ~~from~~fluctuated ~~changes~~since ~~in short-term interest rates as~~ the ~~Company’s~~initial ~~short~~public ~~term~~offering ~~credit agreement which consists~~ of aits ~~term~~common ~~loan~~stock in ~~the~~May ~~amount of $6~~1995.0 ~~million~~Quarterly ~~due December~~operating ~~31,~~results ~~2002.~~of ~~The term loan bears interest at either~~ the ~~prime~~Company ~~rate~~and orother ~~LIBOR~~restaurant ~~plus~~companies, ~~2.0%.~~daily ~~As of June 30~~transactional volume, ~~2002,~~changes ~~the~~in ~~Company~~general ~~had~~conditions ~~$3.0 million~~ in ~~debt outstanding under~~ the ~~term loan. Based on a hypothetical 50 basis point adverse change in prime rates~~economy, ~~net~~the ~~interest~~financial ~~expense~~markets ~~would~~or ~~increase~~the byrestaurant ~~approximately $15~~industry,~~000~~ onnatural andisasters ~~annual~~or ~~basis,~~other ~~and~~developments ~~likewise~~affecting ~~would~~the ~~decrease~~Company ~~earnings~~or ~~and~~its ~~cash~~competitors ~~flows.~~could ~~The~~cause ~~Company~~the ~~cannot predict~~ market ~~fluctuations~~price inof ~~interest~~the ~~rates~~common ~~and~~stock ~~their~~to ~~impact~~fluctuate substantially. onIn ~~debt~~addition, ~~nor~~in ~~can~~recent ~~there~~years ~~be any~~the ~~assurance~~stock ~~that~~market ~~long-term~~has ~~fixed~~experienced ~~rate~~extreme ~~debt~~price ~~will~~and bevolume ~~available~~fluctuations. atThis ~~favorable~~volatility ~~rates,~~has ifhad ata ~~all.~~significant ~~Consequently,~~effect ~~future~~on ~~results~~the ~~may~~market ~~differ~~price ~~materially~~of ~~from~~securities ~~the~~issued ~~estimated~~by ~~results~~many ~~due~~companies tofor ~~adverse~~reasons ~~changes~~unrelated into ~~interest~~the operating ~~rates~~performance orof ~~debt~~these ~~availability~~companies.

~~The~~18 ~~Company did not have any foreign currency or other market risk or any derivative financial instruments at June 30, 2002.~~

21Table of Contents

~~PART~~ ITEM ~~II—OTHER~~3: ~~INFORMATION~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~ITEM~~On November 1., ~~LEGAL~~2002 ~~PROCEEDINGS~~the ~~Not~~Company ~~Applicable~~entered ~~ITEM~~into 2.a ~~CHANGES~~line INof ~~SECURITIES~~credit ~~Not~~agreement ~~Applicable~~(Credit ~~ITEM~~Agreement) 3with Wells Fargo Bank. ~~DEFAULTS~~This ~~UPON~~credit ~~SENIOR~~agreement ~~SECURITIES~~provides ~~Not~~for ~~Applicable~~borrowings ~~ITEM~~up 4.to ~~SUBMISSION~~$6 OFmillion ~~MATTERS~~under TOa Arevolving ~~VOTE~~credit agreement OFthat ~~SECURITY~~will ~~HOLDERS~~carry ~~Not~~interest ~~Applicable~~at ~~ITEM~~either 5.the ~~OTHER~~prime ~~INFORMATION~~rate ~~Not~~or ~~Applicable~~LIBOR ~~ITEM~~plus 62% with interest payable at the beginning of each month. ~~EXHIBITS~~At ~~AND~~December ~~REPORTS~~31, ON2002 ~~FORM~~the ~~8-K~~Company ~~Exhibits:~~did ~~The~~not ~~Exhibits~~have ~~required~~an byoutstanding ~~Item~~balance ~~6(a)~~under its line of credit agreement with the ~~report~~bank. Should ~~are~~the ~~listed~~Company draw from this line of credit, changes in short-term interest rates could affect the ~~Exhibit~~Company’s ~~Index~~line onof ~~page~~credit 23interest ~~herewith~~rate, increasing net interest expense and likewise decreasing earnings and cash flow. ~~Reports~~The onCompany ~~Form~~cannot predict ~~8-K:~~market Nofluctuations ~~reports~~in interest rates and their impact on ~~Form~~debt, 8nor can there be any assurance that long-Kterm ~~have~~fixed ~~been~~rate ~~filed~~debt bywill ~~the~~be ~~Company~~available ~~during~~at favorable rates, if at all. Consequently, future results may differ materially from the estimated ~~fiscal~~results ~~quarter~~due ~~ended~~to ~~June~~adverse 30changes in interest rates or debt availability. This agreement terminates on January 31, ~~2002~~2004.

22The Company did not have any foreign currency or other market risk or any derivative financial instruments at December 31, 2002.

~~SIGNATURES~~19

PursuantTable to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Contents

						GARDEN FRESH RESTAURANT CORP. (Registrant)
Dated: August 9, 2002						/s/ MICHAEL P. MACK
						Michael P. Mack Chief Executive Officer/President (Principal Executive Officer)

ITEM 4: CONTROLS AND PROCEDURES

~~/s/~~(a) ~~DAVID~~Under W.the ~~QUALLS~~supervision ~~David~~and W.with ~~Qualls~~the ~~Chief~~participation ~~Financial~~of ~~Officer~~management, ~~(Principal~~including ~~Accounting~~the principal executive and ~~Financial~~principal ~~Officer~~financial officers, the effectiveness of the design and operation of our disclosure controls and procedures was evaluated, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended, within the 90 day period prior to the filing date of this report. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of that date.

23(b) There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

~~EXHIBIT~~20 ~~INDEX~~

Exhibit Number		Description
3.1*		Restated Certificate of Incorporation of Garden Fresh Restaurant Corp.
3.1******		Certificate of Designation, Preferences and Rights of the Terms of the Series A Preferred Stock, as filed with the Delaware Secretary of State on February 23, 2001.
3.2**		Bylaws of Garden Fresh Restaurant Corp., as amended.
4.1******		Rights Agreement between the Company and Equiserve Trust Company, N. A., dates as of February 15, 2001.
10.1**		Form of Indemnity Agreement for executive officers and directors.
10.2**		The Company’s Restaurant Management Stock Option Plan, as amended.
10.3**		The Company’s Key Employee Stock Option Plan, as amended.
10.4**		The Company’s 1995 Outside Director Stock Option Plan.
10.5**		The Company’s 1995 Key Employee Stock Option Plan, as amended.
10.6***		Form of Executive Employment Agreement
10.6A		Employees Subject to Employment Agreements
10.7***		Wells Fargo Bank Revolving Line of Credit Note
10.8****		The Company’s 1998 Stock Option Plan (subsequently amended to increase the share reserve to 550,000)
10.9****		The Company’s Variable Deferred Compensation Plan for Executives
10.9A****		Amendment to the Company’s Variable Deferred Compensation Plan for Executives
10.14*****		Indemnification Agreement between the Company and David Qualls, Greg Keller, and Michael Mack dated April 28, 1998.
10.15*******		Office Lease between the Company and Pacific Holding Company, dated September 14, 2001.
10.16*******		Wells Fargo Bank Credit Agreement, dated December 3, 2001
99.1		Certification of Chief Executive Officer
99.2		Certification of Chief Financial Officer

*PART ~~Incorporated~~II—OTHER INFORMATION ~~by reference from Exhibit 3.1 filed with the Company’s Registration Statement on Form S-8 (No. 33-93568) filed June 16, 1995.~~

** Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Registration Statement on Form S-1 (No. 33-90404), as amended by Amendment No. 1 to Form S-1 filed on April 19, 1995, Amendment No. 2 for Form S-1 filed May 8, 1995, Amendment No. 3 to Form S-1 filed on May 15, 1995, Exhibit 10.2 is incorporated by reference from Exhibits 10.2 and 10.2A, Exhibit 10.3 is incorporated by reference from Exhibits 10.3 and 10.3A and Exhibit 10.5 is incorporated by reference from Exhibit 10.5 and 10.5A.

Item 1. Legal Proceedings		Not Applicable
Item 2. Changes in Securities		Not Applicable
Item 3. Defaults Upon Senior Securities		Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders		Not Applicable
Item 5. Other Information		Not Applicable
Item 6. Exhibits and Reports on Form 8-K

*** Incorporated by reference from the Exhibits: ~~with corresponding numbers filed with the Company’s Form 10-Q filed with the SEC on February 13, 1998.~~

~~****~~The ~~Incorporated by reference from the~~ Exhibits ~~with~~required ~~corresponding~~by ~~numbers~~Item ~~filed~~6(a) ~~with~~of the ~~Company’s~~report ~~Form~~are ~~10-Q~~listed ~~filed~~in ~~with~~ the ~~SEC~~Exhibit Index on ~~April~~page ~~28,~~25 ~~1998, as amended by Amendment No~~herewith. ~~1 to Form 10-Q filed on April 28, 1998, Amendment No. 2 for Form 10-K filed on August 13, 1999, and Amendment No. 3 for Form 10-Q filed on December 29, 1999.~~

~~*****~~Reports ~~Incorporated~~on ~~by reference from the Exhibits with corresponding numbers filed with the Company’s~~ Form S8-1K: ~~(No. 33-51267) filed with the SEC on April 29, 1998.~~

~~******~~No ~~Incorporated~~reports byon ~~reference from the Company’s~~ Form 8-K have been filed ~~with~~by the ~~SEC~~Company onduring ~~February~~the 15fiscal quarter ended December 31, ~~2001~~2002.

~~*******~~21 ~~Incorporated by reference from the Company’s Form 10-K filed with the SEC on December 27, 2001.~~

24Table of Contents

SIGNATURES

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

DATED:

						GARDEN FRESH RESTAURANT CORP.
February 11, 2003						(Registrant)

/s/ Michael P. Mack

Michael P. Mack

Chief Executive Officer/President

(Principal Executive Officer)

/s/ David W. Qualls

David W. Qualls

Chief Financial Officer

(Principal Accounting and Financial

Officer)

CERTIFICATIONS

I, Michael P. Mack, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Garden Fresh Restaurant Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: February 11, 2003

/s/ MICHAEL P. MACK

Michael P. Mack

Chief Executive Officer,

President and Director

CERTIFICATIONS

I, David W. Qualls, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Garden Fresh Restaurant Corporation;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: February 11, 2003

/s/ DAVID W. QUALLS

David W. Qualls

Chief Financial Officer and Chief Accounting Officer

EXHIBIT INDEX

Exhibit Number		Description

3.1		Restated Certificate of Incorporation of Garden Fresh Restaurant Corp. ⁽¹⁾
3.2		Certificate of Designation, Preferences and Rights of the Terms of the Series A Preferred Stock, as filed with the Delaware Secretary of State on February 23, 2001. ⁽⁶⁾
3.3		Bylaws of Garden Fresh Restaurant Corp., as amended. ⁽²⁾
4.1		Rights Agreement between the Company and Equiserve Trust Company, N. A., dates as of February 15, 2001. ⁽⁶⁾
99.1		Certification of Chief Executive Officer
99.2		Certification of Chief Financial Officer

(1)

Incorporated by reference from Exhibit 4.1 filed with the Company’s Registration Statement on Form S-8 (No. 33-93568) filed June 16, 1995.

(2)

Incorporated by reference from the Company’s Form 8-K filed with the SEC on February 15, 2001.

(3)

Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Registration Statement on Form S-1 (No. 33-90404), as amended by Amendment No. 1 to Form S-1 filed on April 19, 1995, Amendment No. 2 for Form S-1 filed May 8, 1995, Amendment No. 3 to Form S-1 filed on May 15, 1995, Exhibit 10.2 is incorporated by reference from Exhibits 10.2 and 10.2A, Exhibit 10.3 is incorporated by reference from Exhibits 10.3 and 10.3A and Exhibit 10.5 is incorporated by reference from Exhibit 10.5 and 10.5A.

Filing Compare · GARDEN FRESH RESTAURANT CORP /DE/