UNITEDTable STATESof Contents

~~SECURITIES~~UNITED ~~AND EXCHANGE~~STATES ~~COMMISSION~~

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

~~FORM~~Washington, ~~10–K~~D.C. 20549

~~(Mark~~FORM ~~One)~~10-K

~~x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15~~(dMark One) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~x ~~the~~ANNUAL ~~fiscal~~REPORT ~~year~~PURSUANT ~~ended~~TO ~~September~~SECTION ~~30,~~13 ~~2001~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the fiscal year ended September 30, 2003

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

~~For~~¨ ~~the~~TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from~~TO toSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~0–25886~~For the transition period from to

~~(Commission~~0-25886 ~~file number)~~

~~GARDEN~~(Commission ~~FRESH~~file ~~RESTAURANT~~number) ~~CORP.~~

~~(Exact~~GARDEN ~~name~~FRESH ofRESTAURANT ~~registrant~~CORP. ~~as specified in its charter)~~

Delaware		33–0028786
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
17180 Bernardo Center Drive
San Diego, CA		92128
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(858) 675–1600

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

15822 Bernardo Center Drive Ste. A San Diego, CA		92127
(Address of principal executive offices)		(Zip Code)

(~~Registrant’s telephone number, including area code~~858) 675-1600

~~Securities~~(Registrant’s ~~registered pursuant~~telephone tonumber, ~~Section~~including ~~12(b~~area code) ~~of the Act:~~

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

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

~~Common~~Securities ~~Stock,~~registered ~~$.01~~pursuant ~~par~~to ~~value~~Section 12(g) of the Act:

~~(Title~~Common ofStock, ~~Class)~~$.01 par value

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

Indicate by check mark ifwhether ~~disclosure~~the ofregistrant ~~delinquent~~(1) has ~~filers~~filed ~~pursuant~~all reports required to ~~Item~~be ~~405~~filed ofby ~~Regulation~~Section ~~S-K~~13 isor ~~not~~15(d) ~~contained~~of ~~herein,~~the ~~and~~Securities ~~will~~Exchange ~~not~~Act ~~be contained,~~of to1934 during the ~~best~~preceding of12 ~~registrant’s~~months ~~knowledge,~~(or infor ~~definitive~~such ~~proxy~~shorter orperiod ~~information~~that ~~statements~~the ~~incorporated~~registrant bywas ~~reference~~required into ~~Part~~file ~~III~~such ofreports), ~~this~~and ~~Form~~(2) ~~10-K~~has orbeen ~~any~~subject ~~amendment~~ to such ~~this~~filing ~~Form~~requirements ~~10-K~~for the past 90 days. Yes x No ¨

~~The~~Indicate ~~approximate~~by ~~aggregate~~check ~~market~~mark ~~value~~if disclosure of ~~the~~delinquent ~~registrant’s~~filers ~~Common~~pursuant ~~Stock~~to ~~held~~Item 405 ~~by nonaffiliates~~ of ~~the~~Regulation ~~registrant~~S-K ~~(based~~is onnot ~~the~~contained ~~closing~~herein, ~~sales~~and ~~price~~will ofnot ~~such~~be ~~stock~~contained, asto ~~reported in~~ the ~~Nasdaq~~best ~~National~~of ~~Market)~~registrant’s ~~on December 14~~knowledge, ~~2001~~in ~~was~~definitive ~~$17,919,523.~~proxy ~~Excludes~~or ~~shares~~information ofstatements ~~Common~~incorporated ~~Stock held~~ by ~~directors,~~reference ~~officers~~in ~~and~~Part ~~each~~III ~~person~~of ~~who~~this ~~holds~~Form 5%10-K or ~~more~~any ofamendment ~~the~~to ~~registrant’s Common Stock~~this Form 10-K. x

~~Number~~Indicate by ofcheck ~~shares~~mark ofwhether ~~Common~~the ~~Stock,~~registrant ~~$0.01~~is ~~par~~an ~~value,~~accelerated ~~outstanding~~filer (as ofdescribed ~~December~~in ~~14,~~Rule ~~2001~~12b-2 ~~was~~of ~~5,688,926~~the Act). Yes ¨ No x

~~Parts~~The ofaggregate ~~the~~market ~~definitive~~value ~~Proxy~~of the ~~Statement~~voting ~~per~~and ~~Registrant’s~~non-voting ~~2002 Annual~~common ~~Meeting~~equity ofheld ~~Shareholders~~by ~~are~~non-affiliates ~~incorporated~~computed by reference ~~into~~to ~~Part~~the ~~III~~price ofat ~~this~~which ~~Form~~the ~~10-K.~~common ~~Such~~equity ~~Proxy~~was ~~Statement~~last ~~shall~~sold, beor ~~filed with~~ the ~~Securities~~average bid and ~~Exchange~~asked ~~Commission~~prices ~~pursuant~~of tosuch ~~Regulation~~common ~~14A~~equity, noas ~~later than 120 days after the end~~ of ~~the fiscal~~March ~~year~~31, ~~covered~~2003 bywas ~~this Form 10-K~~$33,672,000.*

~~GARDEN~~*Excludes ~~FRESH~~the ~~RESTAURANT~~Common ~~CORP~~Stock held by executive officers, directors and stockholders whose ownership exceeds 5% of the Common Stock outstanding as of March 31, 2003. The calculation does not reflect a determination that such persons are affiliates for any other purposes.

~~ANNUAL~~Number ~~REPORT~~of ONshares ~~FORM~~of ~~10–K~~Common Stock, $0.01 par value, outstanding as of November 14, 2003 was 5,833,792.

TABLETable OFof CONTENTS Contents

		Page
PART I
Item 1.	Business		3
Item 2.	Properties		18
Item 3.	Legal Proceedings		18
Item 4.	Submission Of Matters To A Vote Of Security Holders		18
PART II
Item 5.	Market for Company’s Common Equity and Related Stockholder Matters		19
Item 6.	Selected Financial Data		20
Item 7.	Management’s Discussion and Analysis Of Financial Condition and Results of Operations		22
Item 7a.	Quantitative and Qualitative Disclosures about Market Risk		33
Item 8.	Financial Statements and Supplementary Data		33
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		33
PART III
Item 10.	Directors and Executive Officers of the Company		34
Item 11.	Executive Compensation and Other Matters		34
Item 12.	Security Ownership of Certain Beneficial Owners And Management		34
Item 13.	Certain Relationships and Related Transactions		34
PART IV
Item 14.	Exhibits, Financial Statement Schedule, and Reports on Form 8–K		35
SIGNATURES
EXHIBIT INDEX

GARDEN FRESH RESTAURANT CORP.

2ANNUAL REPORT ON FORM 10-K

~~PART~~ TABLE IOF CONTENTS

Item 1. BUSINESS

		Page
PART I
Item 1.	Business	3
Item 2.	Properties	12
Item 3.	Legal Proceedings	12
Item 4.	Submission Of Matters To A Vote Of Security Holders	13

PART II
Item 5.	Market for Company’s Common Equity and Related Stockholder Matters	14
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 8.	Financial Statements and Supplementary Data	32
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33
Item 9A.	Controls and Procedures	33

PART III
Item 10.	Directors and Executive Officers of the Company	34
Item 11.	Executive Compensation and Other Matters	38
Item 12.	Security Ownership of Certain Beneficial Owners And Management	40
Item 13.	Certain Relationships and Related Transactions	42
Item 14.	Principal Accounting Fees and Services	42

PART IV
Item 15.	Exhibits, Financial Statement Schedule, and Reports on Form 8-K	44

SIGNATURES
EXHIBIT INDEX

~~The~~2 statements contained in this Form 10–K that are not purely historical are forward looking statements, including statements regarding the Company’s 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) timing for implementation of its new accounting software program, (v) need to obtain additional financing, (vi) future restaurant sales,(vii) plans to close existing restaurants, 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 the new accounting software as well as escalating costs of both utilities and fuel, as well as increased labor costs for the distribution center.

GeneralTable of Contents

~~Garden~~PART ~~Fresh~~I Restaurant Corp. was founded in 1983 and currently operates 94 salad buffet restaurants in California, Florida, Arizona, Colorado, Georgia, Illinois, Kansas, Missouri, Nevada, New Mexico, North Carolina, Oregon, Texas, Utah, and Washington under the names Souplantation and Sweet Tomatoes. The Company also operates one Ladles, A Soup and Salad Takery (“Ladles”) and one Slurp! The Soup Experience (Slurp!) in California, however, the Company has determined that they will exit these concepts in fiscal 2002. The Company’s restaurants feature fresh, great tasting salads and other complementary foods. Due to its salad focus, the Company’s concept falls within a segment of the restaurant industry that is distinct from other buffet concepts and moderately priced casual restaurants. The Company believes that it is well–positioned to further penetrate this segment and that the opportunity for expansion within this segment currently is attractive relative to expansion opportunities for many other restaurant segments.

Item 1. Business ~~Strategy~~

The statements contained in this Form 10-K that are not purely historical are forward looking statements, including statements regarding the Company’s ~~fundamental~~expectations, ~~strategy~~hopes, isbeliefs, 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 (i) plans to ~~provide~~operate aand ~~casual~~expand within its applicable segment of the restaurant ~~dining~~industry, ~~experience~~(ii) ~~that~~beliefs ~~incorporates~~regarding operating margins and price structures, (iii) standards of customer service, (iv) strategies to increase guest frequency rates, (v) the ~~variety~~benefits of utilizing distribution centers and ~~choice~~central ~~inherent~~kitchens, in(vi) athe ~~buffet~~Company’s expansion and construction plans, (vii) the expenses and performance of the restaurants, (viii) the expenses associated with increased insurance premiums, (ix) the expected increase of occupancy and other costs, (x) the anticipation of an increase to the provisional income tax rate, (xi) the need to obtain additional financing, (xii) future restaurant ~~but~~sales, (xiii) the ~~food~~Company’s ~~quality~~expectations regarding increased competition and ~~service~~its ~~expected~~ability to compete against other companies, (xiv) strategic marketing programs and effects of such programs, (xv) the sufficiency of the Company’s sources of cash to meet its requirements and its ability to comply with financial covenants, (xvi) the result of litigation and its impact on the Company, (xvii) the impact of new accounting standards, and (xviii) the ability to complete the pending merger transaction referred to in ~~casual~~this ~~chains~~report and the additional costs to be incurred related to this transaction, 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. ~~The~~It is important to note that the Company’s ~~believes~~actual results could differ materially from those in such forward looking statements. Among the factors that ~~this~~could ~~strategy~~cause ~~will~~actual ~~create~~results ~~restaurant~~to differ ~~operating~~materially ~~margins~~are ~~not~~the ~~normally~~factors ~~found~~set inforth under the ~~buffet/family~~heading ~~dining~~“Management’s ~~segment.~~Discussion ~~The~~and ~~key~~Analysis ~~elements~~of Financial Condition and Results of Operations—Business Risks.” In particular, the Company’s expansion efforts and plans ~~strategy~~to ~~are~~open asnew ~~follows:~~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 escalating costs of goods and services.

~~Commitment to High Quality~~General Food. The Company seeks to provide fresh wholesome food with a strong emphasis on salads, which are featured on two 55 foot bars that include a wide range of salad offerings featuring three freshly tossed salads as well as a large assortment of fresh cut produce, dressings and toppings and several signature prepared salads. Various other offerings include made from scratch soups, a hot pasta bar, a bakery which serves a variety of hot muffins, focaccias and other breads and a dessert bar centered around a frozen yogurt station with toppings complemented by fresh fruits and puddings.

3Garden Fresh Restaurant Corp. was founded in 1983 and currently operates 97 salad buffet style restaurants in California, Florida, Arizona, Colorado, Georgia, Illinois, Kansas, Missouri, Nevada, New Mexico, North Carolina, Oregon, Texas, Utah, and Washington under the names Souplantation and Sweet Tomatoes. The Company’s restaurants feature soups, salads, freshly baked goods and desserts. Due to its focus on fresh food, the Company’s concept falls within a segment of the restaurant industry that is distinct from other buffet concepts and moderately priced casual restaurants. The Company believes that it has developed strategies that will further its penetration into this segment and it believes that the opportunity for expansion within this segment continues to be attractive relative to expansion opportunities into other restaurant segments.

~~Commitment to Guest Service.~~ The Company’s ~~seeks~~menu tois ~~provide~~designed ~~its~~to ~~guests~~focus ~~with~~on ahigh ~~level~~quality, offreshly ~~service~~made, ~~that~~great ~~exceeds~~tasting ~~the~~food. ~~standards~~The ~~set~~dining byexperience ~~other~~begins ~~buffet~~with ~~concepts~~the ~~while~~salad ~~not~~bar ~~inhibiting~~and ~~the~~is ~~guest~~completed ~~from~~with ~~enjoying~~other ~~the~~interesting ~~benefits~~and ofexciting ~~selecting~~food ~~from~~offerings ~~a cornucopia of~~at ~~choices~~the ~~offered~~hot atpasta, ~~the~~soup, ~~various~~bakery, ~~food~~frozen ~~bars~~yogurt ~~within~~and ~~the~~dessert ~~restaurant~~bars. InThe ~~addition~~Company seeks to ~~high~~provide ~~service~~guests ~~standards,~~with ~~the~~an ~~Company~~excellent ~~has~~value ~~implemented~~by ~~several~~offering ~~programs~~unlimited access to ~~maximize~~its ~~guest~~entire ~~satisfaction.~~menu ~~Included~~of inhigh ~~these~~quality isfresh aitems ~~“zero~~at ~~defect”~~a ~~program~~fixed ~~that~~price. ~~focuses~~ Depending on the ~~most~~region ~~popular~~and ~~offerings~~time of today, ~~ensure~~the ~~that~~price ~~each~~ranges ~~portion~~from is$6.49 ~~prepared~~to ~~exactly~~$7.99 asat ~~specified~~lunch byand ~~the~~from ~~recipes~~$7.89 ~~The~~to ~~Company’s~~$9.29 ~~high~~at ~~service~~dinner. ~~standards~~The ~~can~~restaurants ~~only~~provide bediscounts ~~maintained~~to ~~through~~children ~~intensive~~under ~~recruiting~~12 and ~~training programs designed~~ to ~~employ~~senior ~~crew members~~citizens. ~~and~~Throughout ~~management~~the ~~that~~year ~~can~~the ~~sustain~~Company autilizes ~~friendly,~~various ~~enjoyable~~other ~~environment~~discount ~~thereby~~and ~~maximizing the guest’s meal experience~~coupon programs.

~~Excellent~~On ~~Price/Value~~September ~~Relationship. The~~30, ~~Company~~2003, ~~believes that~~ the ~~pricing~~Company ~~and~~announced ~~varied~~that ~~product~~it had ~~mix~~entered atinto ~~each~~a ~~restaurant~~definitive ~~are~~agreement ~~maintained~~to atmerge ~~such~~with aan ~~level that~~affiliate ~~the~~of ~~resulting~~Fairmont ~~meal~~Capital, ~~experience~~Inc. ~~can~~The ~~only~~merger beagreement ~~duplicated~~provides inthat ~~other~~the ~~casual~~stockholders ~~chains~~of atGarden ~~price~~Fresh ~~points~~will ~~that~~receive ~~average~~$16.35 ~~two~~per toshare ~~three~~in ~~dollars~~cash ~~higher~~for ~~than~~their atshares ~~the~~of ~~Souplantation~~common ~~and Sweet Tomatoes restaurants~~stock. The ~~Company’s management and front–line~~merger ~~personnel~~agreement ~~have~~was ~~embraced~~amended aon ~~company~~November ~~purpose~~21, ~~and~~2003. ~~values~~Any ~~that~~references ~~encompass commitment~~ to ~~serving high quality foods. The Company has involved~~ “the ~~guests~~merger” inor ~~establishing~~ a ~~price~~“pending ~~value,~~merger” ~~such~~in asthis ~~notifying~~report ~~them~~refer into ~~writing~~the intransaction ~~advance~~contemplated ofby ~~its~~that ~~intent~~agreement toas ~~raise prices~~so ~~that~~amended. ~~only~~The ~~cover~~merger ~~increased~~is ~~costs,~~pending ~~resulting~~as inof ~~positive~~the ~~guest~~date ~~feedback~~of this report.

~~Cost~~3 Management. The ability of the Company to maintain the highest possible quality products combined with what the Company believes to be one of the lowest cost structures in the casual chain segment is directly attributable to the Company’s ability to manage costs rigorously. This is achievable only through the use of the Company’s fully integrated, proprietary computer management information system. The precision with which the system operates allows a manager to review his/her entire cost structure in increments of cents per guest or minutes per employee if need be. At the same time, every level of management can review virtually any data in any store as quickly as the store itself. This allows for rapid problem detection and resolution thereby minimizing potential cost problems. The Company believes that the system’s sophistication combined with the ability of management to effectively use it are unequaled in the industry.

ExpansionTable Strategyof Contents

~~The~~Business ~~Company~~Strategy intends to expand in fiscal 2002 in existing markets. In fiscal 2001, the Company opened three new restaurants and re-opened one existing restaurant in California, as well as one new restaurant in Arizona, two new restaurants in Missouri, and three new restaurants and one stand-alone kitchen facility in Illinois. Subsequent to the close of fiscal 2001, the Company opened one additional restaurant in Irvine, California. In fiscal 2002, the Company anticipates opening a total of four new restaurants, of which three have signed leases and one has purchased land. The Company has purchased two sites to be opened in fiscal 2003. Expansion within the Company’s existing regions will allow the Company to continue generally utilizing a central kitchen to serve several restaurants located within a particular region. The Company added delivery and separate distribution centers for its restaurants on the West Coast (opened April 2000) and on the East Coast (opened November 2001). This decision was based on the expiration of the distribution vendor’s contract, coupled with the potential control and long-term cost savings over other distribution alternatives in this area of the business. See “Restaurant Operations – Distribution Center”.

~~During~~The ~~fiscal 1999 the~~ Company ~~opened it~~’s ~~first~~fundamental ~~location~~strategy ofis ~~Ladles,~~to Aprovide ~~Soup and Salad and Takery in San Diego, California. The Company opened and closed~~ a ~~second~~casual ~~“Ladles,~~restaurant Adining ~~Soup~~experience ~~and~~that ~~Salad~~combines ~~Takery” in fiscal 2000. In June 2001~~ the ~~Company~~variety ~~opened~~and ~~the~~choice ~~first~~characteristic ~~“SLURP!~~to ~~The Soup Experience”, a new concept in quick~~buffet ~~service,~~style ~~take-away~~restaurants ~~dining.~~with ~~Located~~the infood ~~San~~quality ~~Diego,~~and ~~California,~~attention ~~SLURP! was designed~~ to ~~fit into~~ guests’ ~~busy~~typical ~~schedules,~~of ~~offering~~casual ~~soup and other to-go items in a high energy, irreverent atmosphere~~chains. InThe ~~September 2001, the~~ Company ~~decided~~believes tothat ~~abandon the~~this ~~Ladles~~strategy ~~and~~will ~~Slurp!~~create ~~concepts~~restaurant ~~due to poor~~ operating ~~performance.~~margins ~~The~~not ~~Company~~normally ~~plans~~found toin ~~close these restaurants during~~ the ~~first~~buffet/family ~~half~~dining ~~of fiscal 2002~~segment. The ~~Company~~key ~~still plans to keep~~ elements of the ~~products~~Company’s ~~developed~~strategy ~~for~~are ~~Slurp!~~as ~~for~~follows: ~~us in its core concept.~~

4Commitment to High Quality Fresh Food. The Company seeks to provide fresh wholesome food beginning with salads, which are featured on two approximately 55 foot-long bars that include a wide range of salad offerings featuring three freshly tossed salads as well as a large assortment of fresh cut produce, dressings, toppings and several signature prepared salads. Various other offerings include made from scratch soups, a hot pasta bar, a bakery which serves a variety of hot muffins, focaccias, other breads, warm desserts, and a traditional dessert bar centered around a frozen yogurt station with toppings complemented by fresh fruits and puddings.

Commitment to Guest Service. The Company’s ~~ability~~seeks to ~~achieve~~ provide its ~~expansion~~guests ~~plans~~with ~~will depend on~~ a ~~variety~~level of ~~factors,~~service ~~many~~that ofexceeds ~~which may be beyond~~ the ~~Company’s~~standards ~~control,~~set ~~including~~by ~~the~~other ~~Company’s ability to locate suitable restaurant sites, negotiate acceptable lease or purchase terms, obtain~~buffet ~~required~~concepts ~~governmental approvals, construct new restaurants in a timely manner, attract, train~~ and ~~retain~~encourages ~~qualified and experienced personnel and management, operate~~ its ~~restaurants~~guests ~~profitably~~to ~~and~~enjoy ~~obtain additional capital, as well as general economic conditions and~~ the ~~degree~~benefits of ~~competition~~selecting infrom ~~the~~an ~~particular~~abundance ~~region~~ of ~~expansion.~~choices ~~The~~offered ~~Company~~at ~~has~~the ~~experienced,~~various ~~and~~food ~~expects~~bars towithin ~~continue~~the ~~to experience, delays in~~ restaurant. ~~openings~~In ~~from~~addition ~~time~~ to ~~time.~~high ~~Since~~service ~~its~~standards, ~~inception~~ the Company has ~~closed three~~implemented ~~non-performing~~several ~~salad~~programs ~~buffet~~to ~~restaurants,~~both measure ~~one small quick service restaurant,~~ and ~~one~~maximize ~~Ladles~~guest ~~restaurant~~satisfaction. AsIncluded ~~mentioned~~in ~~earlier,~~these ~~the~~is ~~Company~~a ~~plans~~“zero todefect” ~~close~~program ~~the~~that ~~remaining~~focuses ~~Ladles~~on ~~restaurant and~~ the ~~Slurp!~~most ~~restaurant~~popular ~~during~~offerings ~~the~~to ~~first~~ensure ~~half~~that ofeach ~~fiscal 2002.~~portion ~~Given~~is ~~the~~prepared ~~number~~exactly ofas ~~restaurants~~specified inby ~~current~~the ~~operation~~recipes. ~~and~~The ~~the~~ Company’s ~~projected~~high ~~expansion~~service standards ~~rate there~~ can only be nomaintained ~~assurances~~through ~~that~~intensive ~~the~~recruiting ~~Company~~and ~~will~~training ~~not~~programs ~~close~~designed ~~restaurants~~to inemploy ~~the~~crew ~~future.~~members ~~Any~~and ~~closure~~management ~~could~~that ~~result~~can insustain a ~~significant write off of assets~~friendly, ~~which~~enjoyable ~~could~~environment ~~adversely~~thereby ~~affect~~maximizing the ~~Company~~guest’s ~~business,~~meal ~~financial condition and results of operations~~experience.

~~The~~Excellent ~~Company~~Price/Value ~~incurs~~Relationship. ~~substantial~~The ~~costs in opening a new restaurant and, in the~~ Company’s ~~experience,~~believes ~~new~~that ~~restaurants experience fluctuating operational levels for some time~~the ~~after~~pricing ~~opening.~~and ~~Owned~~varied ~~restaurants~~product ~~generally~~mix ~~require~~at ~~significantly~~each ~~more~~restaurant ~~up-front~~are ~~capital~~maintained ~~than~~at ~~leased~~such ~~restaurants, as~~ a ~~result~~level ofthat ~~which an increase in~~ the ~~percentage~~resulting ofmeal ~~owned~~experience ~~restaurant openings as compared to historical practice would increase the overall capital required to meet the Company’s growth plans. There~~ can beonly ~~no assurance that the Company will successfully expand or that the Company’s existing or new restaurants will~~ be ~~profitable.~~duplicated ~~The Company has encountered intense competition for restaurant sites, and~~ in ~~many~~other ~~cases~~existing ~~has~~casual ~~had~~chains ~~difficulty~~at ~~buying~~price orpoints ~~leasing desirable sites on terms~~ that ~~are~~average ~~acceptable~~two to ~~the~~three ~~Company.~~dollars Inhigher ~~many~~than ~~cases,~~at the Souplantation ~~Company’s competitors are willing~~ and ~~able~~Sweet toTomatoes ~~pay more than the Company for sites~~restaurants. ~~The Company expects these difficulties in obtaining desirable sites to continue for the foreseeable future.~~

Cost Management. The ability of the Company ~~currently~~to ~~has~~maintain nohigh ~~plans~~quality products is combined with the Company’s ability to ~~offer~~manage ~~franchises~~costs rigorously. This is achievable only through the use of the Company’s fully integrated, computer management information system (See “Restaurant Operations—Information Management System”). The system allows a restaurant manager to review his/her entire cost structure in increments of cents per guest or minutes per employee if need be. At the same time, management can review virtually any data in any store as quickly as the store itself. This allows for rapid problem detection and resolution thereby minimizing potential cost problems. The Company believes that the system’s sophistication combined with the ability of management to effectively use it are valuable strengths.

Unit Economics

~~For~~The following ~~the~~table ~~twelve~~contains ~~month~~selected ~~period~~restaurant ~~ended September~~operating ~~30,~~statistics ~~2001,~~for the 8395 ~~salad buffet~~ restaurants that were open for the entire ~~period~~12 had an average of approximately 271,000 guest visits during the period, generated average net sales of approximately $2,237,000, average restaurant operating income (net sales less (i) cost of sales, (ii) restaurant operating expenses and (iii) depreciation and amortization) of approximately $290,000 or 13.0% of net sales, and average cash flow (operating income plus depreciation and amortization) of approximately $425,000 or 19.0% of net sales. The Company’s average cash investment for the nine new salad buffet restaurants opened, and one existing salad buffet restaurant re-opened, one Slurp! restaurant opened, and one central kitchen facility opened during the twelve month period ended September 30, ~~2001 excluding land purchases and pre–opening costs, was approximately $2,185,000 Pre–opening costs averaged approximately $177,000 for opening of these restaurants and one kitchen facility~~2003. The investment of capital to open a new restaurant typically includes the purchase or installation of furniture, fixtures, equipment and leasehold improvements, and in the case of an owned site, the purchase of land and a building. The Company currently leases the sites for most of its restaurants, mixed between in–line locations and stand–alone sites, although the Company purchases sites when necessary to acquire desirable locations.

Concept and Menu

Average Unit Guest Counts		285,000
Average Unit Sales	$	2,293,000
Average Unit Operating Income	$	268,000
Percentage of Net Sales		11.7	%

~~The~~4 Company’s menu is designed to focus on freshly made, great tasting food. The focal point of the menu is the salad bar, but not to the point of neglecting other interesting and exciting food offerings at the hot pasta, soup, bakery, frozen yogurt and dessert bars. The Company seeks to provide guests with an excellent value by offering unlimited access to its entire menu of high quality fresh items at a fixed price. Depending on the region and time of day, the price ranges from $6.49 to $7.99 at lunch and from $7.59 to $9.29 at dinner. Discounts are provided to children under 12 and senior citizens, along with various other discount programs.

5Table of Contents

The following istable aillustrates ~~description of~~ the ~~Company’s~~approximate ~~menu~~average ~~items~~capital ininvestment ~~the~~for ~~order~~a ~~they~~salad ~~would~~buffet ~~appear~~restaurant based toon athe ~~guest~~95 ~~walking~~stores ~~along~~that ~~the~~were ~~various~~open ~~food~~for ~~bars~~the inentire aperiod ~~typical~~ended ~~restaurant:~~September 30, 2003.

Tossed Salads. Upon entering the restaurant, guests are greeted at the door and begin to walk along either of the salad bars. The initial featured selections along the salad bars are two to three specialty salads that are tossed fresh approximately every 20 minutes. The selections are changed weekly for variety. The following is a partial listing of the Company’s specialty salad recipes:

Land*	$	1,268,000
Building*	$	1,021,000
Furniture & Equipment	$	883,000

Total	$	3,172,000

~~Antipasto~~* ~~Salad~~For ~~Barbecue~~restaurants ~~Chicken~~that ~~Chopped~~are ~~Salad~~leased ~~Bartlett~~the ~~Pear~~capital ~~Caesar~~was ~~Salad~~derived ~~California~~by ~~Cobb~~using ~~Salad~~a ~~Chicken~~capitalization ~~Tortilla~~rate ~~Country~~of ~~French~~10% ~~Salad~~for ~~with~~land ~~Bacon~~leases ~~Ensalada~~and ~~Azteca~~12% ~~Greek~~for ~~Salad~~buildings. ~~Italian~~The ~~Sub~~previously ~~Monterey~~owned ~~Bleu~~property ~~Cheese~~that ~~with~~was ~~Peanuts~~converted ~~Pesto~~to ~~Orzo~~a ~~with~~sale-lease ~~Pine~~back ~~nuts~~during ~~Roasted~~fiscal ~~Vegetable~~2003 ~~Salad~~is ~~with~~included ~~Feta~~as &if ~~Olives~~the ~~Roma~~property ~~Tomato,~~was ~~Mozzarella~~leased &for ~~Basil~~the ~~Salad~~entire ~~Shrimp~~fiscal ~~& Krab Louie Salad Spinach Salad with Mandarin Oranges and Caramelized Walnuts Summer Lemon with Spiced Pecans Watercress Orange Won Ton Chicken Salad~~year.

~~Following~~The ~~the specialty~~Company’s ~~tossed~~restaurants ~~salads~~experience onseasonal ~~the salad bar~~influences, ~~guests~~as ~~can make their own salads by choosing from~~ a ~~broad~~disproportionate ~~assortment~~amount of ~~fresh~~the ~~cut~~Company’s ~~salad~~net ~~ingredients.~~income ~~The~~is ~~salad~~generally ~~bar~~realized ~~offers~~during the ~~three types of lettuce (romaine~~second, ~~iceberg~~third and ~~one~~fourth ~~other~~fiscal ~~rotational~~quarters ~~lettuce),~~due ~~an assortment~~to ofhigher ~~eleven~~average ~~seasonal~~sales ~~fresh~~and ~~cut~~lower ~~vegetables~~average ~~(such~~costs. asQuarterly ~~grated~~results ~~carrots,~~have ~~sliced~~fluctuated ~~mushrooms,~~and ~~chopped~~are ~~bell~~expected ~~peppers~~to ~~and~~continue ~~diced~~to ~~jicama),~~fluctuate ~~ten~~as ~~toppings~~a ~~(such~~result asof ~~sunflower~~a ~~seeds,~~number ~~fresh~~of ~~bacon bits~~factors, ~~grated~~including ~~cheddar~~the ~~cheese~~timing ~~and~~of ~~crumbled~~new ~~eggs)~~restaurant openings, ~~various condiments~~ and ~~ten~~are ~~dressings.~~not ~~Employees~~necessarily ~~located~~indicative ~~between~~of the ~~two~~results ~~salad~~that ~~bars~~may ~~replenish~~be ~~the~~achieved ~~salad~~for ~~offerings~~a ~~frequently~~full ~~and~~fiscal ~~assist guests~~year.

~~Next,~~Restaurant ~~the~~Operations ~~salad bar features prepared signature salads. The following is a partial list of the Company’s signature salad recipes:~~

~~Artichoke~~Restaurant ~~Rice~~Level ~~Salad~~Operation. Aunt Doris’ Red Pepper Slaw Baja Bean with Cilantro Salad with Chipotle Vinaigrette BBQ Potato Salad Carrot Raisin Salad Chinese Krab Salad Cucumber Tomato Salad with Chile Lime Dijon Potato Salad with Garlic Dill Vinaigrette Gemelli Pasta Salad with Chicken German Potato Salad Greek Couscous with Feta Cheese Italian White Bean Salad Jalapeño Potato Salad Joan’s Broccoli Madness Lemon Orzo Salad with Feta & Mint Mandarin Noodles with Broccoli and Sesame Seeds Mandarin Shells with Almonds and Snow Peas Marinated Summer Vegetable Salad Moroccan Marinated Vegetables Old Fashioned Macaroni Salad Oriental Ginger Slaw with Krab Pesto Pasta Picnic Potato Salad Pineapple Coconut Slaw Poppyseed Coleslaw Roasted Potato Salad with Chipotle Vinaigrette Shrimp & Seafood Shells Southern Dill Potato Salad Spicy Southwestern Pasta Summer Barley with Black Bean Salad Thai Noodles with Peanut Sauce Three Bean Marinade Salad Tortellini Salad Tortellini Salad with Basil Tuna Tarragon Salad Turkey Chutney Pasta Salad Tumbleweed Tortellini Salad Wild Rice & Chicken Zesty Tortellini

~~Beverages~~A. At Food Preparation and Quality Control. The Company uses only fresh produce and high quality groceries in its menu offerings. Staff at both the ~~end~~restaurant ofkitchens and the ~~salad~~central ~~bar,~~kitchens prepare food items from scratch daily (see Food Management System—Central Kitchens). Menu offerings are closely monitored on the ~~Company~~food ~~offers~~bars anand ~~assortment~~frequently ofreplenished ~~beverages,~~to ~~including~~assure ~~fresh~~constant ~~juices,~~food ~~milk,~~freshness. ~~soft~~Items ~~drinks~~that are highly sensitive to freshness, ~~sparkling~~such ~~waters~~as tossed salads, ~~lemonades~~ muffins, focaccias, and prepared pastas are made on-site in ~~certain~~small ~~locations,~~batches ~~beer~~throughout the day in order to maintain a high level of freshness and ~~wine~~great taste. ~~Refills~~The Company has developed a wide assortment of ~~soft~~recipes ~~drinks,~~that ~~coffee~~are used in each restaurant and ~~tea~~central ~~are~~kitchen ~~provided~~in atan noeffort ~~extra~~to ~~cost~~achieve consistently high quality. The Company’s food development effort focuses on the creation of new recipes within existing food product categories as well as review of and improvement to existing recipes.

6The Company devotes substantial attention and resources to maintaining cleanliness and fresh presentation of the salad and other food bars in order to enhance the visual appeal of the menu offerings. Each restaurant receives independent evaluations of product quality, cleanliness and service from secret shoppers approximately twice a month. The results of these independent evaluations are taken into consideration in determining each restaurant manager’s monthly bonus.

~~Soup Bar~~B. ~~The~~ ~~soup~~Customer ~~bar~~Service. ~~contains~~One ~~a selection~~ of ~~five~~the toCompany’s ~~six~~fundamental ~~soups~~strategies ~~made~~is ~~fresh~~to ~~daily,~~develop ~~featuring~~a ~~three~~strong ~~regular~~foundation ~~offerings~~ of ~~chicken noodle soup~~loyal, ~~clam~~high ~~chowder~~frequency ~~and~~guests, ~~chili.~~in ~~The~~part ~~Company~~by ~~seeks~~providing toa ~~offer~~level ~~only~~of ~~the~~customer ~~highest~~service ~~quality~~not ~~soups.~~typically ~~In making~~associated ~~one~~with ofa ~~its~~buffet ~~most~~style ~~popular~~restaurant. ~~dishes~~Accordingly, ~~chicken noodle soup,~~ the Company ~~cooks~~seeks ~~its~~to ~~own~~attract ~~chicken~~and ~~broilers~~retain friendly, ~~selecting~~guest-oriented ~~only~~employees. ~~the~~Employees ~~white~~are ~~meat~~present ~~for~~at ~~use in~~ the ~~soup~~food bars and ~~using~~in ~~some of~~ the ~~remaining~~dining ~~portion~~room to ~~create~~replenish afood ~~natural~~offerings, ~~broth.~~answer ~~The~~questions, ~~Company~~and ~~offers additional~~assist ~~soups~~guests ~~that~~in ~~are~~serving ~~selected from the Company’s soup recipes, including the following:~~ themselves.

~~Albondigas~~C. ~~Buenas~~Guest ~~Soup~~Feedback. ~~Butternut~~The ~~Squash~~Company ~~Soup~~actively ~~Chesapeake~~solicits ~~Corn~~guest ~~Chowder~~input ~~Chunky~~through ~~Potato~~the ~~Cheese~~use ~~Soup Country Corn & Red Potato Chowder Cream~~ of ~~Asparagus~~comment ~~Soup~~cards, ~~Cream~~the ofinternet, ~~Broccoli~~and ~~Soup~~other ~~Cream~~survey ofinstruments. ~~Mushroom~~The ~~Soup~~Company ~~French~~and ~~Onion~~management ~~Soup~~attempt ~~Green~~to ~~Chile~~respond ~~Stew~~in ~~Irish~~writing ~~Potato~~or ~~Leek~~verbally ~~Soup~~to ~~Minestrone~~all ~~Soup~~guest ~~Navy~~suggestions ~~Bean~~and ~~Soup~~complaints. ~~New~~Restaurant ~~England~~managers ~~Clam~~evaluate ~~Chowder~~their ~~with~~respective ~~Bacon~~restaurants ~~Old~~approximately ~~Fashioned~~four ~~Vegetable~~times ~~Soup~~per ~~Posole~~day ~~Santa~~for Fecompliance ~~Black Bean Chile Shrimp Bisque Southwest Tomato Cream Soup Spicy 4–Bean Minestrone Split Pea Soup~~ with ~~Ham~~Company ~~Sweet~~standards. ~~Tomato~~In ~~Onion~~addition, ~~Soup~~the ~~Texas~~Company ~~Red~~conducts ~~Chili~~in-house ~~Tomato~~market ~~Parmesan~~research &through ~~Vegetable~~exit ~~Tortilla~~interviews ~~Soup~~and ~~Turkey~~guest ~~Cassoulet~~focus ~~Turkey~~groups ~~Noodle~~in ~~Soup~~order ~~Turkey~~to ~~Vegetable~~be ~~Soup~~responsive ~~Tuscany~~to ~~Chicken~~changes ~~Stew~~in ~~Vegetable~~guest ~~Beef~~tastes ~~Stew~~and ~~Vegetable Medley Soup Vegetarian Harvest Soup~~expectations.

~~Pasta Bar. At~~5 the pasta bar, guests can select from three hot pasta dishes that are made fresh every 20–30 minutes. Pasta is prepared exhibition style to order at the pasta station and served in individual servings to ensure that both the pasta and the sauce remain hot. The Company’s pasta sauce recipes include the following:

BruschettaTable Carbonaraof Chipotle Chicken with Cilantro Creamy Bruschetta Creamy Herb Chicken Creamy Pepper Jack Fettuccine Alfredo Garden Vegetable with Italian Sausage Garden Vegetable with Meatballs Italian Sausage with Red Pepper Puree Italian Vegetable Beef Jalapeño Salsa Macaroni & Cheese Nutty Mushroom Pasta Florentine Smoked Salmon & Dill Vegetarian Marinara with Basil Vegetable Ragu Walnut PestoContents

7D. Restaurant Management. The management staff of a typical Souplantation/Sweet Tomatoes restaurant consists of one general manager, one production manager, one service manager and several other key employees. The Company recruits most of its management team (production manager & service manager) from outside the Company, the majority of whom have prior restaurant management experience. Most of the Company’s general managers, however, have been promoted from internal management positions. The general manager of each restaurant is principally responsible for the day-to-day operation and profitability of the restaurant. Before assuming management responsibility, each restaurant management employee completes the Company’s basic management skills program in a training restaurant. The Company also certifies restaurant management employees for participation in ongoing management training programs that focus on leadership, team building, technical skills, harassment prevention and awareness, performance reviews, interviewing and other management skills. The Company grants monthly bonuses to restaurant managers based on restaurant financial performance and quality, service and cleanliness scores. Restaurant general managers are responsible for managing their respective restaurants and reporting to the director of operations. Directors of operations are responsible for six to ten restaurants.

~~Baked~~Information Management ~~Goods~~System (IMS). ~~Each~~ ~~day,~~The ~~the~~Company ~~bakery~~is ~~bar~~committed ~~offers~~to ~~three~~controlling ~~different~~costs ~~muffins,~~without ~~two~~sacrificing ~~varieties~~either offood ~~fresh~~quality ~~dough~~or ~~pizza~~guest ~~focaccias and a variety of freshly baked breads~~service. InTo ~~addition~~accomplish this, the Company ~~offers~~has ~~baked~~developed ~~potatoes~~an ~~and~~integrated ~~assorted~~management ~~toppings.~~information ~~All muffins and other baked goods are baked on site and replenished frequently to ensure warmth and freshness~~system. The ~~Company’s~~specific ~~recipes~~components ~~include~~of the ~~following~~IMS are:

~~Apple~~A. ~~Cinnamon~~The ~~Bran~~Restaurant ~~Muffin~~Computer ~~Apple~~Information ~~Raisin~~System. ~~Muffin~~The ~~Apricot~~core ~~Nut~~component ~~Muffin~~of ~~Banana~~the ~~Nut~~Company’s ~~Muffin~~cost ~~Buttermilk~~management ~~Corn~~information ~~Bread~~system ~~Caribbean~~is ~~Key~~the ~~Lime~~proprietary ~~Carrot~~computerized ~~Pineapple~~management ~~Muffin~~information ~~with~~system ~~Oat~~in ~~Bran~~each ~~Cherry~~restaurant. ~~Nut~~The ~~Muffin~~Company ~~Chile~~believes ~~Corn~~that, ~~Muffin~~as ~~Chocolate~~compared ~~Brownie~~to ~~Muffin~~off-the-shelf ~~Chocolate~~software ~~Chip~~applications, ~~Mandarin~~this ~~Muffin~~system ~~Chocolate~~provides ~~Chip~~significantly ~~Muffin~~greater ~~Country~~access ~~Blackberry~~to ~~Cranberry~~restaurant ~~Orange~~operating ~~Bran~~data ~~Muffin~~and ~~Fruit~~a ~~Medley~~much ~~Bran~~shorter ~~Muffin~~management ~~Garlic~~reaction ~~Parmesan~~time. ~~Focaccia~~The ~~Muffin~~system ~~Georgia~~is ~~Peach~~used ~~Poppyseed~~as ~~Muffin~~a ~~Indian~~critical ~~Grain~~planning ~~Bread~~tool ~~Lemon~~by ~~Muffin~~restaurant ~~Mandarin~~managers ~~Almond~~in ~~with~~four ~~Oat~~primary ~~Bran~~areas: ~~Maple~~production, ~~Walnut~~labor, ~~Nutty~~food ~~Peanut~~cost ~~Butter~~and ~~Muffin~~financial ~~Pauline~~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 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 ~~Apple~~staffing ~~Cake~~needs ~~Peanut~~based ~~Butter~~on ~~Chocolate~~changing ~~Chip~~trends ~~Muffin~~and ~~Pizza~~guest ~~Focaccia~~volume ~~Pumpkin~~forecasts. ~~Raisin~~Corporate ~~Muffin~~management, ~~Roasted~~through ~~Potato~~daily ~~Focaccia~~information ~~Sourdough~~updates, ~~Bread~~has ~~Strawberry~~complete ~~Buttermilk~~access ~~Muffin~~to ~~Sweet~~restaurant ~~Orange~~data &and ~~Cranberry~~can ~~Taffy~~react ~~Apple~~quickly ~~Tomatillo~~to ~~Focaccia~~changing ~~Wild~~trends. ~~Maine~~The ~~Blueberry~~Company ~~Muffin~~can ~~Zucchini~~quickly ~~Nut~~analyze ~~Muffin~~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.

~~Desserts~~B. ~~Each~~ ~~restaurant~~The ~~offers~~Corporate ~~several~~Accounting ~~varieties~~and ofInformation ~~fresh~~System. ~~fruit~~In ~~and~~May ~~other~~2002, ~~dessert~~the ~~items.~~Company ~~The~~completed ~~most~~its ~~popular~~conversion ~~dessert~~to ~~offering~~new isaccounting ~~frozen~~software ~~yogurt.~~which Atreplaced not only the ~~yogurt~~ ~~bar~~previous software, ~~guests~~but ~~have~~also incorporates the ~~choice~~Company’s ofdistribution ~~two~~and ~~varieties~~purchasing offunctions ~~frozen~~into ~~yogurt~~an ~~and~~integrated ~~assorted~~system. ~~toppings~~The ~~(such~~corporate assystem ~~cookie~~directly ~~crumbs,~~interfaces ~~granola,~~with ~~sprinkles~~the restaurant system, ~~peanuts~~which ~~and~~creates ~~chocolate~~a ~~sauce)~~seamless flow of information throughout the Company.

~~Restaurant~~Food ~~Operations~~Management System (FMS). The Company utilizes a system for managing all aspects of food production which encompasses purchasing, preparation, and distribution in order to emphasize food quality and costs as well as to focus on safety and sanitation. This system removes responsibility for the food distribution process away from restaurant operations management so that restaurant managers can provide more attention to total guest experience within the restaurant. The following components comprise the Food Management System (FMS):

~~Cost~~A. ~~Management~~Food ~~Focus~~Purchasing. ~~The~~ ~~Company~~Most isfood ~~committed~~items toare ~~cost~~contracted ~~management~~on ~~without~~a ~~degrading~~centralized ~~either~~basis ~~quality~~in ofan ~~food~~effort orto ~~service.~~achieve Touniform ~~accomplish this~~quality, ~~the Company~~adequate ~~has~~supplies ~~developed~~and acompetitive ~~proprietary~~prices. ~~management~~The ~~information~~Company’s ~~system~~food ~~which,~~purchasing ~~in conjunction with several other cost related~~ programs, ~~allows~~are ~~the~~designed ~~Company~~ to ~~provide~~assist ~~a cost structure that~~ the Company ~~believes~~in isminimizing ~~superior~~food tocosts ~~any~~through ~~casual~~vendor ordiscounts ~~buffet~~based ~~style restaurant.~~upon volume

~~Computer~~6 Information System. The core component of the Company’s cost management program is the Company’s computer information system. The Company has developed a proprietary computer accounting and management information system that is fully integrated throughout the Company, including in each restaurant. The Company believes that, as compared to off–the–shelf software applications, this system provides significantly greater access to restaurant operating data and a much shorter management reaction time. The system is used as a 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 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. Weekly computer–generated profit and loss statements and monthly accounting department–generated profit and loss statements are reviewed at the corporate, regional and restaurant management levels.

BecauseTable of the Company’s growth and additional needs in the areas of distribution, construction and regional management reporting, the component of the system that provides the Company’s formal accounting reports is in the process of being replaced with a commercial software package. The Company has selected a Contents

8purchases. In order to minimize price fluctuations, to the extent practical, 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. Produce is delivered to the individual restaurants and central kitchen restaurants approximately three to five times a week from either regional distribution or through the Company’s internal distribution centers. At each restaurant, the production manager is responsible for ensuring that all deliveries meet the Company’s guidelines regarding freshness and quality.

~~package~~B. Distribution Centers. The Company’s food and ~~implementation~~supplies ~~began~~costs ~~during~~rely heavily upon the results of operation and efficiency of the Company’s ~~fiscal~~delivery and distribution centers, which began operations on April 1, 2000 on the West Coast and on November 1, 2001 ~~second~~on ~~quarter~~the East Coast. The ~~Company~~decision ~~expects~~by the Company to ~~complete~~operate ~~the~~an internal distribution system ~~conversion~~was ~~and~~initially ~~begin~~based ~~live~~on ~~transaction~~the ~~processing~~expiration ~~during~~of the ~~second~~ ~~quarter~~previous West Coast distribution vendor’s contract on March 31, 2000, coupled with the potential control and long-term cost savings over other distribution alternatives in this area of ~~fiscal~~the ~~2002~~business.

~~Food Purchasing. Most~~Potential ~~food~~increases ~~items are contracted on a centralized basis~~ in ancosts ~~effort~~for toutilities ~~achieve uniform quality, adequate supplies~~ and ~~competitive~~fuel ~~prices.~~along ~~The~~with ~~Company’s~~increased hourly ~~food~~wage ~~purchasing~~rates ~~programs~~and ~~are~~increased ~~designed~~insurance ~~to assist the Company in minimizing food~~ costs ~~through~~for ~~vendor~~property ~~discounts~~and ~~based~~employees ~~upon~~could ~~volume~~adversely ~~purchases.~~affect ~~In order to minimize price fluctuations, to~~ the ~~extent~~distribution ~~practical, 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. The Company~~center’s ~~regional~~ability ~~distributors deliver produce and groceries~~ to ~~the~~provide ~~individual~~or ~~restaurants~~deliver ~~and~~food ~~central~~or ~~kitchen~~supplies ~~restaurants~~at ~~approximately~~favorable ~~three~~costs toin ~~five times a week. At each restaurant,~~ the ~~production assistant manager is responsible for ensuring that all deliveries meet the Company’s guidelines regarding freshness and quality~~future.

~~Food~~C. ~~Management~~Central ~~System~~Kitchens. In ~~fiscal~~nineteen ~~2001~~geographic ~~the~~areas ~~entire~~servicing ~~food~~all ~~distribution~~of ~~plan~~the ~~was~~Company’s ~~combined~~restaurant bylocations, the Company ~~in order~~uses central kitchens to ~~place~~prepare ~~increased~~certain ~~emphasis~~menu offerings on a more efficient scale. Primarily located in existing restaurants, the kitchens use food ~~quality~~preparation ~~and~~processes ~~costs~~identical asto ~~well~~those asused ~~provide~~in athe ~~higher~~restaurants. ~~focus~~Each oncentral ~~safety~~kitchen generally services between two and ~~sanitation~~twenty-three restaurants. ~~Additionally~~Items prepared in the central kitchen are delivered daily to the Company’s local restaurants. On average, the food costs within the central kitchens account for approximately 50% of the Company’s total food cost. The Company believes that bythe ~~removing~~use of central kitchens assists the ~~food~~Company ~~distribution~~in ~~process~~the ~~from~~production ~~operations~~of ~~management~~consistently ~~that~~high itquality, ~~can~~great ~~provide a~~tasting ~~higher~~food, ~~degree~~and the enhancement of ~~attention~~the tofreshness ~~total~~of ~~guest~~certain ~~experience~~menu ~~within~~offerings while at the same time allows the restaurant. managers to devote more time and attention to guests without significant additional operating costs.

~~Central~~There ~~Kitchens. In~~can ~~twenty-one~~be ~~geographic~~no ~~areas~~assurance ~~covering~~that ~~90% of~~ the Company~~’s business~~, ~~the~~through ~~Company~~its ~~uses~~restaurant ~~central~~operating ~~kitchens~~strategies, tomanagement ~~prepare~~information ~~certain menu~~system ~~offerings~~or onfood amanagement ~~more efficient scale. Primarily located in existing restaurants~~system, ~~the~~will ~~kitchens~~experience ~~use~~higher ~~food~~net preparation processes identical to those used in the restaurants. Each central kitchen generally services between two and ten restaurants. Items prepared in the central kitchen are delivered daily to the Company’s local restaurants. On averagesales, ~~the central kitchens combined account for approximately 50% of the Company’s total food~~ cost. ~~The~~reduction ~~Company believes that~~savings, ~~where~~or increases ~~economically~~in ~~feasible,~~net ~~the~~income ~~use of central kitchens assists the Company~~ in ~~providing consistently high quality, great tasting food, enhances~~ the ~~freshness of certain menu offerings and allows the restaurant managers to devote more time and attention to guests without significant additional operating costs~~future.

~~Distribution~~Marketing ~~Center. The Company’s food~~ and ~~supplies~~Promotion costs are heavily dependent upon the results of operation and efficiency of the Company’s delivery and distribution centers, which began operations on April 1, 2000 on the West Coast and on November 1, 2001 on the East Coast. The decision by the officers and Board of Directors to operate an internal distribution system was initially based on the expiration of the previous West Coast distribution vendor’s contract on March 31, 2000, coupled with the potential control and long–term cost savings over other distribution alternatives in this area of the business. Increasing costs for utilities and fuel along with increasing hourly wage rates could adversely affect the distribution center’s ability to deliver groceries at favorable costs in the future.

~~Food Preparation and Quality Control.~~ The Company’s ismarketing ~~committed~~efforts toseek using fresh produce and high quality groceries in its menu offerings. The kitchen and central kitchen staff prepare food items from scratch daily. Menu offerings are closely monitored on the food bars and frequently replenished to ~~assure~~develop ~~constant~~loyal ~~food freshness.~~guests ~~Items~~for ~~that are highly sensitive to freshness~~repeat business, ~~such~~attract asnew ~~tossed~~guests ~~salads, muffins, pizza focaccias,~~ and ~~prepared~~create ~~pastas~~awareness ~~are made on–site in small batches throughout the day in order to maintain a high level~~ of ~~freshness~~existing and ~~great~~new ~~taste~~restaurants. The Company ~~has~~believes ~~developed~~that a ~~wide~~strong ~~assortment~~execution of ~~recipes that are used in each restaurant and central kitchen in an effort to achieve consistently high quality. The Company’s food development effort focuses on~~ the ~~creation of new recipes within existing food product categories. The~~ Company’s ~~computer~~concept ~~system~~at ~~assists~~ the restaurant ~~managers~~level inis ~~monitoring quality control without raising costs by providing a detailed analysis of~~ the ~~raw~~platform ~~materials~~for ~~used~~external inmedia ~~the~~and ~~creation~~promotional ~~of each finished product~~efforts.

~~Customer~~A ~~Service. One~~significant portion of the Company’s ~~fundamental~~external ~~strategies~~marketing effort isconsists ~~to develop a strong core~~ of ~~loyal,~~attracting ~~high~~new ~~frequency~~ guests, inthrough ~~part~~the byuse ~~providing a level~~ of ~~customer~~freestanding ~~service~~inserts ~~not~~(“FSIs”). ~~typically~~FSIs ~~associated~~contain ~~with~~descriptive ainformation ~~buffet~~regarding ~~style~~the ~~restaurant.~~restaurants, ~~The~~as ~~Company~~well ~~seeks~~as toin ~~attract~~most ~~and retain friendly~~cases, ~~customer–oriented~~discount ~~employees~~coupons. ~~Employees~~FSIs are ~~present~~distributed atby ~~the~~direct ~~food~~mail ~~bars~~ and through innewspapers. ~~the~~In ~~dining~~addition, ~~room~~the toCompany ~~replenish~~has ~~food~~a ~~offerings,~~“Business-to-Business” ~~answer~~program ~~questions~~under ~~and~~which ~~assist~~it ~~guests~~mails indiscount ~~serving~~cards ~~themselves.~~to ~~The~~local ~~Company~~businesses ~~devotes~~for ~~substantial~~distribution ~~attention and resources~~ to ~~maintaining~~their ~~cleanliness~~employees. ~~and~~The ~~fresh~~discount ~~presentation~~cards ofentitle the ~~salad~~employees ~~and~~to ~~other~~a ~~food~~certain ~~bars~~price discount inon ~~order~~each torepeat ~~enhance~~visit ~~the~~during ~~visual~~a ~~appeal~~specified ~~of the menu offerings~~period.

9During fiscal 2003 the Company increased its use of radio advertising to stimulate demand to the majority of its markets during different periods throughout the year.

~~The~~In ~~Company~~addition, ~~actively solicits guest input through~~ the ~~use~~restaurants ofoften ~~comment~~co-sponsor ~~cards~~fundraising ~~and~~events ~~other survey instruments. The Company and management attempt to respond~~ in ~~writing~~the orrestaurants ~~verbally~~for tolocal ~~all~~charitable ~~guest suggestions~~ and ~~complaints.~~other ~~Restaurant managers evaluate their respective restaurants~~community ~~approximately~~organizations. ~~four~~For ~~times~~each ~~per~~new ~~day for compliance with Company standards. In addition~~restaurant, the Company conducts ~~in–house~~a ~~market~~pre-opening ~~research~~awareness ~~through~~program ~~exit~~beginning ~~interviews~~approximately ~~and~~two ~~guest focus groups on an ongoing basis in order~~ to bethree ~~responsive~~weeks toprior ~~changes in guest tastes and expectations. Each restaurant receives independent evaluations of product quality~~to, ~~cleanliness~~ and ~~service~~ending ~~from~~four ~~secret~~to ~~shoppers~~six ~~approximately~~weeks ~~twice a month~~after, ~~as well as a technical evaluation by a director of operations or a training store general manager once a month to ensure strict adherence to~~ the ~~Company’s~~opening ~~standards for food quality, service and cleanliness. The results~~ of ~~these independent evaluations are taken into consideration in determining each restaurant~~ ~~manager’s monthly bonus.~~

~~Restaurant Management. The~~7 Company seeks to attract and retain friendly, guest–oriented employees for its restaurant management positions. Upon joining the Company and before assuming management responsibility, each restaurant management employee completes the Company’s basic management skills program in a training restaurant. The Company also certifies restaurant management employees for participation in ongoing management training programs that focus on leadership, team building, technical skills, harassment, prevention and awareness, performance reviews, interviewing and other management skills.

GeneralTable managers are responsible for managing their respective restaurants and reporting to the director of operations. Most directors of operations are responsible for five to eight restaurants. The management staff of a typical Souplantation/Sweet Tomatoes restaurant consists of one general manager, one production manager, one service manager and several other key employees. The Company recruits most of its management team (production manager & service manager) from outside the Company, the majority of whom have prior restaurant management experience. Most of the Company’s general managers, however, have been promoted from internal management positions. The general manager of each restaurant is principally responsible for the day–to–day operation and profitability of the restaurant. The Company grants monthly bonuses to restaurant managers based on restaurant financial performance and quality, service and cleanliness scores. As an additional incentive, general managers are eligible for stock options. Contents

~~Marketing~~ the restaurant. The program typically includes special promotions, site signs and ~~Promotion~~sponsorship of a fundraising event for a local charity to establish ties to local community leaders and increase awareness of the new restaurant, and pre-opening trial operations, to which the family and friends of new employees are invited.

~~The~~In ~~Company’s marketing~~fiscal ~~efforts seek to develop loyal guests for repeat business~~2003, ~~attract~~marketing ~~new guests~~ and ~~create~~promotion ~~awareness~~expenses of ~~existing~~$6,662,000 ~~and~~constituted ~~new~~approximately ~~restaurants~~3.0% ~~Because the Company believes strong execution is the most effective form~~ of ~~marketing,~~net ~~it continues to execute a “zero–defect” program in its restaurants on certain popular food offerings in an effort to provide consistently high quality products~~sales. ~~The “zero–defect” program establishes highly detailed procedures describing the precise methods under which these certain popular food offerings are prepared, presented and replenished.~~

AThere ~~significant~~can ~~portion~~be ofno ~~the~~assurance ~~Company’s~~that ~~external~~the marketing ~~effort~~and ~~consists~~promotion ~~of attracting new guests through the use of freestanding inserts (“FSIs”). FSIs contain~~strategies ~~descriptive~~discussed ~~information~~herein ~~regarding~~will ~~the~~result ~~restaurants,~~in ashigher ~~well~~net assales in ~~some cases, discount coupons. FSIs are distributed by direct mail and through newspapers. In addition,~~ the ~~Company has a “Business–to–Business” program under which it mails discount cards to local businesses for distribution to their employees~~future. ~~The discount cards entitle the employees to a certain price discount on each repeat visit during a specified period.~~

~~In markets in which the Company has sufficient penetration, the Company uses radio advertising to~~Expansion ~~stimulate~~Strategy demand. In fiscal 2001, the Company used radio advertising in its San Diego, Tampa Bay, Phoenix, Denver, Los Angeles, Portland, and Southeast Florida markets. During fiscal 2001, the Company implemented a television campaign in the San Diego region.

In ~~addition~~fiscal 2003, the ~~restaurants~~Company ~~often~~opened ~~co–sponsor~~two new ~~fund–raising~~restaurants ~~events~~and ina ~~the~~stand ~~restaurants~~alone ~~for~~central ~~local~~kitchen ~~charitable~~facility ~~and~~in ~~other~~California. ~~community~~The ~~organizations.~~Company ~~For~~does ~~each~~not ~~new~~have ~~restaurant,~~any ~~the~~plans ~~Company~~for ~~conducts~~expansion ain ~~pre–opening~~fiscal ~~awareness~~2004. ~~program~~The ~~beginning~~Company ~~approximately~~expects ~~two~~unit growth to ~~three~~accelerate ~~weeks~~after ~~prior~~2004 ~~to,~~within ~~and~~its ~~ending four~~existing toregions. ~~six~~Expansion ~~weeks~~within ~~after,~~ the Company’s ~~opening~~existing ofregions will allow the ~~restaurant.~~Company ~~The~~to ~~program~~continue ~~typically~~generally ~~includes~~utilizing ~~special~~a ~~promotions,~~central ~~site~~kitchen ~~signs~~to ~~and~~serve ~~sponsorship~~several ofrestaurants located within a ~~fund–raising~~ particular region.

10Since its inception the Company has closed three non-performing salad buffet restaurants, one small quick service restaurant, two Ladles restaurants and its one Slurp! restaurant. 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.

~~event~~The ~~for~~Company incurs substantial costs in opening a ~~local~~new ~~charity~~restaurant and, in the Company’s experience, new restaurants experience fluctuating operational expenses for some time after opening. In the Company’s experience, operational expenses tend to ~~establish~~stabilize ~~ties~~over a period of three to ~~local~~fifteen ~~community~~months ~~leaders~~after ~~and~~a store opens. Owned restaurants generally require significantly more up-front capital than leased restaurants, as a result of which an increase ~~awareness~~in the percentage of owned restaurant openings as compared to historical practice would increase the overall 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 ~~pre–opening~~in ~~trial~~many ~~operations,~~cases tohas ~~which~~had difficulty buying or leasing desirable sites on terms that are acceptable to the ~~family~~Company. ~~and~~In ~~friends~~many ofcases, ~~new~~the ~~employees~~Company’s competitors are ~~invited~~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.

InThe ~~fiscal~~Company ~~2001,~~currently ~~marketing~~has ~~and~~no ~~promotion expenses~~plans ~~constituted~~to ~~approximately~~offer 3franchises.1% ~~of net sales.~~

Restaurant Facilities

Design. Each Souplantation/Sweet Tomatoes restaurant generally has a similar appearance. The Company currently uses a standardized design in constructing restaurants, with modifications for each particular site. The design and layout of the restaurants are intended to emphasize the fresh, great tasting salads and other complementary menu offerings and promote a casual, comfortable and inviting atmosphere. The centerpiece of the restaurants are the two approximately 55–-foot long salad bars located near the entrance of the restaurants. An aisle between the two salad bars allows employees easy access for replenishment of fresh food items, preparation of specialty tossed salads and ongoing clean–-up without disturbing guests. The remainder of the menu offerings are presented in a scatter bar format designed to accommodate a high volume of traffic while providing guests with unlimited and convenient access to the food items. The dining area, ~~which~~ seats approximately 220 guests~~, provides a warm, comfortable atmosphere that creates a relaxed dining environment similar to many casual family restaurants~~. The Company’s existing restaurants average approximately 7,400 square feet (including the dining area, kitchen and food preparation and storage areas).

118

Location. TheTable following is a list of the Company’s current salad buffet restaurants and their locations by region: Contents

		Month Opened	Approximate Square Footage(1)
Region:	Southern California(2)
	Irvine	October 2001		7,500
	Northridge	September 2001		7,400
	City of Industry	April 2001		7,180
	Vista (San Diego)	August 2000		7,400
	Camarillo	July 2000		7,240
	Temecula	June 2000		7,240
	Kearny Mesa (San Diego)	October 1999		8,500
	Del Mar (San Diego)	September 1993		6,760
	Laguna Niguel	July 1993		6,800
	Rancho Bernardo (San Diego)	January 1993		6,760
	San Bernardino	May 1992		6,500
	Fountain Valley	January 1990		7,500
	Brentwood (Los Angeles)	January 1990		6,580
	Beverly (Los Angeles)	September 1989		8,100
	Alhambra	September 1989		7,500
	Marina del Rey	June 1989		8,490
	Costa Mesa	May 1989		10,140	(3)
	Rancho Cucamonga	April 1989		7,630
	Brea	October 1988		7,630
	Arcadia	October 1988		7,500
	Torrance	July 1988		8,080
	Mira Mesa (San Diego)	February 1988		8,210
	Pasadena	November 1987		7,940
	Carlsbad	July 1987		8,210
	Lakewood	July 1987		8,210
	Garden Grove	December 1986		8,210
	Tustin	August 1986		7,470
	La Mesa	February 1986		8,420	(3)
	Point Loma (San Diego)	January 1982		7,000
	Mission Gorge (San Diego)	March 1978		7,570
Region:	Northern California
	San Jose	December 2000		11,870	(3)
	Pleasant Hill	June 2000		8,400
	N. Fresno Street (Fresno)	October 1993		6,760
	Fremont	February 1993		6,860
	Shaw Avenue (Fresno)	September 1990		6,760
	Sunnyvale	May 1990		7,500
	Pleasanton	March 1990		7,910

Location. The following is a list of the Company’s current salad buffet restaurants, central kitchens, and distribution centers and their location by state as of September 30, 2003:

State	Type	Number
Arizona	Restaurants	8
	Central Kitchens	2

California	Restaurants	40
	Central Kitchens*	3
	Distribution Centers	1

Colorado	Restaurants	4
	Central Kitchens	1

Florida	Restaurants	18
	Central Kitchens	4

Georgia	Restaurants	4
	Central Kitchens	1
	Distribution Centers	1

Illinois	Restaurants	3
	Central Kitchens*	1

Kansas	Restaurants	1

Missouri	Restaurants	3
	Central Kitchens	1

New Mexico	Restaurants	2
	Central Kitchens	1

Nevada	Restaurants	2
	Central Kitchens	1

North Carolina	Restaurants	2
	Central Kitchens	1

Oregon	Restaurants	3

Texas	Restaurants	4
	Central Kitchens	1

Utah	Restaurants	2
	Central Kitchens	1

Washington	Restaurants	1
	Central Kitchens	1

	Total Restaurants	97
	Total Central Kitchens	19
	Total Distribution Centers	2

		Month Opened	Approximate Square Footage(1)
Region:	Florida
	Boca Raton	May 2000		10,410	(3)
	Pembroke Pines	April 2000		7,740
	Jacksonville	November 1999		7,240
	Orlando I	October 1999		6,472
	Orlando II	October 1999		7,700
	Orange Park (Jacksonville)	March 1999		7,240	(3)
	Coral Springs	December 1997		7,240
	Fort Lauderdale	September 1997		7,960
	Hollywood	August 1997		8,000
	Altamonte Springs (Orlando)	February 1997		8,740	(3)
	Fort Myers	January 1997		7,240
	Sarasota	July 1996		8,500	(3)
	Plantation	April 1996		8,030
	Brandon (Tampa)	August 1995		8,110
	Tampa	July 1995		8,500
	Carrollwood (Tampa)	June 1993		7,020
	Largo (Tampa)	September 1992		6,800
	Palm Harbor (Tampa)	January 1990		8,000	(3)
Region:	Arizona
	Metro Center (Phoenix)	May 2001		7,180
	Tucson II	November 1996		6,960
	Ahwatukee (Phoenix)	July 1996		6,960
	Peoria (Phoenix)	June 1996		6,460
	Phoenix	May 1996		6,940
	Tucson I	May 1996		7,420	(3)
	Tempe (Phoenix)	February 1995		6,320
	Scottsdale (Phoenix)	February 1994		9,000	(3)
Region:	New Mexico
	Cottonwood Mall (Albuquerque)	October 1996		6,300
	San Mateo Avenue (Albuquerque)	September 1996		7,240	(3)
Region:	Utah
	Centennial (Salt Lake City)	November 1997		7,450
	Overlook (Salt Lake City)	September 1997		9,000	(3)
Region:	Colorado
	Lone Tree (Denver)	April 2000		9,000
	Littleton (Denver)	September 1999		7,700
	Westminster (Denver)	August 1999		8,900	(3)
	Aurora (Denver)	July 1999		7,000
Region:	North Carolina
	Cary	July 2000		7,500
	Raleigh	March 1999		8,080	(3)
Region:	Nevada
	Henderson	July 1999		6,920
	Las Vegas	February 1998		7,240	(3)
Region:	Georgia
	Alpharetta	June 1999		7,240
	Perimeter (Atlanta)	September 1998		8,900	(3)
	Gwinnett (Atlanta)	August 1998		7,240
	Barrett (Atlanta)	July 1998		7,240

*	Denotes central kitchen, which is a separate facility. Within California, one kitchen occupies its own facility. All other California kitchen facilities are located within a restaurant facility.

139

		Month Opened	Approximate Square Footage(1)
Region:	Texas
	Woodlands	September 2000		7,700
	Stafford I	February 2000		7,700
	Houston II	March 1999		7,240
	Brogden (Houston)	August 1998		8,900	(3)
Region:	Pacific Northwest
	Tigard (Oregon)	May 2000		7,000
	Clackamas (Oregon)	August 1999		8,080
	Beaverton (Oregon)	December 1998		7,240
	Vancouver (Washington)	July 1998		8,000	(3)
Region:	Mid-West
	Crestwood	April 2001		9,570	(3)
	Creve Couer	December 2000		7,286
	Overland Park (Kansas)	June 2000		7,300
	Kansas City	April 2000		8,900	(3)
Region:	Illinois (4)
	St. Charles (Chicago)	February 2001		7,300
	Glenview (Chicago)	February 2001		7,360
	Schaumburg	September 2001		7,300

~~The~~Property ~~restaurants listed below are under development and have been purchased or have lease or purchase contracts signed:~~

		Approximate Square Footage(1)
Region:	Illinois
	Wheaton	7,025
Region:	California
	Anaheim	7,500
	Fullerton	7,480
	Lake Forest	7,500
	Valencia	7,400

The Company currently leases 75 and owns 22 open restaurant sites of which 77 are freestanding and 20 are located inline within large buildings. The majority of the Company’s leases provide for minimum annual rentals and contain percentage-of-sales rent provisions against which the minimum rent is applied. A significant majority of the leases also provide for periodic escalation of minimum annual rent based upon increases in the Consumer Price Index. Typically, the Company’s leases are 20 years in length with two 10-year extension options. Restaurants leased by the Company are generally leased under “triple net” leases that require the Company to pay real estate taxes, insurance and maintenance expenses. The Company’s executive offices, a test kitchen and a training facility are located in an approximately 30,000 square foot leased facility in San Diego, California under a lease expiring in July 2012. The West Coast distribution center is located in an approximately 30,000 square foot leased facility in San Diego, California under a lease expiring in March 2005, while the East Coast distribution center occupies an approximately 32,000 square foot facility under a lease expiring in June 2008.

~~(1)~~Restaurant ~~Excludes~~Industry ~~outdoor patio space, but includes dining area, kitchen~~ and ~~food~~Competition ~~preparation and storage areas.~~

~~(2)~~The ~~Does~~restaurant ~~not~~industry is highly competitive. Key competitive factors in the industry include ~~Ladles~~the quality and value of the food products offered, ~~which~~quality ~~opened~~of inservice, ~~fiscal~~price, ~~1999~~dining experience, restaurant location and the ambiance of the facilities. The Company’s primary competitors include mid-price, full-service casual dining restaurants at dinner and fast casual restaurants at lunch. Additionally, the Company competes with traditional self-service buffet and other soup and salad restaurants and healthful and nutrition-oriented restaurants at both meal periods. The Company competes with national and regional chains, as well as individually owned restaurants. The number of casual restaurants with operations generally similar to the Company’s has grown substantially in the last several years and the Company believes competition among 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 ~~Slurp!~~adversely affect its revenues. Many of the Company’s competitors have been in existence longer than the Company and have both a more established market presence and substantially greater financial, marketing and other resources than the Company, which ~~opened~~may ingive ~~fiscal~~them ~~2001~~certain competitive advantages. ~~Both~~In ~~Ladles~~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 ~~Slurp!~~implement ~~are~~the ~~located~~Company’s concept. The Company has encountered intense competition for restaurant sites, and in ~~San~~many ~~Diego~~cases has had difficulty buying or leasing desirable sites on terms that are acceptable to the Company. In many cases, ~~California~~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.

~~(3)~~Site ~~Includes~~Selection ~~central~~and Construction ~~kitchen.~~

~~(4)~~The ~~Central~~Company’s ~~kitchen~~site ~~for~~selection ~~this~~strategy is ~~region~~to isopen aeconomically ~~stand-alone~~viable ~~building~~restaurants ~~located~~that achieve an appropriate balance between lunch and dinner guest volumes in ~~Elk~~each ~~Grove~~of its target markets. The Company considers the location of each restaurant to be critical to its long-term success and management devotes significant effort to the investigation and evaluation of potential sites. The site selection process focuses on regional and trade area demographics, ILpopulation density, ~~which~~household ~~opened~~income inand ~~February~~education levels, ~~2001~~day-time traffic patterns, as well as specific site characteristics such as visibility, accessibility, traffic volume and the availability of adequate parking.

14The Company recently completed the development of, and has commenced utilizing a demographic based site selection model to measure the accuracy of sales forecasting for projected units.

The ~~following~~Company ~~Ladles~~also reviews potential competition and ~~Slurp! restaurant~~customer ~~locations~~activity ~~are~~at ~~open~~other restaurants operating in the area. To date, the Company has located a majority of its restaurants in strip shopping centers and ~~have~~neighborhood ~~lease~~shopping ~~contracts~~centers ~~signed:~~located near business districts.

		Month Opened	Approximate Square Footage
Region:	California
	Encinitas (San Diego)	July 1999	1,200
	Mission Valley (San Diego)	June 2001	2,000

AsTable mentioned earlier, the Company plans to close both Ladles and Slurp! during the first half of fiscal 2002. Contents

~~Site~~The ~~Selection~~Company generally engages outside general contractors for the required construction or build-out of restaurant sites and expects to continue this practice for the foreseeable future. The Company’s experience to date has been that obtaining construction permits has taken from two to nine months. The interior build-out of in-line restaurants ~~Construction~~and the construction of freestanding restaurants generally takes approximately four months and five months, respectively.

The Company’s ~~site~~may ~~selection~~experience ~~strategy~~delays isin ~~to open~~opening ~~economically~~new ~~viable~~ restaurants ~~that~~or ~~achieve~~may annot ~~appropriate~~be ~~balance~~able ~~between~~to ~~lunch~~open ~~and~~new ~~dinner~~restaurants ~~guest~~as ~~volumes~~a inresult ~~each~~ of ~~its~~a ~~target~~variety ~~markets.~~of ~~The~~factors ~~Company~~including ~~considers~~ the Company’s ~~location~~ability ~~of each restaurant~~ to belocate ~~critical~~suitable torestaurant ~~its~~sites, ~~long–term~~construct ~~success~~new ~~and management~~restaurants ~~devotes~~in ~~significant~~a ~~effort~~timely tomanner ~~the investigation~~ and ~~evaluation~~obtain ofadditional ~~potential sites~~funds. ~~The~~See ~~site~~“Management’s ~~selection~~Discussion ~~process focuses on regional~~ and ~~trade~~Analysis ~~area~~of ~~demographics,~~Financial ~~population~~Condition ~~density, household income~~ and ~~education~~Results ~~levels,~~of ~~day–time traffic~~Operations” ~~patterns, as well as specific site characteristics such as visibility, accessibility, traffic volume~~ and “Business ~~the~~Risks—Expansion ~~availability of adequate parking~~Risks.”

~~The~~There ~~Company~~can ~~also~~be no ~~reviews~~assurance ~~potential~~that ~~competition~~the ~~and~~Company ~~customer~~will ~~activity~~continue atto ~~other~~be ~~restaurants~~successful ~~operating~~ in ~~the~~selecting ~~area.~~or Toacquiring ~~date,~~suitable ~~the~~restaurant ~~Company~~sites ~~has~~or ~~located~~that ait ~~majority of~~will ~~its~~be ~~restaurants~~successful in ~~strip~~developing ~~shopping~~a ~~centers~~site ~~and~~selection ~~neighborhood~~model ~~shopping~~that ~~centers~~will ~~located~~favorably ~~near~~assist ~~business~~the ~~districts~~site selection process.

~~The~~Government ~~Company~~Regulation generally engages outside general contractors for the required construction or build–out of restaurant sites and expects to continue this practice for the foreseeable future. The Company’s experience to date has been that obtaining construction permits has taken from two to nine months. The interior build–out of in–line restaurants and the construction of freestanding restaurants generally takes approximately four months and five months, respectively.

The Company’s ~~may~~business ~~experience~~is ~~delays~~subject into ~~opening~~and ~~new~~affected by various federal, state and local laws. Each restaurant must comply with state, county and municipal licensing and regulation requirements relating to health, safety, sanitation, building construction and fire prevention. The Company’s restaurants are subject to federal and state laws governing wages, working conditions, citizenship requirements and overtime. Congress and various states (including California and the other fourteen states in which the Company operates) passed proposals that imposed increases in state or ~~may~~federal ~~not~~minimum wages in 1996, 1997, 1998, 2000, 2001, 2002, and 2003. There is no assurance that the Company will be able to ~~open~~continue ~~new~~to ~~restaurants~~pass assuch aincreased ~~result~~costs ofon ato ~~variety~~its guests. The Company is subject to the Americans with Disabilities Act of ~~factors~~1990, ~~including~~which requires certain accommodations to the Company’s ~~ability~~restaurant designs to allow access for people with disabilities. In addition, the Company is subject to the regulations of the Immigration and Naturalization Service (“INS”). Given that many of the ~~locate~~Company’s ~~suitable~~restaurants ~~restaurant~~are ~~sites~~located in California and Arizona, ~~construct~~even ~~new~~if the Company’s operation of those restaurants is in astrict ~~timely~~compliance ~~manner~~with INS requirements, the Company’s employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in its work force. Additionally, legislative proposals are currently under consideration by Congress and ~~obtain~~state ~~additional~~legislators ~~funds~~to require employers to pay for health insurance for all employees and similar legislation has been passed in California that may go into effect in 2006. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations~~” and “~~—Business ~~Risks–Expansion~~ Risks—Cost Sensitivity.”

~~Competition~~Insurance

The ~~restaurant~~Company ~~industry~~carries isproperty, ~~highly~~liability, ~~competitive.~~product ~~Key~~tampering, ~~competitive~~business ~~factors~~interruption, inautomobile, ~~the~~umbrella, ~~industry include the quality and value of the food products~~fiduciary ~~offered~~liability, ~~quality of service~~crime, ~~price~~earthquake, ~~dining experience~~flood, ~~restaurant~~directors ~~location~~ and ~~the ambiance of the facilities. The Company~~officer’s ~~primary competitors include mid–price~~liability, ~~full–service~~employee ~~casual dining restaurants~~health, ~~as well as traditional self–service buffet~~ and ~~other~~workers’ ~~soup~~compensation ~~and~~insurance ~~salad restaurants and healthful and nutrition–oriented restaurants~~policies. ~~The Company competes with national and regional chains~~However, asthere ~~well~~can asbe ~~individually~~no ~~owned~~assurance ~~restaurants.~~that ~~The number of buffet and casual restaurants with operations generally similar to~~ the Company’s ~~has~~insurance ~~grown~~coverage ~~substantially~~will inbe ~~the~~adequate ~~last~~or ~~several~~that insurance ~~years and the Company believes competition among buffet–style and casual restaurants has increased and~~ will continue to ~~increase~~be ~~as the~~available ~~Company’s~~to ~~competitors expand operations in various geographic areas. Such increased competition could increase~~ the Company’s ~~operating~~at ~~costs~~reasonable orrates, ~~adversely~~if ~~affect~~at ~~its revenues~~all. ~~The~~In ~~Company believes it competes favorably in~~ the ~~industry, although~~event ~~many~~coverage ofis ~~the~~inadequate ~~Company’s~~or ~~competitors~~becomes ~~have been in existence longer than the Company and have both a more established market presence and substantially greater financial~~unavailable, ~~marketing and other resources than~~ the Company, ~~which~~could ~~may give them certain competitive advantages. In addition, the restaurant industry has few non–economic barriers to entry. Therefore, there can~~ be nomaterially ~~assurance~~adversely ~~that third parties will not be able to successfully imitate and implement the Company’s concept~~affected. ~~The Company has encountered intense competition~~

15Trade Names and Service Marks

The Company and its predecessor have used the trademarks and service marks ~~for~~Souplantation ~~restaurant~~since ~~sites,~~1978 and inSweet ~~many~~Tomatoes ~~cases~~since ~~has~~1990. ~~had~~The ~~difficulty~~Souplantation ~~buying~~trademark oris ~~leasing~~used ~~desirable~~in ~~sites~~the onSouthern ~~terms~~California ~~that~~market, ~~are~~while ~~acceptable~~the toSweet Tomatoes trademark is used in the ~~Company.~~Northern InCalifornia, ~~many~~Florida, ~~cases~~Arizona, ~~the~~New ~~Company’s~~Mexico, ~~competitors~~Utah, ~~are~~Colorado, ~~willing~~North Carolina, Nevada, Georgia, Texas, Washington, Oregon, Kansas, Missouri and ~~able~~Illinois tomarkets. ~~pay~~The ~~more~~Company ~~than~~registered both Souplantation and Sweet Tomatoes trademarks, as well as the ~~Company~~Garden ~~for~~Fresh ~~sites~~Restaurant Corp. trademark, with the United States Patent and Trademark Office. The Company ~~expects~~has ~~these~~also ~~difficulties~~used inthe ~~obtaining~~trademark ~~desirable~~and ~~sites~~service tomarks ~~continue~~“Ladles, ~~for~~A Soup and Salad Takery” and “Slurp! The Soup Experience” in the ~~foreseeable~~California ~~future~~market.

~~Government~~11 ~~Regulation~~

The Company’sTable business is subject to and affected by various federal, state and local laws. Each restaurant must comply with state, county and municipal licensing and regulation requirements relating to health, safety, sanitation, building construction and fire prevention. The Company’s restaurants are subject to federal and state laws governing wages, working conditions, citizenship requirements and overtime. Congress and various states (including California) passed proposals that imposed increases in state or federal minimum wages in 1996, 1997, 1998, 2000, and 2001. There is no assurance that the Company will be able to continue to pass such increased costs on to its guests. The Company is subject to the Americans with Disabilities Act of 1990, which requires certain accommodations to the Company’s restaurant designs to allow access for people with disabilities. In addition, the Company is subject to the regulations of the Immigration and Naturalization Service (“INS”). Given that many of the Company’s restaurants are located in California and Arizona, even if the Company’s operation of those restaurants is in strict compliance with INS requirements, the Company’s employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in its work force. Additionally, legislative proposals are currently under consideration by Congress and state legislators to require employers to pay for health insurance for all employees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Risks–Cost Sensitivity.” Contents

~~Insurance~~Employees

~~The~~As ~~Company~~of ~~carries~~September ~~property~~30, ~~liability~~2003, ~~business~~the ~~interruption,~~Company ~~crime~~had 5,420 ~~employee~~employees ~~benefits,~~including ~~earthquake~~4,955 ~~directors~~hourly ~~and~~restaurant ~~officers~~employees ~~liability~~(of ~~and~~whom ~~workers’~~4,009 ~~compensation~~were ~~insurance policies.~~part-time ~~However~~employees), ~~there~~320 full-time ~~can~~restaurant bemanagement noemployees, ~~assurance~~30 ~~that~~full-time ~~the~~distribution ~~Company’s~~employees, ~~insurance~~111 ~~coverage~~full-time ~~will~~corporate bemanagement ~~adequate~~and orstaff ~~that~~employees ~~insurance~~and ~~will~~4 ~~continue~~part-time tocorporate beemployees. ~~available~~None toof the Company’s atemployees ~~reasonable~~are ~~rates,~~represented ifby ata ~~all~~labor union. InThe Company ~~the~~believes ~~event~~that ~~coverage~~its isrelationship ~~inadequate~~with orits ~~becomes unavailable,~~employees ~~the~~is ~~Company could be materially adversely affected~~good.

~~Trade Names and Service Marks~~ Other

The Company ~~and~~provides ~~its~~a ~~predecessor~~link ~~have~~to ~~used~~this ~~the trademarks~~ and ~~service~~previous ~~marks~~Company ~~Souplantation~~filings ~~since~~on ~~1978~~forms ~~and Sweet Tomatoes since 1990. The Souplantation trademark is used in the Southern California market~~10-K, ~~while the Sweet Tomatoes trademark is used in the Northern California~~10-Q, ~~Florida~~8-K, ~~Arizona,~~S-8 ~~New Mexico, Utah, Colorado, North Carolina, Nevada, Georgia, Texas, Washington, Oregon, Kansas, Missouri~~ and ~~Illinois~~other ~~markets.~~SEC ~~The~~filings ~~Company~~through ~~registered~~its ~~both Souplantation and Sweet Tomatoes trademarks~~website, asaccessible ~~well~~at ~~as the Garden Fresh Restaurant Corp~~www. ~~trademark~~gardenfreshcorp.com, ~~with the United States Patent and Trademark Office~~www.souplantation.com ~~The~~or ~~Company has also used the trademark and service marks “Ladles, A Soup and Salad Takery” since July 1999 and “Slurp! The Soup Experience” since June 2001 in the California market~~www.sweettomatoes.com.

~~Property~~ Item 2. Properties

The Company currently leases 7275 and owns 2422 open restaurant sites, ~~including~~of ~~one~~which ~~Ladles~~77 are freestanding and ~~one~~20 ~~Slurp!~~are ~~site~~located inline within large buildings. In addition, the Company also owns land for two potential restaurant sites. The majority of the Company’s leases ~~provides~~provide for minimum annual rentals and ~~contains~~contain percentage–-of–-sales rent provisions against which the minimum rent is applied. A significant majority of the leases also provide for periodic escalation of minimum annual rent based upon increases in the Consumer Price Index. Typically, the Company’s leases are 20 years in length with two 10–-year extension options. Restaurants leased by the Company are generally leased under “triple net” leases that require the Company to pay real estate taxes, insurance and maintenance expenses. The Company’s executive offices, a test kitchen and a training facility are located in an approximately 1130,000 square foot leased facility ~~near~~in ~~one~~San ofDiego, ~~the~~California ~~Company’s~~under a ~~restaurants~~lease expiring in July 2012. The West Coast distribution center is located in an approximately 30,000 square foot leased facility in San Diego, California under a lease expiring in March 2005, while the East Coast distribution center occupies an approximately 32,000 square foot facility under a lease expiring in June 2008. For additional information regarding the Company’s properties, please see the information set forth in Item 1 of this Report under the caption “Restaurant Facilities”.

16 Item 3. Legal Proceedings

~~under~~On aSeptember ~~lease~~29, ~~expiring~~2003, inthe ~~July~~Company ~~2002~~entered into an Agreement and Plan of Merger with GF Holdings, Inc. ~~The~~(“GF Holdings”), a Delaware corporation, and GFR Acquisition Company, ~~has~~a ~~signed~~Delaware corporation and wholly-owned subsidiary of GF Holdings (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company, with the Company being the surviving corporation and becoming a ~~lease~~wholly-owned ~~for~~subsidiary anof ~~approximately~~GF 30Holdings. On October 2,~~000~~ ~~square~~2003, ~~foot~~a ~~office~~purported ~~facility~~stockholder ~~located~~class action lawsuit was filed in the San Diego Superior Court against the Company, ~~California~~its directors and ~~expects~~25 unnamed “Doe” defendants entitled Allan Aites v. Garden Fresh Restaurant Corp., et al., Case No. GIC818850. The suit alleges that the individual defendants breached their fiduciary duty to ~~move~~the ~~during~~Company’s stockholders in connection with the ~~second half~~merger by advancing their individual interests at the expense of ~~fiscal~~the ~~2002~~Company’s stockholders. The ~~West~~complaint ~~Coast~~also ~~distribution~~alleges ~~center~~that isthe ~~located~~individual indefendants anfailed ~~approximately~~to 30properly value the Company,~~000~~ ~~square~~ignored ~~foot~~conflicts ~~leased~~of ~~facility~~interest in ~~San~~connection ~~Diego,~~with ~~California~~the ~~under~~merger and failed to engage in arm’s length negotiations in the merger. The complaint seeks: (i) a ~~lease~~declaration ~~expiring~~that the merger agreement was entered into in ~~March~~breach ~~2005,~~of ~~while~~the defendants’ fiduciary duties; (ii) an injunction against the ~~East~~defendants ~~Coast~~preventing ~~distribution~~them ~~center~~from ~~occupies~~consummating the merger unless a procedure or process is adopted to obtain the highest possible price for the stockholders; (iii) disclosure of fourth quarter financial information; (iv) rescission of the merger agreement; (v) such other equitable relief as the court deems appropriate; and (vi) an award ~~approximately~~of 32attorneys’ fees,~~000~~ ~~square~~among ~~food~~other ~~facility~~relief. ~~under~~The aCompany ~~lease~~believes ~~expiring~~that inthis ~~June~~lawsuit is without merit and intends to defend against it vigorously. A hearing on the defendants’ demurrer and application to have the complaint dismissed has been scheduled by the Court for February 6, ~~2008~~2004. The claims have not progressed sufficiently for the Company to estimate a range of possible exposure, if any.

~~Employees~~12

AsTable of September 30, 2001, the Company had approximately 5,600 employees including 5,000 hourly restaurant employees (of whom 4,200 were part–time employees), 500 full–time restaurant management employees and 119 full–time corporate management and staff employees and 5 part–time corporate employees. None of the Company’s employees are represented by a labor union. The Company believes that its relationship with its employees is good. Contents

~~Executive~~The ~~Officers~~Company is from time to time the subject of complaints, threat letters or litigation from guests alleging illness, injuries or other food quality, health or operational concerns. Adverse publicity resulting from such allegations may materially adversely affect the Company and its restaurants, regardless of whether such allegations are valid or whether the Company is liable. The Company also is the subject of complaints or allegations from former or prospective employees from time to time. The Company believes that the lawsuits, claims and other legal matters to which it has become subject in the course of its business are not material to the Company’s financial position or results of operations. Nevertheless, an existing or future lawsuit or claim could result in an adverse decision against the Company that could adversely affect the Company or its business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Risks—Legal Matters”.

~~The executive~~ ~~officers~~Item of4. Submission ~~the Company as~~ of ~~September~~Matters ~~30,~~to ~~2001~~a ~~are~~Vote asof ~~follows:~~Security Holders

Name	Age		Position
Michael P. Mack		50	Chairman of the Board, President and Chief Executive Officer
David W. Qualls		56	Executive Vice President–Finance and Real Estate, Chief Financial Officer and Secretary
R. Gregory Keller		53	Senior Vice President of Operations
Kenneth J. Keane		46	Vice President Human Resources

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003.

~~Michael~~13 P. Mack co–founded the Company in 1983 and was the President and Chief Operating Officer from the Company’s inception until April 1991 and the Chief Executive Officer from September 1990 to April 1991. Mr. Mack assumed the role of Chairman of the Board of Directors in December 1997. Mr. Mack has also been a director of the Company since its inception. Since February 1994, Mr. Mack has been the Company’s President and Chief Executive Officer. From April 1991 to February 1994, Mr. Mack served as the President of MPM Management, Inc., a consulting firm. Prior to joining the Company, from 1977 to 1983, Mr. Mack worked for Bain & Company, a management consulting firm, where he specialized in the development and implementation of business strategies. Mr. Mack received a B.A. from Brown University and a M.B.A. from Harvard University.

DavidTable W. Qualls joined the Company in November 1985 as Chief Financial Officer and Secretary. Since 1990, Mr. Qualls has also served as the Company’s Executive Vice President in charge of Finance and Real Estate. From 1982 to 1985, Mr. Qualls served as Vice President of Finance and Administration and Chief Financial Officer of Diatek, Inc., a medical electronics company. Mr. Qualls received a B.A. from California State University at Fresno and a M.B.A. from the University of Virginia. Contents

R.PART ~~Gregory~~II Keller joined the Company in June 1991 as Vice President of Operations. From January 1991 to June 1991 prior to joining the Company, Mr. Keller served as a consultant to the Company. From June 1990 to January 1991, Mr. Keller served as an independent consultant. From June 1971 to June 1990, Mr. Keller served as a divisional Vice President of Operations of Paragon, Inc., a restaurant company, where he managed operations for 33 restaurants. Mr. Keller received a B.S. from Northern Illinois University.

~~Kenneth~~ Item J5. Market ~~Keane~~for ~~is currently Vice President of Human Resources. Mr. Keane joined the~~ Company’s inCommon ~~1986~~Equity ~~as a restaurant manager. During his employment with the Company he has served as Director of Operations, Director of Training~~ and ~~Executive~~Related ~~Director~~Stockholder ofMatters ~~Human Resources. Prior to joining the Company, Mr. Keane worked in restaurant management for ten years. Mr. Keane received a certificate in Human Resources from San Diego State University in 1996.~~

17Garden Fresh Restaurant Corp. Common Stock (Symbol: LTUS) is traded over the counter via NASDAQ National Market. As of September 30, 2003, 5,824,023 shares were owned by 350 shareholders of record. The following is a summary of market activity for the fiscal years 2002 and 2003.

Item 2. Properties

2002	High		Low
First Quarter	$	7.00	$	5.90
Second Quarter		9.89		6.81
Third Quarter		14.41		9.50
Fourth Quarter		13.10		9.46

2003	High		Low
First Quarter	$	12.00	$	8.91
Second Quarter		10.78		8.90
Third Quarter		11.05		8.10
Fourth Quarter		15.91		9.00

~~The~~Garden ~~Company currently~~Fresh operates 94 salad buffet restaurants in California, Florida, Arizona, Colorado, Georgia, Illinois, Kansas, Missouri, Nevada, New Mexico, North Carolina, Oregon, Texas, Utah and Washington. One restaurant has opened in fiscal 2002. Nine restaurants have opened and one reopened in fiscal 2001, seventeen restaurants were opened in fiscal 2000, ten restaurants were opened in fiscal 1999, eight restaurants were opened in fiscal 1998, and seven restaurants were opened in fiscal 1997. Additionally one Slurp! Restaurant ~~was opened in fiscal 2001, one Ladles restaurant was opened in fiscal 1999 and one additional Ladles restaurant was opened and closed in fiscal 2000~~Corp. ~~The~~completed ~~Company currently leases the sites for most of~~ its ~~restaurants,~~initial ~~mixed between~~public ~~stand–alone~~offering ~~sites~~(IPO) ~~and~~on ~~in–line~~May ~~locations. The Company operates 75 freestanding restaurants and 19 restaurants located within larger buildings. The Company leases both of its distribution centers located in San Diego~~16, ~~California~~1995 ~~and Kennesaw,~~at Georgia. The Company owns nine properties located in Florida, two in Arizona, two in New Mexico, one in Utah, two in Colorado, one in North Carolina, one in California, three in Georgia, one in Illinois and one in Missouri. Current restaurant ground and building leases vary as to rental provisions, expiration dates and renewal options. The majority of the leases provides for minimum annual rentals and contain percentage–of–sales rent provisions against which the minimum rental is applied. A significant majority of the leases also provide for periodic escalation of minimum annual rentals based upon increases in the Consumer Price Index. Typically, the Company’s leases are 20 years in length with two 10–year extension options. Restaurants leased by the Company are typically leased under “triple net” leases that require the Company to pay real estate taxes, insurance and maintenance expenses. In the future the Company expects to continue to both lease and purchase its sites. The Company’s executive offices, a ~~test~~price ~~kitchen and a training facility are located in an approximately 11,000 square foot leased facility near one~~ of ~~the Company’s restaurants in San Diego, California under a lease expiring in July 2002~~$9.00 ~~The~~per ~~Company has signed a lease for an approximately 30,000 square foot office facility located in San Diego, California~~share.

~~During~~To ~~fiscal~~date, ~~1999~~ the Company ~~opened~~has ~~it’s~~not ~~first~~paid ~~location~~any ofcash ~~Ladles, A Soup and Salad and Takery in San Diego, California~~dividends. The ~~Company~~ ~~opened and closed a second “Ladles, A Soup and Salad Takery” in fiscal 2000. In June 2001 the~~ Company ~~opened~~intends ~~the first “SLURP! The Soup Experience”, a new concept in quick service, take-away dining. Located in San Diego, California, SLURP! was designed~~ to ~~fit~~retain ~~into~~future ~~guests’~~earnings ~~busy~~for ~~schedules,~~use ~~offering soup and other to-go items~~ in aits ~~high~~business ~~energy, irreverent atmosphere. In September 2001 the Company decided to abandon the Ladles~~ and ~~Slurp!~~does ~~concepts~~not ~~due~~anticipate ~~to poor~~paying ~~operating~~cash ~~performance.~~dividends ~~The~~in ~~Company plans to close~~ the ~~restaurants~~foreseeable ~~during the first half of fiscal 2002~~future. ~~The Company still plans to keep elements of the products developed for Slurp! for use in its core concept.~~

For ~~additional~~the ~~information~~year ~~regarding~~ended September ~~the~~30, ~~Company’s properties~~2003, ~~please~~the ~~see~~Company had the ~~information~~following ~~set~~compensation ~~forth in~~plans ~~Item~~under 1which ofit ~~this~~has ~~Report~~authorized ~~under~~ the ~~caption~~issuance ~~“Restaurant~~of ~~Facilities”.~~equity securities:

Item 3. Legal Proceedings

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance⁽¹⁾
Equity compensation plans approved by security holders	1,391,655	$	10.47	585,318

Equity compensation plans not approved by security holders	—		—	—

Total	1,391,655	$	10.47	585,318

~~The~~(1) ~~Company is from time to time the subject of complaints~~133,339 threat letters or litigation from guests alleging illness, injuries or other food quality, health or operational concerns. Adverse publicity resulting from such allegations may materially adversely affect the Company and its restaurants, regardless of ~~whether~~these ~~such~~shares ~~allegations~~ are ~~valid~~reserved orfor ~~whether~~issuance ~~the~~under ~~Company is liable. The Company also is~~ the ~~subject of complaints or allegations from former or prospective employees from time to time. The~~ Company ~~believes that the lawsuits, claims and other legal matters to which it has become subject in the course of its business are not material to the Company~~’s ~~financial~~Employee ~~position~~Stock orPurchase ~~results of operations~~Plan. Nevertheless, an existing or future lawsuit or claim could result in an adverse decision against the Company that could adversely affect the Company or its business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Risks-Legal Matters”.

~~Item~~The 4. Company has five stock option plans under which 2,282,500 options are ~~Submission~~authorized to be granted to employees, consultants and directors of ~~Matters~~the Company. Of this balance, 451,979 options are still available to be granted as of September 30, 2003. The plans provide for the grant of both incentive stock options and non-qualified stock options. Under the plans, options to purchase common stock may be granted for periods up to ten years at a ~~Vote~~price per share ranging from 85% to 110% of ~~Security~~the ~~Holders~~fair market value of the Company’s common stock at the date of grant. During fiscal 2001, 2002 and 2003, employee stock options were granted at the fair market value of the stock at the date of grant. The options generally vest over periods of one to five years and may be exercised in annual installments ranging from one to ten years. Under the plans, directors will receive options to purchase 10,000 shares of common stock upon their election to the Board of Directors, and options to purchase 7,500 shares annually thereafter.

No14 ~~matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2001.~~

18Table of Contents

~~PART~~ Item II6. Selected Financial Data

Item 5. Market for Company’s Common Equity and Related Stockholder Matters

	Years ended September 30,
	1999			2000			2001			2002			2003
	(In thousands, except per share and operating data)
Statement of Operations Data:
Net sales	$	131,944		$	165,406		$	198,463		$	214,296		$	220,489

Costs and expenses:
Costs of sales		33,840			41,632			49,447			52,333			53,912
Restaurant operating expenses:
Labor		39,995			52,349			64,420			68,130			69,846
Occupancy and other expenses		27,312			35,140			47,210			52,092			56,849
General and administrative expenses		8,214			10,280			13,538			13,488			14,270
Restaurant opening costs		—			2,750			1,952			303			227
Depreciation and amortization expenses		9,441			9,719			12,503			13,727			14,475
Facility exit costs		—			473			1,572			(83	)		—
Merger costs		—			—			—			—			997

Total costs and expenses		118,802			152,343			190,642			199,990			210,576

Operating income		13,142			13,063			7,821			14,306			9,913
Interest income		111			148			160			85			55
Interest expense		(1,618	)		(3,623	)		(4,876	)		(4,537	)		(3,678	)
Other income (expense), net		(183	)		(65	)		804			(394	)		(639	)

Income before income taxes and cumulative effect of accounting change		11,452			9,523			3,909			9,460			5,651
Provision for income taxes		(4,548	)		(3,747	)		(1,547	)		(3,875	)		(2,658	)

Income before cumulative effect of accounting change		6,904			5,776			2,362			5,585			2,993
Cumulative effect of accounting change for start-up costs, net of income tax benefit of $800 in 2000		—			(1,233	)		—			—			—

Net income	$	6,904		$	4,543		$	2,362		$	5,585		$	2,993

Basic net income per common share:
Income before cumulative effect of accounting change	$	1.24		$	1.02		$	0.42		$	0.98		$	0.52
Cumulative effect of change in accounting for start-up costs		—			(0.22	)		—			—			—

Basic net income per common share	$	1.24		$	0.80		$	0.42		$	0.98		$	0.52

Shares used in computing basic net income per common share		5,574			5,647			5,670			5,707			5,784

Diluted net income per common share:
Income before cumulative effect of accounting change	$	1.18		$	1.00		$	0.42		$	0.96		$	0.51
Cumulative effect of change in accounting for start-up costs		—			(0.21	)		—			—			—

Diluted net income per common share	$	1.18		$	0.79		$	0.42		$	0.96		$	0.51

Shares used in computing diluted net income per common share		5,867			5,780			5,682			5,838			5,923


Selected Operating Data:
Percentage change in comparable restaurant sales⁽¹⁾		3.7	%		3.1	%		3.3	%		2.1	%		1.6	%
Average price per guest⁽²⁾	$	7.01		$	7.22		$	7.51		$	7.72		$	7.93
Average sales for salad buffet restaurants open for full period (in thousands)	$	2,156		$	2,206		$	2,237		$	2,265		$	2,293
Number of salad buffet restaurants open for full period		57			66			83			93			95
Number of salad buffet restaurants open at end of period		67			83			93			95			97

~~Garden~~15 Fresh Restaurant Corp. Common Stock (Symbol: LTUS) is traded over the counter via Nasdaq National Market. As of September 30, 2001, 5,675,826 shares were owned by 326 shareholders of record. The following is a summary of market activity for the fiscal years 2000 and 2001.

	High	Low
2000
First Quarter	$17.63	$12.38
Second Quarter	17.50	10.75
Third Quarter	12.13	10.44
Fourth Quarter	14.75	9.88
	High	Low
2001
First Quarter	$11.00	$ 6.19
Second Quarter	7.94	5.88
Third Quarter	10.00	6.00
Fourth Quarter	7.50	5.89

Garden Fresh Restaurant Corp. completed its initial public offering (IPO) on May 16, 1995 at a price of $9.00 per share.

	As of September 30,
	1999			2000			2001			2002			2003
Balance Sheet Data:
Working capital (deficit)	$	(11,300	)	$	(29,075	)	$	(25,144	)	$	(9,646	)	$	(10,609	)
Total assets		114,618			147,188			157,896			153,006			152,493
Long-term debt, including current portion		29,197			39,554			48,103			43,605			38,825
Revolving line of credit		5,001			12,000			9,150			—			—
Shareholders’ equity		66,849			71,671			74,180			80,233			83,984

In(1) ~~May~~Comparable ~~1998,~~restaurant ~~the~~sales ~~Company~~are ~~completed~~computed on a ~~secondary~~monthly ~~public~~basis ~~offering~~and atthen aggregated to determine comparable restaurant sales on a ~~price~~quarterly ofor ~~$17~~annual basis.19 ~~per~~A ~~share~~restaurant is included in this computation after it has been open for 15 full calendar months. As a result, a restaurant may be included in this computation for only a portion of a given quarter or year.

To(2) ~~date,~~Average ~~the~~price ~~Company~~per ~~has~~guest ~~not~~is ~~paid~~derived ~~any~~from ~~cash~~the ~~dividends. The~~ Company’s ~~intends~~net tosales, ~~retain~~which ~~future~~reflects ~~earnings~~discounts ~~for use in its business~~ and ~~does not anticipate paying cash dividends in the foreseeable future~~coupons.

19Operating Results

~~Item~~The 6. following table sets forth the percentage of net sales of certain items ~~Selected~~included ~~Financial~~in ~~Data~~the Company’s statements of operations for the periods indicated.

	Years ended September 30,
	1997		1998		1999		2000		2001
	2001		2002		2003
	(In thousands, except per share and operating data)
Statement of Operations Data:
Statement of Operations Data:
Net sales	100.0	%	100.0	%	100.0	%
Net sales	$90,252		$110,049		$131,944		$165,406		$198,463
Costs and expenses:
Costs and expenses:
Costs of sales	24.9		24.4		24.4
Costs of sales	23,497		28,605		33,840		41,632		49,447
Restaurant operating expenses:
Restaurant operating expenses:
Labor	32.5		31.8		31.7
Labor	26,130		32,526		39,995		52,349		64,420
Occupancy and other expenses	23.7		24.3		25.8
Occupancy and other expenses	20,836		24,290		27,312		35,140		47,210
General and administrative expenses	6.8		6.3		6.5
General and administrative expenses	5,672		6,781		8,214		10,280		13,538
Restaurant opening costs	1.0		0.1		0.1
Restaurant opening costs	—		—		—		2,750		1,952
Depreciation and amortization expenses	6.3		6.4		6.6
Depreciation and amortization expenses	6,147		7,267		9,441		9,719		12,503
Facility exit costs	0.8		—		—
Facility exit costs	—		—		—		473		1,572
Merger costs	—		—		0.4
Total costs and expenses	~~82,282~~96.0		~~99,469~~93.3		~~118,802~~95.5		~~152,343~~		~~190,642~~
Operating income	~~7,970~~4.0		~~10,580~~6.7		~~13,142~~4.5		~~13,063~~		~~7,821~~
Interest income	~~106~~0.1		~~227~~—		~~111~~—		~~148~~		~~160~~
Interest expense	(~~1,579~~2.5	)	(2.1~~,958~~	)	(1~~,618~~.6	)	~~(3,623~~	)	~~(4,876~~	)
Other income (expense), net	~~(62~~0.4	)	(~~111~~0.2	)	(~~183~~0.3	)	~~(65~~	)	~~804~~
Income before income taxes and cumulative effect of accounting change	6,435		8,738		11,452		9,523		3,909
Income before provision for income taxes	2.0		4.4		2.6
Provision for income taxes	(~~2,548~~0.8	)	(~~3,420~~1.8	)	(~~4,548~~1.2	)	~~(3,747~~	)	~~(1,547~~	)
Income before cumulative effect of accounting change	3,887		5,318		6,904		5,776		2,362
Net income	1.2	%	2.6	%	1.4	%
Cumulative effect of accounting change for start–up costs, net of income tax benefit of $800 in 2000	—		—		—		(1,233	)	—
Net income	$ 3,887		$ 5,318		$ 6,904		$ 4,543		$ 2,362
Basic net income per common share:
Income before cumulative effect of accounting change	$ 0.93		$ 1.12		$ 1.24		$ 1.02		$ 0.42
Cumulative effect of change in accounting for start–up costs	—		—		—		(0.22	)	—
Basic net income per common share	$ 0.93		$ 1.12		$ 1.24		$ 0.80		$ 0.42
Shares used in computing basic net income per common share	4,192		4,734		5,574		5,647		5,670
Diluted net income per common share:
Income before cumulative effect of accounting change	$ 0.88		$ 1.04		$ 1.18		$ 1.00		$ 0.42
Cumulative effect of change in accounting for start–up costs	—		—		—		(0.21	)	—
Diluted net income per common share	$ 0.88		$ 1.04		$ 1.18		$ 0.79		$ 0.42
Shares used in computing diluted net income per share	4,402		5,089		5,867		5,780		5,682
Selected Operating Data:
Percentage change in comparable restaurant sales(1)	4.7	%	7.5	%	3.7	%	3.1	%	3.3	%
Average price per guest(2)	$ 6.75		$ 6.94		$ 7.01		$ 7.22		$ 7.51
Average sales for salad buffet restaurants open for full period (in thousands)	$ 1,985		$ 2,098		$ 2,156		$ 2,206		$ 2,237
Number of salad buffet restaurants open for full period	42		49		57		66		83
Number of salad buffet restaurants open at end of period	49		57		67		83		93

2016

	As of September 30,
	1997		1998		1999		2000		2001
Balance Sheet Data:
Working capital (deficit)	$ (7,776	)	$ (7,071	)	$ (11,300	)	$ (29,075	)	$ (25,144	)
Total assets	62,409		84,932		114,618		147,188		157,896
Long–term debt, including current portion	17,421		14,866		29,197		39,554		48,103
Revolving line of credit	—		—		5,001		12,000		9,150
Shareholders’ equity	34,168		59,247		66,849		71,671		74,180

~~(1)~~ Item ~~Comparable~~7. Management’s ~~restaurant~~Discussion ~~sales~~and ~~are~~Analysis ~~computed~~of onFinancial aCondition ~~monthly basis~~ and ~~then~~Results aggregated to determine comparable restaurant sales on a quarterly or annual basis. A restaurant is included in this computation after it has been open for 15 full calendar months. As a result, a restaurant may be included in this computation for only a portion of aOperations ~~given quarter or year.~~

~~(2)~~Critical ~~Average~~Accounting ~~price~~Policies ~~per guest is derived from the Company’s net sales, which reflects discounts and coupons.~~

~~Operating~~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,” the Company has identified the following critical accounting policies that reflect the more significant judgments and estimates used in the preparation of our 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 claims, 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.

~~The~~We ~~following~~believe ~~table~~that ~~sets~~the ~~forth~~following ~~the~~critical ~~percentage~~accounting ofpolicies ~~net~~reflect ~~sales~~the ofmore ~~certain~~significant ~~items~~judgments ~~included~~and estimates used in the ~~Company’s~~preparation ~~statements~~ of ~~operations~~our ~~for~~financial ~~the~~statements: ~~periods indicated.~~

	Years ended September 30,
	1999		2000		2001
Statement of Operations Data:
Net sales	100.0	%	100.0	%	100.0	%
Costs and expenses:
Costs of sales	25.6		25.2		24.9
Restaurant operating expenses:
Labor	30.3		31.6		32.5
Occupancy and other expenses	20.7		21.2		23.7
General and administrative expenses	6.2		6.2		6.8
Restaurant opening costs	—		1.7		1.0
Depreciation and amortization expenses	7.2		5.9		6.3
Facility exit costs	—		0.3		0.8
Total costs and expenses	90.0		92.1		96.0
Operating income	10.0		7.9		4.0
Interest income	—		0.1		0.1
Interest expense	(1.2	)	(2.2	)	(2.5	)
Other income (expense), net	(0.1	)	—		0.4
Income before provision for income taxes and cumulative effect of accounting change	8.7		5.8		2.0
Provision for income taxes	(3.5	)	(2.3	)	(0.8	)
Income before cumulative effect of accounting change	5.2		3.5		1.2
Cumulative effect of change in accounting principle	—		(0.7	)	—
Net income	5.2	%	2.7	%	1.2	%

•

The Company periodically assesses the impairment of long-lived assets to be held for use whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held for use is based on expectations of future undiscounted cash flows from the related operations, and when circumstances dictate, the Company adjusts the asset to the extent the carrying value exceeds the fair value of the asset. Judgments made by the Company related to the expected useful lives of long-lived assets and its ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, and changes in operating performance. As the Company assesses the ongoing expected cash flows and carrying amounts of our long-lived assets, these factors could cause the Company to realize a material impairment charge, which would result in decreased results of operations, and potentially decrease the carrying value of these assets.

21• The Company maintains an accrual for workers’ compensation and general liability claims which are recorded in the accrued liabilities section of the balance sheets. The Company determines the adequacy of this accrual by periodically evaluating (1) information periodically 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 the accruals are overstated or understated, the Company will adjust the assumptions utilized in their methodologies and reduce or provide for additional accruals as appropriate. An increase or decrease to the workers’ compensation or general liability claims would affect the Company’s results of operations by increasing or decreasing the Company’s occupancy and other expense.

~~Item~~• 7The Company is subject to various claims and legal actions in the ordinary course of business. ~~Management~~ Some of these matters include landlord disputes, professional liability, employee-related matters, and investigations by governmental agencies regarding employment practices. The Company is currently in a dispute with a landlord relating to common area maintenance charges and a former employee relating to employment matters, and accordingly has recorded a liability for its estimated losses under these disputes totaling $201,000, which was based on invoices received from the landlord, and management’s ~~Discussion~~best ~~and~~estimate ~~Analysis~~of the potential cost of ~~Financial~~the ~~Condition~~lawsuit. In addition, On October 2, 2003, a purported stockholder class action lawsuit relating to the merger was filed against the Company and ~~Results~~other ofdefendants. ~~Operations~~The claims have not progressed sufficiently for the Company to estimate a range of

~~The~~17 statements contained 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 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) timing for implementation of its new accounting software program, (v) need to obtain additional financing, (vi) future restaurant sales, (vii) plans to close existing restaurants, 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 centers.

The followingTable shouldof be read in conjunction with the “Selected Financial Data” and the Company’s financial statements and related notes thereto. Contents

~~General~~ possible exposure, if any, and accordingly, the Company has not recorded a liability for its estimated losses under this dispute. 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, should the amounts it is currently disputing change, or should the Company be able to estimate the range of possible exposure for the stockholder class action lawsuit, it will re-evaluate its estimated losses and provide new or additional accruals for such contingencies as necessary.

The ~~Company~~following ~~has grown~~should ~~from~~be 2read ~~restaurants~~ in ~~1984~~conjunction towith ~~93 salad buffet restaurants as of September 30, 2001. Of~~ the ~~93 restaurants, 29 are located in Southern California using the name Souplantation and the remaining are located in Northern California (7), Florida~~ ~~(18),~~“Selected ~~Arizona~~Financial ~~(8),~~Data” ~~New Mexico (2), Utah (2), Nevada (2), Washington (1), Georgia (4), Texas (4), North Carolina (2), Oregon (3), Colorado (4), Missouri (3) Kansas (1)~~ and ~~Illinois (3) using~~ the ~~name Sweet Tomatoes. The~~ Company’s ~~existing restaurants~~financial ~~average~~statements approximately 7,400 square feet, however, newer restaurants are based on the Company’s latest 7,240 sq. ft prototype. The Company currently leases the sites for most of its restaurants, mixed between in-line locations and ~~stand-alone~~ ~~sites,~~related ~~although~~notes ~~the Company purchases sites when necessary to acquire desirable locations~~thereto.

~~Net~~General sales reflect discounts and coupons. Costs of sales consists primarily of food and beverage costs. Food costs can vary significantly depending upon pricing and availability of produce and grocery items. The Company attempts to minimize cost fluctuations for some of its foods by entering into two month to one year fixed price supply contracts that typically have no minimum purchase requirements. Restaurant operating expenses include all restaurant-level operating costs, the significant components of which are direct and indirect labor expenses (including benefits), advertising expenses, occupancy costs and maintenance and utility expenses. Occupancy and other operating expenses include rent, real estate taxes and insurance. Certain elements of the Company’s restaurant operating expenses and, in particular, occupancy costs, are relatively fixed. However, a significant majority of the Company’s leases provide for periodic escalation of minimum annual rentals based upon increases in the Consumer Price Index. Occupancy costs, as well as depreciation and amortization expenses, will vary between restaurants depending on whether a restaurant site is leased or owned. See “Business Risks—Cost Sensitivity” and “Business Risks—Reliance on Key Suppliers and Distributors.”

~~Restaurant~~The ~~opening~~Company has ~~costs~~grown ~~incurred~~from 2 restaurants in ~~connection~~1984 ~~with~~to ~~opening~~97 ~~new~~restaurants ~~restaurant~~as ~~locations~~of September 30, ~~including~~2003. ~~hiring~~Of the 97 restaurants, ~~training~~33 are located in Southern California using the name Souplantation and ~~legal~~the ~~costs,~~remaining are ~~currently~~located ~~expensed~~in asNorthern California (7), Florida (18), ~~incurred.~~Arizona ~~Restaurant~~(8), ~~opening~~New ~~costs~~Mexico ~~totaled~~(2), $Utah (2), Nevada (2), Washington (1),~~952~~ Georgia (4),~~000~~ ~~for~~Texas (4), North Carolina (2), Oregon (3), Colorado (4), Missouri (3) Kansas (1) and Illinois (3) using the ~~opening~~name ofSweet ~~nine~~Tomatoes. ~~new~~The ~~salad~~Company’s ~~buffet~~existing restaurants average ~~opened~~approximately 7,400 ~~one~~square ~~Slurp!~~feet, ~~location~~however, ~~one~~newer ~~distribution~~restaurants ~~center~~are ~~and~~based on the ~~re-opening~~Company’s oflatest ~~one~~7,240 ~~existing~~sq. ~~salad~~ft ~~buffet~~prototype. ~~restaurant~~The inCompany currently leases the ~~twelve~~sites ~~month~~for ~~period ended~~most ~~September~~of 30its restaurants, ~~2001~~mixed between in-line locations and stand-alone sites, although the Company purchases sites when necessary to acquire desirable locations.

22On September 30, 2003, the Company announced that it had entered into a definitive agreement to merge with an affiliate of Fairmont Capital, Inc. The merger agreement provides that the stockholders of Garden Fresh will receive $16.35 per share in cash for their shares of common stock. The merger is pending as of the date of this report.

~~Fiscal~~Net ~~2001~~sales ~~Versus~~reflect ~~Fiscal~~discounts ~~2000~~and coupons. Costs of sales consists primarily of food and beverage costs. Food costs can vary significantly depending upon pricing and availability of produce and grocery items. The Company attempts to minimize cost fluctuations for some of its foods by entering into two month to one year fixed price supply contracts, the majority of which have no minimum purchase requirements. Restaurant operating expenses include all restaurant-level operating costs, the significant components of which are direct and indirect labor expenses (including benefits), advertising expenses, occupancy costs and maintenance and utility expenses. Occupancy and other operating expenses include rent, real estate taxes and insurance. Certain elements of the Company’s restaurant operating expenses and, in particular, occupancy costs, are relatively fixed. However, a significant majority of the Company’s leases provide for periodic escalation of minimum annual rentals based upon increases in the Consumer Price Index. Occupancy costs, as well as depreciation and amortization expenses, will vary between restaurants depending on whether a restaurant site is leased or owned. See “Business Risks—Cost Sensitivity” and “Business Risks—Reliance on Key Suppliers and Distributors.”

~~Net~~Restaurant ~~Sales. Net~~opening ~~sales~~costs ~~for~~incurred ~~the~~in ~~fiscal~~connection ~~year~~with ~~ended~~opening ~~September~~new 30restaurant locations, ~~2001 increased~~including ~~20.0%~~hiring, totraining ~~$198.5~~and ~~million~~legal ~~from~~costs, ~~$165.4~~are ~~million~~currently ~~for~~expensed ~~the~~as ~~comparable 2000 period~~incurred. ~~This~~Restaurant ~~increase~~opening ~~was~~costs ~~primarily~~totaled ~~due~~$227,000 tofor the opening of ~~nine~~two new salad buffet restaurants opened and ~~the re-opening of~~ one ~~existing~~distribution ~~salad~~center ~~buffet restaurant since the comparable 2000 period and the increase~~ in ~~comparable restaurant sales of 3.3%. Net sales includes $0.6 million from~~ the ~~Ladles~~twelve ~~and~~month ~~Slurp!~~period ended ~~restaurants.~~September ~~See~~30, ~~“Business Risks—Certain Operating Results and Considerations”~~2003.

~~Costs~~Fiscal of2003 ~~Sales. Costs~~Versus ofFiscal ~~sales~~2002 increased 18.8% to $49.4 million for the fiscal year ended September 30, 2001 from $41.6 million for the comparable 2000 period. This increase was due primarily to the addition of nine new salad buffet restaurants and the re-opening of one existing salad buffet restaurant since the comparable 2000 period. As a percentage of net sales, costs of sales decreased to 24.9% from 25.2% since the comparable 2000 period as a result of an increase in the average meal price across most markets effective July 2000. See “Business Risks—Certain Operating Results and Considerations”.

~~Labor~~Net Sales. ~~Labor~~ ~~expense~~Net sales for the fiscal year ended September 30, ~~2001~~ 2003 increased 232.19% to $64220.45 million from $52214.3 million for the comparable ~~2000~~2002 period. This increase was due primarily to antwelve ~~increase~~months inof ~~the~~sales ~~minimum~~revenue ~~wage~~contributed ~~rate~~by inthe ~~California~~two ~~and~~new ~~increases~~restaurants inadded ~~staff~~during infiscal ~~connection~~2002 ~~with~~that ~~the~~were ~~addition~~not ofopen ~~nine~~for ~~new~~the ~~salad~~entire fiscal ~~buffet~~2002 ~~restaurants~~period, ~~and~~to the ~~re-~~opening of ~~one~~two ~~existing~~new ~~salad~~restaurants ~~buffet~~in ~~restaurant~~fiscal ~~since~~2003 and to the increase in comparable ~~2000~~restaurant ~~period~~sales of 1.6% Asfor afiscal ~~percentage~~2003. ofThe ~~net~~same store sales, ~~the~~increase ~~labor~~was ~~expense~~driven ~~increased~~by toan ~~32.5%~~increase ~~from~~in 31same store average meal price of 2.67%, offset by a decrease in ~~the~~guest ~~comparable~~counts ~~2000~~of ~~period~~1.1% ~~due~~since ~~primarily~~the tocomparable an2002 ~~increase~~period. inSee ~~the~~“Business ~~employee~~Risks—Certain ~~hourly~~Operating ~~wage~~Results ~~rates~~and Considerations”.

~~Occupancy~~18 and Other Expenses. Occupancy and other expenses for the fiscal year ended September 30, 2001 increased 34.5% to $47.2 million from $35.1 million for the comparable 2000 period. Occupancy and other expenses as a percentage of net sales increased to 23.7% from 21.2% for the comparable 2000 period. This increase was due primarily to planned marketing expenses, higher utility costs in California and higher natural gas costs in our other markets, higher property and general liability insurance costs as a result of increased rate pressure throughout the insurance industry, increases in base rent associated with sale-leasebacks, and increases in repair and maintenance costs for aging restaurants.

GeneralTable and Administrative Expenses. General and administrative expenses for the fiscal year ended September 30, 2001 increased 31.1% to $13.5 million from $10.3 million for the comparable 2000 period. These increases were primarily due to personnel costs, including planned increases to field supervision and human resources to support both the additional nine new salad buffet restaurants opened and one existing salad buffet restaurant reopened since the comparable 2000 period and future restaurant openings. As a percentage of net sales, general and administrative expenses increased to 6.8% from 6.2% for the comparable 2000 period. Contents

~~Restaurant Opening~~ Costs of Sales. ~~Restaurant~~ ~~opening~~Costs ~~costs~~of sales for the fiscal year ended September 30, ~~2001~~2003 ~~decreased~~increased 283.61% to $253.09 million from $252.83 million ~~from~~for the ~~2000~~comparable 2002 period. ~~Restaurant~~This ~~opening~~increase ~~costs~~was asdue aprimarily ~~percentage~~to ofthe ~~net~~two ~~sales~~new ~~decreased~~restaurants ~~0.7%~~added ~~to 1.0%~~during ~~from~~fiscal ~~1.7%~~2002 that were not open for the ~~comparable~~entire ~~2000~~fiscal 2002 period. ~~This~~and ~~decrease~~to ~~resulted~~the ~~from~~addition ~~fewer~~of two new ~~restaurant~~restaurants ~~openings~~in fiscal ~~during~~2003. ~~fiscal~~As ~~2001~~a ~~compared~~percentage toof net sales, costs of sales have remained consistent at 24.4% for fiscal ~~2000~~2003 and 2002. ~~Nine~~Should ~~salad~~the ~~buffet~~Company ~~restaurants~~continue ~~and~~to ~~one~~make ~~Slurp!~~expenditures ~~restaurant~~towards ~~were~~menu ~~opened~~improvement ~~and~~or ~~one~~to ~~existing~~support ~~restaurant~~specific ~~was re-opened~~programs, ~~during~~costs ~~fiscal~~of ~~2001~~sales ~~compared~~can be expected to ~~seventeen~~continue ~~salad~~to ~~buffet~~increase. ~~restaurants~~See ~~opened~~“Business ~~during~~Risks—Certain ~~fiscal~~Operating ~~2000~~Results and Considerations”.

~~Depreciation and Amortization Expense~~Labor. ~~Depreciation~~ ~~and~~Labor ~~amortization~~ expense for the fiscal year ended September 30, ~~2001~~2003 increased 282.95% to $1269.5 8 million from $968.71 million for the comparable ~~2000~~ 2002 period. ~~Depreciation~~This increase was due primarily to (i) an increase in the minimum wage rate in California, (ii) two new restaurants added during fiscal 2002 that were not open for the entire fiscal 2002 period, and ~~amortization~~(iii) ~~expense~~the asaddition of two new restaurants and one stand alone central kitchen opened in fiscal 2003. As a percentage of net sales, ~~increased~~labor expense decreased 0.1 percentage points to 631.37% from 531.98% ~~for~~since the comparable ~~2000~~2002 period. ~~These~~The ~~increases~~decrease ~~were~~as a percentage of net sales is due to ~~additional~~programs put ~~depreciation~~in ~~for~~place ~~the~~to ~~nine new~~better ~~salad~~utilize ~~buffet~~crew ~~restaurants~~labor ~~opened~~hours and ~~one~~reduce ~~existing~~the ~~salad~~number ~~buffet~~of ~~restaurant~~managers ~~re-opened~~in ~~since~~each ~~the~~store ~~comparable~~from ~~2000~~four ~~period~~to three, partially offset by ~~decreased~~higher ~~depreciation~~wage ~~expense~~rates ~~associated~~across ~~with~~markets, ~~the~~increased ~~sale-leaseback~~health ofand ~~five~~workers’ ~~restaurant~~compensation ~~locations~~insurance ~~during~~premiums ~~fiscal~~for ~~2001~~restaurant employees due to escalating rate pressures from the insurance industry, and increased costs for employee benefits. The Company expects health and workers’ compensation insurance premiums to continue to increase, especially in California, its largest employment base, resulting in increased labor expense.

23Occupancy and Other Expenses. Occupancy and other expenses for the fiscal year ended September 30, 2003 increased 9.0% to $56.8 million from $52.1 million for the comparable 2002 period. Occupancy and other expenses as a percentage of net sales increased 1.5 percentage points to 25.8% from 24.3% for the comparable 2002 period. This increase was due primarily to an increase in marketing expense, increases in base rent from Consumer Price Index (CPI) escalations for leased sites as well as increased rent from the sale-leaseback of one site during fiscal 2003. In addition, part of the increase can be attributed to higher utility costs and increased liability and property insurance costs as a result of increased rate pressure throughout the insurance industry. The Company anticipates occupancy and other expenses to increase as it continues to experience rising insurance premiums, increasing rent expense resulting from CPI escalation clauses under operating leases and higher repair and maintenance expenses relating 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 increased base rent related to new leases at those sites but experience a decrease in depreciation expense related to the sale of those assets. See “Business Risks—Other Operating Expenditures”.

~~Facility~~General ~~Exit Costs~~and Administrative Expenses. ~~Facility~~ ~~exit~~General ~~costs~~and administrative expenses for the fiscal year ended September 30, ~~2001~~2003 increased ~~220~~5.9% to $114.63 million from $013.5 million for the comparable ~~2000~~2002 period. InAs ~~September~~a ~~2001,~~percentage ~~the~~of ~~Company~~net ~~decided~~sales, general ~~to abandon the Ladles~~ and ~~Slurp!~~ ~~concepts~~administrative ~~due~~expenses toincreased ~~poor operating performance~~0.2 ~~The~~percentage ~~Company~~points ~~plans~~ to ~~close~~6.5% ~~these~~from ~~restaurants~~6.3% ~~during~~for the ~~first~~comparable ~~half of fiscal~~ 2002 period. ~~Facility~~The ~~exit~~increase ~~costs~~as ~~for~~a ~~fiscal~~percentage ~~2001 consist~~ of ~~impairment~~net ~~charges~~sales ofis ~~$1,368,000~~the asresult ~~well as an accrual~~ of ~~$204,000, representing~~increased ~~the~~staffing ~~present~~in ~~value of~~ the ~~estimated~~real ~~net~~estate ~~future~~and ~~lease~~marketing ~~payments~~departments ~~associated~~and increased ~~with~~fees ~~these restaurants. Facility exist costs~~ for ~~fiscal~~audit, ~~2000 consist of impairment charges of $375~~tax,~~000~~ asand ~~well~~legal ~~as an accrual of $98~~services,~~000~~ ~~representing~~which ~~the~~were ~~present value~~only ofpartially ~~the~~offset ~~estimated~~by ~~net~~higher ~~future lease payments associated with the closure of one Ladles restaurant~~sales.

~~Interest~~Restaurant ~~Expense~~Opening Costs. ~~Interest~~ ~~expense~~Restaurant opening costs for the fiscal year ended September 30, ~~2001~~2003 ~~increased~~decreased 3633.13% to $40.92 million from $30.63 million from ~~for~~ the comparable ~~2000~~ 2002 period due to the timing of restaurant openings. ~~Interest~~Two ~~expense~~salad ~~increased~~buffet ~~due~~restaurants ~~primarily~~and toone ancentral ~~increase~~kitchen infacility ~~borrowings~~were inopened during fiscal ~~2001~~2003 compared to two salad buffet restaurants and one distribution center opened in fiscal ~~2000~~2002. Restaurant opening costs as a percentage of net sales remained consistent at 0.1% for both the 2003 and 2002 period.

~~Other~~Depreciation ~~Income~~and ~~(Expense),~~Amortization ~~net~~Expense. ~~Other~~ ~~income~~Depreciation and amortization expense, ~~net~~ for the fiscal year ended September 30, ~~2001~~2003 increased 5.8% to $~~804,000~~14.5 million from ($~~65,000)~~13.7 million for the comparable ~~2000~~2002 period. ~~This~~Depreciation ~~increase~~and ~~was~~amortization ~~primarily~~expense ~~due~~as toa ~~the~~percentage ~~receipt~~ of annet ~~insurance~~sales ~~settlement~~increased ~~of $1~~0.32 ~~million~~percentage ~~related~~points to 6.6% from 6.4% for the ~~loss~~comparable of2002 ~~assets~~period. inThese aincreases ~~fire~~are atthe aresult ~~restaurant~~of additional inexpense ~~San~~related ~~Diego,~~to ~~California.~~ the opening

~~Provision~~19 ~~for Income Taxes. Our provisional income tax rate as a percentage of income before taxes increased slightly to 39.5% for fiscal 2001 from 39.3% in fiscal 2000.~~

FiscalTable 2000of Versus Fiscal 1999 Contents

~~Net~~ of ~~Sales. Net~~two ~~sales for~~new ~~the~~restaurants ~~fiscal~~and ~~year~~the ~~ended~~stand-alone ~~September~~kitchen 30facility, ~~2000~~and ~~increased~~to ~~25.4%~~a tofull ~~$165.4~~year ~~million~~of ~~from~~depreciation ~~$131.9~~expense ~~million~~related ~~for~~to the ~~comparable~~addition ~~1999~~of ~~period.~~a ~~This~~new ~~was~~corporate ~~due~~office ~~primarily~~and the toamortization ~~(i)~~of a ~~3.1%~~new ~~increase~~accounting insoftware ~~comparable~~package ~~restaurant~~compared ~~sales~~to ~~which~~the ~~resulted~~2002 ~~from~~period, anwhere ~~increase~~only ina ~~guest volume~~partial amount of ~~0.3%~~these ~~and~~charges ~~2.8%~~were ~~resulted~~included ~~from~~in anthe ~~increase~~balance. inThese ~~average~~increases ~~meal~~were ~~price~~partially ~~effective~~offset ~~August~~by 1,decreased ~~1999~~depreciation ~~and~~expense ~~(ii)~~associated with the sale-leaseback ~~addition~~ of ~~seventeen~~one ~~new~~restaurant ~~stores~~site ~~that~~since ~~opened~~the incomparable ~~fiscal~~2002 ~~2000~~period. ~~Net sales includes $0.8 million from the Ladles restaurants.~~

~~Costs~~Facility ofExit ~~Sales.~~ Costs. ofThe ~~sales~~Company ~~increased~~did ~~23.1%~~not incur any costs related to ~~$41.6~~ ~~million~~facility exit activities for the fiscal year ended September 30, ~~2000~~2003 ~~from~~compared ~~$33.8 million for the comparable 1999 period. This increase was due~~ to ~~an increase in guest volume. As~~ a ~~percentage~~gain of ~~net sales, cost of sales decreased to 25~~$0.2%1 ~~from~~million ~~25.6%~~ for the comparable ~~1999~~2002 period~~, due to leveraged purchasing price variances across all regions and the utilization of our own delivery and distribution center for the West Coast restaurants beginning in April 2000~~.

~~Labor~~Merger Costs. ~~Labor~~ ~~expense~~The ~~for~~Company ~~the~~incurred ~~fiscal~~costs ~~year~~of ~~ended September 30~~$997,000 ~~2000 increased~~related ~~30.8%~~ to ~~$52.3~~the merger ~~million~~acquisition ~~from~~activities ~~$40.0~~that ~~million~~occurred ~~for~~during the ~~comparable~~fourth ~~1999~~quarter ~~period~~2003. ~~This~~These ~~increase~~costs ~~was~~include ~~due~~fees ~~primarily~~paid to anobtain ~~increase~~a infairness ~~the minimum wage in California~~opinion, ~~the~~legal ~~opening~~and ofaccounting ~~seventeen restaurants~~services, ~~which require higher labor utilization during the first ninety days,~~ and ~~increased~~other ~~staffing~~transaction ~~requirements~~related ~~resulting from the increase in guest volume~~costs. AsThese aexpenses ~~percentage~~are ofexpected ~~net sales, labor expense for the fiscal year ended September 30, 2000 increased~~ to ~~31.6%~~continue ~~from 30.3% in~~ until the ~~comparable~~transaction ~~1999 period,~~is ~~primarily due to increased employee hourly wage rates~~completed.

~~Occupancy~~Interest ~~and Other Expenses~~Income. ~~Occupancy~~ ~~and~~Interest income ~~other expenses~~ for the fiscal year ended September 30, ~~2000~~2003 ~~increased~~was ~~28.6% to~~ $~~35.1~~55,000 ~~million~~compared ~~from~~to $~~27.3 million~~85,000 for the comparable ~~1999~~2002 period. ~~Occupancy and other operating costs~~ as a ~~percentage~~result of ~~net~~lower ~~sales~~interest ~~increased~~rates tocombined ~~21.2%~~with ~~from~~decreased ~~20.7%~~investing ~~for~~activity ~~the comparable 1999 period. This was primarily due to an increase in repair and maintenance for aging restaurants, and increased costs for utilities, supplies costs and janitorial services~~ of ~~0.1%,~~available 0cash.~~2%,~~ ~~0.1%, and 0.1% respectively.~~

~~General~~Interest ~~and Administrative Expenses~~Expense. ~~General~~ ~~and~~Interest ~~administrative~~expense ~~expenses~~ for the fiscal year ended September 30, ~~2000~~2003 ~~increased~~decreased 2517.68% to $~~10.~~3.7 million from $84.25 million for the comparable ~~1999~~2002 period. ~~This~~as ~~increase~~a ~~was~~result ~~due~~of tolower ~~personnel~~interest rates and ~~travel~~the ~~costs~~reduction ~~associated with supporting stores~~ in ~~new~~debt ~~regions.~~balances Assince athe ~~percentage~~same ofperiod ~~net~~in ~~sales, general and administrative expenses were 6.2%, which approximated~~ the ~~comparable~~prior ~~1999~~fiscal ~~period~~year.

24Other Income (Expense), net. Other expense, net for the fiscal year ended September 30, 2003 increased to $639,000 from $394,000 for the comparable 2002 period. The additional expense for the 2003 period is due to increased asset disposals during fiscal 2003 compared to the same period in fiscal 2002.

~~Restaurant~~Provision ~~Opening Costs. Restaurant~~for ~~opening~~Income ~~costs~~Taxes. ~~for~~For the fiscal year ended September 30, 2003, ~~2000~~the ~~were~~provisional ~~$2.8~~income ~~million~~tax orrate ~~1.7%~~as a percentage of ~~net~~income ~~sales~~before taxes increased 6.0 ~~Prior~~percentage points to 47.0% from 41.0% for the ~~implementation~~comparable period in fiscal 2002 as a result of ~~SOP~~higher ~~98-5~~apportionment of taxable earnings to states such as California and Illinois that have greater marginal income tax rates, inand a larger amount of permanent differences associated with the ~~1999~~merger ~~period~~costs, $2which are non-deductible for tax purposes.4 ~~million~~The ofCompany ~~startup~~anticipates ~~costs~~that ~~were~~it ~~amortized~~will continue to ~~and~~experience ~~were~~the ~~included~~effects inof ~~depreciation~~apportionment ~~and~~on ~~amortization~~its ~~expenses~~taxable earnings should it continue to expand into or continue to concentrate within states with greater marginal income tax rates.

~~Depreciation~~Fiscal ~~and~~2002 ~~Amortization~~Versus ~~Expense. Depreciation~~Fiscal ~~and~~2001 amortization expense for the fiscal year ended September 30, 2000 increased 3.2% to $9.7 million from $9.4 million for the comparable 1999 period. Depreciation expense increased due primarily to the additional restaurants open for the entire year, additional restaurants owned versus leased and the seventeen new restaurants opened since the comparable 1999 period. Depreciation and amortization expense as a percentage of net sales decreased to 5.9%, from 7.2% for the comparable 1999 period resulting from the change in accounting for startup costs effective October 1, 1999, which are now being expensed as incurred.

~~Interest Income~~Net Sales. ~~Interest~~ ~~income~~Net sales for the fiscal year ended September 30, ~~2000~~2002 increased 338.30% to $~~148,000~~214.3 million from $~~111,000~~198.5 million for the comparable ~~1999~~ 2001 period. ~~Interest~~This ~~income~~increase ~~increased~~was due primarily to ~~more~~twelve ~~cash~~months onof ~~hand~~sales revenue contributed by the nine new restaurants added and one existing restaurant re-opened during fiscal ~~2000~~2001 that were not open for the entire fiscal 2001 period, the opening of two new restaurants since the comparable 2001 period and the increase in comparable restaurant sales of 2.1%. The same store sales increase was driven by an increase in same store average meal price of 2.1% since the comparable 2001 period. Net sales for 2002 includes $0.3 million from the Ladles and Slurp! restaurants compared to $0.6 million for 2001. See “Business Risks—Certain Operating Results and Considerations”.

~~Interest~~Costs ~~Expense~~of Sales. ~~Interest~~ ~~expense~~ Costs of sales for the fiscal year ended September 30, 2002 ~~2000~~ increased ~~125~~5.9% to $352.63 million from $149.64 million for the comparable ~~1999~~2001 period. ~~Interest~~This ~~expense~~increase ~~increased~~was due primarily tothe annine ~~increase~~new restaurants added and one existing restaurant re-opened during fiscal 2001 that were not open for the entire fiscal 2001 period and the addition of two new restaurants in ~~debt~~fiscal 2002. As a percentage of ~~$17~~net sales, costs of sales decreased 0.5 percentage points to 24.4% ~~million~~from 24.9% since the comparable 2001 period. The decrease as a percentage of net sales is due to increases in average meal price during fiscal ~~2000~~2002 and to efficiencies achieved through the utilization of the East Coast distribution center resulting in lower food costs. See “Business Risks—Certain Operating Results and Considerations”.

~~Other~~20 Income (Expense), net. Other income and expense, net, for the fiscal year ended September 30, 2000 decreased 64.5% to $(65,000) from $(183,000) for the comparable 1999 period. This decrease was primarily due to fewer write-offs of fixed assets during fiscal 2000, compared to fiscal 1999.

ProvisionTable for Income Taxes. Our provisional income tax rate as a percentage of income before taxes decreased slightly from 39.7% during fiscal year 1999 to 39.3% for fiscal year 2000. Contents

25Labor. Labor expense for the fiscal year ended September 30, 2002 increased 5.7% to $68.1million from $64.4 million for the comparable 2001 period. This increase was due primarily to an increase in the minimum wage rate in California and to the nine new restaurants added and one existing restaurant re-opened during fiscal 2001 that were not open for the entire fiscal 2001 period and the addition of two new restaurants opened in fiscal 2002. As a percentage of net sales, labor expense decreased 0.7 percentage points to 31.8% from 32.5% since the comparable 2001 period. This decrease is due to increases in average meal price during fiscal 2002 and programs put in place to better utilize crew labor hours and reduce the number of managers in each store from four to three.

~~Quarterly~~Occupancy ~~Results~~and Other Expenses. Occupancy and ~~Seasonality~~other expenses for the fiscal year ended September 30, 2002 increased 10.4% to $52.1 million from $47.2 million for the comparable 2001 period. Occupancy and other expenses as a percentage of net sales increased 0.6 percentage points to 24.3% from 23.7% for the comparable 2001 period. This increase was due primarily to 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. During the fiscal year ended September 30, 2002, the Company completed four sale-leaseback transactions whereby the Company sold and leased back the land and building for four separate restaurant sites.

~~The~~General ~~following~~and ~~table~~Administrative ~~sets~~Expenses. ~~forth~~General ~~certain~~and ~~unaudited~~administrative ~~quarterly~~expenses ~~results~~for ~~and~~ the ~~percentage~~fiscal ~~that~~years ~~certain~~ended ~~items~~September 30, in2002 ~~the~~and ~~Company’s~~2001 ~~statements~~remained ofconsistent ~~operations~~at ~~bear~~$13.5 tomillion. As a percentage of net sales, ~~for~~general ~~the~~and ~~four~~administrative ~~quarters~~expenses ofdecreased ~~fiscal~~0.5 ~~2000~~percentage ~~and~~points ~~2001~~to 6.3% ~~The~~from ~~Company~~6.8% ~~believes~~for ~~that~~the ~~this~~comparable ~~unaudited~~2001 ~~quarterly~~period. ~~information~~The ~~includes~~decrease ~~all~~as ~~adjustments,~~a ~~consisting~~percentage ~~only~~ of ~~normal~~net ~~recurring~~sales ~~adjustments~~is the ~~and~~result ~~accruals,~~of ~~necessary~~higher ~~for~~net asales ~~fair~~and ~~presentation~~to ofreduced ~~the~~spending ~~information~~due ~~shown.~~to ~~The~~a ~~operating~~reduction ~~results~~in ~~for~~staff ~~any~~and ~~quarter~~programs ~~are~~put ~~not~~in ~~necessarily~~place ~~indicative~~to ofbetter ~~results~~manage ~~for~~general ~~any~~and ~~future~~administrative ~~period~~expenditures.

	Fiscal 2000												Fiscal 2001
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars in thousands)
Statement of Operations Data:
Net sales		$35,702			$40,783			$42,657			$46,264			$43,359			$51,322			$52,103			$51,679
Operating income		2,070			3,761			3,958			3,274			797			3,543			3,429			52
Income before cumulative effect of accounting change		801			1,867			1,894			1,214			571			1,408			1,259			(876	)
Net income		(432	)		1,867			1,894			1,214			571			1,408			1,259			(876	)
Basic net income (loss) per common share		$ (0.08	)		$ 0.33			$ 0.34			$ 0.21			$ 0.10			$ 0.25			$ 0.22			$ (0.15	)
Diluted net income (loss) per common share		$ (0.08	)		$ 0.32			$ 0.33			$ 0.21			$ 0.10			$ 0.25			$ 0.22			$ (0.15	)
As a Percentage of Net Sales:
Operating income		5.8	%		9.2	%		9.3	%		7.9	%		1.8	%		6.9	%		6.6	%		0.1	%
Income before cumulative effect of accounting change		2.2	%		4.6	%		4.4	%		2.6	%		1.3	%		2.7	%		2.4	%		(1.7	)%
Selected Operating Data:
Number of salad buffet restaurants open at end of period		71			71			79			83			86			88			91			93
Percentage change in comparable restaurant sales(1)		2.4	%		4.8	%		2.8	%		2.8	%		3.4	%		4.7	%		3.5	%		1.4	%

Restaurant Opening Costs. Restaurant opening costs for the fiscal year ended September 30, 2002 decreased 85.0% to $0.3 million from $2.0 million from the comparable 2001 period. Restaurant opening costs as a percentage of net sales decreased 0.9 percentage points to 0.1% from 1.0% for the comparable 2001 period. The decrease is consistent with the Company’s reduction in restaurant opening activity during fiscal 2002 compared to fiscal 2001. Two salad buffet restaurants were opened during fiscal 2002 compared to nine salad buffet restaurants and one Slurp! restaurant opened and one existing restaurant re-opened during fiscal 2001.

~~(1)~~Depreciation ~~Comparable~~and ~~restaurant~~Amortization ~~sales~~Expense. ~~are~~Depreciation ~~computed~~and onamortization aexpense ~~monthly~~for ~~basis~~the ~~and~~fiscal ~~then~~year ~~aggregated~~ended September 30, 2002 increased 9.6% to ~~determine~~$13.7 million from $12.5 million for the comparable ~~restaurant~~2001 ~~sales~~period. onDepreciation and amortization expense as a ~~quarterly~~percentage orof ~~annual~~net ~~basis~~sales increased 0.1 Apercentage ~~restaurant~~points isto ~~included~~6.4% infrom ~~this~~6.3% ~~computation~~for ~~after~~the itcomparable ~~has~~2001 ~~been~~period. ~~open~~These increases were due to additional depreciation for 15the ~~full~~two ~~calendar~~new ~~months.~~restaurants Asopened asince ~~result,~~the acomparable ~~restaurant~~2001 period ~~may~~and beto ~~included~~depreciation inexpense ~~this~~related ~~computation~~to ~~for~~the ~~only~~new aaccounting ~~portion~~software package and new corporate office, partially offset by decreased depreciation expense associated with the sale-leaseback of afour ~~given~~restaurant ~~quarter~~locations orsince ~~year~~the comparable 2001 period.

Facility Exit Costs. The Company’s ~~restaurants~~recorded ~~experience~~a gain ~~seasonal~~of ~~influences~~$0.1 million related to facility exit costs for the fiscal year ended September 30, as2002 acompared ~~disproportionate~~to ~~amount~~an expense of $1.6 million for the ~~Company’s~~ ~~net~~comparable ~~income~~2001 isperiod. ~~generally~~In ~~realized~~September ~~during~~2001, the ~~second,~~Company ~~third~~decided ~~and~~to ~~fourth~~abandon ~~fiscal~~the ~~quarters~~Ladles and Slurp! concepts due to ~~higher~~poor ~~average~~operating ~~sales~~performance. ~~and~~The ~~lower~~Company ~~average~~closed ~~costs~~these restaurants during the first half of fiscal 2002. ~~Quarterly~~Facility ~~results~~exit ~~have~~costs ~~fluctuated~~for ~~and~~fiscal ~~are~~2001 ~~expected~~consist toof ~~continue~~impairment tocharges ~~fluctuate~~of $1,368,000 as awell ~~result~~as an accrual of a$204,000, representing the present ~~number~~value of ~~factors~~the estimated net future lease payments associated with these restaurants. During fiscal 2002, ~~including~~the Company made cash payments to reduce the ~~timing~~liabilities for future rent payments of ~~new~~$121,000. ~~restaurant~~The ~~openings~~Company reversed the accrual for the remaining balance of $83,000 ~~and~~during ~~are~~the ~~not~~fourth ~~necessarily~~quarter ~~indicative~~of fiscal year 2002 due to the termination of the ~~results~~lease ~~that~~of ~~may~~the beLadles ~~achieved~~location ~~for~~and a ~~full~~long-term ~~fiscal~~sublease ~~year~~for the Slurp! location.

~~Liquidity~~Interest ~~and~~Income. ~~Capital~~Interest ~~Resources~~income for the fiscal year ended September 30, 2002 decreased 50.0% to $0.1 million from $0.2 million for the comparable 2001 period as a result of lower interest rates combined with decreased investing activity of available cash.

~~The~~Interest ~~Company finances its cash requirements principally from cash flow from operating activities, bank debt, mortgage financing, sale-leaseback of owned properties and sale of Company stock~~Expense. ~~The~~Interest ~~Company~~expense ~~does~~for ~~not have significant receivables and receives trade credit based upon negotiated terms when purchasing food and supplies. For~~ the fiscal year ended September 30, ~~2001,~~2002 ~~the~~decreased ~~Company generated $15~~8.~~6 million from operating activities, repaid $~~2.9% ~~million~~to ~~under its bank line of credit, obtained~~ $194.05 million from ~~equipment and mortgage financing (with repayments of~~ $104.59 million) ~~and~~for ~~received $0.1 million from~~ the ~~sale of the Company’s Common Stock~~comparable ~~pursuant~~2001 toperiod ~~stock~~as ~~option~~a ~~plans~~result ~~and the Company’s Employee Stock Purchase Plan. The Company’s principal capital requirement has been for funding the development~~ of ~~restaurants.~~lower ~~Historically,~~interest ~~the~~rates ~~Company has primarily leased the land~~ and ~~buildings~~ ~~for~~to ~~its restaurant operations. The Company does purchase land or land and buildings when favorable conditions are available. The Company currently owns~~ the ~~land~~reduction orin ~~land~~debt ~~and~~balances ~~buildings~~since ~~for 27 restaurants, including~~ the ~~land~~same ~~for~~period ~~certain~~in ~~sites~~ the ~~Company~~prior ~~expects to open during~~ fiscal ~~2002~~ year.

2621

andTable fiscal 2003. During fiscal 2001 the Company opened three owned salad buffet restaurant sites, six leased salad buffet restaurant sites, one leased Slurp! location, and one leased kitchen facility, reopened one leased restaurant site and completed sale-leasebacks for five restaurant sites. As of September 30, 2001, the Company operated 93 salad buffet restaurants, 1 Ladles restaurant, and 1 Slurp! restaurant. Contents

~~The~~Other ~~Company’s~~Income ~~principal~~(Expense), ~~capital~~net. ~~requirement~~Other ~~has~~income ~~been~~ and ~~will~~expense, ~~continue~~net tofor ~~be funding~~ the ~~development~~fiscal ~~of restaurants. For the~~ year ended September 30, 2002 ~~2001~~decreased to ($394,000) ~~cash~~from ~~used~~$804,000 infor ~~investing~~the ~~activities~~comparable ~~totaled~~2001 ~~$23~~period.4 ~~million~~This ~~including~~decrease ~~$12.5~~was ~~million~~primarily indue ~~proceeds~~to ~~from~~ the ~~sale-lease~~receipt ~~back~~ of ~~five~~an ~~restaurant~~insurance ~~locations~~settlement ~~which~~of ~~partially offset the~~ $241.03 million ofin ~~expenditures~~fiscal ~~for~~2001 related to the ~~development~~loss of ~~new~~assets ~~restaurants.~~in ~~The~~a ~~remaining~~fire ~~capital expenditures primarily funded replacements and new additions~~ at ~~existing~~a ~~restaurants.~~restaurant Inin ~~addition~~San ~~to budgeted capital expenditures for fiscal 2002 of~~Diego, ~~$16.4~~California ~~million~~which ~~for~~offset ~~new~~asset ~~restaurant~~disposals ~~openings,~~in the ~~Company~~same ~~has budgeted $5~~period.8 ~~million~~Expenses inincurred ~~expenditures~~during ~~for~~ fiscal 2002 ~~for~~relate ~~capital~~to ~~improvements~~asset ~~at existing sites~~disposals. ~~See “Business–Unit Economics.”~~

AsProvision offor ~~September~~Income ~~30, 2001, the Company had borrowed $9~~Taxes.2 ~~million~~For ~~of its $12 million bank line of credit. Such credit line bears interest at a rate equal to~~ the ~~prime~~fiscal ~~rate,~~year ~~which~~ended ~~totaled 6.0% per annum as of~~ September 30, ~~2001; or LIBOR plus 2%. As of September 30~~2002, ~~2001, none of~~ the ~~$12~~provisional ~~million~~income ~~credit~~tax ~~line~~rate ~~was~~as ~~borrowed~~a atpercentage ~~LIBOR.~~of ~~Borrowings~~income ~~under~~before ~~the~~taxes ~~line~~increased ~~of credit are collateralized by equipment and other assets~~1.4 ~~The~~percentage ~~credit~~points ~~agreement will expire on December 31, 2001 and contains various financial covenants and restrictions, including restrictions on the Company’s ability~~ to ~~pay~~41.0% ~~dividends or~~from ~~to effect mergers or acquisitions without the bank’s approval~~39.6% Asfor ~~of September 30, 2001,~~ the ~~Company~~comparable ~~was~~period ~~not~~ in ~~compliance~~fiscal ~~with certain financial covenant provisions of the credit agreement. However the financial institution has waived the violations through September 30,~~ 2001 ~~and~~as ~~has negotiated~~ a ~~new~~result ~~credit agreement with the Company consisting~~ of ~~two~~higher ~~term~~apportionment ~~loans in the amount~~ of ~~$6.0~~taxable ~~million~~earnings due December 31, 2002, and $2.7 million, due March 31, 2002, respectively. The new term loans require scheduled repayments of principal and interest at regular intervals throughout the terms of the agreement and bear interest at a rate equal to ~~either~~states ~~the~~such ~~prime~~as ~~rate~~California ~~or LIBOR plus 2%,~~ and ~~prime~~Illinois ~~rate~~that orhave ~~LIBOR~~greater ~~plus~~marginal ~~2.5%,~~income ~~respectively.~~tax ~~The new term loans are collaterized by equipment and other assets of the Company~~rates. ~~This new agreement contains various financial covenants and restrictions.~~

InQuarterly ~~connection~~Results ~~with the development of new restaurants, the Company has over time obtained mortgage~~ and ~~equipment~~Seasonality financing from approximately nine lenders, each of which has financed multiple loans. The outstanding balance of each loan generally is between $0.1 million and $1.9 million. The loans have varying maturity rates extending through August 2006, interest rates generally ranging from 7.52% through 10.72% with an average interest rate of 9.12% per annum, and in certain cases, pre–payment penalties of one to two percent. As of September 30, 2001, the outstanding balances on such loans aggregated approximately $48.1 million.

InThe ~~addition~~following totable ~~funds~~sets ~~generated~~forth ~~from~~certain ~~operations,~~unaudited ~~sale-leaseback~~quarterly ~~of owned~~results ~~properties~~ and the percentage ~~sale~~that ofcertain items in the Company’s ~~stock,~~statements ~~the~~of ~~Company~~operations ~~will~~bear ~~need~~ to ~~obtain~~net ~~external~~sales ~~financing~~for tothe ~~complete~~four ~~its~~quarters ~~expansion~~of ~~plans for~~ fiscal ~~year~~ 2002 and ~~beyond~~2003. ~~There~~The ~~can~~Company bebelieves ~~no assurance~~ that ~~such~~this ~~funds~~unaudited ~~will~~quarterly beinformation ~~available~~includes ~~when~~all ~~needed. Additionally~~adjustments, ~~should~~consisting ~~the~~only ~~Company’s results~~ of normal ~~operations~~recurring ~~decrease~~adjustments orand ~~should costs or capital expenditures rise~~accruals, ~~the~~necessary ~~Company~~for ~~may~~a ~~not~~fair ~~have~~presentation of the ~~ability~~information toshown. ~~open~~The ~~new~~operating ~~restaurants~~results atfor ~~its~~any ~~desired~~quarter ~~pace~~are ornot atnecessarily ~~all,~~indicative ~~because~~of ~~capital~~results ~~may~~for ~~not~~any befuture ~~available~~period. ~~See~~ ~~“Business Risks—Expansion Risks.”~~

If these sources of financing are insufficient to satisfy the Company’s liquidity requirements, the Company may be required to sell additional equity or debt securities or obtain additional credit facilities. There is no assurance that financing will be available to the Company on favorable terms, or at all.

	Fiscal 2002												Fiscal 2003
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars in thousands)
Statement of Operations Data:
Net sales	$	47,879		$	55,948		$	55,713		$	54,756		$	49,685		$	56,445		$	56,629		$	57,730
Operating income		170			5,198			4,922			4,016			1,392			3,651			3,410			1,460
Net income (loss)		(692	)		2,394			2,243			1,640			206			1,575			1,340			(128	)
Basic net income (loss) per common share	$	(0.12	)	$	0.42		$	0.39		$	0.29		$	0.04		$	0.27		$	0.23		$	(0.02	)
Diluted net income (loss) per common share	$	(0.12	)	$	0.42		$	0.38		$	0.28		$	0.03		$	0.27		$	0.23		$	(0.02	)
As a Percentage of Net Sales:
Operating income		0.0	%		9.3	%		8.8	%		7.3	%		2.8	%		6.5	%		6.0	%		2.5	%
Net income (loss)		1.4	%		4.3	%		4.0	%		3.0	%		0.4	%		2.8	%		2.4	%		0.2	%

Selected Operating Data:
Number of salad buffet restaurants open at end of period		94			95			95			95			95			97			97			97
Percentage change in comparable restaurant sales⁽¹⁾		0.4	%		2.3	%		2.9	%		2.4	%		3.6	%		(1.1	)%		0.3	%		3.9	%

~~Impact~~(1) Comparable restaurant sales are computed on a monthly basis and then aggregated to determine comparable restaurant sales on a quarterly or annual basis. A restaurant is included in this computation after it has been open for 15 full calendar months. As a result, a restaurant may be included in this computation for only a portion of ~~Inflation~~a given quarter or year.

The ~~primary~~Company’s ~~inflationary~~restaurants ~~factors~~experience ~~affecting~~seasonal influences, as a disproportionate amount of the Company’s ~~operations~~net ~~include~~income ~~food~~ is generally realized during the second, third and ~~beverage~~fourth fiscal quarters due to higher average sales and ~~labor~~lower average costs. ~~The~~However, during the fourth quarter of fiscal year 2003, the Company ~~does~~incurred ~~not~~costs ~~believe~~of ~~that~~$997,000 ~~inflation~~related ~~has~~to ~~materially~~the ~~affected~~merger ~~earnings~~transaction, ~~during~~which ultimately resulted in the ~~past~~Company ~~four~~incurring ~~years~~a net loss for the period. ~~Substantial~~Had ~~increases~~these charges not been incurred, fourth quarter results would have resulted in ~~costs~~net income for the quarter. Quarterly results have fluctuated and ~~expenses,~~are ~~particularly~~expected ~~food,~~to ~~supplies~~continue to fluctuate as a result of a number of factors, ~~labor~~including ~~and~~the ~~operating~~timing ~~expenses~~of new restaurant openings, ~~could~~and ~~have~~are not necessarily indicative of the results that may be achieved for a full fiscal year.

2722

aTable significantof impact on the Company’s operating results to the extent that such increases cannot be passed along to guests. Contents

~~Effects~~Liquidity ofand ~~Energy~~Capital ~~Crisis~~Resources

The Company’s ~~continues~~principal tocapital ~~experience~~requirement ~~increased~~has ~~energy~~been ~~costs~~both ~~related~~for tofunding the ~~California~~development ~~energy~~of ~~crisis~~new restaurants and toimproving existing ~~higher~~restaurants. ~~natural~~The ~~gas~~Company ~~prices~~finances in its ~~other~~cash ~~markets.~~requirements Inprincipally ~~addition~~from tocash ~~higher utility~~flows ~~costs,~~from ~~the~~operating ~~California~~activities, ~~energy~~bank ~~crisis~~debt, ~~has~~mortgage ~~resulted~~financing, inequipment ~~electricity~~lease ~~shortages~~financing, ~~that~~sale-lease ~~have~~back ~~caused~~of ~~power~~owned ~~providers~~properties toand ~~implement~~the ~~rolling~~sale ~~blackouts~~of ~~throughout~~Company ~~the state~~stock. ~~Disruptions~~Cash and incash ~~the~~equivalents ~~power~~increased ~~supply~~$5.8 ~~could~~million ~~occur~~to in$11.1 ~~areas~~million ~~where~~at ~~Company~~September ~~restaurants are located~~30, ~~causing~~2003 ~~those~~from ~~restaurants to experience temporary interruptions in operations~~$5.3 ~~Such~~million ~~interruptions~~at inthe ~~operations~~beginning ~~may~~of ~~result~~the infiscal ~~lost revenue and affect store profitability~~year. The ~~increased~~higher ~~utility~~cash ~~and~~balance ~~natural~~at ~~gas~~September ~~costs~~30, ~~were~~2003 ~~not~~resulted ~~part~~from ofcash ~~the Company’s~~generated ~~original~~from ~~plan~~operations and ~~will continue to affect~~ the ~~Company’s~~receipt ~~profitability.~~of proceeds Inrelated ~~addition,~~to ~~there~~financing ~~can~~activities beduring ~~no assurance that~~ the ~~interruptions~~year inended ~~power~~September ~~supplies~~30, ~~resulting~~2003. ~~from~~These ~~the~~proceeds ~~energy~~were ~~shortages~~used into ~~California~~fund ~~will~~capital ~~not~~expenditures ~~also impact the Company’s operating results~~ and ~~ability~~ to ~~control~~repay ~~costs~~borrowings inthat ~~the~~existed ~~future~~previously.

~~New~~Capital ~~Accounting~~expenditures ~~Standards~~totaled $11.2 million during fiscal 2003 and $12.8 million for the comparable period in fiscal 2002. During fiscal 2003, the Company made capital expenditures of $6.0 million (including the decrease in construction costs included in accounts payable) for construction of two new restaurants and a stand-alone kitchen facility, which opened during the second quarter of fiscal 2003, and $5.2 million for capital improvements at existing sites. For fiscal 2002, the Company paid $4.7 million (including the decrease in construction costs included in accounts payable) for the opening of two new restaurants, and construction of future restaurants, and paid $8.0 million for capital improvements at existing restaurants. The cash investment to open a new restaurant excludes restaurant opening costs and typically includes the purchase or installation of furniture, fixtures, equipment and leasehold improvements, and in the case of an owned site, the purchase of land and a building.

InThe ~~July~~Company’s ~~2001,~~original ~~the~~capital ~~Financial~~budget ~~Accounting~~for ~~Standards~~fiscal ~~Board~~2003 ~~(“FASB”)~~totaled ~~issued Statement of Financial Accounting Standards No~~$12.7 ~~141 (SFAS No. 141)~~million, ~~“Business~~which ~~Combinations”,~~included ~~and Statement No~~$6.7 ~~142~~million ~~(SFAS No. 142), “Goodwill and Other Intangible Assets”. SFAS No. 141 supersedes APB Opinion No. 16, “Business Combinations” and SFAS No. 38, “Accounting~~ for ~~Preacquisition~~the ~~Contingencies~~completion of ~~Purchases~~the ~~Enterprises”~~construction ~~and eliminates pooling-~~of~~-interests accounting prospectively. SFAS No. 141 was adopted on July 1, 2001. SFAS No. 142 supersedes APB~~ ~~Opinion~~three ~~No.~~new 17restaurants, ~~“Intangible~~one ~~Assets” and changes the accounting for goodwill from an amortization method to an impairment~~stand-~~only~~alone ~~approach.~~kitchen ~~Under~~facility ~~SFAS~~and No$6.0 ~~142,~~million ~~goodwill~~for ~~will~~capital beimprovements ~~tested~~for ~~annually~~existing ~~and whenever events or circumstances occur indicating that goodwill might be impaired~~facilities. ~~The~~In ~~provisions~~January ~~of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15~~2003, ~~2001.~~the ~~Upon~~Company ~~adoption~~completed ofits ~~SFAS~~development ~~No. 142, amortization~~ of ~~goodwill~~the ~~recorded~~two ~~for~~new ~~business combinations~~restaurants ~~consummated prior to July 1, 2001 will cease,~~ and ~~intangible assets acquired prior to July 1, 2001 that do not meet~~ the ~~criteria~~stand-alone ~~for~~kitchen ~~recognition under SFAS No~~facility. ~~141 will be reclassified to goodwill.~~ The ~~adoption of SFAS No. 141 did not~~ ~~have an impact on the~~ Company’s ~~financial~~currently ~~position or results of operations. The Company will adopt SFAS No. 142 on October 1, 2003. At this time, the Company~~ does not ~~anticipate~~have ~~that~~plans ~~the~~to ~~adoption~~open ofany ~~SFAS~~additional ~~No.~~restaurants ~~142~~in ~~will~~fiscal ~~have~~2004. aSee ~~material~~“Business ~~effect~~Risks—Expansion ~~on the Company’s financial statements~~Risks.”

InDuring ~~August~~fiscal ~~2001~~2003, the ~~FASB issued~~Company ~~Statement~~generated ~~of Financial Accounting Standards No~~$18.0 ~~143~~million ~~(SFAS~~in ~~No.~~cash ~~143),~~flows ~~“Accounting~~from ~~for~~operating ~~Asset Retirement Obligations~~activities,” ~~which~~obtained ~~addresses~~$8.7 ~~financial~~million ~~accounting~~from ~~and reporting for obligations associated with the retirement of tangible~~ long-~~lived~~term ~~assets~~equipment financing and ~~for the associated asset retirement costs~~$1.5 ~~The~~million ~~standard applies to tangible long-lived assets that have a legal obligation associated with their retirement that results~~ from the ~~acquisition,~~draw ~~construction~~on ~~or development or normal use of~~ the ~~asset.~~line ~~SFAS No. 143 requires that the fair value~~ of acredit, ~~liability~~received ~~for~~proceeds anfrom ~~asset retirement obligation be recognized in the period in which it is incurred if~~ a ~~reasonable~~sale-lease ~~estimate~~back transaction of ~~fair value can be made~~$3.1 ~~The~~million, ~~fair value of the liability is added to the carrying amount of the associated asset~~ and ~~this~~received ~~additional~~$0.7 ~~carrying~~million ~~amount~~from ~~is depreciated over~~ the ~~remaining~~sale ~~life~~ of the ~~asset.~~Company’s ~~The~~Common ~~liability~~Stock ispursuant ~~accreted at the end of each period through charges~~ to ~~operating~~stock ~~expense.~~option ~~The provisions~~plans ofand ~~SFAS No. 143 are required to be applied during~~ the Company’s ~~quarter~~Employee ~~ending~~Stock ~~December~~Purchase ~~31, 2003~~Plan. ToIn ~~accomplish this~~addition, the Company ~~must~~made ~~identify~~repayments ~~all~~of ~~legal~~$13.5 ~~obligations~~million ~~for~~towards ~~asset~~its ~~retirement~~long-term debt obligations, ~~if any,~~ and ~~determine~~$1.5 ~~the~~million ~~fair value~~ of ~~these obligations~~repayments on the ~~date~~line of ~~adoption.~~credit ~~The~~during ~~determination of fair value is complex and will require~~ the ~~Company~~year toended ~~gather~~September ~~market information and develop cash flow models. Additionally~~30, ~~the Company will be required to develop processes to track and monitor these obligations~~2003. ~~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.~~

InThe ~~October~~Company’s ~~2001~~current assets increased $6.0 million to $24.3 million at September 30, 2003 from September 30, 2002 primarily due to the ~~FASB~~increases ~~issued~~in ~~Statement~~cash ofand ~~Financial~~cash ~~Accounting~~equivalents, ~~Standards~~inventories Noand other assets. ~~144~~The ~~(SFAS~~Company’s Nocurrent liabilities increased $7.0 ~~144)~~million to $34.9 million at September 30, ~~“Accounting~~2003 ~~for~~from September 30, 2002 primarily due to an increase in accrued liabilities and the current portion of long term debt. The Company and the restaurant industry in general maintain insignificant receivables and vendors grant trade credit for purchasing ~~Impairment~~food orand ~~Disposal~~supplies. Inventories have increased $547,000 from September 30, 2002 in order to support the addition of ~~Long~~two new restaurants and a stand-~~Lived~~alone ~~Assets~~central kitchen during the year ended September 30,” 2003. The Company also continues to invest in the business through the addition of new restaurants and refurbishment of existing restaurants, which ~~addresses~~are ~~financial~~reflected ~~accounting~~as long-term assets and not as part of working capital. As of September 30, 2003 the current ratio increased to 0.70 to 1.0 compared with 0.66 to 1.0 at the beginning of the fiscal year, primarily due to the increase in cash and cash equivalents and inventories and the decrease in accounts payable, offset by an increase in current portion of long-term debt. There can be no assurance that the Company will continue to reduce its working capital deficit in the future.

28As of September 30, 2003, the Company operated 97 restaurants. The Company currently owns the land or land and buildings for 24 restaurants, including the land for two sites related to future openings. The Company opened two new restaurants and one new stand alone kitchen facility in January 2003, and as a result incurred restaurant opening costs of $227,000 during the year ended September 30, 2003. See “Business Risks—Expansion Risks.”

~~reporting~~23 for the impairment or disposal of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” it retains many of the fundamental provisions of SFAS No. 121, including the recognition and measurement of the impairment of long-lived assets to be held and used, and the measurement of long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the accounting and reporting provisions of Accounting Principles Board Opinion No. 30 (APB No. 30), “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. However, it retains the requirement in APB No. 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. At this time, the Company does not anticipate that the adoption of SFAS No. 144 will have a material effect on the Company’s financial statements.

29Table of Contents

~~BUSINESS~~The ~~RISKS~~Company requires capital principally to grow the business through new restaurant construction, as well as to maintain, improve and refurbish existing restaurants, and for general operating purposes. In addition to funds generated from operations, the Company may need to obtain external financing in the form of a sale-lease back of owned properties and long-term debt financing to complete its long-term plans for expansion of new restaurants and improvements to existing restaurants and 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 delay the development of new restaurants in the future and cease improvements to existing restaurants. Additionally, should the Company’s results of operations decrease it may not have the ability to pay its debt of $38.8 million outstanding at September 30, 2003. Based upon current levels of operations and anticipated growth, the Company expects that cash flows from operations, combined with other financing alternatives available, will be sufficient to meet debt service, capital expenditures and working capital requirements for the next twelve months. See “Business Risks—Capital Requirements.”

InThe ~~addition~~Company is subject to ~~other~~a ~~information~~number inof ~~this~~covenants ~~Form~~under ~~10–K~~various debt instruments, ~~shareholders~~including limitations on additional borrowings, acquisitions, capital expenditures, lease commitments and ~~prospective~~dividend ~~investors~~payments, as well as requirements to maintain certain financial ratios, cash flows and net worth. As of September ~~should~~30, ~~consider~~2003, ~~carefully~~the Company was not in compliance with a fourth quarter net income covenant. Management believes that this violation was the ~~following~~product ~~factors~~of the merger costs that were incurred during fourth quarter of fiscal year 2003, and expects to be in compliance ~~evaluating~~with the quarterly covenant in the future. The financial institution has issued a waiver of the violation through September 30, 2003. The Company’s original line of credit agreement expires on January 31, 2004 and ~~its~~the ~~business~~letter of credit issued will expire on April 1, 2004. In November 2003, the Company signed an amendment to this agreement extending the expiration until April 30, 2004.

~~Certain~~If ~~Operating~~the ~~Results~~merger agreement with GF Holdings is terminated under specific circumstances as set forth in the agreement, the Company will be liable to pay GF ~~and~~Holdings ~~Considerations~~a fee of $4.1 million

InTotal ~~fiscal~~debt ~~1999, 2000 and 2001, the Company~~outstanding ~~experienced~~decreased an$4.8 ~~increase~~million ofto 3$38.~~7%,~~8 ~~3.1%~~million, ~~and~~at ~~3.3%~~September ~~respectively~~30, in2003 ~~comparable~~from ~~restaurant sales~~$43.6 ~~The~~million ~~Company~~at ~~does not believe it has significant latitude to achieve comparable restaurant sales growth through price increases, and, as a result,~~ the ~~Company~~ ~~does~~beginning ~~not believe that recent comparable restaurant sales are indicative~~ of ~~future~~the ~~trends~~fiscal ~~in comparable restaurant sales~~year. The Company ~~believes~~is ~~that~~also itsubject ~~may from time~~ to ~~time~~payments inunder ~~the~~specific ~~future~~contractual ~~experience~~obligations ~~declines in comparable restaurant sales,~~ and ~~that~~ ~~any future increases in comparable restaurant sales may be modest~~commitments. ~~Further,~~A ~~the~~summary ~~Company’s~~of ~~newer~~those ~~restaurants~~contractual obligations ~~have~~and ~~not~~commercial ~~historically~~commitments ~~experienced~~as ~~significant~~of ~~increases~~September in30, ~~guest~~2003 ~~volume~~is ~~following~~as ~~their~~follows: ~~initial opening period. See “Selected Financial Data.”~~

Expansion Risks

	Payments due by period as of September 30, 2003 *(In thousands)*
Contractual obligations	Less than 1 year		1 – 3 years		3 – 5 years		Thereafter		Total
Long-term debt	$	17,606	$	19,442	$	1,777	$	—	$	38,825
Operating leases		14,279		25,805		22,576		88,349		151,009
Minimum purchase obligations ⁽¹⁾		1,802		147		—		—		1,949

Total cash contractual obligations	$	33,687	$	45,394	$	24,353	$	88,349	$	191,783

The Company opened ten salad buffet restaurants in fiscal 1999, seventeen in fiscal 2000, and ten in fiscal 2001 (opening nine new restaurants and re-opening one existing restaurant). The Company currently intends to open four restaurants in fiscal 2002. The Company may experience difficulty in opening four restaurants in fiscal 2002, including but not limited to hiring qualified restaurant managers and staff. The Company’s ability to achieve its expansion plans will depend on a variety of factors, many of which may be beyond the Company’s control, including the Company’s ability to locate suitable restaurant sites, qualified managers, negotiate acceptable leases or purchase terms, obtain required governmental approvals, construct new restaurants in a timely manner, attract, train and retain qualified and experienced personnel and management, operate its restaurants profitably and obtain additional capital, as well as general economic conditions and the degree of competition in the particular region of expansion. The Company has experienced, and expects to continue to experience, delays in restaurant openings from time to time.

	Amount of commitment expiration per period as of September 30, 2003 *(In thousands)*
Commercial commitments	Less than 1 year		1 – 3 years		3 – 5 years		Thereafter		Total
Guarantee ⁽²⁾	$	43	$	13	$	—	$	—	$	56
Letter of credit ⁽³⁾		1,702		—		—		—		1,702

Total commercial commitments	$	1,745	$	13	$	—	$	—	$	1,758

~~Since~~(1) ~~its~~Consists ~~inception,~~of ~~the Company~~procurement ~~has~~contracts ~~closed~~with ~~three~~minimum ~~non–performing~~purchase ~~restaurants~~obligations ~~and~~related ~~currently plans on closing the remaining Ladles restaurant and the Slurp! restaurant during the first half of fiscal 2002 due~~ to ~~poor~~tangible ~~operating performance~~goods. Given the number of restaurants in current operation and the 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 effect the Company’s business, financial condition and results of operations.

~~The~~(2) ~~Company~~Consists ~~incurs~~solely ~~substantial~~of ~~costs~~guarantee inassociated ~~opening~~with asub-leased ~~new~~property. ~~restaurant~~The ~~and, in the~~ Company’s ~~experience,~~is ~~new~~not ~~restaurants~~aware ~~experience~~of ~~fluctuating~~any ~~operational~~non-performance ~~levels~~under ~~for~~the ~~some~~sub-lease ~~time after~~arrangement ~~opening.~~that ~~Owned~~would ~~restaurants generally require significantly more up–front capital than leased restaurants. As a~~ result, ~~an increase~~ in ~~the~~our ~~percentage~~having ~~of owned restaurant openings as compared~~ to ~~historical~~perform ~~practice~~in ~~would~~accordance ~~increase~~with the ~~capital~~ ~~required~~terms toof ~~meet~~ the ~~Company’s~~guarantee ~~growth~~and plans. There can be no assurance that the Company will successfully expand into new regions or that the Company’s existing or new restaurants will be profitable. The Company has encountered intense competition for restaurant sitesaccordingly, ~~and in many cases~~ has ~~had~~not ~~difficulty~~recorded ~~buying~~a orliability ~~leasing~~related ~~desirable sites on terms that are acceptable~~ to ~~the~~this ~~Company~~guarantee. In ~~many cases,~~ the ~~Company’s~~event ~~competitors~~of ~~are~~non-performance ~~willing~~under ~~and~~the ~~able~~arrangement, ~~to pay more than~~ the ~~Company~~ ~~for sites. The~~ Company ~~expects~~would ~~these~~be ~~difficulties~~required ~~in obtaining desirable sites~~ to ~~continue~~fulfill ~~for~~ the ~~foreseeable~~lease ~~future~~obligation. ~~See “Restaurant Industry and Competition,” “Business–Expansion Strategy” and “Business–Competition.”~~

~~Restaurant~~24 ~~Industry and Competition~~

TheTable 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 Contents

(3) Letter of credit agreement is a security for the performance under the Company’s insurance agreement with its carrier. The agreement will remain in effect until the carrier deems the policy has no remaining liability. The carrier can draw on the letter of credit in the event that they receive a notice from the bank indicating that the letter of credit will not be renewed, or if the Company fails to reimburse the carrier up to an amount equal to the carrier’s claim for reimbursement. The letter of credit agreement with the bank is for an amount not to exceed $1,702,000 and expires on April 1, 2004, however is deemed to be automatically extended without amendment for one year after the expiration date. As of September 30, 2003, there have been no amounts drawn on the letter of credit. As part of establishing the letter of credit, the Company paid a fee of $19,500.

~~ambiance of the facilities.~~ The Company’s ~~primary~~is ~~competitors~~not ~~include~~aware ~~mid–price,~~of ~~full–service~~any ~~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~~factors, aswhich ~~well~~are asreasonably ~~individually~~likely ~~owned restaurants. The number of buffet and casual restaurants with operations generally similar~~ to ~~the~~affect ~~Company’s has grown substantially in~~ the ~~last~~liquidity, ~~several~~other ~~years~~than ~~and~~those ~~the~~discussed ~~Company~~above ~~believes competition among buffet–style~~ and ~~casual~~disclosed ~~restaurants~~as ~~has~~business ~~increased~~risks and ~~will~~risk ~~continue~~factors todisclosed ~~increase~~below. asWhile the Company’s ~~competitors~~has ~~expand~~noted ~~operations~~that incertain ~~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~~expenses, ~~although~~including ~~many~~insurance ~~of the~~and ~~Company’s~~occupancy ~~competitors which have been in existence longer than the Company~~costs, ~~have~~are arising ~~more established market presence~~ and ~~have substantially greater financial, marketing and other resources than~~ the ~~Company,~~economy ~~which~~has ~~may~~slowed ~~give them certain competitive advantages. In addition~~down, the ~~restaurant~~Company ~~industry~~believes ~~has~~that ~~few non–economic barriers to entry. Therefore,~~ there ~~can~~are besufficient nofunds ~~assurance~~available ~~that~~from ~~third~~operations, ~~parties~~the ~~will~~existing ~~not~~credit befacility ~~able to successfully imitate~~ and ~~implement~~ the ~~Company’s concept. The~~ ~~Company~~sale-lease ~~has~~back ~~encountered~~of ~~intense competition for~~ restaurant ~~sites,~~properties ~~and in many cases has had difficulty buying or leasing desirable sites on terms that are acceptable~~ to ~~the~~accommodate ~~Company. In many cases,~~ the Company’s ~~competitors~~future ~~are willing and able to pay more than the Company for sites~~operations. ~~The Company expects these difficulties in obtaining desirable sites to continue for the foreseeable future.~~

~~Cost~~Impact ~~Sensitivity~~of Inflation

The ~~Company’s~~ ~~profitability~~primary isinflationary ~~highly~~factors ~~sensitive~~affecting tothe ~~increases~~Company’s inoperations include food, ~~labor,~~and ~~utilities~~beverage and ~~other~~labor ~~operating~~ costs. The Company’s ~~dependence~~does onnot ~~frequent~~believe ~~deliveries~~that ofinflation ~~fresh~~has ~~produce~~materially ~~and~~affected ~~groceries~~earnings ~~subjects~~during ~~it to~~ the ~~risk~~past ~~that~~four ~~shortages~~years ~~or interruptions~~with ~~in supply caused by adverse weather or other conditions could materially adversely affect~~ the ~~availability, quality and cost~~ exception of ~~ingredients. In addition~~labor, ~~unfavorable~~which ~~trends~~was oraffected ~~developments~~by ~~concerning~~California ~~factors such as inflation, food, labor~~ and ~~employee~~Federal ~~benefit~~minimum ~~costs~~wage ~~(including~~increases. Substantial increases in ~~hourly~~costs ~~wage~~ and ~~minimum~~expenses, ~~unemployment~~particularly ~~tax rates)~~food, ~~rent increases resulting from the rent escalation provisions in the Company’s leases~~supplies, ~~and the availability of experienced management and hourly employees may also adversely affect the Company. The Company believes recent relatively favorable inflation rates and part–time~~ labor ~~supplies in its principal market area have contributed to relatively stable food~~ and ~~labor~~operating ~~costs in recent years. However~~expenses, ~~there~~could ~~can~~have bea nosignificant ~~assurance~~impact ~~that~~on ~~these conditions will continue or that~~ the Company’s ~~will~~operating results ~~have the ability~~ to ~~control costs in~~ the ~~future.~~extent ~~See~~that ~~“Reliance~~such onincreases ~~Key~~cannot ~~Suppliers~~be ~~and~~passed ~~Distributors,”~~along ~~and~~to ~~“Business~~guests.”

~~Importance~~New ofAccounting ~~Key~~Standards ~~Employees~~

~~The~~In ~~Company~~September is2002, the ~~heavily~~Financial ~~dependent~~Accounting ~~upon~~Standards ~~the~~Board ~~services~~(“FASB”) ofissued ~~its~~Statement ~~officers~~of ~~and~~Financial ~~key~~Accounting ~~management~~Standards ~~personnel~~No. ~~involved~~146 in(SFAS ~~restaurant~~No. ~~operations~~146), ~~purchasing,~~“Accounting ~~expansion~~for ~~and administration.~~Costs InAssociated ~~particular,~~with ~~the~~Exit ~~Company~~or isDisposal ~~dependent~~Activities”, ~~upon~~which ~~the~~addresses ~~management~~accounting for restructuring and ~~leadership~~similar ofcosts. ~~its~~SFAS ~~four~~No. ~~executive~~146 ~~officers,~~supersedes ~~Michael~~previous P.accounting ~~Mack~~guidance, ~~David~~principally W.Emerging ~~Qualls,~~Issues R.Task ~~Gregory~~Force ~~Keller~~Issue ~~and~~No. ~~Kenneth J~~94-3. ~~Keane~~SFAS No. ~~The~~146 ~~loss~~requires ofthat ~~any~~the ofliability ~~these~~for ~~four~~costs ~~individuals~~associated ~~could~~with ~~have~~an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a ~~material~~liability ~~adverse~~for ~~effect~~an onexit cost was recognized at the ~~Company~~date of the company’s ~~business,~~commitment ~~financial~~to ~~condition~~an ~~and~~exit ~~results~~plan. ofSFAS ~~operations~~No. ~~The~~146 ~~success~~also ofestablishes that the ~~Company~~liability should initially be measured and recorded ~~its~~at ~~individual~~fair ~~restaurants~~value. ~~depends~~Accordingly, ~~upon~~SFAS No. 146 may affect the ~~Company’s~~timing ~~ability~~of torecognizing ~~attract~~any ~~and~~future ~~retain~~restructuring ~~highly~~costs ~~motivated,~~ as well~~–qualified~~ ~~restaurant~~as ~~operations~~the ~~and~~amounts ~~other~~recognized. ~~management~~SFAS ~~personnel~~No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company ~~faces~~adopted ~~significant~~the ~~competition~~provisions inof SFAS No. 146 on January 1, 2003 and the ~~recruitment~~adoption of ~~qualified~~SFAS ~~employees~~No. ~~See~~146 ~~“Business–Restaurant~~did ~~Operations–Restaurant~~not ~~Management”~~have ~~and “Business–Restaurant~~a ~~Operations–Customer~~material ~~Service~~effect on its financial statements.”

~~Seasonality~~In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (SFAS No. 148), “Accounting for Stock Based Compensation—Transition and ~~Quarterly~~Disclosure”, ~~Fluctuations~~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 prominence of disclosures about the pro forma effects of using the fair value based method of accounting for stock-based compensation for all companies—regardless of the accounting method used—by requiring that the data be presented more prominently and in a more user-friendly format in the

~~The~~25 Company’s business experiences 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 fluctuated 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. See “Quarterly Results and Seasonality.”

31Table of Contents

~~Geographic~~ footnotes ~~Concentration~~to the financial statements. In addition, the Statement improves the timeliness of those disclosures by requiring that this information be included in ~~California~~interim as well as annual financial statements. The Company did not adopt the fair value based method of accounting for stock-based employee compensation. The Company adopted the interim and ~~Florida;~~annual ~~Restaurant~~disclosure ~~Base~~provisions of SFAS No. 148 in the quarter ended March 31, 2003 and year ended September 30, 2003, respectively,which did not have a material effect on its financial statements.

~~Thirty~~In ~~seven~~April of2003, the ~~Company’s~~FASB 94issued ~~existing~~Statement ~~salad~~of ~~buffet~~Financial ~~restaurants~~Accounting ~~are~~Standards ~~located in~~No. ~~California~~149 ~~and~~(SFAS ~~eighteen are located in Florida~~No. ~~Accordingly~~149), ~~the~~“Amendment ~~Company~~of isStatement ~~susceptible~~133 toon ~~fluctuations~~Derivative Instruments inand ~~its~~Hedging ~~business~~Activities.” ~~caused~~SFAS byNo. ~~adverse~~149 ~~economic~~amends orand ~~other~~clarifies ~~conditions~~accounting infor ~~these~~derivative ~~regions~~instruments, including ~~natural~~certain ~~disasters,~~derivative ~~such~~instruments asembedded ~~hurricanes which have occurred annually~~ in ~~recent~~other ~~years in Florida~~contracts, orand ~~other~~for ~~acts~~hedging ofactivities ~~God~~under ~~that~~SFAS ~~could~~No. ~~have a material adverse effect on the Company’s business~~133. ~~The~~In ~~Company’s significant investment in~~particular, this ~~and~~Statement ~~long–term~~clarifies ~~commitment~~under ~~to,~~what ~~each~~circumstances ofa ~~its~~contract ~~restaurant~~with ~~sites limits~~an ~~its~~initial ~~ability~~net toinvestment ~~respond~~meets ~~quickly~~the orcharacteristic ~~effectively~~of toa ~~changes~~derivative inand ~~local~~when ~~competitive~~a ~~conditions~~derivative orcontains ~~other~~a ~~changes~~financing component that ~~could~~warrants ~~affect~~special ~~the~~reporting ~~Company’s~~in ~~operations. In addition,~~ the ~~Company~~statement ~~has a small number~~ of ~~restaurants~~cash ~~relative to some of its competitors~~flows. This ~~Consequently,~~Statement ais ~~decline~~generally ineffective ~~the~~for ~~profitability~~contracts ofentered aninto ~~existing~~or ~~restaurant~~modified orafter ~~the~~September ~~introduction~~30, of2003, anand ~~unsuccessful~~is ~~new~~not ~~restaurant~~expected ~~could~~to have a ~~more~~material ~~significant~~impact ~~effect~~ on the Company’s ~~result~~financial ~~of operations than would be the case in a company with a larger number of restaurants~~statements. ~~See “Business–Restaurant Facilities” and “Business–Expansion Strategy.”~~

~~Reliance~~In onMay ~~Key~~2003, ~~Suppliers~~the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (SFAS 150), “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and ~~Distributors~~Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for the Company for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after September 15, 2003, and is not expected to have a material impact on the Company’s financial statements.

~~The~~In ~~Company~~November ~~utilizes~~2002, ~~sole~~the ~~source~~FASB ~~suppliers~~issued ~~for~~FASB ~~certain~~Interpretation ~~produce~~No. ~~and~~45 ~~grocery~~(FIN ~~items~~No. ~~In addition~~45), in“Guarantor’s ~~order~~Accounting toand ~~minimize~~Disclosure ~~price~~Requirements ~~fluctuations~~for Guarantees, Including ~~the~~Indirect ~~Company~~Guarantees ~~enters~~of ~~into~~Indebtedness ~~fixed~~of ~~price~~Others, ~~supply contracts~~an ~~that~~interpretation ~~typically have terms~~ of ~~two~~FASB ~~months~~Statements toNo. ~~one~~5, ~~year~~57, and ~~generally~~107 doand ~~not~~Rescission ~~have~~of ~~minimum~~FASB ~~purchase~~Interpretation ~~requirements~~No. ~~However,~~34.” inFIN ~~the~~No. ~~event~~45 ~~that~~elaborates ~~the~~on ~~Company’s suppliers are unable to make~~ the ~~required~~disclosures ~~deliveries due~~ to ~~shortages~~be ~~or interruptions~~made ~~caused~~ by ~~adverse~~a ~~weather~~guarantor orin ~~other~~its ~~conditions~~interim and orannual ~~are~~financial ~~relieved~~statements ofabout ~~their~~its ~~contract~~ obligations ~~due~~under tocertain anguarantees ~~invocation~~that ofit anhas ~~act of God provision, the Company would need to renegotiate these contracts or purchase such products and groceries elsewhere~~issued. ~~There~~It ~~can~~also berequires ~~no assurance~~ that ~~the~~a ~~Company’s~~guarantor ~~produce~~recognize, ~~and~~at ~~grocery~~the ~~costs~~inception ~~would~~of ~~not as~~ a ~~result be higher~~guarantee, ~~and such higher costs could have~~ a ~~material~~liability ~~adverse~~for ~~effect on~~ the ~~Company’s~~fair ~~business,~~value ~~financial~~of ~~conditions~~certain ~~and results of operations~~guarantees. The ~~Company~~initial recognition ~~has several local produce distributors~~ and ~~also~~initial ~~distributes~~measurement ~~other~~provisions ~~grocery~~of ~~items~~FIN ~~through~~No. ~~its~~45 ~~own~~are ~~distribution~~applicable ~~system~~on ~~out~~a ofprospective ~~one~~basis ~~warehouse~~to onguarantees ~~the~~issued ~~West~~or ~~Coast~~modified ~~and~~after ~~one~~December on31, ~~the East Coast~~2002. ~~All~~The ~~produce~~disclosure ~~and~~requirements ~~groceries~~of ~~purchased~~FIN byNo. ~~the Company~~45 are ~~channeled~~effective ~~from~~for ~~the~~interim ~~growers~~or ~~and~~annual ~~other~~periods ~~suppliers~~ending after toDecember ~~the Company’s warehouses~~15, ~~restaurants~~2002. ~~and~~The ~~restaurant~~Company ~~commissaries~~adopted ~~through these distributors. In~~ the ~~event~~disclosure ~~that~~provisions ~~any~~ of ~~these~~FIN ~~distributors~~No. ~~were~~45 toas ~~cease~~of ~~distribution~~January on1, ~~behalf of the Company~~2003, ~~the~~which ~~Company~~did ~~would~~not behave ~~required~~a tomaterial ~~make~~effect ~~alternate~~on ~~arrangements for produce. There can be no assurance that~~ the ~~Company’s~~financial ~~distribution expense would not be greater under such alternate arrangements~~statements. ~~See “Cost Sensitivity” and “Business–Restaurant Operations.”~~

~~Legal~~In ~~Matters~~January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risk will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. FIN No. 46 also requires enhanced disclosure requirements related to variable interest entities. FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period ending after December 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company does not believe that the adoption of this accounting pronouncement will have a material impact on our financial statements.

~~The~~In ~~Company~~November is2002, ~~from time to time~~ the ~~subject~~FASB’s ofEmerging ~~complaints,~~Issues ~~threat~~Task ~~letters~~Force or(EITF) ~~litigation~~discussed ~~from~~Issue ~~guests alleging~~02-16 ~~illness~~(EITF 02-16), ~~injury~~“Accounting orby ~~other~~a ~~food~~Customer ~~quality,~~(including ~~health~~a orReseller) ~~operational~~for ~~concerns.~~Cash ~~Adverse~~Consideration ~~publicity~~Received ~~resulting~~ from ~~such~~a ~~allegations~~Vendor”. ~~may~~Issue 02-16 ~~materially~~provides ~~adversely~~guidance ~~affect~~on ~~the~~how ~~Company~~a ~~and~~customer ~~its~~should ~~restaurants,~~account ~~regardless~~for ofcash ~~whether~~consideration ~~such~~received ~~allegations~~from ~~are~~a ~~valid~~vendor. ~~or whether~~This ~~the~~Issue ~~Company~~ is ~~liable.~~effective ~~The~~for ~~Company~~new isarrangements ~~party~~entered tointo ~~various~~after ~~legal~~December ~~actions~~15, ~~relating~~2002. toThe ~~former~~Company ~~employees.~~adopted In the ~~opinion~~provisions of ~~management,~~Issue ~~after~~02-16 ~~reviewing~~in the second ~~information~~quarter ~~which~~of isfiscal ~~currently~~year ~~available~~2003 ~~with~~for ~~respect~~all toprospective ~~these~~agreements ~~matters,~~with ~~and~~effective ~~consulting~~dates ~~with the~~after ~~Company’s~~January ~~counsel~~1, ~~any~~2003 ~~liability~~and ~~which~~the ~~may~~adoption ~~ultimately~~did benot ~~incurred~~have ~~will~~a ~~not~~material ~~materially~~impact ~~affect~~on the results of operations or financial position oras ~~results~~these type of ~~operations~~agreements ofwere previously ~~the~~accounted ~~Company.~~for ~~See~~in ~~“Legal~~a ~~Proceedings~~similar manner.”

~~Government~~26 ~~Regulation~~

TheTable Company’s business is subject to and affected by various federal, state and local laws. Each restaurant must comply with state, county and municipal licensing and regulation requirements relating to health, safety, sanitation, building construction and fire prevention. The Company’s restaurants are subject to federal and state laws governing wages, working conditions, citizenship requirements and overtime. Congress and various states (including California) passed proposals that imposed increases in state or federal minimum wages in 1996, 1997, 1998, 2000 and 2001. There is no assurance that the Company will be able to continue to pass increased costs on to its guests. The Company is subject to the Americans with Disabilities Act of 1990, which requires certain Contents

32BUSINESS RISKS

~~accommodations~~In toaddition ~~the Company’s restaurant designs~~ to ~~allow~~other ~~access~~information ~~for~~in ~~people~~this ~~with~~Form ~~disabilities. In addition~~10-K, ~~the~~shareholders ~~Company~~and isprospective ~~subject~~investors toshould ~~the~~consider ~~regulations~~carefully of the ~~Immigration and Naturalization~~ ~~Service~~following ~~(“INS”).~~factors ~~Given the location of many of the Company’s restaurants, even if the Company’s operation of those restaurants is~~ in ~~strict~~evaluating ~~compliance with INS requirements,~~ the Company’s ~~employees~~and ~~may not all meet federal citizenship or residency requirements, which could lead to disruptions in~~ its ~~work force~~business. ~~Additionally, legislative proposals are currently under consideration by Congress and state legislators to require employers to pay for health insurance for all employees.~~

~~Anti–takeover~~Certain Operating ~~Measures~~Results and Considerations

~~Certain~~In ~~provisions~~fiscal of2001, 2002, ~~the Company’s Restated Certificate of Incorporation~~ and ~~Bylaws~~2003, ~~could have~~ the ~~effect~~Company ofexperienced ~~making~~an itincrease ~~more difficult~~of ~~for~~3.3%, ~~a third party to acquire~~2.1%, orand of1.6% ~~discouraging a third party from attempting to acquire~~respectively, ~~control~~in ofcomparable ~~the~~restaurant ~~Company~~sales. ~~Such~~The ~~provisions~~Company ~~could~~does ~~limit~~not ~~the~~believe ~~price~~it ~~that~~has ~~investors~~significant ~~might~~latitude ~~be willing~~ to ~~pay~~achieve incomparable ~~the~~restaurant ~~future~~sales ~~for~~growth ~~shares~~through ofprice ~~the Company’s~~increases, ~~Common~~and, ~~Stock.~~as ~~Certain~~a ofresult, ~~these provisions allow~~ the Company todoes ~~issue~~not ~~Preferred~~believe ~~Stock~~that ~~with~~recent ~~rights~~comparable ~~senior~~restaurant tosales ~~those~~are ofindicative ~~the Common Stock without any further vote or action by the stockholders, eliminate the right~~ of ~~stockholders~~future totrends ~~act~~in bysuch ~~written consent~~sales. ~~and~~The ~~impose~~Company ~~various~~believes ~~procedural and other requirements~~ that ~~could make~~ it ~~more~~may ~~difficult~~from ~~for~~time ~~stockholders~~ to ~~effect~~time ~~certain~~in ~~corporate actions. The issuance of Preferred Stock could decrease~~ the ~~amount~~future ofexperience ~~earnings~~declines ~~and~~in ~~assets~~comparable ~~available for~~restaurant ~~distribution~~sales, toand ~~the~~that ~~holders~~any offuture ~~Common~~increases ~~Stock~~in ~~and~~comparable ~~could~~restaurant ~~adversely~~sales ~~affect~~may ~~the~~be ~~rights~~modest. ~~and powers~~Further, ~~including voting rights, of~~ the ~~holders~~Company’s ofnewer ~~the~~restaurants ~~Common~~have ~~Stock.~~not Inhistorically ~~certain~~experienced ~~circumstances,~~significant ~~such~~increases ~~issuance~~in ~~could~~guest ~~have~~volume ~~the~~following ~~effect~~their ofinitial ~~decreasing~~opening ~~the~~period. ~~market price~~See of“Selected ~~the~~Financial ~~Common Stock~~Data.”

~~Volatility~~Expansion ofRisks ~~Stock Price~~

The ~~market~~Company ~~price~~opened often ~~the~~salad ~~Company’s~~buffet ~~Common~~restaurants ~~Stock~~in ~~has~~fiscal ~~fluctuated~~1999, ~~since~~seventeen ~~the~~in fiscal ~~initial~~2000, ~~public~~ten ~~offering~~in offiscal ~~the~~2001 ~~Common~~(opening ~~Stock~~nine new restaurants and re-opening one existing restaurant), two restaurants in ~~May~~fiscal ~~1995. Quarterly~~2002 ~~operating~~and ~~results~~two ofrestaurants ~~the~~in fiscal 2003. The Company ~~and~~currently ~~other~~does ~~restaurant~~not ~~companies,~~have ~~changes~~any inspecific ~~general~~plans ~~conditions~~to open any restaurants in ~~the~~fiscal ~~economy,~~2004. ~~the~~The ~~financial~~Company’s ~~markets~~ability orto ~~the~~achieve ~~restaurant~~its ~~industry~~expansion plans during fiscal 2005 and beyond will depend on a variety of factors, ~~natural~~many ~~disasters~~of orwhich ~~other~~may ~~developments~~be ~~affecting~~beyond the Company’s orcontrol, ~~its~~including the Company’s ability to locate ~~competitors~~suitable ~~could~~restaurant ~~cause~~sites, ~~the~~qualified ~~market~~managers, ~~price~~negotiate ofacceptable ~~the~~leases ~~Common~~or ~~Stock~~purchase toterms, ~~fluctuate~~obtain ~~substantially.~~required Ingovernmental ~~addition~~approvals, construct new restaurants in ~~recent~~a ~~years~~timely ~~the~~manner, ~~stock~~attract, ~~market~~train ~~has~~and retain qualified and experienced ~~extreme~~personnel ~~price~~and management, operate its restaurants profitably and ~~volume~~obtain ~~fluctuations.~~additional ~~This~~capital, ~~volatility~~as ~~has~~well ~~had~~as ageneral ~~significant~~economic ~~effect~~conditions onand the ~~market price~~degree of ~~securities~~competition ~~issued~~in bythe ~~many~~particular ~~companies~~region ~~for~~of ~~reasons~~expansion. ~~unrelated~~The toCompany ~~the~~has ~~operating~~experienced, ~~performance~~and ofexpects ~~these~~to ~~companies.~~continue ~~See~~to experience, ~~“Market~~delays ~~for~~in ~~Company’s~~restaurant ~~Common~~openings ~~Equity~~from ~~and~~time ~~Related~~to ~~Stockholder Matters~~time.”

~~Item~~Since 7aits inception, the Company has closed three non-performing buffet restaurants, one mini restaurant, two Ladles restaurants and one SLURP! restaurant due to poor operating performance. Given the number of restaurants in current ~~Quantitative~~operation, ~~and~~there ~~Qualitative~~can ~~Disclosures~~be ~~About~~no ~~Market~~assurances ~~Risk~~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.

~~Market~~The ~~risks~~Company ~~relating~~incurs tosubstantial costs in opening a new restaurant and, in the Company’s ~~operations~~experience, ~~result~~new ~~primarily~~restaurants ~~from~~experience ~~changes~~fluctuating inoperational ~~short–term~~levels ~~interest~~for ~~rates~~some astime after opening. In the Company’s ~~line~~experience, ofoperational ~~credit~~expenses istend ~~tied~~ to ~~the~~stabilize ~~prime~~over a period of three to ~~rate~~fifteen months after a store opens. AsOwned ofrestaurants ~~September~~generally ~~30,~~require ~~2001,~~significantly ~~the~~more ~~Company~~up-front ~~had~~capital $9than leased restaurants.2 ~~million~~As a result, an increase in ~~debt~~the ~~outstanding~~percentage ~~under~~of owned restaurant openings as compared to historical practice would increase the ~~credit~~capital ~~facility.~~required ~~Based~~to onmeet athe ~~hypothetical~~Company’s 50growth ~~basis~~plans. ~~point~~There ~~adverse~~can ~~change~~be inno ~~prime~~assurance ~~rates,~~that ~~net~~the ~~interest~~Company ~~expense~~will ~~would~~successfully ~~increase~~expand byinto ~~approximately~~new ~~$460,000~~regions onor ~~an annual~~that ~~basis,~~the ~~and~~Company’s ~~likewise~~existing ~~would~~or ~~decrease~~new ~~earnings~~restaurants ~~and~~will ~~cash~~be ~~flows~~profitable. The Company ~~cannot~~has encountered ~~predict~~intense ~~market~~competition ~~fluctuations~~for restaurant sites, and in ~~interest~~many ~~rates~~cases ~~and~~has ~~their~~had ~~impact~~difficulty buying or leasing desirable sites on ~~debt,~~terms ~~nor~~that ~~can~~are ~~there~~acceptable beto ~~any~~the ~~assurance~~Company. ~~that~~In ~~long–term~~many ~~fixed~~cases, ~~rate~~the ~~debt~~Company’s ~~will~~competitors beare ~~available~~willing atand able to pay more ~~favorable~~than ~~rates,~~the ifCompany atfor ~~all~~sites. ~~Consequently,~~The ~~future~~Company ~~results~~expects ~~may~~these ~~differ~~difficulties ~~materially~~in ~~from~~obtaining ~~the~~desirable ~~estimated~~sites ~~results~~to ~~due~~continue tofor ~~adverse~~the ~~changes~~foreseeable infuture. ~~interest~~See ~~rates~~“Business—Restaurant orIndustry ~~debt~~and ~~availability~~Competition,” and “Business—Expansion Strategy”.

~~The~~Restaurant ~~Company~~Industry ~~did~~and ~~not~~Competition ~~have any foreign currency or other market risk or any derivative financial instruments at September 30, 2001.~~

~~Item~~The 8restaurant industry is highly competitive. Key competitive factors in ~~Financial~~the ~~Statements~~industry include the quality and ~~Supplementary~~value ~~Data~~of the food products offered, quality of service, price, dining experience, restaurant location and the

~~The~~27 Company’s financial statements as of September 30, 2001 and 2000, and for each of the three fiscal years in the period ended September 30, 2001 and the report of our independent accountants, are included in this report as listed in the index on page 33 of this report—Item 14(a).

Item 9. ChangesTable Inof and Disagreements With Accountants on Accounting and Financial Disclosure Contents

~~Not~~ ambiance ~~Applicable~~of the facilities. The Company’s primary competitors include mid-price, full-service casual dining restaurants at dinner and fast casual restaurants at lunch. Additionally, the Company competes with traditional self-service buffet and other soup and salad restaurants and healthful and nutrition-oriented restaurants at both meal periods. The Company competes with national and regional chains, as well as individually owned restaurants. The number of casual restaurants with operations generally similar to the Company’s has grown substantially in the last several years and the Company believes competition among 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, and have both a more established market presence and 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.

33Multi-unit food service businesses such as the Company’s can also be materially and adversely affected by publicity resulting from poor food quality, illness, injury or other health concerns with respect to the nutritional value of certain food. To minimize the risk of food-borne illness, the Company has implemented sanitation audits through its Food Management System for managing food safety and quality. Nevertheless, the risk of food-borne illness cannot be completely eliminated. Any outbreak of such illness attributed to Company restaurants in particular, or within the food service industry in general, could have a material adverse effect on our financial condition and results of operations

~~PART~~Capital ~~III~~Requirements

~~Item~~In 10addition to funds generated from operations, the Company will need to obtain external financing in the form of sale-lease backs 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 2005 and beyond and meet principal payments on its existing loans. There can be no assurance that such ~~Directors~~funds will be available when needed and ~~Executive~~should ~~Officers~~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 its debt of $38.8 million outstanding at September 30, 2003.

~~The~~Cost ~~information~~Sensitivity relating to directors of the Company is incorporated by reference from the Company’s Proxy Statement filed in connection with the Company’s Annual Meeting of Stockholders to be held March 15, 2002 as set forth under the caption “Election of Directors.” Information relating to the executive officers of the Company is set forth in Part I, Item 1 of this Report under the caption “Executive Officers of the Company.”

~~Item~~The 11Company’s profitability is highly sensitive to increases in food, labor, utilities, insurance costs, and other operating costs. The ~~Executive~~Company’s ~~Compensation~~dependence on frequent deliveries of fresh produce and ~~Other~~groceries ~~Matters~~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, increasing food, labor and employee benefit costs (including increases in minimum hourly wage and unemployment tax rates), rent increases resulting from the rent escalation provisions in the Company’s leases, and the availability of experienced management and hourly employees may also adversely affect the Company. The Company believes recent relatively favorable inflation rates and part-time labor supplies in its principal market area have contributed to relatively stable food and labor costs in recent years. However, both insurance and energy costs have increased at much higher than historical rates in the Company’s core market, California, and other regions. Should these costs continue to increase, the food and labor costs will unfavorably impact the results of operations. However, there can be no assurance that these conditions will continue or that the Company will have the ability to control costs in the future. See “Reliance on Key Suppliers and Distributors,” and “Business.”

~~The~~28 ~~information relating to executive compensation is incorporated by reference to the Proxy Statement under the caption “Executive Compensation and Other Matters.”~~

ItemTable 12. Security Ownership of Certain Beneficial Owners and Management Contents

~~The~~Minimum ~~information~~Wage relating to ownership of equity securities of the Company by certain beneficial owners and management is incorporated by reference to the Proxy Statement under the caption “General Information—Stock Ownership of Certain Beneficial Owners and Management.”

~~Item~~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. 13These 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 ~~Certain~~to ~~Relationships~~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 ~~Related~~absorb ~~Transactions~~these increases in wage costs in the future.

~~The~~Planned ~~information~~Marketing ~~relating~~Expenditures ~~to certain relationships and related transactions is incorporated by reference to the Proxy Statement under the caption “Certain Transactions.”~~

34The Company has incurred increased marketing expenditures during the year ended 2003 as an attempt to increase guest counts. A significant portion of the Company’s external marketing effort consists of attracting guests through the use of freestanding inserts (“FSIs”), print media, and radio advertising as a means to increase market awareness. In addition, the restaurants often co-sponsor fund-raising events in the restaurants for local charitable and other community organizations. There can be no assurance that the marketing and promotion strategies discussed herein will be successful or benefit the Company by increasing guest counts or achieving higher net sales in the future.

~~PART~~Other IVOperating Expenditures

~~Item~~As ~~14. Exhibits~~the facilities for the Company’s existing restaurant base continue to age, ~~Financial~~the ~~Statement~~Company ~~Schedule~~expects to experience increased repair and maintenance expenditures related to those existing stores. Such increases may affect store profitability. Further, the Company has experienced and ~~Reports~~expects onto ~~Form~~continue ~~8–K~~to experience higher property insurance costs as a result of increased rate pressure throughout the insurance industry. There can be no assurance that the increases in repair and maintenance expense and increased property insurance expense will not continue to impact the Company’s profitability or its ability to control costs in the future.

~~(a) The~~For ~~following~~the ~~documents~~fiscal ~~are~~year ~~filed~~ended September 30, 2003, the Company converted one location to leased from owned as part of ~~this~~a ~~Report:~~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.

			Page Number
(1	)	Independent Auditors’ Report		F–1
		Balance Sheets as of September 30, 2000 and 2001		F–2
		Statements of Operations for the years ended September 30, 1999, 2000 and 2001		F–3
		Statements of Shareholders’ Equity for the years ended September 30, 1999, 2000 and 2001		F–4
		Statements of Cash Flows for the years ended September 30, 1999, 2000 and 2001		F–5
		Notes to Financial Statements		F–6
		Schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(2	)	Exhibits. The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Report.

Importance of Key Employees

~~(b) Reports~~The onsuccess ~~Form~~of ~~8–K. The~~the ~~registrant~~Company ~~did~~and ~~not~~its ~~file~~individual ~~any~~restaurants ~~Reports~~depends onupon ~~Form~~the ~~8–K~~Company’s ~~during~~ability ~~the~~to ~~fourth~~attract ~~quarter~~and retain highly motivated, well-qualified restaurant operations and other management personnel. The Company faces significant competition in the recruitment of ~~fiscal~~qualified ~~2001~~employees.

35Seasonality and Quarterly Fluctuations

~~INDEPENDENT~~The ~~AUDITORS~~Company’s ~~REPORT~~business experiences 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 fluctuated 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. See “Quarterly Results and Seasonality.”

ToGeographic ~~the~~Concentration ~~Board~~in ofCalifornia ~~Directors~~ and ~~Shareholders~~Florida; ofRestaurant Base

GaForty ~~rden~~of ~~Fresh~~the ~~Restaurant~~Company’s ~~Corp~~97 existing salad buffet restaurants are located in California and eighteen are located in Florida.: Accordingly, the Company is susceptible to fluctuations in its business caused by adverse

We29 have audited the accompanying balance sheets of Garden Fresh Restaurant Corp. as of September 30, 2000 and 2001, and the related statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In economic ~~our~~or ~~opinion~~other conditions in these regions, ~~the~~including ~~financial~~natural ~~statements~~disasters, ~~referred~~such toas ~~above~~hurricanes ~~present~~which ~~fairly,~~have occurred annually in ~~all~~recent ~~material~~years ~~respects~~in Florida, ~~the~~or other ~~financial~~acts ~~position~~ of ~~Garden~~God ~~Fresh~~that ~~Restaurant~~could ~~Corp~~have a material adverse effect on the Company’s business. asThe ofCompany’s ~~September~~significant 30investment in, ~~2000~~ and ~~2001,~~long-term ~~and~~commitment ~~the~~to, ~~results~~each of its ~~operations~~restaurant ~~and~~sites limits its ~~cash~~ability ~~flows~~to ~~for~~respond ~~each~~quickly ofor ~~the~~effectively to ~~years~~changes in ~~the~~local ~~three-year~~competitive ~~period~~conditions ~~ended~~or ~~September~~other 30changes that could affect the Company’s operations. In addition, ~~2001~~the Company has a small number of restaurants relative to some of its competitors. Consequently, a decline in ~~conformity~~the ~~with~~profitability of ~~accounting~~an ~~principles~~existing ~~generally~~restaurant ~~accepted~~or inthe introduction of an unsuccessful new restaurant could have a more significant effect on the ~~United~~Company’s ~~States~~result of ~~America~~operations than would be the case in a company with a larger number of restaurants. See “Business—Restaurant Facilities” and “Business—Expansion Strategy.”

KPReliance MGon ~~LLP~~Key Suppliers and Distributors

~~San~~The ~~Diego~~Company utilizes sole source suppliers for certain produce and grocery items. In addition, ~~California~~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 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 “Cost Sensitivity” and “Business—Restaurant Operations.”

NoLegal ~~vember~~Matters ~~8, 2001, except as to Note 3,~~

whOn ~~ich~~September 29, 2003, the Company entered into a merger agreement pursuant to which Merger Subsidiary will merge with and into the Company, with the Company being the surviving corporation and becoming a wholly-owned subsidiary of GF Holdings. On October 2, 2003, a purported stockholder class action lawsuit was filed in the San Diego Superior Court against the Company, its directors and 25 unnamed “Doe” defendants entitled Allan Aites v. Garden Fresh Restaurant Corp., et at., Case No. GIC818850. The suit alleges that the individual defendants breached their fiduciary duty to the Company’s stockholders in connection with the merger by advancing their individual interests at the expense of the Company’s stockholders. The complaint also alleges that the individual defendants failed to properly value the Company, ignored conflicts of interest in connection with the merger and failed to engage in arm’s length negotiations in the merger. The complaint seeks: (i) a declaration that the merger agreement was entered into in breach of the defendants’ fiduciary duties; (ii) an injunction against the defendants preventing them from consummating the merger unless a procedure or process is adopted to obtain the highest possible price for the stockholders; (iii) disclosure of fourth quarter financial information; (iv) rescission of the merger agreement; (v) such other equitable relief as the court deems appropriate; and (vi) an award of ~~December~~attorneys’ 3fees, ~~2001~~among other relief. A hearing on the defendants’ demurrer and application to have the complaint dismissed has been scheduled by the Court for February 6, 2004. The Company believes that this lawsuit is without merit and intends to defend against it vigorously.

~~F-1~~30

GARDENTable FRESHof RESTAURANT CORP. Contents

~~BALANCE~~The ~~SHEETS~~Company is from time to time the subject of complaints, threat letters or litigation from guests alleging illness, injury or other food quality, health or operational concerns. Adverse publicity resulting from such allegations may materially adversely affect the Company and its restaurants, regardless of whether such allegations are valid or whether the Company is liable. The Company is party to various legal actions relating to former employees. In the opinion of management, after reviewing the information which is currently available with respect to these matters, and consulting with the Company’s counsel, any liability which may ultimately be incurred will not materially affect the financial position or results of operations of the Company.

	September 30,
	2000	2001
A S S E T S
Current assets:
Cash and cash equivalents	$ 2,058,000	$ 165,000
Inventories	6,383,000	8,185,000
Other current assets	1,273,000	4,030,000
Total current assets	9,714,000	12,380,000
Property and equipment, net	135,535,000	143,588,000
Intangible and other assets	1,939,000	1,928,000
TOTAL ASSETS	$147,188,000	$157,896,000
L I A B I L I T I E S A N D S H A R E H O L D E R S’ E Q U I T Y
Current liabilities:
Accounts payable	$ 9,701,000	$ 7,862,000
Revolving line of credit	12,000,000	9,150,000
Current portion of long–term debt	8,942,000	10,296,000
Current deferred income taxes	218,000	—
Accrued liabilities	7,928,000	10,216,000
Total current liabilities	38,789,000	37,524,000
Deferred income taxes	3,745,000	5,149,000
Long–term debt, net of current portion	30,612,000	37,807,000
Other liabilities	2,371,000	3,236,000
Shareholders’ equity:
Preferred stock, $.001 par value; 0 and 120,000 shares authorized at September 30, 2000 and 2001, respectively; 0 shares issued and outstanding at September 30, 2000 and 2001, respectively	—	—
Common stock, $.01 par value; 12,000,000 shares authorized at September 30, 2000 and 2001 respectively; 5,655,645 and 5,675,826 issued and outstanding at September 30, 2000 and 2001, respectively	57,000	57,000
Additional paid–in capital	59,518,000	59,665,000
Retained earnings	12,096,000	14,458,000
Total shareholders’ equity	71,671,000	74,180,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$147,188,000	$157,896,000
Commitments and contingencies (note 8)

Government Regulation

~~See~~The ~~accompanying~~Company’s ~~notes~~business is subject to ~~financial~~and ~~statements~~affected by various federal, state and local laws. Each restaurant must comply with state, county and municipal licensing and regulation requirements relating to health, safety, sanitation, building construction and fire prevention. The Company’s restaurants are subject to federal and state laws governing wages, working conditions, citizenship requirements and overtime. Congress and various states (including California and the other fourteen states in which the Company operates) passed proposals that imposed increases in state or federal minimum wages in 1996, 1997, 1998, 2000, 2001, 2002, and 2003. There is no assurance that the Company will be able to continue to pass increased costs on to its guests. The Company is subject to the Americans with Disabilities Act of 1990, which requires certain accommodations to the Company’s restaurant designs to allow access for people with disabilities. In addition, the Company is subject to the regulations of the Immigration and Naturalization Service (“INS”). Given the location of many of the Company’s restaurants, even if the Company’s operation of those restaurants is in strict compliance with INS requirements, the Company’s employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in its work force. Additionally, legislative proposals are currently under consideration by Congress and state legislators to require employers to pay for health insurance for all employees and similar legislation has been passed in California that may go into effect in 2006.

FAnti-2takeover Measures

~~GARDEN~~Certain ~~FRESH~~provisions ~~RESTAURANT~~of ~~CORP~~the Company’s Restated Certificate of Incorporation and Bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could limit the price that investors might be willing to pay in the future for shares of the Company’s Common Stock. Certain of these provisions allow the Company to issue Preferred Stock with rights senior to those of the Common Stock without any further vote or action by the stockholders, eliminate the right of stockholders to act by written consent and impose various procedural and other requirements that could make it more difficult for stockholders to effect certain corporate actions. The issuance of Preferred Stock could decrease the amount of earnings and assets available for distribution to the holders of Common Stock and could adversely affect the rights and powers, including voting rights, of the holders of the Common Stock. In certain circumstances, such issuance could have the effect of decreasing the market price of the Common Stock.

~~STATEMENTS~~Volatility OFof ~~OPERATIONS~~Stock Price

	Years ended September 30,
	1999		2000		2001
Net sales	$131,944,000		$165,406,000		$198,463,000
Costs and expenses:
Costs of sales	33,840,000		41,632,000		49,447,000
Restaurant operating expenses:
Labor	39,995,000		52,349,000		64,420,000
Occupancy and other expenses	27,312,000		35,140,000		47,210,000
General and administrative expenses	8,214,000		10,280,000		13,538,000
Restaurant opening costs	—		2,750,000		1,952,000
Depreciation and amortization expenses	9,441,000		9,719,000		12,503,000
Facility exit costs	—		473,000		1,572,000
Total costs and expenses	118,802,000		152,343,000		190,642,000
Operating income	13,142,000		13,063,000		7,821,000
Other income (expense):
Interest income	111,000		148,000		160,000
Interest expense	(1,618,000	)	(3,623,000	)	(4,876,000	)
Other income (expense), net	(183,000	)	(65,000	)	804,000
	(1,690,000	)	(3,540,000	)	(3,912,000	)
Income before provision for income taxes and cumulative effect of accounting change	11,452,000		9,523,000		3,909,000
Provision for income taxes	(4,548,000	)	(3,747,000	)	(1,547,000	)
Income before cumulative effect of accounting change	6,904,000		5,776,000		2,362,000
Cumulative effect of change in accounting for start–up costs, net of income tax benefit of $800,000	—		(1,233,000	)	—
Net income	$ 6,904,000		$ 4,543,000		$ 2,362,000
Basic net income per common share:
Income before cumulative effect of accounting change	$ 1.24		$ 1.02		$ 0.42
Cumulative effect of change in accounting for start–up costs	$ —		$ (0.22	)	$ —
Basic net income per common share	$ 1.24		$ 0.80		$ 0.42
Shares used in computing basic net income per common share	5,574,000		5,647,000		5,670,000
Diluted net income per common share:
Income before cumulative effect of accounting change	$ 1.18		$ 1.00		$ 0.42
Cumulative effect of change in accounting for start–up costs	$ —		$ (.21	)	$ —
Diluted net income per common share	$ 1.18		$ 0.79		$ 0.42
Shares used in computing diluted net income per common share	5,867,000		5,780,000		5,682,000

The market price of the Company’s Common Stock has fluctuated since the initial public offering of the Common Stock in May 1995. Quarterly operating results of the Company and other restaurant companies, 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. See “Market for Company’s Common Equity and Related Stockholder Matters.”

~~See~~31 ~~accompanying notes to financial statements.~~

F-3Table of Contents

~~GARDEN~~Certain ~~FRESH~~Risks ~~RESTAURANT~~Associated ~~CORP.~~with the Merger

~~STATEMENTS~~On OFSeptember ~~SHAREHOLDERS~~29, 2003, the Company entered into a merger agreement, pursuant to which Merger Subsidiary will merge with and into Garden Fresh, with Garden Fresh being the surviving corporation and becoming a wholly-owned subsidiary of GF Holdings. In the merger, each issued and outstanding share of the Company’s ~~EQUITY~~common stock, par value $0.01 per share, will be canceled and converted automatically into the right to receive $16.35 per share in cash. The merger remains subject to a condition that the aggregate proceeds of the financings contemplated by certain debt financing commitments be available to GF Holdings at the closing, as well as other customary closing conditions, including the approval of the merger by the Company’s shareholders. The Company expects to hold a special meeting of stockholders to vote on the merger agreement in the second fiscal quarter of 2004. There can be no assurance, however, that the merger will be completed.

~~YEARS~~Since ~~ENDED~~the ~~SEPTEMBER~~announcement ~~30,~~of ~~1999~~the pending merger, ~~2000~~the ~~AND~~trading in the Company’s stock has been influenced by the market expectations about the closing of ~~2001~~the merger. If the merger fails to close or is delayed, that may have a material adverse impact on the business of the Company and market price for the Company’s stock.

	Common Stock				Additional paid-in capital		Retained earnings	Total
	Shares		Amount
Balance at September 30, 1998	5,544,217		$56,000		$58,542,000		$ 649,000	$59,247,000
Exercise of common stock options	204,317		2,000		1,706,000		—	1,708,000
Issuance of common stock under employee stock purchase plan	12,871		—		159,000		—	159,000
Treasury stock repurchases and retired	(132,000	)	(2,000	)	(1,906,000	)	—	(1,908,000	)
Tax benefits from exercise of common stock options	—		—		739,000		—	739,000
Net income	—		—		—		6,904,000	6,904,000
Balance at September 30, 1999	5,629,405		56,000		59,240,000		7,553,000	66,849,000
Exercise of common stock options	8,861		—		81,000		—	81,000
Issuance of common stock under employee stock purchase plan	17,379		1,000		184,000		—	185,000
Tax benefits from exercise of common stock options	—		—		13,000		—	13,000
Net income	—		—		—		4,543,000	4,543,000
Balance at September 30, 2000	5,655,645		57,000		59,518,000		12,096,000	71,671,000
Exercise of common stock options	1,400		—		7,000		—	7,000
Issuance of common stock under employee stock purchase plan	18,781		—		140,000		—	140,000
Net income	—		—		—		2,362,000	2,362,000
Balance at September 30, 2001	5,675,826		$57,000		$59,665,000		$14,458,000	$74,180,000

If the merger agreement is terminated under specific circumstances as set forth in the agreement, the Company will be liable to pay GF Holdings a fee of $4.1 million.

~~See~~ Item ~~accompanying~~7A. Quantitative ~~notes~~and ~~to financial~~Qualitative ~~statements.~~Disclosures About Market Risk

FAt September 30, 2003 the Company did not have an outstanding balance under its line of credit agreement and no amounts have been drawn against the letter of credit. On November 1, 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 that will carry interest at either the prime rate or LIBOR plus 2% with interest payable at the beginning of each month. Accordingly, changes in short-4term interest rates could affect the Company’s line of credit interest rate, increasing net interest expense and likewise decreasing earnings and cash flow. The Company cannot predict market fluctuations in interest rates and their impact on debt, nor can there be any assurance that long-term fixed rate debt will be available at favorable rates, if at all. Consequently, future results may differ materially from the estimated results due to adverse changes in interest rates or debt availability.

~~GARDEN~~The ~~FRESH~~majority ~~RESTAURANT~~of ~~CORP~~the Company’s outstanding long-term debt balance at September 30, 2003 of $38.8 million is financed through loans from lending institutions with fixed interest rates. As such, the Company does not believe that changes in short-term interest rates would have a material impact on interest expense related to these loans or significantly decrease results of operations or cash flow. However, if the Company chose to refinance any amounts due in fiscal year 2004, the Company may be subject to changes in short-term interest rate fluctuations, which may decrease or increase results of operations and cash flow.

~~STATEMENTS~~The OFCompany ~~CASH~~did ~~FLOWS~~not have any foreign currency or other market risk or any derivative financial instruments at September 30, 2003.

	Years Ended September 30,
	1999		2000		2001
Cash flows from operating activities:
Net income	$ 6,904,000		$ 4,543,000		$ 2,362,000
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of accounting change, net of tax benefit	—		1,233,000		—
Depreciation and amortization	9,441,000		9,719,000		12,503,000
Loss on disposal of property and equipment	192,000		638,000		512,000
Facility exit costs	—		473,000		1,572,000
Provision for deferred income taxes	777,000		3,744,000		(80,000	)
Tax benefits from exercise of common stock options	739,000		13,000		—
Amortization of deferred gain on sale–leaseback of properties	—		(4,000	)	(36,000	)
Changes in operating assets and liabilities:
Increase in inventories	(698,000	)	(2,106,000	)	(1,803,000	)
Increase in other current assets	(354,000	)	(259,000	)	(1,593,000	)
Increase (decrease) in accounts payable	(388,000	)	3,981,000		(193,000	)
Increase in accrued liabilities	1,264,000		1,443,000		2,181,000
Increase in other liabilities	209,000		514,000		190,000
Net cash provided by operating activities	18,086,000		23,932,000		15,615,000
Cash flows from investing activities:
Acquisition of property and equipment:
New restaurant development	(30,766,000	)	(36,626,000	)	(24,033,000	)
Existing restaurant additions	(5,751,000	)	(6,658,000	)	(9,320,000	)
Decrease in construction costs included in accounts payable	—		(806,000	)	(2,451,000	)
Increase in intangible and other assets	(3,331,000	)	(802,000	)	(28,000	)
Proceeds from sale–leaseback transactions	—		4,485,000		12,478,000
Net cash used in investing activities	(39,848,000	)	(40,407,000	)	(23,354,000	)
Cash flows from financing activities:
Borrowings (repayments) under line of credit	5,001,000		6,999,000		(2,850,000	)
Proceeds from long–term debt	19,898,000		18,054,000		19,001,000
Repayment of long–term debt	(5,567,000	)	(7,697,000	)	(10,452,000	)
Net proceeds from issuance of common stock	1,867,000		266,000		147,000
Repurchase of common stock	(1,908,000	)	—		—
Net cash provided by financing activities	19,291,000		17,622,000		5,846,000
Net increase (decrease) in cash and cash equivalents	(2,471,000	)	1,147,000		(1,893,000	)
Cash and cash equivalents at beginning of year	3,382,000		911,000		2,058,000
Cash and cash equivalents at end of year	$ 911,000		$ 2,058,000		$ 165,000
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$ 2,241,000		$ 3,466,000		$ 5,035,000
Cash paid during the year for income taxes	$ 2,685,000		$ 976,000		$ 1,521,000
Supplemental disclosure of noncash transaction—property and equipment asset purchases in accounts payable	$ 806,000		$ 2,451,000		$ 805,000

Item 8. Financial Statements and Supplementary Data

~~See~~The ~~accompanying~~Company’s ~~notes to~~ financial statements as of September 30, 2003 and 2002, and for each of the three fiscal years in the period ended September 30, 2003, and the report of our independent auditors, are included in this report as listed in the index on page 44 of this report—Item 15(a).

~~F-5~~32

GARDENTable FRESHof RESTAURANT CORP. Contents

~~NOTES~~ Item TO9. Changes ~~FINANCIAL~~In ~~STATEMENTS~~and Disagreements With Accountants on Accounting and Financial Disclosure

~~Note~~Not 1Applicable. ~~The~~ ~~Company and a Summary of Significant Accounting Policies~~

~~The~~ Item ~~Company~~9A. Controls and Procedures

~~Garden~~Under ~~Fresh~~the ~~Restaurant~~supervision ~~Corp.~~and (with the ~~“Company”)~~participation isof amanagement, ~~Delaware~~including ~~Corporation~~the ~~which~~principal ~~owns~~executive and ~~operates~~principal 93financial ~~salad~~officers, ~~buffet~~we ~~restaurants~~evaluated inthe ~~Arizona,~~effectiveness ~~California,~~of ~~Colorado,~~our ~~Florida~~disclosure controls and procedures, as such ~~Georgia,~~term ~~Illinois,~~is ~~Kansas,~~defined ~~Missouri,~~under ~~Nevada,~~Rule ~~New~~13a-15(e) ~~Mexico,~~promulgated ~~North~~under ~~Carolina,~~the ~~Oregon,~~Securities ~~Texas~~Exchange Act of 1934, ~~Utah~~as ~~and~~amended. ~~Washington~~Based on this evaluation, ~~under~~our ~~the~~principal ~~names~~executive ~~Souplantation~~officer and ~~Sweet~~principal ~~Tomatoes.~~financial ~~The~~officer concluded that the Company’s ~~also~~disclosure ~~operates~~controls and ~~two~~procedures ~~other~~were ~~restaurants~~effective ~~under~~as of the ~~names~~end ~~Slurp!~~of ~~The~~the ~~Soup~~period ~~Experience and~~covered ~~Ladles,~~by Athis ~~Soup~~annual ~~and~~report. ~~Salad~~There ~~Takery~~were no changes in internal control over financial reporting that would require additional disclosure under Regulation S-K 308(c).

~~Use~~33 ~~of Estimates~~

TheTable preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Contents

~~Inventories~~PART III

~~Inventories,~~ Item ~~consisting~~10. Directors ~~principally of food, beverages~~ and ~~restaurant~~Executive ~~supplies,~~Officers ~~are~~of ~~valued at~~ the ~~lower~~Company ~~of cost (first–in, first–out) or market.~~

~~Property~~The Company has a classified Board of Directors consisting of two Class A directors (Michael P. Mack and ~~Equipment~~David Nierenberg), two Class B directors (Edgar F. Berner and John M. Robbins, Jr.), and three Class C directors (Edward A. Blechschmidt, Robert A. Gunst and Michael M. Minchin, Jr.,) who will serve until the Annual Meetings of Stockholders to be held in 2006, 2005 and 2004, respectively, and until their respective successors are duly elected and qualified. At each Annual Meeting of Stockholders, directors are elected for a full term of three years to succeed those directors whose terms expire at such annual meeting. The names, ages and positions of the Registrant’s directors and executive officers are listed below, along with a brief account of their business experience. There are no family relationships among these directors or officers, nor any arrangement or understanding between any such directors or officers and any other person pursuant to which any of such officers were selected as executive officers.

~~Property,~~Directors equipment, and leasehold improvements are recorded at cost. Depreciation and amortization are provided using the straight–line method. Property, equipment, and leasehold improvements are depreciated over estimated useful lives of ~~3 years to 30 years or~~ the ~~remaining~~Company: ~~lease term, whichever is shorter.~~

Maintenance and repairs are charged to operations as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations.

Name	Age	Positions With The Company	Director Since
Class A directors:

Michael P. Mack*	52	Director, Chief Executive Officer and President	1984
David Nierenberg	50	Director	2001

Class B directors:

Edgar F. Berner	72	Director	1996
John M. Robbins, Jr.	56	Director	1996

Class C directors:

Edward A. Blechschmidt.	51	Director	2003
Robert A. Gunst	55	Chairman of the Board and Director	1996
Michael M. Minchin, Jr.	77	Director	1993

~~Intangibles~~*Executive ~~and~~Officer ~~Other~~of ~~Assets~~the Company

~~Intangible~~Class ~~assets~~A ~~resulting~~Directors ~~from~~(term ~~the~~expires ~~1983~~2006): ~~acquisition of the two original Souplantation restaurants, comprised of leasehold interests and goodwill, are amortized using the straight–line method over 15 years.~~

~~Debt~~Michael P. Mack co-founded the Company in 1983 and was the President and ~~issuance~~Chief ~~costs~~Operating ~~are~~Officer ~~capitalized~~from the Company’s inception until April 1991 and ~~amortized~~the ~~into~~Chief ~~interest~~Executive ~~expense~~Officer ~~using~~from September 1990 to April 1991. Mr. Mack assumed the ~~straight–line~~role ~~method~~of ~~over~~Chairman of the ~~term~~Board of Directors from December 1997 until January 2003. Mr. Mack has been a director of the ~~debt~~Company since 1984. Since February 1994, Mr. Mack has been the Company’s President and Chief Executive Officer. From April 1991 to February 1994, Mr. Mack served as the President of MPM Management, Inc., a consulting firm. Prior to joining the Company, from 1977 to 1983, Mr. Mack worked for Bain & Company, a management consulting firm, where he specialized in the development and implementation of business strategies. Mr. Mack received a Bachelor of Arts Degree from Brown University and a Master’s Degree in Business Administration from Harvard University.

~~Income~~David ~~Taxes~~Nierenberg joined the Company’s Board of Directors in 2001. Mr. Nierenberg currently serves as President of Nierenberg Investment Management Company. Since 1996 his firm has managed The D3 Family Fund, LP, a private investment partnership based in Camas, Washington, that seeks long term capital gain through investments in undervalued micro-cap domestic public companies. Mr. Nierenberg also manages the following funds: D3 Family Fund, D3 Family Retirement Fund, LP; D3 Children’s Fund, LP, and D3 Offshore Fund. Prior to forming Nierenberg Investment Management, he was a general partner at Trinity Ventures, Ltd., in

~~Current~~34 income tax expense is the amount of income taxes expected to be payable for the current year. A deferred tax asset or liability is established for the expected future consequences resulting from the differences in the financial reporting and tax bases of assets and liabilities. Deferred income tax expense (benefit) is the net change during the year in the deferred income tax asset or liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

F-6Table of Contents

~~Impairment~~ Menlo Park, California, from 1986 to 1995 where he specialized in turnarounds and financial service and healthcare companies. Previously, he was a senior vice president at General Electric Venture Capital Corp., also based in Menlo Park. He began his career at Bain & Company, an international management consulting firm, from 1978 to 1985, where he was a partner managing strategy, acquisition and cost reduction projects. Mr. Nierenberg is a member of ~~Long–Lived~~the ~~Assets~~Massachusetts State Bar. He serves on the Board of Directors of several public and private corporations and civic and charitable organizations, including Southwest Washington Medical Center, Mexican Restaurants, Inc. (CASA) and Natus Medical Inc. (BABY). Mr. Nierenberg received his Juris Doctorate from Yale Law School and his Bachelor of Arts degree from Yale College where he was elected to Phi Beta Kappa.

~~The~~Class ~~Company~~B ~~periodically~~Directors ~~assesses~~(term ~~the~~expires ~~impairment~~2005): 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. These factors, along with management’s plans with respect to the operations, are considered in assessing the recoverability of goodwill, other purchased intangibles and property and equipment.

~~During~~Edgar ~~the~~F. ~~third~~Berner ~~quarter~~joined ~~of fiscal 2000,~~ the Company’s ~~closed~~Board ~~one~~of ~~salad~~Directors ~~buffet~~in ~~restaurant~~1996. ~~and recorded an impairment charge of $68,000~~Mr. Berner Inis ~~the~~a ~~fourth~~private ~~quarter~~investor ofand ~~fiscal~~is ~~2000,~~ the ~~Company~~ ~~determined~~former ~~that~~Chairman it(from ~~would~~1991 ~~close~~to a1996) ~~Ladles~~and ~~restaurant~~CEO in(from ~~the~~1991 ~~first~~to ~~quarter~~1998) of ~~fiscal~~Sweet ~~2001~~Factory, ~~due to poor operating performance~~Inc. ~~Accordingly~~, ~~the~~a ~~Company~~national ~~recorded~~candy anspecialty ~~impairment~~chain. ~~charge~~From of1969 ~~$307~~to 1980,~~000~~ inMr. ~~the~~Berner ~~fourth~~was ~~quarter~~founder and President of ~~fiscal~~Fashion ~~2000~~Conspiracy, ~~determined~~a as280 ~~the~~store ~~amount~~junior byapparel ~~which~~chain. ~~the~~He ~~carrying~~previously ~~amount~~served ofon the ~~assets~~Board ~~exceeded~~of ~~the~~Directors ~~present value~~ of ~~the~~The ~~estimated~~Clothestime, ~~future cash flows~~Inc. ~~Net~~and ~~book~~Edison ~~value~~Brothers ~~of assets determined to be impaired relating to the restaurant closures included $375~~Stores,~~000~~ ~~of equipment and leasehold improvements~~Inc. In addition, ~~the~~to ~~Company~~serving ~~recorded~~on anthe ~~accrual~~Board of ~~$98,000~~Directors ~~representing the present value~~ of the ~~estimated~~Company, ~~net~~Mr. ~~future~~Berner ~~lease~~is ~~payments~~a ~~associated~~Director ~~with~~of ~~the~~Hot ~~Ladles~~Topic ~~location~~(Nasdaq), ~~which was recorded as other long term liabilities. The Company was~~a ~~successful~~teen inspecialty ~~exiting~~retail ~~the~~chain, ~~lease agreement during fiscal year 2001~~ and ~~paid~~a ~~the~~Director ~~lessor $49,000 to terminate the lease agreement. As~~ of ~~September~~Barbeques ~~30,~~Galore ~~2001,~~(Nasdaq) ~~there was no remaining balance accrued relating to this liability. All charges described above have been included in~~ the ~~2000~~nation’s ~~results~~largest ofbarbeque ~~operations~~chain ~~as facility exit costs~~store.

InJohn ~~September~~M. ~~2001~~Robbins, ~~the~~Jr. ~~Company~~joined ~~made~~ the ~~decision~~Company’s ~~that~~Board ~~they~~of ~~would~~Directors ~~abandon~~in ~~the Ladles and Slurp! concepts due to poor operating performance~~1996. ~~The Company plans to close these restaurants during the first half of fiscal 2002~~Mr. ~~This~~Robbins ~~triggered~~currently anserves ~~impairment~~as ~~evaluation~~Chairman ~~by the Company~~ of ~~its long lived assets related to these restaurants in~~ the ~~fourth~~Board ~~quarter~~ of ~~fiscal~~Directors ~~2001.~~and ~~Based~~CEO ~~on the Company’s analyses~~ of ~~the results~~ ofAmerican ~~operations~~Residential ~~and~~Investment ~~projected future cash flows associated with these restaurants~~Trust, ~~the~~Inc. ~~Company~~(AMEX) ~~determined that an impairment existed~~(“ARIT”). ~~Accordingly,~~Prior ~~the~~to ~~Company~~joining ~~recorded an impairment charge of $1~~ARIT,~~368,000~~ inMr. ~~the~~Robbins ~~fourth~~was ~~quarter~~Chairman of ~~fiscal 2001 determined as~~ the ~~amount~~Board ~~by which the carrying amount~~ of ~~the~~Directors ~~assets exceeded the present value~~ of ~~the~~American ~~estimated~~Residential ~~future~~Mortgage ~~cash~~Corporation ~~flows.~~(“AMRES ~~Net~~Mortgage”) ~~book~~from ~~value~~1990 ofuntil ~~assets~~1994 ~~determined~~and President ~~to be impaired included $340,000~~ of ~~equipment,~~AMRES ~~$273,000~~Mortgage offrom ~~furniture~~the ~~and~~time ~~fixtures,~~he ~~$353,000 of~~co-founded ~~leasehold~~it ~~improvements, $299,000 of construction~~ in ~~process,~~1983 ~~and~~until ~~$103,000~~1994. ~~of inventory and other assets~~Mr. InRobbins ~~addition,~~is ~~the~~also ~~Company~~a ~~recorded~~Director anof ~~accrual~~Accredited ofHome ~~$204~~Lenders,~~000~~ ~~representing~~ the ~~present~~University ~~value~~ of ~~the~~San ~~estimated net future lease payments associated with these restaurants. Of this amount~~Diego, ~~$80,000 has been recorded as accrued liabilities~~ and ~~$124,000 has been recorded as other long term liabilities. There were no cash payments made to reduce~~ the ~~liabilities~~Mortgage ~~during~~Bankers ~~fiscal~~Association ~~year 2001. All charges described above have been included in the 2001 results~~ of ~~operations as facility exit costs~~America.

~~Advertising~~Class C Directors (term expires 2004):

~~Advertising~~Edward ~~costs~~A. ~~are~~Blechschmidt ~~expensed~~joined asthe ~~incurred~~Company’s Board of Directors in April 2003. ~~Advertising~~Mr. ~~expenses~~Blechschmidt ~~were~~is ~~$2,641,000,~~a ~~$3,331,000~~private investor and $6management consultant and formerly Chairman and CEO (from 2000 to 2002) of Gentiva Health Services,~~243,000~~ inInc. ~~fiscal~~Prior ~~1999~~to joining Gentiva, Mr. Blechschmidt was CEO of Olsten Corporation from 1998 to 2000,. From 1996 to 1998 he was President and ~~2001,~~CEO ~~respectively,~~of Siemens Nixdorf Americas and ~~are~~Siemens’ ~~included~~Pyramid Technologies. Prior to Siemens, he spent more than 20 years with Unisys Corporation in various lines and staff positions including Chief Financial ~~occupancy~~Officer. Mr. Blechschmidt is also a Director of Gentiva Health Services, Inc., Lionbridge Technologies, Inc., and ~~other~~Bayshore ~~expenses~~Healthcare, Ltd.

~~Fair~~Robert ~~Value~~A. Gunst joined the Company’s Board of ~~Financial~~Directors ~~Instruments~~in 1996 and assumed the role of Chairman of the Board in January 2003. Mr. Gunst has more than 30 years of experience in food and retailing. Mr. Gunst currently is a private investor. Mr. Gunst had previously served as President and Chief Executive Officer of The Good Guys, Inc. (Nasdaq) from 1993 to 1999. In 1990, he became President and Chief Operating Officer of The Good Guys, Inc. while remaining a member of its Board of Directors of which he had joined in 1986. Mr. Gunst holds a Master’s Degree in Business Administration from the University of Chicago’s Graduate School of Business and a Bachelor of Arts Degree from Dartmouth College.

~~Because~~Michael ofM. ~~their~~Minchin, ~~short~~Jr. ~~maturities,~~joined the ~~carrying~~Company’s ~~amounts~~Board ~~for~~of ~~cash~~Directors in November 1993 and ~~cash~~assumed ~~equivalents~~the role of Chairman of the Board from February 1994 to December 1997. From May 1992 to November 1993, ~~accounts~~Mr. Minchin served ~~payable~~as an independent consultant to Sizzler International, ~~accrued~~Inc. ~~liabilities~~(NYSE) a restaurant company, and several other ~~liabilities, approximate~~publicly ~~their~~held ~~fair~~restaurant ~~value~~chains. ~~The~~Prior ~~carrying~~to ~~amounts~~that, ~~for~~Mr. Minchin served as the ~~bank~~Executive ~~line~~Vice President of ~~credit~~Sizzler ~~and~~International ~~long–term~~from ~~debt~~May 1980 ~~approximate~~to ~~fair~~May ~~value~~1992. asMr. ~~the~~Minchin ~~interest~~received ~~rates~~a ~~and~~Bachelor ~~terms~~of ~~are~~Arts ~~substantially~~Degree ~~similar~~from toStanford ~~rates~~University and ~~terms~~a ~~which~~Master’s ~~could~~Degree bein ~~obtained~~Business ~~currently~~Administration ~~for~~from ~~similar instruments~~Harvard University. Currently,

~~Cash~~35 ~~and Cash Equivalents~~

CashTable equivalents are highly liquid investments purchased with original maturities of three months or less. Cash equivalents consist of investments in money market accounts backed by Federal government securities. The carrying amount is reflected at cost, which approximates the fair value due to the short maturity of these instruments. The Company’s policy is to place its cash with high credit quality financial institutions in order to limit the amount of credit exposure. Contents

F Mr. Minchin serves as President and Managing Director of the John Douglas French Alzheimer’s Research Foundation as well as an independent consultant to several publicly held restaurant chains and bio medical start-7ups.

~~Net~~Committees ~~Income~~of ~~per~~the ~~Common~~Board ~~Share~~of Directors

The ~~Company has presented basic net income per common share and diluted net income per common share in conformity with the Financial Accounting Standards~~ Board ~~Statement~~ of ~~Financial~~Directors ~~Accounting~~has ~~Standards~~three ~~(“SFAS”)~~standing ~~No.~~committees: ~~128.~~an ~~Basic~~Audit ~~net~~Committee, ~~income~~a ~~per~~Compensation ~~common~~Committee ~~share~~and isa ~~computed~~Nominating 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 number of common shares outstanding during the period increased by the effect of dilutive stock options using the treasury stock method and ~~common~~Governance ~~shares expected to be issued under the Company’s employee stock purchase plan~~Committee.

~~Potentially~~The ~~dilutive~~Audit ~~securities~~Committee’s ~~of approximately~~function ~~293,000,~~is ~~133~~to review,~~000~~ with the Company’s independent accountants and 12management,~~000~~ ~~shares~~the ~~for~~results ~~fiscal~~of ~~1999,~~the ~~2000~~examination ~~and~~of ~~2001,~~the Company’s ~~respectively,~~financial ~~were~~statements ~~used~~by tothe ~~calculate~~independent ~~diluted~~accountants ~~earnings~~and ~~per~~the ~~common~~independent ~~share~~accountants’ opinion. ~~There~~The ~~are~~Audit noCommittee ~~reconciling~~also ~~items~~approves inall ~~calculating~~professional ~~the~~services ~~numerator~~performed ~~for~~by ~~basic~~the ~~and~~independent ~~diluted~~accountants, ~~net~~recommends ~~income~~the ~~per~~retention of the ~~common~~independent ~~share~~accountants ~~for~~to the ~~periods~~Board, ~~presented.~~subject ~~For~~to ratification by the ~~years~~stockholders, ~~ended~~recommends ~~September~~a ~~30,~~code ~~1999~~of corporate conduct, ~~2000~~and periodically reviews the Company’s accounting policies and ~~2001,~~internal ~~respectively,~~accounting ~~shares~~and ~~related~~financial tocontrols. ~~stock~~For ~~options~~fiscal 2003, the members of ~~422~~the Audit Committee were Messrs. Berner,~~000,~~ ~~791~~Gunst,~~000~~ and 1Nierenberg. In addition,~~146,000,~~ ~~respectively~~in April 2003, ~~were~~Edward ~~excluded~~Blechschmidt ~~from~~joined the ~~calculation~~Board, ofand ~~diluted~~was ~~net~~elected ~~income per~~to ~~common~~serve ~~share,~~ as the ~~effect~~audit ofcommittee ~~their~~chair, ~~inclusion~~and ~~would~~replaced beMr. Nierenberg ~~anti–dilutive~~in his role as audit committee member.

~~Stock–Based~~The Compensation Committee’s function is to review and recommend executive compensation, including officer salary levels, incentive compensation programs and stock option grants. During fiscal 2003, the members of the Compensation Committee were Messrs. Gunst, Minchin and Nierenberg.

The ~~Company~~Nominating ~~measures~~and ~~compensation~~Governance Committee’s ~~expense~~function ~~for~~is ~~its~~to ~~stock–based~~identify ~~employee~~and ~~compensation~~select ~~plans~~potential ~~using~~candidates for the ~~intrinsic~~Company’s ~~value~~Board ~~method~~of Directors. In addition, the Nominating and ~~provides~~Governance ~~pro~~Committee ~~forma disclosures~~recommends ofcorporate ~~net~~governance ~~income~~principles and ~~net~~code ~~income~~of ~~per~~corporate ~~share~~conduct. asThis Committee ifwas ~~the~~formed ~~fair~~in ~~value~~November ~~method~~of ~~had~~2002, ~~been~~and ~~applied~~the inmembers ~~measuring~~are ~~compensation~~Messrs. ~~expense~~Berner, Minchin and Robbins.

~~Segment~~The ~~Reporting~~Board of Directors has determined that the Company has an audit committee financial expert, Edward A. Blechschmidt, serving on its audit committee, who is considered to be independent under the NASDAQ listing requirements in effect during fiscal 2003.

InDuring ~~1998,~~ the ~~Company~~fiscal ~~adopted~~year ~~SFAS~~ended ~~No.~~September ~~131~~30, ~~“Disclosures about Segments of and Enterprise and Related Information~~2003,” ~~which~~the ~~establishes~~Board ~~annual~~held ~~and~~five ~~interim reporting standards for an enterprise’s operating segment and related disclosures about its products, services, geographic areas and major customers~~meetings. AnAll ~~operating~~directors ~~segment~~attended isat ~~defined~~least asseventy-five apercent ~~component~~ of ~~an enterprise that engages in business activities from~~these ~~which~~meetings ~~it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. All~~ of the ~~Company’s~~Board ~~restaurants~~and ~~are aggregated into one reportable segment given~~ the ~~similarities~~committees ofon ~~economic~~which ~~characteristics~~they ~~between~~served ~~the~~(during ~~operations represented by~~ the ~~restaurants~~periods ~~and~~that ~~the~~they ~~common nature of the products, customers and methods of distribution~~served).

~~Sale–Leasebacks~~Executive Officers of the Company:

~~During the year ended September 30, 2000, the Company entered into two sale-leaseback transactions whereby the Company sold and leased back the land and building for two separate~~The ~~restaurant~~executive ~~sites.~~officers ~~The Company received net proceeds~~ of ~~$4,485,000 for~~ the ~~two~~Company ~~transactions~~as ~~and recorded deferred gains~~ of ~~$231~~September 30,~~000.~~ ~~The~~2003 ~~gains~~ are ~~being~~as ~~amortized~~follows ~~over~~(in ~~the~~alphabetical ~~respective~~order ~~lease~~with ~~terms~~CEO/President oflisted 20first): ~~years. The related leases are being accounted for as operating leases.~~

During the fiscal year ended September 30, 2001, the Company completed five sale–leaseback transactions whereby the Company sold and leased back the land and building for five separate restaurant sites. The Company received net proceeds of $12,478,000 for the five transactions and recorded deferred gains of $614,000. The gains are being amortized over the respective lease terms of 20 years. The related leases are being accounted for as operating leases.

Name	Age	Position
Michael P. Mack	52	President and Chief Executive Officer
Walter J. Carucci	53	Vice President of Development and Construction
Lloyd Fritzmeier	59	Chief Operating Officer
Kenneth J. Keane	47	Vice President of Human Resources
R. Gregory Keller	55	Senior Vice President of Operations
David W. Qualls	58	Chief Financial Officer and Secretary

FMichael P. Mack co-8founded the Company in 1983 and was the President and Chief Operating Officer from the Company’s inception until April 1991 and the Chief Executive Officer from September 1990 to April 1991. Mr. Mack assumed the role of Chairman of the Board of Directors from December 1997 until January 2003. Mr. Mack has also been a director of the Company since its inception. Since February 1994, Mr. Mack has been

~~Reclassifications~~36

CertainTable 1999of and 2000 amounts have been reclassified to conform to the 2001 presentation. Contents

~~Note~~ the 2Company’s President and Chief Executive Officer. ~~Composition~~ From April 1991 to February 1994, Mr. Mack served as the President of ~~Certain~~MPM ~~Financial~~Management, ~~Statement~~Inc., ~~Captions~~a consulting firm. Prior to joining the Company, from 1977 to 1983, Mr. Mack worked for Bain & Company, a management consulting firm, where he specialized in the development and implementation of business strategies. Mr. Mack received a B.A. from Brown University and a M.B.A. from Harvard University.

	September 30,
	2000	2001
Other current assets:
Prepaid taxes	$ 979,000	$1,920,000
Deferred income taxes	—	1,266,000
Prepaid insurance	63,000	420,000
Prepaid rent	52,000	103,000
Other	179,000	321,000
	$1,273,000	$4,030,000

Walter J. Carucci joined the Company in July 2002 as Vice President of Development and Construction. From February 2000 to July 2002, Mr. Carucci served as an independent consultant in the fields of Real Estate, Development and Construction Services to various retail and restaurant clients. In addition to his duties as a consultant, he was Director of Retail Real Estate for Stiles Corporation in Nashville, Tennessee. From November 1994 to February 2000, Mr. Carucci served as Vice President of Development for Al Copeland Investments in New Orleans, Louisiana. From December 1987 to November 1994, Mr. Carucci served as Vice President of Development for Black-Eyed Pea U.S.A., Inc., a multi-concept, chain restaurant company. Mr. Carucci received a B.A. in Architecture from Clemson University, is a member of the American Institute of Architects and presently is registered with the State of Texas Board of Architectural Examiners. Also, he holds an Affiliate Brokers License in the State of Tennessee.

	Depreciable Lives
Property and equipment, net:
Leasehold improvements	Shorter of 30 years or lease term	$ 34,830,000		$ 44,820,000
Furniture and fixtures	3–8 years	40,562,000		46,626,000
Equipment	3–8 years	30,934,000		36,149,000
Land	—	33,062,000		30,608,000
Buildings	30 years	29,091,000		28,032,000
Construction in process on new restaurants	—	11,985,000		11,084,000
		180,464,000		197,319,000
Less accumulated depreciation and amortization		(44,929,000	)	(53,731,000	)
		$135,535,000		$143,588,000

Lloyd J. Fritzmeier joined the Company in September 2002 as Executive Vice President of Marketing and assumed the role of Chief Operating Officer in May 2003. Prior to joining the Company, from 1991 to 2002, Mr. Fritzmeier served as President and Chief Executive Officer of Arby’s Franchise Association (AFA), which operates as the marketing arm for over 3,200 domestic restaurants. Prior to AFA, Mr. Fritzmeier served in various marketing capacities with Marketing Corporation of America, ITT Continental Biking, Standard Brands, J. Walter Thompson, and Henderson Advertising. Mr. Fritzmeier received a B.B.A. from the University of Miami and a M.B.A. from Columbia University in New York City.

	September 30,
	2000	2001
Intangible and other assets:
Intangible assets, net of amortization of $758,000 and $766,000, respectively	$ 8,000	$ —
Cash surrender value of insurance policies	845,000	950,000
Deposits and other assets	1,086,000	978,000
	$1,939,000	$ 1,928,000
Accrued liabilities:
Accrued payroll	$3,346,000	$ 3,892,000
Accrued interest	354,000	383,000
Taxes payable	924,000	1,086,000
Accrued insurance	1,154,000	1,597,000
Current accrued rent	27,000	23,000
Current deferred gain on sale–leaseback properties	12,000	42,000
Other	2,111,000	3,193,000
	$7,928,000	$10,216,000
Other liabilities:
Accrued rent	$1,101,000	$ 1,149,000
Deferred compensation	957,000	1,101,000
Deferred gain on sale–leaseback properties, net of current portion	215,000	762,000
Other	98,000	224,000
	$2,371,000	$ 3,236,000

Kenneth J. Keane has served as the Vice President of Human Resources since November 1998. Mr. Keane joined the Company in 1986 as a restaurant manager. During his employment with the Company he has served as Director of Operations, Director of Training and Executive Director of Human Resources. Prior to his joining the Company, Mr. Keane worked in restaurant management for ten years. Mr. Keane received a certificate in Human Resources from San Diego State University in 1996.

~~F-9~~R. Gregory Keller joined the Company in June 1991 as Vice President of Operations. From January 1991 to June 1991 prior to joining the Company, Mr. Keller served as a consultant to the Company. From June 1990 to January 1991, Mr. Keller served as an independent consultant. From June 1971 to June 1990, Mr. Keller served as a divisional Vice President of Operations of Paragon, Inc., a restaurant company, where he managed operations for 33 restaurants. Mr. Keller received a B.S. from Northern Illinois University.

~~Note~~David 3W. ~~Long–Term~~ ~~Debt~~Qualls joined the Company in November 1985 as Chief Financial Officer and Secretary. From 1982 to 1985, Mr. Qualls served as Vice President of Finance and Administration and Chief Financial Officer of Diatek, Inc., a medical electronics company. Mr. Qualls received a B.A. from California State University at Fresno and a M.B.A from the University of Virginia

~~Obligations~~Section ~~under~~16(a) ~~long–term~~Beneficial ~~debt~~Ownership ~~arrangements~~Reporting ~~are~~Compliance ~~comprised of:~~

	September 30,
	2000		2001
Notes payable to lending institutions, interest at 7.52%–10.72%, due in various monthly installments aggregating $928,000 (including interest) through 2006. Secured by property and equipment.	$19,929,000		$28,307,000
Notes payable to lending institutions, interest at 8.66%–10.537%, due in various monthly installments aggregating $362,000 (including interest) through 2006. Secured by land and property.	19,625,000		19,796,000
Revolving line of credit, interest at either prime rate or LIBOR plus 2%, due December 31, 2001. Secured by property and equipment.	12,000,000		9,150,000
	51,554,000		57,253,000
Less current portion	(20,942,000	)	(19,446,000	)
	$30,612,000		$37,807,000

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers, directors and persons who beneficially own more than 10% of the Company’s Common Stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (“SEC”). Such persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms filed by such persons.

~~During~~Based ~~the~~solely ~~fiscal years~~on ~~ended September 30, 2000 and 2001,~~ the Company’s ~~had~~review ~~a revolving line~~ of ~~credit~~such upforms furnished to ~~$12,000,000~~the ~~collateralized~~Company ~~by property~~ and ~~equipment.~~written ~~The~~representations ~~outstanding~~from ~~principal~~certain ~~balance~~reporting ~~on this line of credit bears interest at either the prime rate (6.0% at September 30~~persons, ~~2001) or LIBOR plus 2% with interest payable at~~ the ~~beginning of each month. At September 30, 2001, the outstanding balance was $9,150,000. None of the $9,150,000 balance was borrowed at LIBOR. All outstanding principal and interest~~Company ~~amounts~~believes ~~are~~that ~~due~~all onfiling ~~December~~requirements ~~31,~~applicable ~~2001.~~to ~~The credit agreement contains various financial covenants and restrictions, including restrictions on~~ the Company’s ~~ability~~executive toofficers, ~~pay~~directors ~~dividends~~ and tomore ~~effect~~than ~~mergers~~10% orstockholders ~~acquisitions~~were ~~without~~timely ~~the~~complied ~~bank’s approval. As of September 30, 2001, the Company was not in compliance~~ with ~~certain~~during ~~financial covenant provisions of~~ the ~~credit~~fiscal ~~agreement.~~year ~~However~~ended ~~the financial institution has waived the violations through~~ September 30, ~~2001 and has negotiated a new credit agreement with the Company consisting of two term loans in the amount of $6~~2003.0 million due December 31, 2002, and $2.7 million, due March 31, 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. The new term loans are collateralized by equipment and other assets of the Company and require scheduled repayments of principal and interest at regular intervals throughout the terms of the agreement. This new agreement contains various financial covenants and restrictions.

~~The~~37 ~~Company capitalized $712,000, $772,000, and $499,000 of interest costs during 1999, 2000, and 2001 respectively, related to construction of new stores.~~

PrincipalTable paymentsof due on long–term debt during the five years subsequent to September 30, 2001 are as follows: Contents

2002		$19,446,000
2003		10,010,000
2004		15,556,000
2005		7,754,000
2006		4,487,000
		$57,253,000

Code of Ethics

~~F-10~~The Company has adopted a code of ethics that applies to all members of Board of Directors and employees of the Company, including, the principal executive officer, principal financial officer, principal accounting officer and controller. The Company has posted a copy of the code on the Company’s internet website at the internet address: http://www.gardenfreshcorp.com. Copies of the code may be obtained free of charge from the Company’s website at the above internet address.

~~Note~~ Item 411. ~~Income~~Executive ~~Taxes~~Compensation and Other Matters

The ~~provision~~following table sets forth information for ~~income~~the ~~taxes~~fiscal years ended September 30, 2003, 2002 and 2001 concerning the compensation of the Chief Executive Officer of the Company, and the four other most highly compensated executive officers of the Company. (Information is ~~summarized~~in asalphabetical ~~follows:~~order with the CEO/President listed first).

	Years ended September 30,
	1999	2000	2001
Current tax expense:
Federal	$2,791,000	$ —	$1,145,000
State	980,000	3,000	483,000
Total current	3,771,000	3,000	1,628,000
Deferred federal tax expense	768,000	3,185,000	109,000
Deferred state tax expense (benefit)	9,000	559,000	(190,000	)
Total tax expense before cumulative effect of change in accounting principle	$4,548,000	$3,747,000	$1,547,000

SUMMARY COMPENSATION TABLE

Income taxes are included in the statements of operations as follows:

						Long-Term Compensation Awards
Name and Principal Positions	Year	Salary		Bonus		Securities Underlying Options⁽¹⁾	All Other Compensation ⁽²⁾
Michael P. Mack	2003	$	350,000	$	—	—	$	20,000
Chief Executive Officer, President	2002	$	334,750	$	45,000	27,500	$	20,000
	2001	$	334,750	$	—	—	$	20,000

Walter J. Carucci⁽³⁾	2003	$	160,000	$	—	—	$	18,000
Vice President of Development and	2002	$	34,416	$	—	25,000	$	—
Construction

Lloyd J. Fritzmeier⁽⁴⁾	2003	$	280,000	$	—	—	$	20,000
Chief Operating Officer	2002	$	23,334	$	—	60,000	$	—

R. Gregory Keller	2003	$	215,000	$	—	—	$	20,000
Vice President of Operations	2002	$	198,275	$	62,500	17,500	$	20,000
	2001	$	198,275	$	—	—	$	20,000

David W. Qualls	2003	$	250,000	$	—	—	$	20,000
Chief Financial Officer, Secretary	2002	$	236,900	$	62,500	20,000	$	20,000
	2001	$	236,900	$	—	—	$	20,000

	Years ended September 30,
	1999	2000		2001
Income tax expense on income before cumulative effect of change in accounting principle	$4,548,000	$3,747,000		$1,547,000
Cumulative effect of change in accounting principle	—	(800,000	)	—
Total tax expense	$4,548,000	$2,947,000		$1,547,000

⁽¹⁾	Consists options granted in fiscal year 2002.

A(2) ~~reconciliation~~Consists of ~~the~~ ~~amount~~deferred ~~computed~~compensation ~~by applying the statutory federal income tax rate to the income before provision for income taxes to the provision for income taxes is as follows:~~ matches.

	Years ended September 30,
	1999	2000	2001
Amounts computed at 34% statutory federal rate	$3,894,000	$2,547,000	$1,329,000
State taxes and other	654,000	400,000	218,000
Provion for income taxes	$4,548,000	$2,947,000	$1,547,000

⁽³⁾	Fiscal 2002 was a partial salary, and based on the hire date of July 22, 2002.

~~The~~(4) ~~tax~~Fiscal ~~effects~~2002 ~~of temporary~~was ~~differences~~a ~~that~~partial ~~give~~salary, ~~rise~~and tobased ~~significant~~on ~~portions of~~ the ~~deferred~~hire ~~tax~~date ~~assets~~of ~~and~~August ~~deferred tax liabilities at September 30~~26, ~~2000 and 2001 are as follows:~~ 2003.

	September 30,
	2000		2001
Write off of start–up costs	$ 837,000		$1,230,000
Net present value of loss on lease obligation	40,000		81,000
Inventories, pursuant to the Tax Reform Act of 1986	27,000		28,000
Accrued rent	452,000		453,000
Accrued vacation expense for financial reporting purposes	243,000		245,000
Change in insurance asset net of deferred compensation	204,000		274,000
Federal deduction for current year state tax expense	95,000		78,000
Net operating loss carryforwards	120,000		—
Alternative minimum tax credit carryforwards	1,490,000		1,060,000
State tax benefit	140,000		—
Total gross deferred tax assets	3,648,000		3,449,000
Depreciation	(7,611,000	)	(7,332,000	)
Total gross deferred tax liabilities	(7,611,000	)	(7,332,000	)
Net deferred tax liabilities	$(3,963,000	)	$(3,883,000	)

F-11Table of Contents

AtThe ~~September~~following ~~30, 2001,~~table provides information concerning exercises of options to purchase the Company’s Common ~~had~~Stock ~~available~~during ~~alternative~~the ~~minimum~~fiscal ~~tax~~year ~~credit~~ended ~~carryforwards~~September of30, $12003,~~060,000.~~ ~~The~~and ~~Internal~~unexercised ~~Revenue~~options ~~Code~~held ~~imposes~~as ~~certain~~of ~~conditions~~September ~~and~~30, ~~possible~~2003 ~~limitations~~by on the ~~future~~persons ~~availability~~named ofin ~~tax~~the ~~credit~~Summary ~~carryforwards,~~Compensation ~~including~~Table. ~~limitations arising~~(Information ~~from~~is ~~changes~~ in alphabetical order with the ~~Company’s~~CEO/President ~~ownership.~~listed first):

~~The realization~~AGGREGATE ofOPTION ~~deferred~~EXERCISES ~~tax~~IN ~~assets~~FISCAL ~~may~~2003 beAND dependent upon the Company’s ability to generate sufficient taxable income in future years. Although realization is not assured, management believes it is more likely than not that the deferred incomeFISCAL ~~tax~~YEAR-END ~~assets~~VALUES ~~will be realized and therefore has not recorded a valuation allowance.~~

Note 5. Shareholders’ Equity

				Number of Securities Underlying Unexercised Options at 9/30/03		Value of Unexercised In-The-Money Options at 9/30/03⁽¹⁾⁽²⁾
	Shares Acquired on	Value
Name	Exercise	Realized		Exercisable	Unexercisable	Exercisable		Unexercisable
Michael P. Mack	—	$	—	270,225	14,275	$	1,506,532	$	57,538
Walter J. Carucci	—	$	—	10,425	14,575	$	45,974	$	64,276
Lloyd J. Fritzmeier	—	$	—	21,671	38,329	$	110,522	$	195,478
R. Gregory Keller	—	$	—	139,418	9,082	$	822,563	$	35,557
David W. Qualls	—	$	—	103,045	10,455	$	442,674	$	41,211

~~Preferred~~(1) ~~Stock~~Values are net of exercise price.

On(2) ~~February~~The ~~15,~~value ~~2001,~~of “in-the-money” ~~Board~~stock ofoptions ~~Directors~~represents ~~declared~~the adifference ~~dividend~~between ~~distribution~~the ofexercise ~~one~~price ~~Preferred~~of ~~Stock~~such ~~Purchase~~option ~~Right (each a “Right”~~ and ~~collectively~~ the ~~“Rights”)~~ ~~for~~fair ~~each~~market ~~outstanding~~value ~~share~~ of ~~Common Stock,~~ $015.0191 ~~par~~per ~~value,~~share of ~~the~~Common ~~Company.~~Stock ~~The~~as ~~distribution~~of ~~was~~September ~~paid~~30, ~~on March 16~~2003, ~~2001 to stockholders of record on that date. Each Right entitles~~ the ~~registered~~closing ~~holder~~price ~~to purchase from the Company one one-hundredth~~ of ~~a share of~~ the ~~Company’s~~Common ~~Preferred~~ Stock, atreported aon ~~price~~the ofNasdaq ~~$34.00.~~National ~~The~~Market ~~Rights~~on ~~shall~~such ~~become exercisable once any person (with some limited exceptions) has acquired or commences to acquire a beneficial interest of at least 20% of the Company’s outstanding common stock~~date.

~~The Preferred~~Compensation ~~Stock purchasable upon exercise~~ of ~~the~~Directors Rights will be non-redeemable and junior to any other series of preferred stock the Company may issue (unless otherwise provided in the terms of such other series). Each share of Preferred Stock will have a preferential cumulative quarterly dividend in an amount equal to the greater of (a) $85.00 or (b) 100 times the dividend declared on each share of Common Stock. In the event of liquidation, the holders of Preferred Stock will receive a preferred liquidation payment equal to the greater of (a) $85.00 per share, plus accrued dividends to the date of distribution whether or not earned or declared, or (b) an amount per share equal to 100 times the aggregate payment to be distributed per share of Common Stock. Each share of Preferred Stock will have 100 votes, voting together with the shares of Common Stock. In the event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged for or changed into other securities, cash and/or other property, each share of Preferred Stock will be entitled to receive 100 times the amount and type of consideration received per share of Common Stock. The rights of the Preferred Stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions.

~~Prior~~The tonon-employee ~~certain~~directors ~~specified~~of ~~events~~the Company each receive $20,000 and the Chairman ~~Rights~~of ~~may~~the beBoard ~~redeemed~~receives by$50,000 ~~the~~per year as cash compensation for attendance at Board of Directors atand committee meetings. Also, for each Board and committee meeting a ~~price~~non-employee ofdirector attends, the director receives from $01,000 to $2,000, depending on the nature of the meeting and the role of the specific member.~~001~~ ~~per~~This ~~Right~~compensation is paid for meetings of the standing committees, as well as meetings of a special committee relating to the merger. ~~There~~Additionally, the directors of the Company are ~~120~~reimbursed for expenses incurred in connection with attendance at Board of Directors or committee meetings. Each non-employee director remaining in office is granted an option to purchase 7,~~000~~500 shares of ~~Series~~Common AStock ~~Preferred~~annually ~~Stock~~in ~~reserved~~addition ~~for~~to ~~issuance~~an ~~upon~~initial ~~exercise~~grant of 10,000 options upon joining the ~~Rights~~Board. NoEach ~~shares~~non-employee director has waived his right to receive the annual option grant that would have been issued asin ofthe ~~September~~first ~~30,~~quarter ~~2001~~of fiscal 2004.

~~Common~~Compensation ~~Stock~~Committee Interlocks and Insider Participation in Compensation Decisions

InDuring ~~October~~the ~~1998~~year ended September 30, ~~the~~2003, ~~Company~~executive compensation ~~announced~~was ~~that~~administered itby ~~intended~~the toCompensation ~~repurchase~~Committee upcomprised toof ~~500,000~~three ~~shares~~non-employee directors of ~~its~~the ~~common~~Company, ~~stock~~Messrs. AsGunst, ofMinchin ~~September~~and ~~30,~~Nierenberg. ~~1999~~Mr. Mack, the Company’s ~~repurchased~~President ~~132~~and Chief Executive Officer,~~000~~ ~~shares~~participated ofin the ~~common~~deliberations ~~stock~~of atthe anCompensation ~~average~~Committee ~~price~~regarding ofexecutive ~~$14.45,~~compensation ~~for~~that aoccurred ~~total~~during offiscal $12003,~~908,000.~~ ~~All~~but ~~shares~~did ~~repurchased~~not ~~have~~take ~~been~~part ~~retired~~in deliberations regarding his own compensation. ~~The~~Mr. Mack’s participation in the deliberations of the Compensation Committee included providing information on the performance of people who work at the Company ~~did~~and ~~not~~advisory ~~repurchase~~recommendations ~~any~~regarding ~~shares~~the ~~during~~appropriate ~~fiscal~~levels ~~2000~~of orcompensation ~~2001~~for the Company’s officers.

~~Stock~~Employment ~~Option~~Contracts ~~Plans~~and Termination of Employment and Change in Control Arrangement

The Company ~~has~~entered ~~five~~into ~~stock~~employment ~~option~~agreements ~~plans~~with Michael ~~under~~Mack, ~~which~~Chief 1Executive Officer and President,~~782,500~~ ~~options~~David ~~are~~Qualls, ~~authorized~~Chief toFinancial beOfficer ~~granted~~and toSecretary, ~~employees~~Gregory Keller, ~~consultants~~Vice President of Operations in July 1997, and ~~directors~~with Kenneth Keane, Vice President of ~~the~~Human ~~Company.~~Resources Ofin ~~this~~November ~~balance~~1998, ~~307,064~~and with ~~options~~Walt ~~are~~Carucci, ~~still~~Vice ~~available~~President toof be Development and Construction in July 2002, and with Lloyd Fritzmeier, Chief

~~F-12~~39

grantedTable as of September 30, 2001. The plans provide for the grant of both incentive stock options and non–qualified stock options. Under the plans, options to purchase common stock may be granted for periods up to ten years at a price per share ranging from 85% to 110% of the fair market value of the Company’s common stock at the date of grant. During fiscal 1999, 2000 and 2001, employee stock options were granted at the fair market value of the stock at the date of grant. The options generally vest over periods of one to five years and may be exercised in annual installments ranging from one to ten years. Under the plans, directors will receive options to purchase 10,000 shares of common stock upon their election to the Board of Directors, and options to purchase 6,640 shares annually thereafter. Contents

~~Activity~~ Operating Officer in September 2002. Under the respective employment agreements, the minimum base annual salary for ~~fiscal~~Mr. ~~1999~~Mack is $250,000, ~~2000~~for Mr. Qualls is $170,000, for Mr. Keller is $150,000, for Mr. Keane is $120,000, for Mr. Carucci is $160,000 and ~~2001~~for ~~with~~Mr. ~~respect~~Fritzmeier tois $280,000. Furthermore, these ~~plans~~employment agreements provide that upon termination of these employees without cause, the Company is obligated asto ~~follows:~~pay severance equal to one half of the then current annual salary of the terminated employee along with certain other benefits. Additionally, in the event of a termination without cause following a change of control, the employment agreements provide for severance equal to two years of base salary plus two years of bonus.

	Shares Underlying Options			Weighted–Average Exercise Price
Outstanding at September 30, 1998		746,019			$ 9.18
Granted		180,460			$13.99
Exercised		(204,317	)		$ 8.36
Canceled		(7,556	)		$12.77
Outstanding at September 30, 1999		714,606			$10.59
Granted		229,260			$13.80
Exercised		(8,861	)		$ 9.28
Canceled		(10,964	)		$13.11
Outstanding at September 30, 2000		924,041			$11.37
Granted		256,500			$ 7.88
Exercised		(1,400	)		$ 4.70
Canceled		(20,666	)		$10.70
Outstanding at September 30, 2001		1,158,475			$10.62

In the event any such severance payment becomes necessary, the amount of such payment will be based upon the current salary and bonus figures set forth in the Summary Compensation Table.

~~Options~~In tothe ~~purchase an~~event ~~aggregate~~ of ~~491,306,~~a ~~624,661,~~change ~~and~~in ~~792~~control,~~716~~ ~~shares~~as ~~were~~defined ~~exercisable~~ under the ~~plans~~Company’s as1998 Option ~~of September 30~~Plan, ~~1999,~~any ~~2000,~~unexercisable ~~and~~or ~~2001~~unvested ~~respectively.~~portion ~~The~~of ~~weighted~~the ~~average~~outstanding ~~price of~~ options ~~exercisable~~will ~~under~~become ~~the~~immediately ~~plans~~exercisable asand ofvested ~~September~~in ~~30,~~full ~~1999,~~prior ~~2000,~~to ~~and~~the ~~2001 was~~change ~~$9.33,~~in ~~$10~~control.~~30,~~ ~~and~~The ~~$10.88~~Company’s ~~per~~other ~~share,~~stock ~~respectively.~~option ~~The~~plans ~~weighted~~also ~~average~~contain ~~exercise~~provisions ~~price~~that ofcould ~~options~~lead to ~~granted under~~ the ~~plans~~vesting ~~during~~and ~~fiscal~~exercisability ~~1999,~~of ~~2000,~~all ~~and~~outstanding ~~2001~~options ~~was~~prior ~~$13.99,~~to ~~$13.80,~~a ~~and~~change ~~$7.88~~in ~~per~~control ~~share,~~of ~~respectively~~the Company.

~~The~~ Item ~~following~~12. Security isOwnership ~~a summary~~ of ~~stock~~Certain ~~options~~Beneficial ~~outstanding~~Owners asand ~~September~~Management ~~30, 2001:~~

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding at September 30, 2001		Weighted–Average Remaining Contractual Life In Years		Weighted–Average Exercise Price		Number Exercisable at September 30, 2001		Weighted–Average Exercise Price
$ 6.50 — $ 9.13		668,662		5.92		$ 8.14		439,520		$ 8.27
$10.00 — $12.75		119,711		6.71		$12.21		97,788		$12.09
$13.00 — $20.63		370,102		7.47		$14.58		255,408		$14.90
$ 6.50 — $20.63		1,158,475		6.49		$10.62		792,716		$10.88

The following table sets forth certain information, as of November 14, 2003, with respect to the beneficial ownership of the Company’s Common Stock by (i) all persons known by the Company to be the beneficial owners of more than 5% of the outstanding Common Stock of the Company; (ii) each director of the Company; (iii) each executive officer of the Company named in the Summary Compensation Table; and (iv) all executive officers and directors of the Company as a group.

The Company applies the intrinsic value method of accounting for its stock–based compensation. No compensation expense has been recognized for employee stock option grants, which were fixed in nature, as the options have been granted at fair market value. No compensation expense has been recognized for the employee

	Shares Beneficially Owned⁽¹⁾
Name and Address of Beneficial Owner	Number	Percent⁽²⁾
The Nierenberg Investment Management Company ⁽³⁾
19605 NE 8th Street
Camas, WA 98607	913,400	15.7	%

T. Rowe Price Associates, Inc. ⁽⁴⁾
T. Rowe Price Small-Cap Value Fund, Inc.
100 E. Pratt Street
Baltimore, MD 21202	551,500	9.5	%

Phronesis Partners, L.P.⁽⁵⁾ Jim Wiggins 180 East Broad Street Columbus, OH 43215	424,400	7.3	%

Dimensional Fund Advisors ⁽⁶⁾
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401	337,200	5.8	%

David Nierenberg ⁽⁷⁾	990,875	16.9	%

Michael P. Mack⁽⁸⁾	401,227	6.6	%

Edgar F. Berner ⁽⁹⁾	61,720	1.0	%

Edward A. Blechschmidt	10,000	*

Robert A. Gunst⁽¹⁰⁾	62,420	1.1	%

Michael M. Minchin, Jr. ⁽¹¹⁾	116,420	2.0	%

John M. Robbins, Jr. ⁽¹²⁾	47,768	*

~~F-13~~40

stockTable purchaseof plan. Had compensation expense for the Company’s stock–based compensation awards and employee stock purchase plan shares issued during fiscal 1999, 2000 and 2001 been determined based on fair value at the grant dates, the Company’s net income and net income per common share would have been reduced to the pro forma amounts indicated below: Contents

	Years ended September 30,
	Shares BeneficiallyOwned (1)
	1999	2000		2001
Name and Address of Beneficial Owner	Number	Percent(2)
Net income:
Walter J. Carucci (13)	12,510	*
As reported	$6,904,000	$4,543,000		$2,362,000
Lloyd J. Fritzmeier (14)	28,339	*
Pro forma	$6,261,000	$2,833,000		$1,197,000
R. Gregory Keller (15)	145,322	2.4	%
Net income per common share:
David W. Qualls (16).	108,155	1.8	%
Basic:
All directors and executive officers as a group (12 persons) (17)	2,021,170	30.2	%
As reported	$ 1.24	$ 0.80		$ 0.42
Pro forma	$ 1.12	$ 0.50		$ 0.21
Diluted:
As reported	$ 1.18	$ 0.79		$ 0.42
Pro forma	$ 1.07	$ 0.49		$ 0.21

~~Pro~~* ~~forma~~Less ~~net~~than ~~income reflects~~one ~~only options granted since October 1, 1995~~percent. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income amounts presented above. The fair value of each option grant is estimated on the date of grant using the Black–Scholes option pricing model with the following weighted–average assumptions for grants in fiscal 1999, 2000 and 2001, respectively: dividend yield of 0.0% for each year, expected volatility of 77%, 91%, and 115.63%, risk–free interest of 4.72%, 5.96%, and 5.78% and expected lives of 6.7 years, 6.8 years, and 8.0 years. The fair value of the employees’ purchase rights pursuant to the employee stock purchase plan is estimated using the Black–Scholes model with the following assumptions for fiscal 1999, 2000 and 2001: dividend yield of 0% for each year, expected volatility of 77%, 91%, and 115.63%, risk–free interest rates of 4.44%, 5.57%, and 5.15% and expected lives of 6 months for each year.

~~Employee~~(1) Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock ~~Purchase~~shown ~~Plan~~as beneficially owned by them, subject to community property laws, where applicable.

~~During~~(2) ~~1996,~~Calculated ~~the Company implemented an employee stock purchase plan for all eligible employees to purchase shares of common stock at 85% of the lower of the fair market value of a share of common stock~~ on the ~~first~~basis ~~day~~ of ~~the~~5,833,792 ~~offering~~shares ~~period or the fair market value~~ of aCommon ~~share~~Stock ~~of common stock on the purchase date~~outstanding.

~~Employees~~(3) ~~may~~The ~~authorize~~General ~~the~~Partner ~~Company~~of toThe ~~withhold~~D3 upFamily toFund, ~~10%~~LP of(which ~~their~~owns ~~compensation~~587,252 ~~during~~shares), ~~any~~the ~~offering~~D3 ~~period,~~Family ~~subject~~Retirement toFund, ~~certain limitations.~~LP ~~During~~(which ~~fiscal~~owns ~~1999~~239,830 ~~2000~~shares), ~~and~~The ~~2001,~~D3 ~~12,871,~~Children’s 17Fund,~~379,~~ ~~and~~LP 18(which owns 44,~~781~~618 shares) ~~were~~and ~~issued~~The ~~under~~D3 ~~the~~Offshore ~~plan~~Fund, ~~respectively.~~LP At(which ~~September~~owns 3041,700 ~~2001, 176,467~~ shares). ~~were~~See ~~reserved~~Note ~~for future issuance~~6.

~~Note~~(4) 6Based on information provided by T. ~~401~~Rowe Associates, Inc. (K“Price Associates”) ~~Savings~~and ~~Plan~~T. Rowe Small-Cap Value Fund, Inc. (“Price Fund”) on Form 13-F filed with the SEC on November 14, 2003 and on a Form 13-G filed with the SEC on February 14, 2003 and information provided verbally by Price Associates. Price Associates has sole dispositive power for the entire holding of 551,500 shares. Price Associates has sole voting power for 46,900 shares and Price Fund has sole voting power for 484,600 shares. Price Associates disclaims beneficial ownership of such securities.

~~The Company has a 401~~(k5) ~~Savings~~Based ~~Plan~~solely ~~(the~~on ~~“Plan”)~~information ~~which~~provided ~~allows eligible employees to contribute from one percent to the maximum percentage as determined~~ by ~~the~~Phronesis ~~Plan administrator (seventeen percent for the plan years ended 1999~~Partners, ~~2000~~L.P. ~~and~~on ~~2001)~~Form of13-G/A ~~pre–tax~~filed ~~compensation,~~ with the ~~Company~~SEC ~~making~~on ~~discretionary~~February ~~matching~~26, ~~contributions~~2002. asPhronensis ~~determined~~Partners, ~~each year by the Plan administrator~~L.P. ~~Employees vest immediately in their contributions~~ and ~~vest~~Jim inWiggins ~~Company~~share ~~contributions~~beneficial ~~over~~ownership ~~a four–year period of service. Included in general and administrative expenses~~ for ~~fiscal~~the ~~1999,~~entire ~~2000~~holding ~~and 2001 are Company contributions~~ of ~~$80~~424,~~000,~~400 ~~$122,000, and $60,000 respectively~~shares.

F(6) Based on information provided by Dimensional Fund Advisors, Inc. on Form 13-14F filed with the SEC on November 5, 2003. Dimensional Fund Advisors Inc. (“Dimensional”), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other investment vehicles, including commingled group trusts. (These investment companies and investment vehicles are the “Portfolios”). In its role as investment advisor and investment manager, Dimensional possessed both voting and investment power over 337,200 shares of Garden Fresh Restaurant Corp. stock as of September 30, 2003. The Portfolios own all securities reported in this statement, and Dimensional disclaims beneficial ownership of such securities.

(7) Includes the 913,400 shares disclosed above as held by the The Nierenberg Investment Management Company. See Note 73. ~~Deferred~~ ~~Compensation~~Mr. ~~Plan~~Nierenberg is President of Nierenberg Investment Management Company. In addition, Mr. Nierenberg has voting and investment power over the shares held by The Nierenberg Family 1993 Trust (which owns 59,975 shares). Includes 17,500 shares issuable upon exercise of stock options, exercisable within 60 days of November 14, 2003. The address of this beneficial owner is the same as stated for The Nierenberg Investment Management Company.

During 1998, the Company implemented a deferred compensation plan whereby a select group of management employees may elect to defer up to 100% of their compensation into the plan. The Company makes matching contributions of 50% up to $6,000 for management and 100% up to $12,000 for officers and up to $20,000 for senior officers. Matching contributions vest over a four–year period (~~25% per year of service~~8). ~~Deferrals~~Includes ~~and~~273,485 ~~matching~~shares ~~contributions~~issuable ~~accrue earnings based~~ upon ~~the~~exercise ~~investment return~~ of astock ~~portfolio selected by the participant from among portfolio~~ options ~~specified~~exercisable inwithin ~~the~~60 ~~plan.~~days ~~The~~of ~~Company’s~~November ~~liability related to this plan at September 30~~14, ~~1999, 2000 and 2001 was $514,000 and $957,000, and $1,101,000, respectively~~2003. The ~~plan~~address ~~also~~of ~~provides~~this abeneficial ~~death~~owner ~~benefit~~is toc/o ~~participants who die while employed by~~ the Company~~. The death benefit is generally $100~~,~~000~~ ~~but~~15822 ~~for~~Bernardo ~~executive~~Center ~~officers is $500~~Drive,~~000.~~ ~~The~~Suite ~~cash surrender value of such insurance at September 30~~A, ~~1999,~~San ~~2000 and 2001 was $438~~Diego,~~000,~~ ~~$845,000,~~California and $950,000, respectively. Benefits under the plan are generally payable at retirement or attainment of a specified age. All contributions and earnings held under the plan remain assets of the Company and are subject to the claims of general creditors of the Company. There are currently 21 participants in the plan. The plan is not intended to be a qualified plan under Section 401(a) of the Internal Revenue Code. 92127

~~Note~~(9) ~~8. Commitments~~Includes ~~and~~57,420 ~~Contingencies~~shares issuable upon exercise of stock options exercisable within 60 days of November 14, 2003.

~~The~~(10) ~~Company~~Includes ~~leases certain of its restaurant facilities~~32,420 ~~including~~shares ~~land~~issuable ~~under~~upon ~~noncancelable~~exercise ~~operating~~of ~~lease~~stock ~~agreements. The leases expire at various dates through 2021 and contain five to twenty–year renewal~~ options. ~~The~~exercisable ~~leases~~within ~~provide~~60 ~~that~~days ~~the~~of ~~Company~~November ~~pay the taxes~~14, ~~insurance and maintenance expenses related to the leasedfacilities, and the monthly rental payments are subject to periodic adjustments~~2003. Certain leases contain fixed escalation clauses and rent under these leases is charged ratably over the lease term. The majority of the leases also provide for percentage rentals on sales above a specified minimum. The Company also has noncancelable operating leases for trucks and certain other equipment that expire at various dates through 2007.

~~The~~(11) ~~aggregate~~Includes ~~future~~107,420 ~~minimum~~shares ~~lease~~issuable ~~commitments~~upon ~~due~~exercise ~~are~~of asstock ~~follows:~~options exercisable within 60 days of November 14, 2003.

Year Ending September 30,		Amount
2002		$ 12,966,000
2003		12,942,000
2004		12,889,000
2005		11,891,000
2006		11,210,000
Thereafter		86,153,000
Total minimum lease payments		$148,051,000

TheTable Company incurred rental expense under all operating leases of $6,447,000, $8,099,000, and $11,096,000 in fiscal 1999, 2000 and 2001, respectively. Rental expense includes percentage rents of $347,000, $437,000, and $515,000 for fiscal 1999, 2000 and 2001, respectively. Contents

~~The~~(12) ~~Company~~Includes is44,268 ~~party~~shares toissuable ~~various~~upon ~~legal~~exercise ~~actions relating~~of tostock ~~former~~options ~~employees.~~exercisable Inwithin ~~the~~60 ~~opinion~~days of ~~management,~~November ~~after reviewing the information~~14, which is currently available with respect to these matters, and consulting with the Company’s counsel, any liability that may ultimately be incurred will not materially affect the liquidity, financial position or results of operations of the Company2003.

~~F-15~~(13) Includes 12,510 shares issuable upon exercise of stock options exercisable within 60 days of November 14, 2003.

~~SIGNATURES~~(14) Includes 28,339 shares issuable upon exercise of stock options exercisable within 60 days of November 14, 2003.

~~Pursuant to the requirements of Section 13 or 15~~(d15) ofIncludes ~~the Securities Exchange Act of 1934~~141,206 ~~the~~shares ~~Registrant~~issuable ~~has~~upon ~~duly~~exercise ~~caused~~of ~~this~~stock ~~Report~~options toexercisable bewithin ~~signed~~60 ondays ~~its~~of ~~behalf~~November ~~by the undersigned~~14, ~~thereunto duly authorized~~2003.

Da(16) ~~te:~~Includes ~~December~~105,155 27shares issuable upon exercise of stock options exercisable within 60 days of November 14, ~~2001~~2003

GA(17) ~~RDEN~~Includes ~~FRESH~~856,137 ~~RESTAURANT~~shares ~~CORP~~issuable upon exercise of stock options exercisable within 60 days of November 14, 2003.

/For a brief description of the Company’s/ ~~MICHAEL~~equity Pcompensation plans, see Item 5. ~~MACK~~

~~By:~~Completion of the merger will result in a change in control of the Company.

~~Michael~~ Item P13. Certain ~~Mack~~Relationships and Related Transactions

~~Chief~~Certain ~~Executive~~Relationships ~~Officer~~and ~~President~~Related Transactions

~~Pursuant~~The toCompany ~~the~~has ~~requirements~~entered ofinto ~~the~~employment ~~Securities~~agreements ~~Exchange~~with ~~Act~~certain of ~~1934,~~its ~~the~~officers. ~~following~~See ~~persons~~“Employment inContracts ~~the~~and ~~capacities~~Termination ~~indicated~~of ~~have~~Employment ~~signed~~and ~~this~~Change ~~Report~~in ~~below~~Control ~~on December~~Arrangement” ~~27,~~in ~~2001~~Item 11.

~~Signature~~The ~~Title /~~Company’s/ ~~MICHAEL~~officers P.and ~~MACK~~directors ~~Michael~~are P.indemnified ~~Mack~~pursuant ~~Chairman~~to certain provisions of ~~the~~Delaware ~~Board,~~General ~~Chief~~Corporation ~~Executive Officer~~Law, ~~President~~the ~~and Director /~~Company’s/ ~~DAVID~~charter W.documents ~~QUALLS David W. Qualls Chief Financial Officer~~ and ~~Chief~~indemnification ~~Accounting~~agreements ~~Officer~~with ~~/s/~~the ~~EDGAR F~~Company. ~~BERNER~~The ~~Edgar~~indemnification F.agreements ~~Berner~~contain ~~Director~~provisions ~~/s/~~that ~~ROBERT~~are A.in ~~GUNST~~some ~~Robert~~respects A.broader ~~Gunst~~than ~~Director~~the ~~/s/~~specific indemnification ~~MICHAEL~~provisions M.contained ~~MINCHIN,~~in ~~JR.~~the ~~Michael~~Delaware M.General ~~Minchin,~~Corporation JrLaw. ~~Director /s/ JOHN M. ROBBINS, JR. John M. Robbins, Jr. Director /s/ DAVID NIERENBERG David Nierenberg Director~~

The Company’s policy has been and continues to be that all transactions between the Company and its officers, directors and other affiliates must (i) be approved by a majority of the members of the Company’s ~~EXHIBIT~~Board ~~INDEX~~of Directors and by a majority of the disinterested members of the Company’s Board of Directors and (ii) be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. In addition, this policy requires that any loans by the Company to its officers, directors or other affiliates be for bona fide business purposes only.

Exhibit Number		Description
3.1*		Restated Certificate of Incorporation of Garden Fresh Restaurant Corp.
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.
3.3**		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
10.7***		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
10.13**		Park Terrace Office Park lease between the Company and Park Terrace Partners dated November 1, 1991
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
23.1		Consent of Independent Accountants—KPMG LLP

The specific interests that the directors and executive officers of the registrant will have in the merger will be described in the proxy materials filed by the Company with the SEC under regulation 14A.

* Item ~~Incorporated by reference from Exhibit 4~~14.1 Principal ~~filed~~Accounting ~~with~~Fees ~~the~~and ~~Company’s~~Services ~~Registration Statement on Form S-8 (No. 33-93568) filed June 16, 1995.~~

**Audit ~~Incorporated~~Fees 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.

~~***~~The aggregate ~~Incorporated~~fees billed for the fiscal years ended September 30, 2003 and 2002 for professional services rendered by ~~reference~~KPMG ~~from~~LLP (“KPMG”) for the ~~Exhibits~~audit ~~with~~of ~~corresponding~~the ~~numbers~~Company’s ~~filed~~annual ~~with~~financial statements and review of the financial statements included in the Company’s Form 10-Q’s ~~filed~~or ~~with~~services that are normally provided by the ~~SEC~~accountant onin ~~February~~connection 13with statutory and regulatory filings or engagements for those fiscal years were $200,000 ~~1998~~and $114,000, respectively.

**** Incorporated by reference from the Exhibits with corresponding numbers filed with the Company’s Form 10Audit-QRelated ~~filed~~Fees with the SEC on April 28, 1998, as amended by Amendment No. 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.

~~*****~~The ~~Incorporated~~aggregate byfees ~~reference~~billed ~~from~~for the ~~Exhibits~~fiscal ~~with~~years ~~corresponding~~ended ~~numbers~~September ~~filed~~30, ~~with~~2003 ~~the~~and ~~Company’s~~2002 ~~Form~~for ~~S-1~~professional ~~(No.~~services ~~33-51267)~~rendered ~~filed~~by KPMG for audit related services rendered in connection with the ~~SEC~~preparation onand ~~April~~filing ~~29,~~of ~~1998.~~

~~******~~42 ~~Incorporated by reference from the Form 8-K filed on February 23, 2001.~~

registration statements, audits of employee benefit plans, and consultation on accounting standards or transactions for those fiscal years were $17,000 and $19,000, respectively.

Tax Fees

The aggregate fees billed for the fiscal years ended September 30, 2003 and 2002 for professional services rendered by KPMG for tax compliance, tax advice, and tax planning for those fiscal years were $71,000 and $65,000, respectively.

All Other Fees

The aggregate fees billed for the fiscal years ended September 30, 2003 and 2002 for professional services rendered by KPMG for non-audit services for those fiscal years were $5,000 and $225,000, respectively. During fiscal 2003, KPMG provided services related to the pending merger with Fairmont Capital Inc. In fiscal 2002, these services related to providing assistance to management with respect to reviewing post system implementation controls and in providing management benchmarks and workflow analysis relating to the new accounting system implementation. Management completed the accounting system implementation, with the implementation services provided by vendor.

PART IV

Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

(a) The following documents are filed as part of this Report:

		Page Number
(1)	Independent Auditors’ Report	F-1
	Balance Sheets as of September 30, 2002 and 2003	F-2
	Statements of Operations for the years ended September 30, 2001, 2002 and 2003	F-3
	Statements of Shareholders’ Equity for the years ended September 30, 2001, 2002 and 2003	F-4
	Statements of Cash Flows for the years ended September 30, 2001, 2002 and 2003	F-5
	Notes to Financial Statements	F-6

	Schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(2)	Exhibits. The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Report.

(b) Reports on Form 8-K.

A report on Form 8-K was filed by the Company on April 3, 2003 furnishing a press release entitled “Garden Fresh Announces Preliminary Second Fiscal Quarter Results” described therein.

A report on Form 8-K was filed by the Company on April 30, 2003 furnishing a press release entitled “Garden Fresh Reports Fiscal 2003 Second Quarter Results” described therein.

A report on Form 8-K was filed by the Company on August 1, 2003 furnishing a press release entitled “Garden Fresh Report Fiscal 2003 Third Quarter Results – Revises Fourth Quarter Estimates Upward” described therein.

A report on Form 8-K was filed by the Company on October 1, 2003 relating to the issuance of a press release entitled “Garden Fresh Restaurant Corp. to Merge with an Affiliate of Fairmont Capital, Inc. Garden Fresh Stockholders to Receive $16.53 Per Share in the Merger.” described therein and the filing of the Agreement and Plan of Merger dated September 29, 2003, by and among Garden Fresh Restaurant Corp., GF Holdings, Inc. and GFR Acquisition Company.

A report on Form 8-K was filed by the Company on November 25, 2003 furnishing a press release entitled “Garden Fresh Reports Fiscal 2003 Fourth Quarter and Year End Results” described therein.

A report on Form 8-K was filed by the Company on November 25, 2003 relating to the issuance of a press release entitled “Garden Fresh Restaurant Corp. Provides Update on Status of Pending $16.35 per Share Merger with an Affiliate of Fairmont Capital, Inc.” described therein and the filing of the Amendment to Agreement and Plan of Merger dated as of November 21, 2003, by and among Garden Fresh Restaurant Corp., GF Holdings, Inc. and GFR Acquisition Company.

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders of

Garden Fresh Restaurant Corp.:

We have audited the accompanying balance sheets of Garden Fresh Restaurant Corp. as of September 30, 2002 and 2003, and the related statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Garden Fresh Restaurant Corp. as of September 30, 2002 and 2003, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP

San Diego, California

November 17, 2003

F-1

GARDEN FRESH RESTAURANT CORP.

BALANCE SHEETS

	September 30,
	2002		2003
ASSETS
Current assets:
Cash and cash equivalents	$	5,294,000	$	11,057,000
Inventories		9,123,000		9,670,000
Other current assets		3,919,000		3,601,000

Total current assets		18,336,000		24,328,000
Property and equipment, net		132,638,000		125,700,000
Intangible and other assets		2,032,000		2,465,000

TOTAL ASSETS	$	153,006,000	$	152,493,000


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,604,000	$	4,243,000
Current portion of long-term debt		10,635,000		17,606,000
Accrued liabilities		11,743,000		13,088,000

Total current liabilities		27,982,000		34,937,000
Deferred income taxes		8,336,000		8,567,000
Long-term debt, net of current portion		32,970,000		21,219,000
Other liabilities		3,485,000		3,786,000
Shareholders’ equity:
Preferred stock, $.001 par value; 2,500,000 shares authorized at September 30, 2002 and 2003 of which 120,000 shares are designated as Series A Preferred Stock; 0 shares issued and outstanding at September 30, 2002 and 2003, respectively		—		—
Common stock, $.01 par value; 12,000,000 shares authorized at September 30, 2002 and 2003 respectively; 5,732,822 and 5,824,023 issued and outstanding at September 30, 2002 and 2003, respectively		57,000		58,000
Additional paid-in capital		60,133,000		60,890,000
Retained earnings		20,043,000		23,036,000

Total shareholders’ equity		80,233,000		83,984,000

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	153,006,000	$	152,493,000


Commitments and contingencies (note 9)

See accompanying notes to financial statements.

F-2

GARDEN FRESH RESTAURANT CORP.

STATEMENTS OF OPERATIONS

	Years ended September 30,
	2001			2002			2003
Net sales	$	198,463,000		$	214,296,000		$	220,489,000

Costs and expenses:
Costs of sales		49,447,000			52,333,000			53,912,000
Restaurant operating expenses:
Labor		64,420,000			68,130,000			69,846,000
Occupancy and other expenses		47,210,000			52,092,000			56,849,000
General and administrative expenses		13,538,000			13,488,000			14,270,000
Restaurant opening costs		1,952,000			303,000			227,000
Depreciation and amortization expenses		12,503,000			13,727,000			14,475,000
Facility exit costs		1,572,000			(83,000	)		—
Merger costs (note 8)		—			—			997,000

Total costs and expenses		190,642,000			199,990,000			210,576,000

Operating income		7,821,000			14,306,000			9,913,000

Other income (expense):
Interest income		160,000			85,000			55,000
Interest expense		(4,876,000	)		(4,537,000	)		(3,678,000	)
Other income (expense), net		804,000			(394,000	)		(639,000	)

Total other expense, net		(3,912,000	)		(4,846,000	)		(4,262,000	)


Income before provision for income taxes		3,909,000			9,460,000			5,651,000
Provision for income taxes		(1,547,000	)		(3,875,000	)		(2,658,000	)

Net income	$	2,362,000		$	5,585,000		$	2,993,000


Basic net income per common share	$	0.42		$	0.98		$	0.52


Shares used in computing basic net income per common share		5,670,000			5,707,000			5,784,000


Diluted net income per common share	$	0.42		$	0.96		$	0.51


Shares used in computing diluted net income per common share		5,682,000			5,838,000			5,923,000

See accompanying notes to financial statements.

F-3

GARDEN FRESH RESTAURANT CORP.

STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED SEPTEMBER 30, 2001, 2002 AND 2003

	Common Stock
	Common Stock			Additional paid-in		Retained
	Shares	Amount		capital		earnings		Total
Balance at September 30, 2000	5,655,645	$	57,000	$	59,518,000	$	12,096,000	$	71,671,000
Exercise of common stock options	1,400		—		7,000		—		7,000
Issuance of common stock under employee stock purchase plan	18,781		—		140,000		—		140,000
Net income	—		—		—		2,362,000		2,362,000

Balance at September 30, 2001	5,675,826		57,000		59,665,000		14,458,000		74,180,000
Exercise of common stock options	33,347		—		306,000		—		306,000
Issuance of common stock under employee stock purchase plan	23,649		—		133,000		—		133,000
Tax benefits from exercise of common stock options	—		—		29,000		—		29,000
Net income	—		—		—		5,585,000		5,585,000

Balance at September 30, 2002	5,732,822		57,000		60,133,000		20,043,000		80,233,000
Exercise of common stock options	71,722		1,000		537,000		—		538,000
Issuance of common stock under employee stock purchase plan	19,479		—		148,000		—		148,000
Tax benefits from exercise of common stock options	—		—		72,000		—		72,000
Net income	—		—		—		2,993,000		2,993,000

Balance at September 30, 2003	5,824,023	$	58,000	$	60,890,000	$	23,036,000	$	83,984,000

See accompanying notes to financial statements.

F-4

GARDEN FRESH RESTAURANT CORP.

STATEMENTS OF CASH FLOWS

	Years Ended September 30,
	2001			2002			2003
Cash flows from operating activities:
Net income	$	2,362,000		$	5,585,000		$	2,993,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,503,000			13,727,000			14,475,000
Loss on disposal of property and equipment		512,000			485,000			652,000
Facility exit costs		1,572,000			(83,000	)		—
Provision for deferred income taxes		(81,000	)		3,372,000			1,177,000
Tax benefits from exercise of common stock options		—			29,000			72,000
Amortization of deferred gain on sale-leaseback of properties		(36,000	)		(51,000	)		(49,000	)
Changes in operating assets and liabilities:
Inventories		(1,803,000	)		(938,000	)		(547,000	)
Other current assets		(1,592,000	)		(74,000	)		(628,000	)
Intangible and other assets		(28,000	)		(135,000	)		(466,000	)
Accounts payable		(193,000	)		(2,008,000	)		(1,773,000	)
Accrued liabilities		2,181,000

Filing Compare · GARDEN FRESH RESTAURANT CORP /DE/