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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q

(Mark One)



|(X) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended October 31, 2001
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

OR



|(   ) | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________________ to _________________________
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission file number 0-12226

CALIFORNIA BEACH RESTAURANTS, INC.

---

(Exact name of Registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|CALIFORNIA                                                     |  | 95-2693503                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

17383 Sunset Boulevard, Suite 140, Pacific Palisades, CA 90272

---

(Address and zip code of Principal executive offices)


(310) 459-9676

---

(Registrants telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to the
filing requirements for at least the past 90 days.

Yes  [X]            No  [   ]

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date:

|                             |  |                              |           | 
|---------------------------- |  | ---------------------------- | --------- | 
|                             |  | Number of Shares Outstanding
|Class                        |  | at December 12, 2001,       
|                             |  |                             
|Common Stock, $.01 par value |  |                              | 3,401,227 | 



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TABLE OF CONTENTS



|                          |                                                                                                |                                            |  |  |  |  |  | 
|------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|                          |                                                                                                | CONSOLIDATED BALANCE SHEETS               
|                          |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                          |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                          |                                                                                                | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                          | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                          | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            
|Part II Other Information
|                          | Item 1. Legal Proceedings.                                                                    
|                          | Item 2. Changes in Securities and Use of Proceeds.                                            
|                          | Item 3. Defaults Upon Senior Securities.                                                      
|                          | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|                          | Item 5. Other Information                                                                     
|                          | Item 6. Exhibits and Reports on Form 8-K.                                                     
|Signature(s)             



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 October 31, 2001
 
 INDEX

|                               |                                                                                                                 |                                                                                       |    |    |  | 
|------------------------------ | --------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -- | -- |  | 
|Part I - FINANCIAL INFORMATION |                                                                                                                 | Page Number                                                                          
|                               |                                                                                                                
|                               | Item 1.                                                                                                         | Financial Statements (Unaudited)                                                      |   
|                              
|                               | Consolidated Balance Sheets at October 31, 2001 and April 30, 2001                                              |                                                                                       | 3  |   
|                              
|                               | Consolidated Statements of Operations for the Three Months Ended and Six Months Ended October 31, 2001 and 2000 |                                                                                       | 5  |   
|                              
|                               | Consolidated Statements of Cash Flows for the Six Months Ended October 31, 2001 and 2000                        |                                                                                       | 6  |   
|                              
|                               | Notes to Consolidated Financial Statements                                                                      |                                                                                       | 7  |   
|                              
|                               | Item 2.                                                                                                         | Managements Discussion and Analysis of Financial Condition and Results of Operations |    | 9  | 
|                              
|                               | Item 3.                                                                                                         | Quantitative and Qualitative Disclosures about Market Risk                            |    | 12 | 
|                              
|Part II - OTHER INFORMATION    |                                                                                                                
|                              
|                               | Item 1.                                                                                                         | Legal Proceedings                                                                     |    | 12 | 
|                              
|                               | Item 2.                                                                                                         | Changes in Securities and Use of Proceeds                                             |    | 12 | 
|                              
|                               | Item 3.                                                                                                         | Defaults Upon Senior Securities                                                       |    | 12 | 
|                              
|                               | Item 4.                                                                                                         | Submission of Matters to a Vote of Security Holders                                   |    | 12 | 
|                              
|                               | Item 5.                                                                                                         | Other Information                                                                     |    | 12 | 
|                              
|                               | Item 6.                                                                                                         | Exhibits and Reports on Form 8-K                                                      |    | 12 | 
|                              
|                               | Signature Page                                                                                                  |                                                                                       | 13 |   



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 Assets

|                                                                          |                             |                      |           |                  |         |                |           |         |         | 
|------------------------------------------------------------------------- | --------------------------- | -------------------- | --------- | ---------------- | ------- | -------------- | --------- | ------- | ------- | 
|                                                                          |                             |                      |           | October 31, 2001 |         | April 30, 2001
|                                                                          |                             |                      |           |                  |         |               
|                                                                          |                             |                      |           | (Unaudited)      |         | (1)           
|Current Assets:                                                           |                             |                      |           |                  |         |                |           |        
|                                                                          | Cash and cash equivalents   |                      | $         | 209,000          |         |                | $         | 221,000 |        
|                                                                          | Trade and other receivables |                      |           | 70,000           |         |                |           | 42,000  |        
|                                                                          | Inventories                 |                      |           | 236,000          |         |                |           | 231,000 |        
|                                                                          | Prepaid expenses            |                      |           | 149,000          |         |                |           | 265,000 |        
|                                                                          |                             |                      |           |                  |         |                |           |        
|                                                                          |                             | Total current assets |           |                  | 664,000 |                |           |         | 759,000 | 
|Fixed assets (at cost)  net of accumulated
depreciation and amortization |                             |                      | 2,616,000 |                  |         |                | 2,797,000 |        
|Other assets                                                              |                             |                      | 164,000   |                  |         |                | 166,000   |        
|                                                                          |                             |                      |           |                  |         |                |           |        
|                                                                          |                             | $                    | 3,444,000 |                  |         | $              | 3,722,000 |        
|                                                                          |                             |                      |           |                  |         |                |           |        

The accompanying notes to consolidated financial statements are an integral
part of this statement.



|(1) |  | The April 30, 2001 amounts have been extracted from the Companys Annual
Report on
Form 10-K for the year ended April 30, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 Liabilities and Stockholders Equity

|                                   |                                                                                                                                                |                             |           |                  |           |                |           |             |           |  
|---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | --------- | ---------------- | --------- | -------------- | --------- | ----------- | --------- | -
|                                   |                                                                                                                                                |                             |           | October 31, 2001 |           | April 30, 2001
|                                   |                                                                                                                                                |                             |           |                  |           |               
|                                   |                                                                                                                                                |                             |           | (Unaudited)      |           | (1)           
|Current Liabilities:               |                                                                                                                                                |                             |           |                  |           |                |           |            
|                                   | Accounts payable                                                                                                                               |                             | $         | 575,000          |           |                | $         | 666,000     |          
|                                   | Accrued liabilities                                                                                                                            |                             |           | 669,000          |           |                |           | 885,000     |          
|                                   | Current portion of note payable                                                                                                                |                             |           | 217,000          |           |                |           | 207,000     |          
|                                   | Revolving line of credit                                                                                                                       |                             |           |                 |           |                |           | 63,000      |          
|                                   |                                                                                                                                                |                             |           |                  |           |                |           |            
|                                   |                                                                                                                                                | Total current liabilities   |           |                  | 1,461,000 |                |           |             | 1,821,000 |  
|Subordinated convertible notes     |                                                                                                                                                |                             | 1,890,000 |                  |           |                | 1,890,000 |            
|Note payable, less current portion |                                                                                                                                                |                             | 499,000   |                  |           |                | 585,000   |            
|Deferred rent                      |                                                                                                                                                |                             | 351,000   |                  |           |                | 361,000   |            
|Other liabilities                  |                                                                                                                                                |                             |          |                  |           |                | 9,000     |            
|Stockholders Equity:              |                                                                                                                                                |                             |           |                  |           |                |           |            
|                                   | Common stock, $.01 par value, authorized
25,000,000 shares, issued and outstanding,
3,401,000 shares at October 31, 2001 and
at April 30, 2001 |                             |           | 34,000           |           |                |           | 34,000      |          
|                                   | Additional paid-in capital                                                                                                                     |                             |           | 13,175,000       |           |                |           | 13,175,000  |          
|                                   | Accumulated deficit                                                                                                                            |                             |           | (13,966,000      | )         |                |           | (14,153,000 | )        
|                                   |                                                                                                                                                |                             |           |                  |           |                |           |            
|                                   |                                                                                                                                                | Total stockholders deficit |           |                  | (757,000  | )              |           |             | (944,000  | )
|                                   |                                                                                                                                                |                             |           |                  |           |                |           |            
|                                   |                                                                                                                                                | $                           | 3,444,000 |                  |           | $              | 3,722,000 |            
|                                   |                                                                                                                                                |                             |           |                  |           |                |           |            

The accompanying notes to consolidated financial statements are an integral
part of this statement.



|(1) |  | The April 30, 2001 amounts have been extracted from the Companys Annual
Report on
Form 10-K for the year ended April 30, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)

|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |           |  
|----------------------------------------------------- | ----------------------------------- | - | ------------------ | --------- | ---------------- | - | --------- | --------- | ---- | - | --------- | --------- | - | - | --------- | --------- | -
|                                                      |                                     |   | Three Months Ended |           | Six Months Ended
|                                                      |                                     |   | October 31,        |           | October 31,     
|                                                      |                                     |   |                    |           |                 
|                                                      |                                     |   | 2001               |           | 2000             |   | 2001      |           | 2000
|                                                      |                                     |   |                    |           |                  |   |           |           |     
|Sales                                                 |                                     | $ | 3,267,000          |           |                  | $ | 3,709,000 |           |      | $ | 7,163,000 |           |   | $ | 7,614,000 |          
|Costs and expenses:                                   |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|                                                      | Cost of goods sold                  |   |                    | 2,920,000 |                  |   |           | 3,115,000 |      |   |           | 6,264,000 |   |   |           | 6,382,000 |  
|                                                      | Selling, general and administrative |   |                    | 190,000   |                  |   |           | 283,000   |      |   |           | 410,000   |   |   |           | 532,000   |  
|                                                      | Depreciation and amortization       |   |                    | 105,000   |                  |   |           | 101,000   |      |   |           | 210,000   |   |   |           | 191,000   |  
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Operating income                                      |                                     |   | 52,000             |           |                  |   | 210,000   |           |      |   | 279,000   |           |   |   | 509,000   |          
|                                                      | Interest expense                    |   |                    | (43,000   | )                |   |           | (47,000   | )    |   |           | (90,000   | ) |   |           | (103,000  | )
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Income before income taxes                            |                                     |   | 9,000              |           |                  |   | 163,000   |           |      |   | 189,000   |           |   |   | 406,000   |          
|Provision for income taxes                            |                                     |   |                   |           |                  |   | (2,000    | )         |      |   | (1,000    | )         |   |   | (2,000    | )        
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Net income                                            |                                     | $ | 9,000              |           |                  | $ | 161,000   |           |      | $ | 188,000   |           |   | $ | 404,000   |          
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Net income per
common share (basic ):                 |                                     | $ | .01                |           |                  | $ | .05       |           |      | $ | .06       |           |   | $ | .12       |          
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Net income per
common share (diluted):                |                                     | $ | .01                |           |                  | $ | .03       |           |      | $ | .04       |           |   | $ | .08       |          
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|Weighted average number of
common shares outstanding: |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|                                                      | Basic                               |   |                    | 3,401,000 |                  |   |           | 3,401,000 |      |   |           | 3,401,000 |   |   |           | 3,401,000 |  
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          
|                                                      | Diluted                             |   |                    | 5,291,000 |                  |   |           | 5,201,000 |      |   |           | 5,291,000 |   |   |           | 5,201,000 |  
|                                                      |                                     |   |                    |           |                  |   |           |           |      |   |           |           |   |   |           |          

The accompanying notes to consolidated financial statements are an integral
part of this statement.



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended October 31, 2001
 (Unaudited)

|                                                                    |                                  |   |          |          |      |   |          |          |  
|------------------------------------------------------------------- | -------------------------------- | - | -------- | -------- | ---- | - | -------- | -------- | -
|                                                                    |                                  |   | 2001     |          | 2000
|                                                                    |                                  |   |          |          |     
|Cash flows from operating activities:                               |                                  |   |          |          |      |   |          |         
|Net income                                                          |                                  | $ | 188,000  |          |      | $ | 404,000  |         
|Adjustments to reconcile net income
to cash provided by operations: |                                  |   |          |          |      |   |          |         
|                                                                    | Depreciation and amortization    |   |          | 210,000  |      |   |          | 191,000  |  
|Changes in operating assets and liabilities:                        |                                  |   |          |          |      |   |          |         
|                                                                    | Trade and other receivables      |   |          | (28,000  | )    |   |          | 12,000   |  
|                                                                    | Inventories                      |   |          | (5,000   | )    |   |          | (3,000   | )
|                                                                    | Prepaid expenses                 |   |          | 116,000  |      |   |          | 4,000    |  
|                                                                    | Other assets                     |   |          | 2,000    |      |   |          | 2,000    |  
|                                                                    | Accounts payable                 |   |          | (91,000  | )    |   |          | (347,000 | )
|                                                                    | Accrued liabilities              |   |          | (216,000 | )    |   |          | 259,000  |  
|                                                                    | Deferred rent                    |   |          | (10,000  | )    |   |          | (10,000  | )
|                                                                    | Other liabilities                |   |          | (9,000   | )    |   |          | (54,000  | )
|                                                                    |                                  |   |          |          |      |   |          |         
|Cash provided by operations                                         |                                  |   | 157,000  |          |      |   | 458,000  |         
|                                                                    |                                  |   |          |          |      |   |          |         
|Investing activities:                                               |                                  |   |          |          |      |   |          |         
|                                                                    | Additions to fixed assets        |   |          | (27,000  | )    |   |          | (76,000  | )
|                                                                    |                                  |   |          |          |      |   |          |         
|Net cash used in investing activities                               |                                  |   | (27,000  | )        |      |   | (76,000  | )       
|                                                                    |                                  |   |          |          |      |   |          |         
|Financing activities:                                               |                                  |   |          |          |      |   |          |         
|                                                                    | Principal payments on borrowings |   |          | (142,000 | )    |   |          | (193,000 | )
|                                                                    |                                  |   |          |          |      |   |          |         
|Net cash used in financing activities                               |                                  |   | (142,000 | )        |      |   | (193,000 | )       
|                                                                    |                                  |   |          |          |      |   |          |         
|Net (decrease) increase in cash                                     |                                  |   | (12,000  | )        |      |   | 189,000  |         
|Cash and cash equivalents at beginning of period                    |                                  |   | 221,000  |          |      |   | 102,000  |         
|                                                                    |                                  |   |          |          |      |   |          |         
|Cash and cash equivalents at end of period                          |                                  | $ | 209,000  |          |      | $ | 291,000  |         
|                                                                    |                                  |   |          |          |      |   |          |         
|Supplemental disclosures of cash flow information:                  |                                  |   |          |          |      |   |          |         
|Cash paid during the period for:                                    |                                  |   |          |          |      |   |          |         
|                                                                    | Interest                         |   | $        | 90,000   |      |   | $        | 103,000  |  
|                                                                    |                                  |   |          |          |      |   |          |         
|                                                                    | Income taxes                     |   | $        | 1,000    |      |   | $        | 2,000    |  
|                                                                    |                                  |   |          |          |      |   |          |         

The accompanying notes to consolidated financial statements are an integral
part of this statement



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)

NOTE 1.- BASIS OF PRESENTATION

The unaudited consolidated financial statements presented herein include the
accounts of California Beach Restaurants, Inc., and its wholly-owned
subsidiaries (the Company). All significant intercompany accounts and
transactions have been eliminated.

The unaudited consolidated financial statements presented herein have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information, the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnote disclosures required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, the accompanying financial statements include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the Companys financial position and results of operations.
The results of operations for the six month period ended October 31, 2001 may
not be indicative of the results that may be expected for the year ending April
30, 2002. These statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Form 10-K for the
year-ended April 30, 2001.

NOTE 2.- EARNINGS PER SHARE

Subordinated convertible notes are convertible into common stock at a rate of
$1 per share and thus have potential for dilution on earnings. The following
table explains the effect of this on weighted average number of common shares
outstanding.

|                                                   |                                                 |   |                    |        |                  |   |           |        | 
|-------------------------------------------------- | ----------------------------------------------- | - | ------------------ | ------ | ---------------- | - | --------- | ------ | 
|                                                   |                                                 |   | Three months ended |        | Six months ended
|                                                   |                                                 |   | October 31, 2001   |        | October
31, 2001
|                                                   |                                                 |   |                    |        |                 
|Net Income-basic                                   |                                                 | $ | 9,000              |        |                  | $ | 188,000   |       
|                                                   | Add back interest expense from convertible note |   |                    | 24,000 |                  |   |           | 48,000 | 
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Net Income-diluted                                 |                                                 | $ | 33,000             |        |                  | $ | 236,000   |       
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Weighted Average outstanding
common shares-basic   |                                                 |   | 3,401,000          |        |                  |   | 3,401,000 |       
|Shares issuable upon exercise of conversion        |                                                 |   | 1,890,000          |        |                  |   | 1,890,000 |       
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Weighted Average outstanding
common shares-diluted |                                                 |   | 5,291,000          |        |                  |   | 5,291,000 |       
|                                                   |                                                 |   |                    |        |                  |   |           |       



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|                                                   |                                                 |   |                    |        |                  |   |           |        | 
|-------------------------------------------------- | ----------------------------------------------- | - | ------------------ | ------ | ---------------- | - | --------- | ------ | 
|                                                   |                                                 |   | Three months ended |        | Six months ended
|                                                   |                                                 |   | October 31, 2000   |        | October
31, 2000
|                                                   |                                                 |   |                    |        |                 
|Net Income-basic                                   |                                                 | $ | 161,000            |        |                  | $ | 404,000   |       
|                                                   | Add back interest expense from convertible note |   |                    | 14,000 |                  |   |           | 28,000 | 
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Net Income-diluted                                 |                                                 | $ | 175,000            |        |                  | $ | 432,000   |       
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Weighted Average outstanding
common shares-basic   |                                                 |   | 3,401,000          |        |                  |   | 3,401,000 |       
|Shares issuable upon exercise of conversion        |                                                 |   | 1,800,000          |        |                  |   | 1,800,000 |       
|                                                   |                                                 |   |                    |        |                  |   |           |       
|Weighted Average outstanding
common shares-diluted |                                                 |   | 5,201,000          |        |                  |   | 5,201,000 |       
|                                                   |                                                 |   |                    |        |                  |   |           |       

Options to purchase common stock outstanding at October 31, 2001 and 2001 had
exercise prices greater than the average market price of common stock for the
three and six month periods then ended. These options were excluded from the
respective computations of diluted earnings per share because their effect
would be anti-dilutive.

NOTE 3.  ACCOUNTING PERIODS

The Companys restaurant operations are conducted through its wholly-owned
subsidiary, Sea View Restaurants, Inc. (Sea View). The Companys consolidated
financial statements for the three months and six months ended October 31,
2001 and 2000 include Sea Views operations for the twelve weeks and
twenty-four weeks ended October 12, 2001 and October 14, 2000, respectively.

NOTE 4.  FIXED ASSETS

|                                               |  |                  |            |                |  |   |            |  
|---------------------------------------------- |  | ---------------- | ---------- | -------------- |  | - | ---------- | -
|                                               |  | October 31, 2001 |            | April 30, 2001
|                                               |  |                  |            |               
|Leasehold improvements                         |  |                  | 4,676,000  |                |  |   | 4,664,000  |  
|Furniture and equipment                        |  |                  | 2,155,000  |                |  |   | 2,140,000  |  
|                                               |  |                  |            |                |  |   |            |  
|                                               |  |                  | 6,831,000  |                |  |   | 6,804,000  |  
|Less accumulated depreciation and amortization |  |                  | (4,215,000 | )              |  |   | (4,007,000 | )
|                                               |  |                  |            |                |  |   |            |  
|                                               |  | $                | 2,616,000  |                |  | $ | 2,797,000  |  
|                                               |  |                  |            |                |  |   |            |  



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES






|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Results of Operations

Restaurant Revenues

Restaurant operations include the results of Gladstones 4 Fish (Gladstones)
in Pacific Palisades, California and RJs  Beverly Hills in Beverly Hills,
California.

Total sales for the three months ended October 31, 2001 were $3,267,000
compared with $3,709,000 for the same period last year, a decrease of $442,000
or 11.9%. For the six months ended October 31, 2001, total sales were
$7,163,000 compared with $7,614,000 for the same period last year, a decrease
of $451,000 or 6.0%. The tragic events of September 11, 2001 and resulting
decline in travel combined with the current economic recession that started
earlier this year, have significantly impacted customer traffic at our
restaurants resulting in lower sales and cash flow for the second quarter of
fiscal year 2002.

Historically as a result of typically more favorable weather and higher tourism
during the summer months from May through September, the Registrants sales and
operating profits have been higher in the first and second quarters of its
fiscal year.

Cost of Goods Sold

Cost of goods sold includes all food, beverages, liquor, direct labor and other
operating expenses, including rent, of the Registrants restaurant operations.

Cost of goods sold for the three months ended October 31, 2001 was $2,920,000,
or, as a percentage of sales, 89.4% compared with $3,115,000, or, as a
percentage of sales, 84.0% during the same period last year. Cost of goods
sold for the six months ended October 31, 2001 was $6,264,000, or, as a
percentage of sales, 87.4% compared with $6,382,000, or, as a percentage of
sales, 83.8% during the same period last year.

The increase in cost of goods sold as a percentage of sales compared with same
period last year is attributable to the increases in general liability
insurance, workers compensation insurance, and rent as a percentage of sales
     .Cost of goods sold will typically be slightly lower during the first and
second quarters due to additional economies of scale that can be achieved with
labor and certain other costs when sales levels are higher. For the fiscal
year ended April 30, 2001, cost of goods sold, as a percentage of sales, was
89.2%.

Selling, General and Administrative Expenses

For the three months ended October 31, 2001, selling, general and
administrative expenses were $190,000 compared with $283,000 for the same
period last year, a decrease of $93,000 or 32.9%. For the six months ended
October 31, 2001, selling, general and administrative expenses were $410,000
compared with $532,000 for the same period last year, a decrease of $122,000 or
22.9%. The decrease in selling, general and administrative expenses for the
three



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and six month periods ended October 31, 2001 as compared to the comparable
periods in the prior year is primarily attributable to reduced costs associated
with legal matters and reduction in Registrants Chief Executive Officers
compensation.

Interest Expense

For the three and six months ended October 31, 2001, interest expense was
$43,000 and $90,000, respectively. Interest expense for the three and six
months ended October 31, 2000 was $47,000 and $103,000, respectively. The
decrease in interest expense for the three and six month periods ended October
31, 2001,as compared to the comparable periods in the prior year, is
attributable to the reduction in the outstanding balance of the Loan with Lyon
Credit Corporation from $897,000 at October 31,2000 to $716,000 at October
31,2001.

Liquidity and Capital Resources

On March 30, 1999, the Registrant completed a $1,800,000 private offering of
subordinated, convertible notes (Subordinated Notes) to a limited number of
existing shareholders of the Registrant who are accredited investors within
the meaning of Regulation D promulgated under the Securities Act of 1933, as
amended. The proceeds of the offering were used to retire existing
indebtedness, and to finance the renovations at Gladstones. The Subordinated
Notes are immediately convertible into common stock of the Registrant at a rate
of $1 per share, and pay interest at 5% per annum. The Registrant may pay
interest on the Subordinated Notes in cash or in kind. The Subordinated Notes
mature on March 30, 2003; provided, however, that the holders of the
Subordinated Notes may elect to receive payment for fifty percent of the
outstanding Subordinated Notes on March 30, 2002 to the extent debt outstanding
to Lyon Credit Corporation has been paid in full. The payment of the principal
and interest on the Subordinated Notes is junior and subordinate to the prior
payment in full of all indebtedness of the Company to Lyon Credit Corporation.

In addition in 1999, the Registrant entered into an agreement for tenant
improvement and equipment financing with Lyon Credit Corporation (TI
Facility). The terms of the agreement provide for the extension of up to
$1,089,000 of credit, to be repaid over a 5 year period with interest at the
rate of 9.94%.This financing is secured by certain tenant improvements and
equipment. At October 31, 2001, the balance due under the TI Facility was
$716,000.

On June 22, 2001, the Registrant extended for fifteen months, a $500,000
revolving line of credit agreement with US Bank (formerly Santa Monica Bank)
originally entered into in June 2000,(the Agreement). The Agreement provides
for interest at prime plus 1% on all amounts borrowed, requires a commitment
fee of 1/2%, and is secured by certain assets of the Registrant, including
its license agreement with MCA for use of the name Gladstones. The line of
credit is also guaranteed by Sea View. The Agreement requires the Registrant
to comply with certain cash flow and liquidity covenants, and includes a 60
consecutive days out of debt requirement. The Registrant utilized $437,500 of
the capacity of the revolving line of credit as collateral support for a letter
of credit issued by US Bank (formerly Santa Monica Bank) pursuant to the
Concession Agreement. The letter of credit expires in one year and requires a
commitment fee of 2%. At October 31, 2001, the Registrant had no borrowing
under line of credit.

The Agreement also provides for a $200,000 increase in the maximum amount of
the line of credit from $500,000 to $700,000. The additional increase will only
be available to the Registrant during the period December 1, 2001 through April
30, 2002.After this period which the line of credit will revert to its original
$500,000 borrowing limit. At October 31, 2001, the Registrant had no borrowings
outstanding under the line of credit.



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The Registrant is exploring various opportunities to expand its operations. The
Registrants ability to expand is subject to the availability of debt or equity
financing on terms that are acceptable to the Registrant. There can be no
assurance that such financing will be available.

Capital expenditures for the six months ended October 31, 2001 totaled $27,000.

Special Note Regarding Forward Looking Statements

Except for the historical information contained herein, certain statements in
this Form 10-Q, including statements in this Item are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievement of the Registrant, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: the Registrants ability to generate an operating profit based
on the terms of the Concession Agreement; that its principal source of cash is
funds generated from operations; that restaurants historically have represented
a high risk investment in a very competitive industry; general and local
economic conditions, which can, among other things, impact tourism, consumer
spending and restaurant revenues; weather and natural disasters, such as
earthquakes and fires, which can impact sales at the Registrants restaurants;
quality of management; changes in, or the failure to comply with, governmental
regulations; unexpected increases in the cost of key food products, labor and
other operating expenses in connection with the Registrants business; and
other factors referenced in this Form 10-Q and the Registrants other filings
with the SEC.



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES




Item 3. Quantitative and Qualitative Disclosures about Market Risk

| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Not applicable as the Registrant is a small business issuer as defined by
SEC
regulations.




Part II
 Other Information




Item 1. Legal Proceedings.

| |                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company is involved in litigation and threatened litigation
arising in the ordinary course of business. However, it is the opinion
of management that these actions, when finally concluded, will not have
a material adverse effect upon the financial position, results of
operations or cash flows of the Company.




Item 2. Changes in Securities and Use of Proceeds.

None




Item 3. Defaults Upon Senior Securities.

None




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

None




Item 5. Other Information

Not applicable.




Item 6. Exhibits and Reports on Form 8-K.

| |                                   
| | ----------------------------------
| | Reports on Form 8-K
         
None



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CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES




Signature(s)

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

|                         |                                                              |                 
|------------------------ | ------------------------------------------------------------ | ----------------
|                         | California Beach Restaurants, Inc. (Registrant)             
|                        
|Dated: December 13, 2001 | By:                                                          | /s/ Alan Redhead
|                         |                                                             
|                         | Alan Redhead
Chief Executive Officer
Chief Financial Officer



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