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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D.C. 20549

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FORM 20-F

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(Mark One)



| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
|- |  | ---------------------------------------------------------------------------------------------------



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the fiscal year ended
January 31, 2003



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 000-29512

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BARBEQUES GALORE LIMITED

(Exact name of registrant as specified in its charter)

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|Australian Capital Territory, Australia (Jurisdiction of incorporationor organization) |  | 327 Chisholm Road, Auburn,Sydney, NSW 2144 Australia (Address of principal executive offices)
|-------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------



Securities registered or to be registered pursuant to Section 12(b) of the Act:



|(Title of each class) |  | (Name of each exchange on which registered)
|--------------------- |  | -------------------------------------------
|None                  |  | Not Applicable                             

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

American Depositary Shares, each representing one Ordinary Share

(Title of Class)

Securities for which there is
a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable

(Title of Class)

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Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as
of the close of the period covered by the annual report:



4,116,652 Ordinary Shares



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 such filing requirements for the past  90 days.    Yesx    No ̈



Indicate by check mark which financial statement item the
registrant has elected to follow:

Item 17 ̈Item 18x



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TABLE OF CONTENTS



|PART I         |  | 1                                                                           
|-------------- |  | ----------------------------------------------------------------------------
|              
|Item 1.        |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                       
|Item 2.        |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                     
|Item 3.        |  | KEY INFORMATION                                                             
|Item 4.        |  | INFORMATION ON OUR COMPANY                                                  
|Item 5.        |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                
|Item 6.        |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                  
|Item 7.        |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                           
|Item 8.        |  | FINANCIAL INFORMATION                                                       
|Item 9.        |  | THE OFFER AND LISTING                                                       
|Item 10.       |  | ADDITIONAL INFORMATION                                                      
|Item 11.       |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|Item 12.       |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|              
|PART II        |  | 47                                                                          
|              
|Item 13.       |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|Item 14.       |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|Item 15.       |  | CONTROLS AND PROCEDURES                                                     
|Item 16.       |  | NOT APPLICABLE                                                              
|              
|PART III       |  | 48                                                                          
|              
|Item 17.       |  | FINANCIAL STATEMENTS                                                        
|Item 18.       |  | FINANCIAL STATEMENTS                                                        
|Item 19.       |  | EXHIBITS                                                                    
|              
|SIGNATURES     |  | 50                                                                          
|CERTIFICATIONS |  | 51                                                                          



TRADEMARKS



BARBEQUES
GALORE, TURBO, CAPTN COOK, COOK-ON, BAR-B-CHEF, TURBO APOLLO, KENT and KENTTHE FLAME OF THE FUTURE, are federally registered trademarks and/or service marks in the United States. We use the phrases AMERICAS LARGEST CHAIN OF
BARBEQUE STORES and RIGHT IN YOUR BACKYARD as common-law trademarks in the United States. BARBEQUES GALORE and COOK-ON are also registered with the State of California. In Australia, we have registered, among others, the names NORSEMAN, KENT and
SAXON and additionally use the phrases YOUR OUTDOOR COOKING AND CAMPING STORE and WE KNOW THE OUTDOORS INSIDE OUT, as common-law trademarks. This Annual Report contains other trade names, trademarks and service marks of ours and other organizations.



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This Annual
Report on Form 20-F (Annual Report) report contains certain statements of a forward-looking nature relating to future events affecting Barbeques Galore Limited (Barbeques Galore or the Company), a public limited
company organized under the laws of Australia, or the markets or industries in which it operates or the future financial performance of the Company. Such statements convey our expectations, hopes, beliefs, intentions, or strategies regarding the
future. These statements use words such as expect, will, may, anticipate, goal, intend, seek, believe, plan, strategy,
estimate, project and derivatives of such words. These forward looking statements include statements regarding:



| |  |  | The sufficiency of our working capital;
| | - |  | ---------------------------------------



| |  |  | The seasonality of our business;
| | - |  | --------------------------------



| |  |  | The availability of necessary supplies;
| | - |  | ---------------------------------------



| |  |  | The expected impact of changes in accounting standards;
| | - |  | -------------------------------------------------------



| |  |  | The adequacy of our accounting reserves;
| | - |  | ----------------------------------------



| |  |  | The timing and effects of changes in tax laws;
| | - |  | ----------------------------------------------



| |  |  | The expected results of ongoing litigation;
| | - |  | -------------------------------------------



| |  |  | The expected effect of tax assessments;
| | - |  | ---------------------------------------



| |  |  | The expected costs and other effects of the closure of retail stores;
| | - |  | ---------------------------------------------------------------------



| |  |  | The anticipated adequacy and efficiencies of new distribution facilities;
| | - |  | -------------------------------------------------------------------------



| |  |  | The expected timing of financial benefits from downsizing our Sydney manufacturing operations and purchasing certain products from China;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The anticipated effects of being unable to purchase any particular line of products for resale;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | Our ability to take advantage of deferred tax assets; and
| | - |  | ---------------------------------------------------------



| |  |  | Our plans to introduce automated store inventory replenishment systems.
| | - |  | -----------------------------------------------------------------------



We caution you that such statements are only predictions and that actual events or results may differ
materially. These forward looking statements are based on information available to us on the date hereof and we assume no obligation to update any such forward looking statements. Our actual results and timing of certain events could differ
materially from those in such forward looking statements due to a number of factors, including but not limited to, general economic conditions, the weather in areas in which we conduct business, the uncertainties of litigation, our ability to meet
the covenants in our credit facilities, the accuracy of our estimates, the final amount of tax assessments, the popularity of certain products and our working capital needs, as well as the matters set forth under the caption Item 3. Key
InformationD. Risk Factors. In addition, you should carefully review the other information contained in this Annual Report and in our periodic reports and other documents filed with the Securities and Exchange Commission
(SEC). Unless the context requires otherwise, references to Barbeques Galore, we, our, us and similar terms, refer to Barbeques Galore Limited and its controlled entities.



PART I



|ITEM |  | 1.    
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|---- |  | ------------------------------------------------------------



Not applicable.



|ITEM |  | 2.    
OFFER STATISTICS AND EXPECTED TIMETABLE
|---- |  | ----------------------------------------------



Not applicable.



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|ITEM |  | 3.    
KEY INFORMATION
|---- |  | ----------------------



|A. |  | SELECTED FINANCIAL DATA
|-- |  | -----------------------



You should read the following selected financial data in conjunction with our consolidated financial statements and the related notes and
Item 5. Operating and Financial Review and Prospects included elsewhere in this Annual Report. The selected financial data as of January 31, 1999, 2000 and 2001 and for the fiscal years ended January 31, 1999 and 2000, is derived from
our audited consolidated financial statements. We have not, however, included our audited consolidated financial statements for those periods in this Annual Report. The selected financial data as of January 31, 2002 and 2003 and for the fiscal years
ended January 31, 2001, 2002 and 2003, is derived from our audited financial statements, audited by KPMG, independent auditors and included in Item 18. Financial Statements.



Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have not declared nor
paid any cash dividends on our Ordinary Shares since delisting from the Australian Stock Exchange (the ASE) on December 31, 1996, other than a dividend in an aggregate amount equal to A$500,000 paid on April 21, 1997 and our first
dividend as a Nasdaq-listed company as defined on page 33, of US$0.15 per share on our common stock, paid on September 12, 2002 to shareholders of record on September 5, 2002. We may pay dividends on the Ordinary Shares or American Depositary Shares
(ADSs) in the future. In addition, we are subject to restrictions on the declaration or payment of dividends under the ANZ Facility as well as the Merrill Lynch Facility as defined on page 22. See Item 5. Operating and Financial
Review and ProspectsB. Liquidity and Capital Resources.



|                                                                |  | Year Ended January 31,                   |        
|--------------------------------------------------------------- |  | ---------------------------------------- | -------
|                                                                |  | 1999                                     |        
|                                                                |  | (In A$ thousands, except per share data) |        
|Statement of Operations Data:                                   |  |                                          |        
|Net sales                                                       |  | $                                        | 224,984
|Cost of goods sold, warehouse, distribution and occupancy costs |  |                                          | 152,708
|                                                                |  |                                          |        
|Gross profit                                                    |  |                                          | 72,276 
|Selling, general and administrative expenses                    |  |                                          | 61,796 
|Store pre-opening costs                                         |  |                                          | 810    
|Relocation and closure costs (gains)                            |  |                                          |       
|                                                                |  |                                          |        
|Operating income (loss)                                         |  |                                          | 9,670  
|Equity in income of affiliates, net of tax                      |  |                                          | 514    
|Interest expense                                                |  |                                          | 2,163  
|                                                                |  |                                          |        
|Income (loss) before income tax                                 |  |                                          | 8,021  
|Income tax expense (benefit)                                    |  |                                          | 2,814  
|                                                                |  |                                          |        
|Net income (loss)                                               |  | $                                        | 5,207  
|                                                                |  |                                          |        
|Earnings (loss) per share:(3)                                   |  |                                          |        
|Basic                                                           |  | $                                        | 1.15   
|                                                                |  |                                          |        
|Diluted                                                         |  | $                                        | 1.13   
|                                                                |  |                                          |        
|Dividend declared per share:                                    |  |                                          |       
|                                                                |  |                                          |        
|Dividend declared per share:                                    |  |                                          |       
|                                                                |  |                                          |        
|Weighted average shares outstanding:(3)                         |  |                                          |        
|Basic                                                           |  |                                          | 4,542  
|                                                                |  |                                          |        
|Diluted                                                         |  |                                          | 4,595  
|                                                                |  |                                          |        
|In thousands                                                    |  |                                          |        
|Balance Sheet Data:                                             |  |                                          |        
|Working capital                                                 |  | $                                        | 41,162 
|Total assets                                                    |  |                                          | 101,202
|Total long-term debt                                            |  |                                          | 29,030 
|Net assets                                                      |  |                                          | 49,113 
|Share capital                                                   |  |                                          | 40,733 
|Ordinary shares outstanding                                     |  |                                          | 4,542  
|                                                               
|Selected U.S. Operating Data:                                   |  |                                          |        
|Stores open at period-end(4)                                    |  |                                          | 43     
|Average net sales per store (in thousands)(5)                   |  | $                                        | 2,292  
|Comparable store sales increase (decrease)(6)                   |  |                                          | 10.9   
|Selling square feet (in thousands)                              |  |                                          | 129.8  
|Sales per selling square foot                                   |  | $                                        | 637    



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|                                              |  | Year Ended January 31,                   |      
|--------------------------------------------- |  | ---------------------------------------- | -----
|                                              |  | 1999                                     |      
|                                              |  | (In A$ thousands, except per share data) |      
|Selected Australian Operating Data:           |  |                                          |      
|Stores open at period-end                     |  |                                          | 33   
|Average net sales per store (in thousands)(5) |  | $                                        | 2,702
|Comparable store sales increase (decrease)(7) |  |                                          | 8.8  
|Selling square feet (in thousands)            |  |                                          | 307.1
|Sales per selling square foot                 |  | $                                        | 282  

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|(1) |  | Relates to the closure of seven U.S. stores, two of which were closed during the fiscal year ended January 31, 2002, one during February 2002 and a further four due
for closure prior to January 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Relates to compensation of A$4.1 million received from the State Rail Authority in relation to the expropriation of leasehold property occupied by the Chatswood,
Australia store. This was offset by an additional A$0.4 million in connection with a further amount required in relation to a store identified for closure during fiscal 2003, pursuant to historical underperformance, a further one U.S. store
identified for closure in fiscal 2004 for similar reasons and A$0.2 million of professional fees, advertising expenses and asset write-offs relating to the Chatswood store.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Basic earnings (loss) per share are computed by dividing net income (loss) available to ordinary shareholders, by the weighted average number of ordinary shares.
Diluted earnings (loss) per share are computed by dividing net income (loss) available to ordinary shareholders, by the weighted average number of ordinary shares and dilutive ordinary share equivalents for the period. In calculating the dilutive
effect of share options, we use the treasury stock method.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Excludes three Military concession stores and the e-Commerce site.
|--- |  | ------------------------------------------------------------------

|(5) |  | For stores open at beginning of period indicated.
|--- |  | -------------------------------------------------

|(6) |  | The number of comparable stores used to compute such percentages was 33, 43, 52, 62 and 64, for the fiscal years ended January 31, 1999, 2000, 2001, 2002 and 2003,
respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | The number of comparable stores used to compute such percentages was 33, 33, 35, 35 and 34, for the fiscal years ended January 31, 1999, 2000, 2001, 2002 and 2003,
respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Exchange Rates



The Australian dollar is convertible into U.S. dollars at
freely floating rates, and there are currently no restrictions on the flow of Australian currency between Australia and the United States. On January 31, 2003, the Noon Buying Rate was US$0.5860 = A$1.00. The following table sets forth, for the
periods indicated, certain information concerning Noon Buying Rates for Australian dollars.



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Fluctuations
in the exchange rate between the Australian dollar and the U.S. dollar may affect our earnings, the book value of our assets and shareholders equity as expressed in Australian and U.S. dollars, and consequently may affect the market price for
the ADSs. Such fluctuations will also affect the conversion into U.S. dollars by Morgan Guaranty Trust Company of New York as Depositary, (the Depositary) of cash dividends, if any, paid in Australian dollars on the Ordinary Shares
represented by the ADSs. See Item 9The Offer and ListingPrice Range of our ADSs on the Nasdaq Stock Market®(Nasdaq) and Item 10. Additional InformationD. Exchange ControlRestrictions on Foreign Ownership; Antitakeover Restrictions.



|                       |  | Average(1) |  | High   |  | Low    |  | PeriodEnd
|---------------------- |  | ---------- |  | ------ |  | ------ |  | ---------
|Year Ended January 31, |  |            |  |        |  |        |  |          
|1999                   |  | 0.6271     |  | 0.6868 |  | 0.5550 |  | 0.6271   
|2000                   |  | 0.6451     |  | 0.6640 |  | 0.6265 |  | 0.6382   
|2001                   |  | 0.5734     |  | 0.6387 |  | 0.5112 |  | 0.5480   
|2002                   |  | 0.5137     |  | 0.5540 |  | 0.4828 |  | 0.5072   
|2003                   |  | 0.5492     |  | 0.5922 |  | 0.5070 |  | 0.5860   
|                      
|Month                  |  |            |  |        |  |        |  |          
|October 2002           |  | 0.5502     |  | 0.5585 |  | 0.5422 |  | 0.5548   
|November 2002          |  | 0.5613     |  | 0.5660 |  | 0.5563 |  | 0.5601   
|December 2002          |  | 0.5624     |  | 0.5660 |  | 0.5589 |  | 0.5625   
|January 2003           |  | 0.5829     |  | 0.5922 |  | 0.5629 |  | 0.5860   
|February 2003          |  | 0.5956     |  | 0.6075 |  | 0.5843 |  | 0.6075   
|March 2003             |  | 0.6013     |  | 0.6161 |  | 0.5905 |  | 0.6003   
|April 25, 2003         |  |            |  |        |  |        |  | 0.6152   

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|(1) |  | Determined by averaging the closing price for each date in the period.
|--- |  | ----------------------------------------------------------------------



|B. |  | CAPITALIZATION AND INDEBTEDNESS
|-- |  | -------------------------------



Not applicable.



|C. |  | REASONS FOR THE OFFER AND USE OF PROCEEDS
|-- |  | -----------------------------------------



Not applicable.



|D. |  | RISK FACTORS
|-- |  | ------------



The following are certain factors that you should consider when evaluating our business, financial conditions and results of operations.
However, these factors are not exclusive and you are urged to consider the statements made elsewhere in this Annual Report and in our other publicly filed documents.



Weakening economic conditions may have an adverse affect on our business and results of operation.



The success of our operations depends upon a number of
factors related to consumer spending, including future economic conditions affecting disposable consumer income such as employment, business conditions, interest rates and taxation. If the economic conditions of 2002 were to continue, or
deteriorate, consumer spending may decline, thereby adversely affecting our business and results of operations. These adverse affects may be exacerbated by the significant current regional concentration of our business in Australia and the Pacific
West, Southwestern and East coast U.S. markets.



We face
business, political and economic risk because we transact business outside of the United States.



Barbeques Galore, with its headquarters, manufacturing, enameling, wholesale and non-U.S. store operations in Australia, transacts a large
proportion of its business in Australia and obtains a significant portion



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of its merchandise, parts and raw materials from China, Taiwan, Indonesia, Thailand, Italy and other markets outside of the United States and
Australia. There are risks inherent in doing business in international markets, including:



| |  |  | tariffs;
| | - |  | --------



| |  |  | customs duties and other trade barriers;
| | - |  | ----------------------------------------



| |  |  | difficulties in staffing and managing foreign operations;
| | - |  | ---------------------------------------------------------



| |  |  | political instability, expropriation, nationalization and other political risks;
| | - |  | --------------------------------------------------------------------------------



| |  |  | foreign exchange controls, technology, export and import restrictions or prohibitions;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the difficulties of compliance with foreign laws and regulations;
| | - |  | -----------------------------------------------------------------



| |  |  | delays from customs brokers or government agencies;
| | - |  | ---------------------------------------------------



| |  |  | seasonal reductions in business activity;
| | - |  | -----------------------------------------



| |  |  | subjection to multiple taxation regimes and potentially adverse tax consequences;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | acts of terrorism; and
| | - |  | ----------------------



| |  |  | actual or intended warfare.
| | - |  | ---------------------------



Any of these risks could materially adversely affect our business, operating results and financial condition.



We rely on a few significant vendors and suppliers who may discontinue
selling to us at any time.



We purchase
certain of our finished inventory and manufacturing parts and all of our raw materials from numerous vendors and suppliers and generally have no long-term purchase contracts with any vendor or supplier. During the twelve months ended January 31,
2003, we purchased inventory from over 500 vendors in the United States, Australia and Asia. In such period, approximately 25% of our merchandise purchases were obtained from our ten largest vendors. Although no vendor accounted for more than 5% of
our merchandise purchases in such period, we consider certain barbecue brands to be significant to our business, especially in the United States. Also during such period, we purchased barbecue and home heater parts from over 90 suppliers in Asia,
Australia and North America. Smorgan Sheet Metal Supplies Pty Limited (SSMS), a steel distributor, Austral Bronze Crane Copper Limited trading as Austral Wright Metals (Austral) and Bromic Pty Limited (Bromic), an
Australian gas components importer, supplied us with approximately 16%, 12% and 8% respectively, of our factory parts and raw material purchases during this period and approximately 74% of our factory parts and raw material purchases were obtained
from our ten largest suppliers. Our results of operations could be adversely affected by a disruption in purchases from any of these key vendors or suppliers or from volatility in the prices of, or tariffs imposed on, such parts or raw materials,
especially steel, which has fluctuated in the past. In addition, some of our key suppliers currently provide us with certain purchasing incentives, such as volume rebates and trade discounts. A reduction or discontinuance of these incentives could
have an adverse effect on our business.



Foreign currency
fluctuations could adversely affect our results.



We prepare our consolidated financial statements in Australian dollars but a substantial portion of our revenues and expenses are denominated in U.S. dollars and, to a lesser extent, other foreign currencies. Accordingly, we are
subject to risks of currency exchange to the extent of currency fluctuations between the Australian dollar and the U.S. dollar or other currencies in which we transact our business. This currency imbalance has resulted in, and may continue to result
in, foreign currency transaction gains and losses. Our Australian operations generally hedge a major portion of their imports against exchange rate fluctuations with respect to the Australian dollar.



In our U.S. operations, however, we have not and currently do
not actively hedge against exchange rate fluctuations, as the vast majority of the U.S. operations purchases are transacted in U.S. dollars, although we



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may elect to do so in the future. Changes in exchange rates may have a material adverse effect on our net sales, cost of goods sold, gross
profit and net income (loss), any of which alone or in the aggregate may in turn have a material adverse effect on our business, operating results and financial condition. Such currency issues could, thus, affect the market price for the ADSs. We
may pay dividends on the Ordinary Shares or the ADSs in the future and accordingly, the above exchange rate fluctuations would affect the conversion into U.S. dollars (for payment to holders of ADSs) by the Depositary, of any cash dividends paid in
Australian dollars on the Ordinary Shares represented by the ADSs. See Item 3. Key InformationA. Selected Financial DataExchange Rates and Item 9. The Offer and ListingPrice Range of our ADSs on the Nasdaq Stock
Market®(Nasdaq).



Intense competition in our market could prevent us from increasing or sustaining our revenues.



The retail and distribution markets for barbecues and our
other product offerings are highly competitive in both the United States and Australia. Our retail operations compete against a wide variety of retailers, including mass merchandisers, discount or outlet stores, department stores, hardware stores,
home improvement centers, specialty patio, fireplace or cooking stores, warehouse clubs, web sites and mail order companies. Our manufacturing and wholesale operations compete with many other manufacturers and distributors throughout the world,
including high-volume manufacturers of barbecues and home heaters. We compete for retail customers primarily based on our broad assortment of competitively priced, quality products (including proprietary and exclusive products), convenience,
customer service and the attractive presentation of merchandise within our stores and on our web site. Many of our competitors have greater financial, marketing, distribution and other resources than we do and, particularly in the United States, may
have greater name recognition than us. Furthermore, the lack of significant barriers to entry into our segment of the retail industry may also result in new competition in the future. If we fail to compete effectively, we may be unable to increase
our market share or our market share may decline, which could adversely affect our revenues.



Changing merchandise trends, consumer demands or product quality could adversely affect our sales.



Our success depends on our ability to anticipate and respond to changing merchandise trends and consumer demands in a timely manner. We
believe we have benefited from a lifestyle trend towards consumers spending more quality time together in outdoor family gatherings and social activities. Any change in this trend could adversely affect consumer interest in our major product lines.
Moreover, our products must appeal to a broad cross-section of consumers whose preferences (as to product features such as colors, styles, finishes and fuel types) cannot always be predicted with certainty and may change between sales seasons. If we
misjudge either the market for our merchandise or our customers purchasing habits, we may experience a material decline in sales or be required to sell inventory at reduced margins. We could also suffer a loss of customer goodwill if our
manufacturing sources or stores do not adhere to our quality control or service procedures or otherwise fail to ensure satisfactory quality of our products. These outcomes may have a material adverse effect on our business, operating results and
financial condition.



Our failure to maintain and upgrade core
computer systems which operate and monitor all major aspects of our business could have a material adverse effect upon our business.



We rely on certain management information systems to obtain daily sales information from our stores and to operate and monitor all major
aspects of our business.



Our Head Office
Information Systems process all distribution, warehouse management, inventory control, purchasing, merchandising, financial and office automation applications. Each store has PC-based point-of-sale (POS) registers which manage all sales
transactions and store based purchasing transactions. The store check out registers are networked to an In-Store Processor (ISP) located in the back office of each store. At the end of each days processing, the data from each
register is consolidated onto the ISP which has an attached modem and which is polled daily to upload the data to the head office system. We rely upon our management information systems in operating and monitoring all major aspects of our business,
including sales, gross profits,



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warehousing, distribution, purchasing, inventory control, financial accounting and human resources. Any disruption in the operation of our
management information systems, or our failure to continue to upgrade, integrate or expend capital on such systems as our business expands, could have a material adverse effect upon our business, operating results and financial condition.



Failure to hire, train and retain competent managers and
personnel could have a material adverse affect on our business.



When we embark on expansion, it will result in increased demand on our managerial, operational and administrative resources. The success of our operations depends on our ability to hire, train and retain competent managers
and other personnel and to manage the systems and operational components when we grow. Our failure to attract and retain qualified management and personnel or appropriately adjust operational systems and procedures, would adversely affect our future
operating results.



Our success depends on several of our
directors, senior management and employees, and they may not remain with us in the future.



Our success is largely dependent on the efforts and abilities of our directors, senior management and employees, particularly Sam Linz, Chairman of the Board, Robert Gavshon, Deputy Chairman of the
Board, John Price, Head of Product Management and Development and Director, and Sydney Selati, Director and President of Barbeques Galore, Inc., our U.S. operating subsidiary. These individuals have an average of 20 years of experience with us and
have chief responsibility for the development of our current business. We do not have employment contracts with any of our directors, senior management and employees. The loss of the services of these individuals or other key employees could have a
material adverse effect on our business, operating results and financial condition.



If we fail to execute certain operational changes, our ability to implement our business strategies would be adversely affected.



We have identified a number of areas in our operations in which improvement would have a significant impact
on our business strategies. In addition, when we expand into new regions, we may need additional warehouse capacity. We may in the future, need to secure further distribution centers, expand our current warehouse facilities in the United States or
utilize public warehousing space, in each case depending on availability and cost at such time. We cannot assure you as to whether or when we will be able to effect any expansion or replacement of distribution facilities, or any other necessary
operational changes that may arise, or that we will not incur cost overruns or disruptions in our operations in connection therewith. Our failure to effect these and any other necessary operational changes on a timely basis would adversely affect
our expense structure and, therefore, our business, financial condition and operating results.



Our revenues fluctuate from period to period and are subject to various factors including seasonality and weather.



Our business is subject to substantial seasonal variations which have caused and are expected to continue to
cause our quarterly results of operations to fluctuate significantly. Historically, we have realized a major portion of our net sales and a substantial portion of our net income for the year during summer months and holiday seasons when consumers
are more likely to purchase barbecue products, camping equipment, outdoor furniture and other backyard products. In anticipation of our peak selling seasons (late spring and early summer), we substantially increase our inventory levels and hire a
significant number of part-time and temporary employees. In non-peak periods, particularly in late winter in the United States and early fall in Australia, we regularly experience monthly losses. In order to partially offset the effects of
seasonality, we operate in both the Southern and Northern hemispheres, which have opposite seasons and offer fireplace products and (in Australia) home heaters, in the fall and winter months. However, sales of any of our major product lines (in
particular home



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heaters), may vary widely in peak seasons depending on, among other things, prevailing weather patterns, local climate conditions, actions by
competitors and shifts in timing of holidays. Our quarterly and annual results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings, releases of new products and changes
in merchandise mix throughout the year. We have in the past experienced quarterly losses, particularly in our fiscal first quarter, and expect to experience such losses in the future. Because of these fluctuations in operating results, the results
of operations in any quarter are not necessarily indicative of the results that we may achieve for a full fiscal year or any future quarter. If for any reason our sales or gross profits during peak seasons or periods were substantially below
expectations, our quarterly and annual results would be adversely affected.



We depend on third-party carriers to distribute our products.



We manufacture, or have manufactured for us, a substantial portion of the barbecues and home heaters that we sell in our stores. We distribute merchandise to our stores primarily from our distribution
centers located at our headquarters in Australia, in Ontario, California and Charlotte, North Carolina. In distributing merchandise, we rely upon third-party sea carriers to ship our manufactured products from Australia to the United States, as well
as third-party surface freight carriers to transport all of our merchandise from our distribution centers and warehouses to our stores. Accordingly, we are subject to numerous risks associated with the distribution of our merchandise, including:



| |  |  | mechanical risks;
| | - |  | -----------------



| |  |  | labor stoppages or strikes;
| | - |  | ---------------------------



| |  |  | inclement weather;
| | - |  | ------------------



| |  |  | import regulation; and
| | - |  | ----------------------



| |  |  | changes in fuel prices.
| | - |  | -----------------------



In addition, we believe that, while our distribution facilities are sufficient to meet our current needs, we may need another distribution
center or larger facilities in the United States or Australia to support the further growth and expansion of stores.



Our products and the personal use thereof are subject to certain government regulations which could influence product liability claims and impact the
manner in which we distribute our products.



Many of our products use gas and flame and, consequently, are subject to regulation by authorities in both the United States and Australia in order to protect consumers, property and the environment. For example, our products and
their personal use are subject to regulations relating to, among other things, the use of fire in certain locations (particularly restrictions relating to the availability or frequency of use of wood heating in homes and barbecues in apartments),
restrictions on the sale or use of products that enhance burning potential such as lighter fluid, restrictions on the use of gas in specified locations (particularly restrictions relating to the use of gas containers in confined spaces) and
restrictions on the use of wood burning heaters. Such regulations have had, and can be expected to have, an increasing influence on product claims, manufacturing, contents, packaging and heater usage. We cannot assure you that certain jurisdictions
in which we operate will not impose additional restrictions on the sale or use of our products. Such restrictions may negatively impact our sales and cause our business to suffer.



Failure of our franchisees and licensees to adhere to our standards could adversely affect customer loyalty and diminish
our brand name and reputation.



As of
January 31, 2003, there were 50 licensed stores in Australia and nine franchised stores in the United States, all of which are operated under the Barbeques Galore name by independent licensees or franchisees to



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whom we sell proprietary and other store products, and provide support services. The licensees and franchisees operate such stores pursuant
to agreements which typically permit licensees and franchisees to assign the agreements to their immediate family and provide the licensees and franchisees with exclusive geographical sales territories. We monitor our licensed and franchised stores
to assure their conformity to our standards and image and require the licensees and franchisees to comply with Barbeques Galores merchandising and advertising guidelines. Serious or protracted failures by licensees or franchisees to adhere to
our standards could adversely affect customer loyalty and diminish our brand name or reputation for quality products and services, and could require us to devote significant management attention and resources to enforcing our rights under such
agreements. Conversely, if we fail to provide adequate support services or otherwise breach our contractual obligations to any licensee or franchisee, such failure or breach could result in termination of, or litigation relating to, the relevant
licensing or franchise agreement and the loss of fees and sales revenue.



The majority of the licensing agreements in Australia are terminable at will (absent fraud) by the licensees only, generally upon 90 days notice.



Product liability claims could materially adversely affect our customer relations and costs.



Failure of a product could give rise to product liability
claims if customers, employees or third parties are injured or any of their property is damaged while using one or more of our products. Such injury could be caused, for example, by a gas valve malfunction, gas leak or an unanticipated flame-up
resulting in injury to persons and/or property. In the event of such an occurrence, we could incur substantial litigation expense, receive adverse publicity, suffer a loss of sales or all or any of the foregoing. Even if such circumstances were
beyond our control, our business, operating results and financial condition could be materially adversely affected. Although we maintain liability insurance in both Australia and the United States, we cannot assure you that such insurance will
provide sufficient coverage in any particular case.



Our
manufacturing and enameling operations are subject to government regulations.



Our barbecue and home heater manufacturing and enameling operations are subject to regulations governing product safety and quality, the discharge of materials hazardous to the environment, water
usage, workplace safety and labor relations. Our distribution facilities are also subject to workplace safety and labor relations regulations. As a barbecue and barbecue accessories store, we sell lighter fluid, lighters, matches and similar
products which may be considered flammable when in contact with open flame or activated. Our sale of certain products may result in technical violations of certain of our leases which prohibit the sale of flammable materials in or on the leased
premises. Over our operating history, we have made our landlords aware that we sell these products. To date, no landlord has terminated or threatened termination of any lease due to these sales. Violations of these regulations and restrictions could
have a material adverse effect on our business, operating results or financial condition.



One of our former insurance providers has been placed into liquidation and the impact of this on our insurance coverage is unclear.



We placed a major portion of our insurance policies with HIH Casualty and General Insurance Limited
(HIH) during the 12 months ending June 30, 2001 and earlier periods. HIH Insurance Limited and 17 of its subsidiaries (HIH Group) have been placed into liquidation. We have replaced these insurance policies with other
insurers and have some claims against us on foot in relation to the period during which we were covered by HIH, the outcome of which, in the opinion of management, is not likely to have a material adverse effect on our business, results of
operations or financial condition. Furthermore, to the best of our knowledge and belief, we are unaware of any further material claims which may arise against us in relation to any events during the period we were covered by HIH. It is also unknown
at this stage when and what amounts, if any, would be recoverable from the Liquidators of the HIH Group were such claims to arise.



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|ITEM |  | 4.    
INFORMATION ON OUR COMPANY
|---- |  | ---------------------------------



|A. |  | HISTORY AND DEVELOPMENT OF OUR COMPANY
|-- |  | --------------------------------------



Our name is Barbeques Galore Limited. We opened our first store in Sydney, Australia in 1977 to serve an unfilled niche in the retail
market for versatile, well-designed barbecues and incorporated in the Australian Capital Territory, Australia as a limited liability company on June 16, 1982. In 1980, we opened our first U.S. store in Los Angeles.



During the 1980s, we vertically integrated our operations by
expanding into barbecue manufacturing in order to capture higher margins, control product development and improve inventory flexibility and supply. Fireplace products and, in Australia, home heaters were added to take advantage of the winter selling
season. We further diversified our product line through the addition of camping equipment and outdoor furniture in Australia and other backyard products in both the United States and Australia, all of which complement our main barbecue line.
Information concerning principal capital expenditure currently in progress, the distribution of these investments geographically and the method of financing is set out in Item 5. Operating and Financial Review and ProspectsB. Liquidity
and Capital Resources.



In April 1987, we
listed our Ordinary Shares on the ASE. In October 1996, as part of our plans to accelerate new store expansion in the United States, we announced our intention to repurchase shares from the public, delist from the ASE (pursuant to a transaction
which was consummated as of December 31, 1996) and to seek capital in the United States. We consummated our initial public offering in the United States in November 1997.



Principal capital expenditures during our last three fiscal years are as follows:



| |  |  | During the 12 months ended January 31, 2003, capital expenditures of A$2.8 million were incurred. In Australia, this related to factory tooling and the commencement
of the refurbishment of certain stores to merchandize the new backyard products. In the United States, this related to the relocation of the distribution center to Ontario, California and the U.S. headquarters to Lake Forest, California and the
remodeling of two stores.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the 12 months ended January 31, 2002, capital expenditures of A$4.2 million were incurred in connection with new store openings in the United States.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the 12 months ended January 31, 2001, capital expenditures of A$7.6 million were incurred. In Australia, this related to store refurbishments and relocations
and in the United States, to new store openings.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our principal executive and registered offices are located at 327 Chisholm Road, Auburn, NSW 2144, Australia. Our telephone number is 61 2 9704 4177. Our Internet addresses arewww.bbqgalore.com and
www.barbequesgalore.com.au.Information contained in our web sites does not constitute a part of this document.



Our agent for service in the United States is the President, Barbeques Galore Inc., 10 Orchard Road, Suite
200, Lake Forest, California 92630, telephone (949) 597 2400.



B.    BUSINESS OVERVIEW



Description of Business



We believe we are the leading specialty retail chain of barbecue and barbecue accessory stores in Australia and the United States, having regard to the number of stores and sales volume. We also base this belief on our years of
experience in the barbecue retail industry as well as our contacts with other industry retailers, suppliers and trade associations. Our stores carry a wide assortment of barbecues and related accessories, displayed in a format that emphasizes social
activities and healthy outdoor lifestyles, in addition to a comprehensive line of



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fireplace products and certain backyard products and, in Australia, home heating products, camping equipment, outdoor furniture and backyard
products. As of January 31, 2003, we owned and operated 34 stores in all six states in Australia as well as one wood heating outlet in Tasmania, Australia and 63 stores (including three U.S. Military concession stores) in ten states in the United
States. In addition, as of such date, there were 50 licensed stores in Australia and nine franchised stores in the United States, all of which operate under the Barbeques Galore name.



Our unique retailing concept differentiates us from our
competitors by:



| | (i) |  | offering an extensive selection of barbecues and related accessories to suit all consumer lifestyles, preferences and price points;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | showcasing these products at convenient store locations with a shopping environment that promotes the total barbecuing experience; and
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------



| | (iii) |  | providing exceptional customer service through well-trained sales associates who have in-depth knowledge of the products and understanding of customer needs.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



Our barbecue and home heater
manufacturing operations enhance these competitive strengths and strategic alliances, which enable us to realize higher margins, control product development and improve inventory flexibility and supply.



In the United States, our strategy for the immediate future,
is to consolidate our existing store base and increase market share through our traditional product categories and the introduction of certain backyard products. During the twelve months ended January 31, 2003, we reduced our company-owned stores
from 66 to 63 (including three U.S. Military concession stores), representing a 4% decrease in the number of company-owned stores in the United States, following the closure of three stores pursuant to historic underperformance.



In Australia, our strategy is to grow market share in our
traditional categories, streamline our camping offer and introduce backyard products in an inviting merchandizing environment. In the area of manufacturing, our strategy is to strengthen our strategic alliances with overseas manufacturers.



The following table sets forth, for the periods
indicated, the percentage of our main categories of product sold:



|                                |  | Year Ended January 31, |  
|------------------------------- |  | ---------------------- | -
|                                |  | 2001                   |  
|Barbecues                       |  | 67.9                   | %
|Barbecue accessories            |  | 12.3                   |  
|Heating and fireplace equipment |  | 7.6                    |  
|Outdoor furniture               |  | 6.3                    |  
|Backyard products               |  |                       |  
|Camping equipment               |  | 5.9                    |  
|                                |  |                        |  
|                                |  | 100.0                  | %
|                                |  |                        |  



We are
engaged in the retail industry and operate through stores located in two geographical segments, Australia and the United States of America. The following table sets forth the geographical distribution of our revenues from external customers in A$
thousands and by percentage, for the periods indicated:



|                                 |  | Year Ended January 31, |        
|-------------------------------- |  | ---------------------- | -------
|                                 |  | 2001                   |        
|                                 |  | (In A$ thousands)      |        
|Revenues from external customers |  |                        |        
|Australia                        |  | $                      | 141,701
|United States of America         |  |                        | 162,770
|                                 |  |                        |        
|Total                            |  | A$                     | 304,471
|                                 |  |                        |        



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Information Systems



In the United States, we have installed a
JDA Software Group Inc. (JDA) system on an IBM AS400 platform which allows us to manage distribution, inventory control, purchasing, sales analysis, warehousing and financial applications. At the store level, we have installed POS
computer terminals as our cash registers in all stores. Each POS terminal is equipped with a bar code scanner for ease of product input and validation with each stores transaction data being captured by our POS terminals and transferred into
the main JDA system daily. The JDA system provides extensive reporting and inquiry capability at both the store and corporate levels, including daily transaction data, gross profit information, exception analysis and stock levels. Additionally, the
system permits inventory and pricing updates to be electronically transmitted to the stores on a daily basis.



In Australia, we have installed a Berger Software Pty Limited (Berger) system on a Sun Unix platform which allows us to manage
distribution, warehouse management, Distribution Requirements Planning, purchasing, sales analysis and financial applications. At store level, we have recently upgraded the POS software to a local product, DposIT, supplied by QQQ Systems Pty Ltd
(trading as SVI Retail). Several operations previously performed manually are now computerised, resulting in improved service levels for our stores. The store checkout registers are networked to a server in the back office of each store, providing
extensive consolidated reporting. Every evening, data from each store is transferred back for integration with Berger.



We have recently installed an analytic application, Stratum, from Silvon Software. Sales and inventory data are automatically interfaced
from Berger over-night, to enable Stratum to analyze the large volumes of data at both detail and summary levels. This, in turn, facilitates quick and efficient analysis of sales profitability and inventory.



Seasonality; Weather; Fluctuations in Results



Our business is subject to substantial seasonal variations
which have caused, and are expected to continue to cause, our quarterly results of operations to fluctuate significantly. Historically, we have realized a major portion of our net sales and a substantial portion of our net income (loss) for the year
during summer months and holiday seasons when consumers are more likely to purchase barbecue products, camping equipment and outdoor furniture. In anticipation of our peak selling seasons (late spring and early summer), we substantially increase our
inventory levels and hire a significant number of part-time and temporary employees. In non-peak periods, particularly in late winter in the United States and early fall in Australia, we regularly experience monthly losses. These seasonal trends
result in our experiencing a loss during our first fiscal quarter.



We believe this is the general pattern associated with our segment of the retail industry and expect this pattern will continue in the future. In order to partially offset the effects of seasonality, we operate in both the
Southern and Northern hemispheres which have opposite seasons. Additionally, we offer fireplace products and (in Australia), home heaters in the fall and winter months. However, sales of any of our major product lines (in particular, home heaters)
may vary widely in peak seasons depending on, among other things, prevailing weather patterns, local climate conditions, actions by competitors and shifts in timing of holidays. Our quarterly and annual results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of new store openings, releases of new products and changes in merchandise mix throughout the year. We have in the past, experienced quarterly losses, particularly in our
fiscal first quarter, and expect to experience such losses in the future. Because of these fluctuations in operating results, the results of operations in any quarter are not necessarily indicative of the results that may be achieved for a full
fiscal year or any future quarter. If for any reason our sales or gross profits during peak seasons or periods were substantially below expectations, our quarterly and annual results would be adversely affected.



Manufacturing



We have developed strategic alliances with overseas
manufacturers, particularly in China, from whom we have begun to source our proprietary Turbo, CaptN Cook, Cook-On and Bar-B-Chef brands and certain other



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house brands. In our Australian factory facilities, we continue to manufacture some barbecues as well as home heaters under our proprietary
Norseman, Kent, Saxon and Austwood brands. During fiscal 2003, we absorbed the Saxon branded heaters into our manufacturing operations thereby cementing our position as Australias leading wood heater manufacturer. During the twelve months
ended January 31, 2003, proprietary barbecue retail sales represented approximately 26% and 14% of our total net sales in the United States and Australia, respectively. Our manufactured products are closely coordinated by our product development
activities. We have a product management and development team that is dedicated to barbecue market analysis and product development. The team continuously studies sales data, customer feedback, consumer trends and product designs, working closely
with our other departments (in both the United States and Australia) and strategic alliance suppliers, to develop the annual Barbeques Galore product line. During the fiscal years ended January 31, 2003, 2002 and 2001, we expended A$1.0 million,
A$1.1 million and A$1.0 million, respectively, on product management and development.



Purchasing



We
believe we have good relationships with our merchandise vendors and suppliers of parts and raw materials and do not anticipate that, as volume increases, there will be any significant difficulty in obtaining adequate sources of supply in a timely
manner and on satisfactory economic terms.



Retail.    We deal with our merchandise vendors principally on an order-by-order basis and do not maintain any long-term purchase contracts with any vendor. Merchandise is purchased for our U.S. and
Australian stores by our central buying staffs in our respective headquarters. In selecting merchandise, the buying staffs obtain input from a variety of sources, including our product management and development team, store employees, focus groups,
customer surveys, industry conventions and trade shows. During the twelve months ended January 31, 2003, we purchased our inventory from over 500 vendors in the United States, Australia and Asia. No single vendor accounted for more than 5% of
merchandise purchases during this period, although we consider certain barbecue brands to be significant to our business, especially in the United States. We do not believe that the loss of any single brand, including those made by Weber-Stephen
Products Co., Dynamic Cooking Systems or Onward Multi-Corp., would have a material adverse effect on our operating results. Approximately 25% of our merchandise purchases were obtained in such period from our ten largest vendors. See Item 3.
Key InformationD. Risk Factors.



Manufacturing.    We also purchase parts and raw materials for use in our manufacturing and enameling operations. During the twelve months ended January 31, 2003, our buying staffs purchased barbecue and
home heater parts from over 90 suppliers in Asia, Australia and North America. No single supplier accounted for more than 5% of factory parts and raw material purchases during this period, other than SSMS, Austral and Bromic which accounted for
approximately 16%, 12% and 8% of these purchases, respectively. We do not have formal supply contracts with any of our suppliers and in the case of SSMS, prices are fixed for a year in advance. Other major suppliers of barbecue components included
G.L.G. Trading Pte. Limited (GLG), a Singapore company which acted as a buying office for Barbeques Galore and other third parties, purchasing grills, burners and other products directly from factories in China and Taiwan until cessation
of those activities on December 31, 2001. The buying office has been dismantled and the administration of Asian purchases is currently being handled from Hong Kong. We have a one-third ownership interest in Bromic whilst the remaining 50% ownership
interest in GLG was acquired by us as of May 2, 2002, as a result of which, GLG is now a wholly-owned subsidiary. Approximately 74% of our factory parts and raw material purchases were obtained in such twelve-month period from our ten largest
suppliers. In order to set production budgets, the price of certain parts and raw materials such as steel, are negotiated and fixed well in advance of production usage. We use back-up suppliers to ensure competitive pricing. In addition, some of our
key suppliers currently provide us with certain purchasing incentives, such as volume rebates and trade discounts. See Item 3. Key InformationD. Risk Factors



Distribution



We currently maintain a 98,821 square foot distribution center in Ontario, California, having relocated in May 2002 from our previous
Irvine distribution center, for reasons of physical constraints and anticipated,



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enhanced distribution efficiencies, a 27,000 square foot distribution center in Charlotte, North Carolina and a 172,000 square foot combined
distribution and warehousing facility as part of our Australian headquarters. The additional company-owned space acquired, eliminated the necessity to utilize significant public warehousing space in Sydney, in the foreseeable future. We also use
smaller warehouses in Melbourne, Brisbane and Perth, Australia (operated by independent distributors), for our retail, licensee and wholesale distribution operations and lease additional public warehouse space in Dallas County, Texas, for short
terms, as necessary.



Vendors and suppliers
deliver merchandise to our distribution facilities and, in certain instances, directly to stores, where it is inspected and logged into our centralized inventory management systems. Merchandise is then shipped by our trucks or third party surface
freight weekly or twice weekly, thereby providing stores with a steady flow of merchandise. Shipments by our Australian operations to our Ontario distribution center are made by third party sea freight, so that our Ontario distribution center can
maintain about two months of Company-manufactured inventory at all times, which we believe is sufficient to meet expected U.S. store requirements for such products.



We maintain separate inventory management systems in Australia and the United States which allow us to
closely monitor sales and track in-store inventory. Current plans include the introduction of an automated store inventory replenishment system in order to better manage our inventory. We estimate that our inventory shrinkage represents no more than
0.5% of our aggregate retail sales. We and our advisors are not aware of any barbecue industry source from which an industry average shrinkage rate can be derived. However, we believe that the general shrinkage rate for retailers is approximately
1.5% to 2.0% of retail sales and that our rate compares favorably to that of other retailers.



As we expand into new regions, we may eventually need additional warehouse capacity. In order to meet such needs and to minimize the impact of freight costs, we may secure another distribution center,
expand our current warehouse facilities in the United States or utilize public warehousing space. We believe that there is an ample supply of warehousing space available at commercially reasonable rates. Wherever possible, we also solicit the
cooperation of our vendors, through drop shipments to public warehouses and/or stores, in order to reduce our freight and handling costs. We believe that our existing Australian distribution arrangements, together with public warehousing space as
needed, are sufficient to meet our current needs.



Wholesale/Export Operations



In Australia, we distribute proprietary and private brand name products and other imported merchandise, on a wholesale basis, through a wholly-owned Australian subsidiary, Pricotech Leisure Brands Pty Limited (Pricotech).
Wholesale products offered by Pricotech include Cook-On barbecues, Igloo coolers and Kent and Saxon, home heaters. Pricotech distributes these products either through indent or delivery from our warehouse, primarily to Australian mass merchants,
chains and buying groups. Customers typically buy these products based on price. In the twelve months ended January 31, 2003, the five largest customers of Pricotech accounted for approximately 70% of its net sales of A$23.4 million. Our wholesale
operation, in which our investment consists primarily of inventory and receivables, sources the majority of its inventory from overseas manufacturers. Pricotechs export business is predominantly focused on the United Kingdom and Europe, with
66% of sales generated through one United Kingdom-based distributor.



Licensing and Franchising



As of January 31, 2003, we licensed 50 Barbeques Galore stores, generally in rural areas of Australia, and franchised nine Barbeques Galore stores in the United States. We receive annual licensing fees and franchising royalties, and
benefit primarily from these arrangements through the sale of Barbeques Galore merchandise to the licensees and franchisees. Independent licensees and franchisees operate such stores pursuant to agreements which require them to comply with Barbeques
Galores merchandising and advertising guidelines and conform to the Barbeques Galore image. These agreements typically provide the licensees and franchisees with exclusive



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geographical sales territories. Most of the Australian licensing agreements have an indefinite term but permit licensees to terminate their
arrangements at will, while franchisees in the United States are generally contractually bound for fixed periods with renewal options. During the twelve months ended January 31, 2003, total net sales to licensee and franchisee stores were A$18.8
million and US$7.3 million, respectively. We estimate that the retail sales of Barbeques Galore products alone by licensees and franchisees were approximately A$24.1 million and US$4.0 million, respectively, in the same period. A number of our
existing licensees have refurbished their stores in accordance with our established criteria (although no licensee is required to do so), and we maintain an assistance program to provide advice relating to these enhancements. We may license
additional Barbeques Galore stores in Australia on a selective basis, although we do not intend to franchise any additional stores in the United States (except within geographical territories as required under existing franchising agreements).



Competition



The retail and distribution markets for barbecues and our
other product offerings are highly competitive in both the United States and Australia. Our retail operations compete against a wide variety of retailers, including mass merchandisers, discount or outlet stores, department stores, hardware stores,
home improvement centers, specialty patio, fireplace or cooking stores, warehouse clubs, web sites and mail order companies. Our manufacturing and wholesale operations compete with many other manufacturers and distributors throughout the world,
including high-volume manufacturers of barbecues and home heaters. We compete for retail customers primarily based on our broad assortment of competitively priced, quality products (including proprietary and exclusive products), convenience,
customer service and the attractive presentation of merchandise within our stores and on our web site. Many of our competitors have greater financial, marketing, distribution and other resources than we do and, particularly in the United States, may
have greater name recognition than us. Furthermore, the lack of significant barriers to entry into our segment of the retail industry may also result in new competition in the future.



We believe that the following business strengths have contributed significantly to our past success and
intend to further capitalize on those strengths in executing our business strategy.



Selection of Merchandise.    We offer an extensive selection of quality barbecues and barbecue accessories designed to suit consumer lifestyles, preferences and price points.
Our stores offer a variety of barbecues, with a range of styles, finishes and special features, including our proprietary brands as well as more than 60 other barbecues under different brand names. Accompanying these barbecues is an assortment of
barbecue replacement parts and accessories which generate high margins. As the leading retail chain specializing in barbecues and related merchandise, we offer consumers one-stop shopping convenience for virtually all their barbecue cooking needs.



Store
Environment.    Our stores offer a shopping environment which is consistent with our outdoor lifestyle image and promotes the total barbecuing experience. Our newer stores generally have high ceilings, wide aisles and
extensively use natural materials such as wood and stone. Merchandise is displayed to convey the breadth and depth of our product lines. An array of barbecues is displayed on the selling floor complete with accessories to provide the consumer with
the opportunity to compare and contrast different models. Store presentation is based on a detailed and comprehensive store plan regarding visual merchandising to ensure that all stores provide a consistent portrayal of the Barbeques Galore image.
Average store retail selling area is approximately 3,450 square feet in the United States and 9,920 square feet in Australia.



Customer Service.    We recognize that customer service is fundamental to our success. We have a
satisfaction guaranteed return policy and honor all manufacturer warranties for products sold at our stores. Store managers and sales associates undergo product and sales training programs which enable them to recommend merchandise that
satisfies each customers lifestyle and needs. We monitor each stores service



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performance and reward high quality customer service both on a team and individual level. We believe that our employees knowledge of
our product offerings and the overall barbecue market and their understanding of customer needs, are critical components of providing customer service and distinguish us from our competitors.



Convenient Store Locations.    We
position our stores in locations that maximize convenience and accessibility. Stores are typically situated at highly visible locations and in close proximity to middle to upper-income residential neighborhoods or areas of new housing construction.
Stores generally feature ample customer parking space and ready access to major thoroughfares. Many stores are situated in retail power centers or close to complementary retail stores, further attracting customer traffic. As a result of our site
selection criteria, we believe we have been effective in identifying successful new store locations.



On-line Retail Opportunities.    In May 1999, our e-Commerce site, www.bbqgalore.com went live with
minimal marketing. Sales from the site have been recorded in all 50 states in the U.S.A. and, as a result, we are reaching customers in regions where we currently do not have a retail store presence.



Integrated Manufacturing Operation; New Product
Development.    Through our vertically integrated operations, we manufacture, or have manufactured for us, a proprietary line of barbecues and home heaters for our retail stores. In addition, we have an experienced in-house
product management and development team dedicated to barbecue and home heater market analysis and product development that can identify and respond to changing consumer trends. We believe that having our own manufacturing operations and strategic
alliances with overseas manufacturers, allows us to realize higher margins, control product development and improve inventory flexibility and supply.



Experienced Management Team.    Our senior executive management team has an average of more than 33 years of
retail industry experience. Since the current executive management team assumed responsibility in 1982, the number of Barbeques Galore stores has grown from 12 stores (including one licensed store) as of June 30, 1982 to 157 stores (including 59
licensed or franchised stores) as of January 31, 2003. We believe that managements experience positions us to execute our business and growth strategies. Our directors and senior management beneficially own approximately 46.09% of our
outstanding Ordinary Shares.



Trademarks and Patents



Barbeques Galore,
Turbo, CaptN Cook, Cook-On, Bar-B-Chef, Turbo Apollo, Kent and KentThe Flame of the Future, are federally registered trademarks and/or service marks in
the United States. In addition, we own a federal trademark registration for the distinctive configuration of our Turbo grill. We use the phrases Americas Largest Chain of Barbecue Stores and Right in Your Backyard, as
common-law trademarks in the United States. Barbeques Galore and Cook-On are also registered with the State of California. In Australia, we have registered, among others, the names Norseman, Kent and
Saxon and additionally use the phrases Your Outdoor Cooking and Camping Store and We Know the Outdoors Inside Out, as common-law trademarks. We further utilize a number of different trademarks relating to various
barbecues, barbecue accessories, home heaters, camping equipment and outdoor furniture manufactured or offered by us. We are not presently aware of any claims of infringement or other challenges to our right to use our marks and our name in the
United States and Australia.



We also own a
number of copyrighted works, including brochures and other literature about our products and many drawings and designs that we use in marketing those products.



Governmental Regulation



Many of our products use gas and flame and, consequently, are subject to regulation by authorities in both the United States and Australia
in order to protect consumers, property and the environment. For example, our barbecue and home heater manufacturing, enameling and powder coating operations are subject to regulations



16



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governing product safety and quality, the discharge of materials hazardous to the environment, water usage, workplace safety and labor
relations. We believe that we are in substantial compliance with such regulations. Our products or personal use thereof are subject to regulations relating to, among other things, the use of fire in certain locations (particularly restrictions
relating to the availability or frequency of use of wood heating in homes and barbecues in apartments), restrictions on the sale or use of products that enhance burning potential such as lighter fluid, restrictions on the use of gas in specified
locations (particularly restrictions relating to the use of gas containers in confined spaces) and restrictions on the use of wood burning heaters. See Item 3. Key informationD. Risk Factors.



In addition, if our level of foreign ownership exceeds 40%, we
would be considered a foreign person and would require certain governmental approvals in connection with certain acquisitions in Australia. See Item 10. Additional InformationD. Exchange ControlRestrictions on Foreign Ownership;
Antitakeover Restrictions.



C.    ORGANIZATIONAL STRUCTURE



We are an Australian resident company involved in the manufacture of barbecues and heaters and the wholesale and retail sale of barbecues, heaters, camping equipment, outdoor furniture, backyard
products, leisure products and related accessories through Company-owned and licensed stores in Australia. We are also involved in the retailing, through Company-owned and franchised stores, of barbecues, fireplace equipment and accessories and
backyard products, in the United States of America. Our manufacturing operations are located in Australia.



As of April 29, 2003, our listing of controlled entities is as follows:



Barbeques Galore Limited

whose controlled entities are:



Galore Group Nominees Pty Limited

Vilbrent Pty Limited

Barbeques Galore (Aust) Pty Limited

whose controlled entities are:



Galore Pty Limited

The Galore Group (International) Pty
Limited

whose controlled entity is:



The Galore Group (U.S.A.), Inc.

whose controlled entities are:



Barbeques Galore, Inc.

Barbeques Galore Online, Inc.



Barbeques Galore Services Pty Limited

whose controlled entities are:



Cook-on-Gas Products (Australia) Pty Limited

whose controlled entities are:



Bosmana Pty Limited

Cougar Leisure Products Pty Limited



G.L.G. Australia Pty Limited

whose controlled entities are:



Australian Enamellers Pty Limited

Douglas Manufacturing Pty Limited

Park-Tec Engineering Pty Limited



17



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Pricotech Leisure Brands Pty Limited

Redgun Pty Limited



GLG Trading Pte Limited



|(a) |  | All the abovementioned controlled entities are incorporated in Australia with the exception of:
|--- |  | -----------------------------------------------------------------------------------------------



The Galore Group (U.S.A.), Inc;

Barbeques Galore, Inc; and

Barbeques Galore Online, Inc.



which are incorporated in the United States of America; and



GLG Trading Pte Limited



which is incorporated in Singapore.



|(b) |  | All the abovementioned controlled entities have ordinary shares as issued share capital and are 100% owned.
|--- |  | -----------------------------------------------------------------------------------------------------------



D.    PROPERTY, PLANTS AND EQUIPMENT



We currently lease all our stores and expect that our policy
of leasing, rather than owning, store properties will continue. Existing store leases provide for original lease terms that generally range from two to ten years, with single or multiple renewal options that range from three to five years at
increased rents. Certain of the leases provide for scheduled rent increases or for contingent rent (based upon store sales exceeding stipulated amounts). We guarantee two franchised store leases, one of which is secured by the franchisees
rights in our Barbeques Galore franchise.



In
Sydney, Australia, we own our headquarters, a 172,000 square foot combined distribution and warehousing facility and a 61,000 square foot assembly facility which also accommodates part of our administrative facilities. The additional company-owned
space acquired, eliminated the necessity to utilize significant public warehousing space in Sydney, in the foreseeable future. We lease the adjacent 75,000 square foot barbecue and home heater factory (which includes our enameling and in-line powder
coating operations) under a five-year lease with three successive five-year renewal options for a total maximum lease term at present of 17 years and use smaller warehouses in Melbourne, Brisbane and Perth, Australia (operated by independent
distributors), for our retail, licensee and wholesale distribution operations. Our factory in Sydney, Australia, manufactures fully welded barbecue frames, roasting hoods, barbecue carts and solid fuel home heaters. Products are enameled, powder
coated or painted, depending on demand. The gas manifolds are assembled by hand and tested individually for compliance to Australian Gas Association, American Gas Association and European Union, requirements. On completion of the decorative surface
finishing, fabricated products are delivered to the assembly plant where they are assembled and packed. In certain cases, product is shipped to our U.S. distribution centers for assembly. Subsequent to January 31, 2003, we determined to downsize our
manufacturing operations in Sydney, Australia as part of our plan for implementing potentially significant cost savings and margin enhancement opportunities with the sourcing of a number of our proprietary barbecues from China.



During May 2002, Barbeques Galore, Inc. relocated its
distribution center to a 98,821 square foot facility in Ontario, California and its headquarters to a 12,696 square foot facility in Lake Forest, California. This move was necessitated entirely due to the existing physical constraints. The
relocation to Ontario (under a five-year and seven-month lease with an option to renew for an additional five years), is anticipated to result in enhanced distribution efficiencies without any significant disruption to either staff or corporate
activities, at the new Lake Forest corporate headquarters which has also been leased, for a period of five years. The 27,000 square foot distribution center in Charlotte, North Carolina has been leased for a period of five years with a renewal
option for a further five years. Additional public warehouse space is leased in Dallas County, Texas for short terms, as necessary. See Item 4. Information on our CompanyB. Business OverviewManufacturing and
Distribution.



Our ownership
interest in our Sydney headquarters and all our leasehold interests in real property are subject to a mortgage interest of Australia and New Zealand Banking Group Limited (ANZ) governed by a Letter of Offer and related documents between
ANZ (successor-in-interest to Westpac Banking Corporation) and ourselves. See Item 19. ExhibitsExhibit Number 10.3.



18



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|ITEM |  | 5.    
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|---- |  | ---------------------------------------------------



The following discussion of our business, financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere
in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such
as those set forth under Item 3. Key InformationD. Risk Factors and elsewhere in this Annual Report.



Overview



We believe we are the leading specialty retail chain of barbecue and barbecue accessory stores in Australia and the United States, having
regard to the number of stores and sales volume. We also base this belief on our years of experience in the barbecue retail industry as well as our contacts with other industry retailers, suppliers and trade associations. We opened our first store
in Sydney, Australia in 1977 and our first U.S. store in Los Angeles in 1980. Our stores carry a wide assortment of barbecues and related accessories, displayed in a format that emphasizes social activities and healthy outdoor lifestyles in addition
to a comprehensive line of fireplace products and certain backyard products and, in Australia, home heating products, camping equipment, outdoor furniture and backyard products. As of January 31, 2003, we owned and operated 34 stores in all six
states in Australia as well as one heating outlet in Tasmania, Australia and 63 stores (including three U.S. Military concession stores) in ten states in the United States. In addition, as of such date, there were 50 licensed stores in Australia and
nine franchised stores in the United States, all of which operate under the Barbeques Galore name.



We derive our revenue primarily from four categories: Australian retail, United States retail (including royalties and sales to
franchisees), Australian licensing (including license fees and sales to licensees) and Australian wholesale. These categories represented 28.1%, 57.1%, 5.9% and 8.9% respectively, of our net sales for the twelve months ended January 31, 2003,
representing a (2.7%), (3.0%), (6.3%) and 6.8% (decrease) increase over their respective net sales levels for the twelve months ended January 31, 2002.



Critical Accounting Policies



In response to the Securities and Exchange Commissions (SEC) Release No. 33-8040, Cautionary Advice Regarding
Disclosure About Critical Accounting Policies, we have identified the critical accounting policies that are most important to the portrayal of our financial condition and results of operations. The policies set forth below require
managements most subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.



Store Closure Costs



We assess the impairment of identifiable long-lived assets whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors we consider important which could trigger an impairment review include the following:



| |  |  | significant underperformance relative to expected historical or projected future operating results;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | significant negative industry or economic trends.
| | - |  | -------------------------------------------------



When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above
indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in our current business model.



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During fiscal
2002, our decision to close seven U.S. stores as referred to on page 20, triggered an impairment review of identifiable net assets in relation to these stores. As a result of this impairment review, leasehold improvements with a net book value of
A$1,018,000 have been written down to nil.



In
addition to these asset write-downs and costs of A$567,000 incurred in relation to the store closures, we raised a further provision of A$622,000 as of January 31, 2002 in relation to stores to be closed during the forthcoming fiscal year. This
provision, pursuant to EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (EITF 94-3) was made in relation to lease buyout costs, future contractual rental
costs to be incurred following closure and prior to sub-lease and, commission expenses related to sub-leasing these stores. In calculating this provision, we made estimates in relation to the period of time it would take to secure a suitable
sub-leasee following closure of the stores and the amount of future expenses that would be incurred. If our assumptions prove to be inaccurate, then the actual amount of cash outflows as a result of the closure of these stores may be in excess of
the amount provided.



During August 2002, one
further U.S. store was identified for closure in fiscal 2004 pursuant to historical underperformance and an additional amount of A$243,000 was provided as of January 31, 2003 in accordance with EITF 94-3. Exit or disposal activities initiated after
December 2002, will be governed by the application of Statement 146 as defined on page 23 which requires a liability to be recorded only when the liability is incurred and can be measured at fair value.



Inventory Reserves



In assessing the adequacy of our reserve for stock
obsolescence, we make assumptions in relation to future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory reserves may be required.



Liquidity



We have historically financed our operations through cash flows from operations and bank borrowings.



All committed facilities are provided subject to
the standard Australian practice of regular annual review of required limits, our performance and the normal terms and conditions, including financial covenants, applicable to bank lending.



The success of our operations depends upon a number of factors
related to consumer spending. These include future economic conditions affecting disposable consumer income such as employment, business conditions, interest rates and taxation. If existing economic conditions were to deteriorate, consumer spending
may decline, thereby adversely affecting our business and results of operations. This could affect the level of cash flows from operations and our ability to meet the financial covenants applicable to our bank lending.



Off Balance Sheet Arrangements



Our off-balance sheet arrangements are limited to the leasing
of plant and equipment and motor vehicles through operating leases. The leases do not expose us to any liabilities not recognized in the balance sheet.



Contractual Cash Commitments



The table below summarizes our contractual cash commitments by payment date:



|                          |  | Total             |         | Less than1 year |   | 1-3 years |  | 4-5 years |        | After 5years
|------------------------- |  | ----------------- | ------- | --------------- | - | --------- |  | --------- | ------ | ------------
|                          |  | (In A$ thousands)
|Operating leases          |  | $                 | 87,241  |                 | $ | 20,647    |  | $         | 32,803 |             
|Capital lease obligations |  |                   | 6,546   |                 |   | 3,115     |  |           | 2,788  |             
|Long term debt            |  |                   | 21,132  |                 |   |          |  |           | 21,132 |             
|                          |  |                   |         |                 |   |           |  |           |        |             
|Total                     |  | $                 | 114,919 |                 | $ | 23,762    |  | $         | 56,723 |             
|                          |  |                   |         |                 |   |           |  |           |        |             



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A.    RESULTS OF OPERATIONS



The following table sets forth for the periods indicated, certain selected statement of operations data as a percentage of net sales:



|                                                                |  | Year Ended Jan. 31, |  
|--------------------------------------------------------------- |  | ------------------- | -
|                                                                |  | 2001                |  
|Statement of Operations Data:                                   |  |                     |  
|Net sales                                                       |  | 100.0               | %
|Cost of goods sold, warehouse, distribution and occupancy costs |  | 68.0                |  
|                                                                |  |                     |  
|Gross profit                                                    |  | 32.0                |  
|Selling, general and administrative expenses                    |  | 28.7                |  
|Store pre-opening costs                                         |  | 0.2                 |  
|Relocation and closure costs (gains)                            |  |                    |  
|                                                                |  |                     |  
|Operating income (loss)                                         |  | 3.1                 |  
|Equity in income of affiliates, net of tax                      |  | 0.1                 |  
|Interest expense                                                |  | 1.0                 |  
|                                                                |  |                     |  
|Income (loss) before income tax                                 |  | 2.2                 |  
|Income tax expense (benefit)                                    |  | 0.7                 |  
|                                                                |  |                     |  
|Net income (loss)                                               |  | 1.5                 | %
|                                                                |  |                     |  



There
has been no material impact of inflation and changing prices on our net sales and operating income for each of the twelve months ended January 31, 2001, 2002 and 2003, respectively.



Twelve Months Ended January 31, 2003 Compared to Twelve Months Ended January 31, 2002



Net sales decreased by approximately A$7.7 million, or 2.3%,
to A$325.6 million for the fiscal year ended January 31, 2003 from A$333.3 million for the fiscal year ended January 31, 2002. In Australia, net sales decreased by approximately A$2.1 million, largely due to lagging consumer confidence, particularly
in the fourth quarter which is seasonally the countrys strongest retail period covering the Christmas holidays, closure of our Chatswood store (pursuant to expropriation of the leasehold property by the State Rail Authority) and the on-going
planned scaled-down camping offering progressively being replaced with backyard speciality items and a broader range of outdoor furniture. In the United States, net sales increased by approximately US$3.5 million as the U.S. retail market began to
experience a slight recovery from the previous year. Comparable store sales increased 1.9% in the United States and 0.3% in Australia. As a result of the material appreciation of the A$ against the US$, comparative store sales decreased by A$7.7
million on a group basis when expressed in A$ terms, in addition to reductions of A$0.5 million in sales from stores not forming part of the comparative store sales and A$1.3 million in sales to Australian licensees. This was partially offset by an
increase of A$1.8 million in Australian wholesale sales. In the United States, no new company-owned stores were opened and three were closed during the twelve months ended January 31, 2003. In Australia, one new company store and one licensed store
were opened, one licensed store was closed, one company-store was closed pursuant to expropriation by the State Rail Authority, of the leasehold property which it occupied and a wood heater outlet in Tasmania was closed and incorporated into our
store in Hobart. The refurbishment of certain stores to merchandize the new backyard products, has continued.



Reported gross profit decreased approximately A$2.8 million, or 2.9%, to A$95.1 million for the fiscal year ended January 31, 2003 from
A$97.9 million for the fiscal year ended January 31, 2002. Gross profit percentage decreased to 29.2% during the fiscal year ended January 31, 2003 from 29.4% during the comparable period in 2002. The decrease in gross profit percentage was
attributable in the main, to the United States, with demand shifting to lower-margin items, on-going promotional and clearance sales and costs associated with the relocation



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of our warehousing operations from Irvine to Ontario. In Australia the cost of imported product decreased pursuant to the appreciation of the
A$ against the US$ and improved margins were achieved, particularly in the barbecue and furniture product categories.



Selling, general and administrative expenses (which exclude store pre-opening expenses), decreased approximately A$7.3 million, or 7.5%,
to A$89.7 million for the fiscal year ended January 31, 2003 from A$97.0 million for the fiscal year ended January 31, 2002. As a percentage of net sales, selling, general and administrative expenses decreased to 27.5% during the fiscal year ended
January 31, 2003 from 29.1% during the comparable period in 2002. This percentage decrease was primarily due to the impact of the cost reduction program both in the United States and Australia, a reduction in U.S.A. advertising and corporate cost
expenditure and the closure of three U.S. stores identified for closure in fiscal 2003, pursuant to historic underperformance.



Store pre-opening expenses increased approximately A$2,000 to A$139,000 for the fiscal year ended January 31, 2003 from A$137,000 for the
comparable period, with no new stores opened in the United States and the opening of one new company-store in Australia.



Relocation and closure costs (gains) increased approximately A$5.8 million to (A$3.6) million for the fiscal year ended January 31, 2003
from A$2.2 million for the fiscal year ended January 31, 2002, due in the main, to compensation of A$4.1 million received from the State Rail Authority in relation to the expropriation of leasehold property occupied by the Chatswood, Australia store
and a reduction of A$1.7 million in closure costs. One further U.S. store has been identified for closure in fiscal 2004 pursuant to historical underperformance, whilst two stores previously identified for closure during fiscal 2003 for similar
reasons, are still to be closed.



Operating
income increased by A$10.8 million to A$8.8 million for the fiscal year ended January 31, 2003 from an operating (loss) of A$(1.5) million for the fiscal year ended January 31, 2002.



Income from affiliates increased by A$167,000 to A$462,000 for the fiscal year ended January 31, 2003 from
A$295,000 for the fiscal year ended January 31, 2002 due to an increase in the profitability of Bromic, the inclusion of income from Renegade Gas Pty Limited (Renegade) for the first time and a reduction in income from GLG pursuant to
its cessation as a buying office on December 31, 2001.



Interest expense decreased by A$0.5 million to A$2.3 million for the fiscal year ended January 31, 2003 from A$2.8 million for the fiscal year ended January 31, 2002 due to lower interest rates and a reduction in long-term debt.



Our effective tax rate was 35.8% for the fiscal
year ended January 31, 2003 as a result of an Australian tax rate of 30%, the exclusion from Australian taxation of equity in income of affiliates, a A$0.4 million write-down in deferred tax assets to reflect recoverable amount and the taxing of
U.S.A. losses at a rate of 36%. During the comparable period in 2002, our effective tax rate was 35.7% (benefit) as a result of an Australian tax rate of 30% and the taxing of U.S.A. losses at a rate of 36%.



Twelve Months Ended January 31, 2002 Compared to Twelve Months Ended
January 31, 2001



Net sales increased by
approximately A$28.8 million, or 9.5%, to A$333.3 million for the fiscal year ended January 31, 2002 from A$304.5 million for the fiscal year ended January 31, 2001. In the United States, we opened four new company-owned stores and closed two
company-owned and two franchised stores during the twelve months ended January 31, 2002. In Australia, two licensed stores were opened and one company-store and one licensed store closed. Comparable store sales decreased 2.6% in the United States
and 0.2% in Australia due to difficult economic conditions and low consumer confidence in both the United States and Australia. As a result of the material depreciation of the A$ against the US$, comparative store sales increased on a group basis
when expressed in A$ terms and contributed A$11.2 million to the increase in net sales. Increased sales of A$16.5 million also resulted from stores not forming part of the comparative store sales, including four new



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stores which opened in the United States in the previous twelve months. The balance of the increased sales was primarily attributable to a
A$2.0 million increase in sales to Australian licensees and a A$0.9 million decrease in Australian wholesale sales.



Reported gross profit increased approximately A$0.6 million, or 0.6% to A$97.9 million for the fiscal year ended January 31, 2002 from
A$97.3 million for the fiscal year ended January 31, 2001. Gross profit percentage decreased to 29.4% during the fiscal year ended January 31, 2002 from 32.0% during the comparable period in 2001. The decrease in gross profit percentage was mainly
attributable to both the United States and Australian operations feeling the impact of the economic environment as consumer confidence remained low and demand shifted down to lower-priced ticket items.



In Australia the cost of imported product increased pursuant
to the depreciation of the A$ against the US$ whilst sales programs were initiated to clear slow moving lines in the camping and furniture ranges. Margins were further impacted by the aforementioned shift towards low-end barbecues which
have lower margins.



In the United States,
margins were adversely impacted by a shift towards certain stainless steel products that have lower margins and the effect of aggressive promotional discounts. This in turn was partially offset by a decrease in the cost of imported product into the
USA resulting from a favorable exchange rate for the USA operation.



Selling, general and administrative expenses (which exclude store pre-opening expenses) increased approximately A$9.6 million, or 11.0%, to A$97.0 million for the fiscal year ended January 31, 2002 from A$87.4 million for
the fiscal year ended January 31, 2001. As a percentage of net sales, selling, general and administrative expenses increased to 29.1% during the fiscal year ended January 31, 2002 from 28.7% during the comparable period in 2001. This percentage
increase was primarily due to the opening of new stores and a lower leverage off a weaker sales base in the USA.



Store pre-opening expenses decreased by A$502,000 to A$137,000 for the fiscal year ended January 31, 2002 from A$639,000 for the
comparable period, due to the number and timing of United States store openings.



Closure costs increased by A$2,207,000 for the fiscal year ended January 31, 2002 from A$ nil for the comparable period and is all attributable to the closure of seven U.S. stores, two of which were
closed during the 2002 fiscal year, one during February 2002 and a further four that were due for closure prior to January 2003. These stores were identified as requiring closure as a result of historic underperformance. Closure costs of A$1.2
million were incurred comprising A$611,000 in relation to the write down of leasehold improvements, A$194,000 in relation to lease buy-out costs, A$248,000 in relation to future contractual lease costs to be incurred following closure and prior to
sub-lease and, A$125,000 in relation to commission expenses associated with sub-leasing.



In addition, costs amounting to A$1.0 million were provided for as of January 31, 2002 comprising the following:



| |  |  | write-down of leasehold improvements totaling A$407,000;
| | - |  | --------------------------------------------------------



| |  |  | lease buyout costs of A$291,000;
| | - |  | --------------------------------



| |  |  | A$186,000 set aside to cover contractual rental costs to be incurred following closure of the stores and prior to sub-lease; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | A$145,000 in commission expenses relating to the sub-leasing of these stores.
| | - |  | -----------------------------------------------------------------------------



Operating (loss) increased by (A$10.8) million to (A$1.5) million for the fiscal year ended January 31, 2002
from an operating income of A$9.3 million for the fiscal year ended January 31, 2001.



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Income from
affiliates decreased by A$45,000 to A$295,000 for the fiscal year ended January 31, 2002 from A$340,000 for the fiscal year ended January 31, 2001 due to a decrease in the profitability of GLG until December 31, 2001. This was partially offset by an
increase in the profitability of Bromic.



Interest expense decreased by A$0.1 million to A$2.8 million for the fiscal year ended January 31, 2002 from A$2.9 million for the fiscal year ended January 31, 2001.



Our effective tax rate was 35.7% (benefit) for the fiscal year ended January 31, 2002 and 33.2% expense
during the comparable period as a result of using a linear rate for the fiscal year ended January 31, 2002, the decrease in the Australian tax rate for this year from 34% to 30% and the taxing of USA losses at a rate of 34%.



QUARTERLY RESULTS



Unaudited Quarterly Results and Seasonality



Our quarterly results of operations have fluctuated, and are
expected to continue to fluctuate materially, primarily because of the seasonality associated with the barbecue and fireplace industries and related item sales. The timing of new store openings and related pre-opening and other startup expenses, net
sales contributed by new stores, increases or decreases in comparable store sales, changes in our merchandise mix and overall economic conditions also contribute to fluctuations in our quarterly results. We believe this is the general pattern
associated with our segment of the retail industry and expect this pattern will continue in the future. In order to partially offset the effects of seasonality, we operate in both the Southern and Northern hemispheres which have opposite seasons,
and offer fireplace products and (in Australia) home heaters in the fall and winter months. In anticipation of our peak selling season, we substantially increase our inventory levels and hire a significant number of part-time and temporary
employees. In non-peak periods, such as late winter and early fall, we have regularly experienced monthly losses. Because of these fluctuations in operating results, the results of operations in any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year or any future quarter. See Item 3. Key InformationD. Risk Factors.



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Unaudited Additional
Quarterly Consolidated Financial Data



The
following table sets forth, for the periods indicated, certain selected statement of operations and operating data for each of our last eight fiscal quarters. The quarterly statement of operations data and selected operating data set forth below
were derived from our unaudited financial statements, which in our opinion contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof:



|                                                                |  | Quarter Ended                            |       
|--------------------------------------------------------------- |  | ---------------------------------------- | ------
|                                                                |  | Apr. 30,2001                             |       
|                                                                |  | (In A$ thousands, except per share data) |       
|Statement of Operations Data:                                   |  |                                          |       
|Net sales                                                       |  | $                                        | 63,029
|Cost of goods sold, warehouse, distribution and occupancy costs |  |                                          | 44,506
|                                                                |  |                                          |       
|Gross profit                                                    |  |                                          | 18,523
|Selling, general and administrative expenses                    |  |                                          | 22,641
|Store pre-opening costs                                         |  |                                          | 51    
|Relocation and closure costs (gains)                            |  |                                          |      
|                                                                |  |                                          |       
|Operating (loss) income                                         |  |                                          | (4,169
|Equity in (loss) income of affiliates, net of tax               |  |                                          | (7    
|Interest expense                                                |  |                                          | 734   
|                                                                |  |                                          |       
|(Loss) income before income tax                                 |  |                                          | (4,910
|Income tax (benefit) expense                                    |  |                                          | (1,437
|                                                                |  |                                          |       
|Net (loss) income                                               |  |                                          | (3,473
|Other comprehensive income (loss)                               |  |                                          | 2,323 
|                                                                |  |                                          |       
|Net income (loss) after other comprehensive income (loss)       |  | $                                        | (1,150
|                                                                |  |                                          |       
|(Loss) earnings per share:                                      |  |                                          |       
|Basic                                                           |  | $                                        | (0.78 
|                                                                |  |                                          |       
|Diluted                                                         |  | $                                        | (0.78 
|                                                                |  |                                          |       
|Weighted average shares outstanding:                            |  |                                          |       
|Basic                                                           |  |                                          | 4,435 
|                                                                |  |                                          |       
|Diluted                                                         |  |                                          | 4,435 
|                                                                |  |                                          |       



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Foreign Exchange
Fluctuations



See Item 3. Key
InformationA. Selected Financial DataExchange Rates and D. Risk Factors.



Governmental Regulation



See Item 4. Information on our CompanyB. Business OverviewGovernmental Regulation.



B.    LIQUIDITY AND CAPITAL RESOURCES



We have historically financed our operations through cash flow from operations and bank borrowings. We have
access to a facility with ANZ (the ANZ Facility) up to A$55.8 million comprising real property loans in principal amount of A$8.5 million (secured by registered first mortgages over our respective freehold properties), overdraft,
leasing, interchangeable and commercial bill acceptance discount facilities in principal amount of A$39.6 million and foreign currency and other facilities in principal amount of A$7.7 million. As of January 31, 2003 we had not utilized A$29.7
million of the total facility. The ANZ Facility is secured by a first security interest over our present and future Australian assets and a second security interest (subordinate to a lien under the Merrill Lynch Facility as defined below) in all our
assets in the United States. The ANZ Facility is further guaranteed by each of our subsidiaries, including The Galore Group (USA), Inc. and Barbeques Galore, Inc. (referred to collectively as Galore USA).



All committed facilities are provided subject to the standard
Australian practice of regular annual review of required limits, our performance and the normal terms and conditions, including financial covenants, applicable to bank lending. Historically, we have renegotiated our credit facilities on similar
terms and conditions and, as we are able to roll-over bank bills (generally taken out for periods varying from approximately 30 to 90 days), the outstanding balance relating to bank bills and property loans is classified as a non-current liability.



Barbeques Galore Inc., our U.S. operating
subsidiary, has access to a credit facility with Merrill Lynch Business Financial Services, Inc., (Merrill Lynch). As currently in effect, such facility comprises a revolving line of credit in aggregate principal amount of US$1.0 million
(the Merrill Lynch Facility). Indebtedness under the revolving line of credit accrues interest at the 30-day commercial paper rate plus 2.70% and is payable monthly. The Merrill Lynch Facility is secured by a first security interest in
all Galore USA present and future assets and is guaranteed by us and The Galore Group (USA), Inc., the parent of Barbeques Galore, Inc. As at January 31, 2003, there were no drawings against this facility.



Our total long-term debt matures as follows:



|Year ending January 31, |  | (In A$ thousands)
|----------------------- |  | -----------------
|2004                    |  | $                
|2005                    |  |                  
|                        |  |                  
|                        |  | $                
|                        |  |                  



For the
fiscal years ended January 31, 2003, 2002 and 2001, cash flows provided by (used in) operating activities were A$11.1 million, A$14.2 million and A$(0.1) million, respectively. The cash flows provided by operating activities reflect the decrease in
receivables and prepaid expenses offset by the decrease in accounts payable and accrued liabilities.



Net cash flows used in investing activities for the fiscal years ended January 31, 2003, 2002 and 2001 were A$3.7 million A$4.1 million
and A$7.1 million, respectively. In Australia, cash flows used in investing activities resulted primarily from capital expenditures related to factory tooling and the commencement of refurbishment of certain Australian stores to merchandize the new
backyard products. In the United States, cash flows used in



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investing activities resulted primarily from capital expenditures related to the relocation of the distribution center to Ontario, California
and the U.S. headquarters to Lake Forest, California and the remodeling of two stores. Our approach for expansion in the USA remains cautious and at the present time, we do not anticipate opening any new stores. In Australia, two new store openings
have been scheduled in existing markets.



The
cash flows used in operations and investing activities have been largely sourced from long term borrowings under the ANZ and Merrill Lynch Facilities.



At January 31, 2003 we had working capital of A$44.6 million, maintained minimal amounts in cash and cash equivalents, amounting to
A$38,000, all of which were held in Australian currency and relied instead on undrawn facilities under our borrowing arrangements with ANZ and Merrill Lynch.



We believe the ANZ and Merrill Lynch Facilities are sufficient to meet our presently anticipated working capital and capital expenditure
requirements for at least the next twelve months.



There are no legal or economic restrictions on the ability of our USA subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. We are subject to restrictions on the declaration or payment of dividends
under the ANZ Facility as well as the Merrill Lynch Facility as defined above.



C.    RESEARCH AND DEVELOPMENT



See Item 4. Information on our CompanyB. Business OverviewManufacturing.



D.    TREND INFORMATION



This information has been disclosed elsewhere throughout this Annual Report.



E.    RECENT ACCOUNTING PRONOUNCEMENTS



In June 2001, the Financial Accounting Standards Board
(FASB) issued Statement No. 141, Business Combinations (Statement 141) and Statement No. 142, Goodwill and Intangible Assets (Statement 142). Statement 141 requires that the purchase method of
accounting be used for all business combinations completed after June 30, 2001 and also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill and those acquired intangible assets
that are required to be included in goodwill. Statement 142 requires that goodwill no longer be amortized, but instead tested for impairment at least annually and that recognized intangible assets be amortized over their respective estimated useful
lives and reviewed for impairment in accordance with Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144). Any recognized intangible asset determined to have an indefinite useful life
will not be amortized, but instead tested for impairment in accordance with Statement 142 until its life is determined to no longer be indefinite.



The provisions of Statement 141 are applicable to all business combinations accounted for by the purchase method for which the date of
acquisition is July 1, 2001 or later. We adopted the provisions of Statement 142 on February 1, 2002 with retroactive application of Statements 141 and 142 not being permitted. Any goodwill and/or intangible asset, however, determined to have an
indefinite useful life, acquired in a business combination completed after June 30, 2001 will not be amortized. Effective February 1, 2002, we no longer amortize goodwill and, having evaluated the impact of Statement 141, believe there will be no
material impact on our results of operations, financial position or liquidity.



As a result of ceasing to amortize goodwill, we estimated that operating income would increase by approximately A$86,000 during the year ended January 31, 2003. Statement 142 provides for a six-month
transitional period from the effective date of adoption to perform an assessment as to whether there is an



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indication that goodwill is impaired. To the extent that an indication of impairment exists, a second test must be performed to measure the
amount of such impairment with the second test to be performed as soon as possible, but no later than the end of the fiscal year. Any impairment measured as of the date of adoption will be recognized as the cumulative effect of a change in
accounting policy. Having made such an assessment, we believe there has been no impairment of goodwill.



In June 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations(Statement 143). Statement
143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs and applies to legal obligations associated with the retirement of long-lived
assets and/or the normal operation of a long-lived asset. Under Statement 143, the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.
The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognized using the credit-adjusted risk-free interest rate in effect when the
liability was initially recognized. Statement 143 will be effective for us as of February 1, 2003 and having evaluated the impact of Statement 143, we believe there will be no material impact on our results of operations, financial position or
liquidity.



In August 2001, the FASB issued
Statement 144, which addresses financial accounting and reporting for the impairment of long-lived assets and which will supersede Statement 121 with respect to the accounting for the impairment or disposal of long-lived assets and Accounting
Principles Board Opinion No. 30 (Opinion 30) for the disposal of a segment of a business. Statements 144 retains the requirements of Statement 121 to:



| | (a) |  | recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows; and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | measure an impairment loss as the difference between the carrying amount and fair value of the asset.
| | --- |  | -----------------------------------------------------------------------------------------------------



Statement 144 also requires that a long-lived asset to be
abandoned, exchanged for a similar productive asset, or distributed to owners in a spin-off be considered held and used until the asset is disposed of. Statement 144 retains the basic provisions for Opinion 30 for the presentation of discontinued
operations in the income statement but broadens that presentation to include a component of an entity rather than a segment of a business. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally
and for financial reporting purposes, from the rest of the entity. A component of an entity that is classified as held for sale or that has been disposed of, is presented as a discontinued operations if the operations and cash flows of the component
will be (or have been) eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations of the component. In addition, discontinued operations are no longer measured on a net
realizable value basis and future operating losses are no longer recognized before they occur.



Statement 144 was effective for us as of February 1, 2002 and, having evaluated the impact of Statement 144, we believe there will be no material impact on our results of operations, financial position
or liquidity.



In April 2002 the FASB issued
Statement No. 145, Rescission of FASB Statements 4, 44 and 64, Amendment of FASB Statement 13, and Technical Corrections (Statement 145). As a result of the rescission of SFAS No. 4, a loss on extinguishments of debt
will no longer be presented as an extraordinary item upon the adoption of Statement 145, which is effective for us in the fiscal year beginning February 1, 2003.



In July 2002 the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (Statement 146) which is based on the general principle that a liability for a cost associated with an exit or disposal activity should be recorded when it is incurred and initially measured at fair value.
Statement 146 applies to costs associated with:



| | (a) |  | an exit activity that does not involve an entity newly acquired in a business combination; or
| | --- |  | ---------------------------------------------------------------------------------------------



| | (b) |  | a disposal activity within the scope of Statement 144.
| | --- |  | ------------------------------------------------------



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These costs
include certain termination benefits, costs to terminate a contract that is not a capital lease, and other associated costs to consolidate facilities or relocate employees. Because the provisions of this statement are to be applied prospectively to
exit or disposal activities initiated after December 31, 2002, the effect of adopting this statement cannot be determined.



In November 2002 the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, (FIN 45) which addresses the disclosures to be made by a guarantor in its annual financial statements in connection with its obligations under guarantees. FIN 45 also
requires the recognition of a liability by a guarantor at the inception of certain guarantees that are entered into or modified after December 31, 2002.



We have adopted the disclosure requirements of FIN 45 and will apply the recognition and measurement provisions for all material
guarantees entered into or modified in periods beginning January 1, 2003. The impact of FIN 45 on our future consolidated financial statements will depend upon whether we enter into, or modify, any material guarantee arrangements.



In December 2002 the FASB issued Statement No. 148,
Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, (Statement
123) to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require
prominent disclosure in annual financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.



ITEM 6.    
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



A.    DIRECTORS AND SENIOR MANAGEMENT



Our directors, senior management and key employees are as follows:



|Name                            |  | Age |  | Position                                                                                               
|------------------------------- |  | --- |  | -------------------------------------------------------------------------------------------------------
|Directors and Senior Management |  |     |  |                                                                                                        
|Sam Linz                        |  | 63  |  | Chairman of the Board                                                                                  
|Robert Gavshon                  |  | 55  |  | Deputy Chairman of the Board and General Counsel                                                       
|John Price                      |  | 52  |  | Head of Product Management and Development and Director                                                
|Sydney Selati                   |  | 64  |  | PresidentGalore USA and Director                                                                      
|Edgar Berner(1)(2)              |  | 71  |  | Director                                                                                               
|Martin Bloom(1)                 |  | 62  |  | Director                                                                                               
|Gordon Howlett(1)(2)            |  | 61  |  | Director                                                                                               
|David Glaser                    |  | 54  |  | Company Secretary                                                                                      
|David James                     |  | 42  |  | Chief Financial Officer                                                                                
|Kevin Ralphs                    |  | 49  |  | Chief Financial OfficerGalore USA                                                                     
|                               
|Key EmployeesAustralia         |  |     |  |                                                                                                        
|Monique Collister               |  | 55  |  | Group Organizational Development Manager                                                               
|Gary Heading                    |  | 52  |  | General Manager of Retail/LicenseesBarbeques Galore (Aust) Pty Limited                                
|Steve Katsilis                  |  | 37  |  | Group Information Technology Manager                                                                   
|Kevin Meltzer                   |  | 40  |  | General Manager of ManufacturingPark-Tec Engineering Pty Limited and Australian Enamellers Pty
Limited
|Ian Redmile                     |  | 51  |  | General ManagerPricotech Leisure Brands Pty Limited                                                   
|Gary Whitehouse                 |  | 53  |  | General ManagerLogistics                                                                              
|                               
|Key EmployeesUnited States     |  |     |  |                                                                                                        
|Todd Budde                      |  | 38  |  | Business Process and Information Systems Manager                                                       
|Benjamin Ramsey                 |  | 48  |  | Executive Vice PresidentGalore USA                                                                    
|Michael Varley                  |  | 56  |  | Vice President of Product Development                                                                  

---

|(1) |  | Member of the Audit Committee
|--- |  | -----------------------------

|(2) |  | Member of the Compensation Committee
|--- |  | ------------------------------------



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Sam Linzhas served as Chairman of the Board since joining us in May 1982. Until July 1997, Mr. Linz served as non-executive Chairman of the Board of Rebel Sport Limited (Rebel), a leading national sports superstore chain in Australia. Mr.
Linz was one of the founders of Rebel and a major shareholder until he sold his interest in July 1997. Prior to joining us, Mr. Linz developed and managed a large chain of liquor stores and hotels in South Africa in association with Mr. Selati. Mr.
Linz has over 36 years of experience in the retail industry.



Robert Gavshon joined us in January 1983 as General Counsel and has also served as Deputy Chairman of the Board since August 1993. Until July 1997, Mr. Gavshon served as a non-executive Director of Rebel. Mr. Gavshon was one
of the founders of Rebel and a shareholder until he sold his interest in July 1997. Prior to joining us, Mr. Gavshon acted as group counsel and director of corporate affairs for a multinational corporation based in Sydney, Australia and prior
thereto as a partner in a large commercial law firm in South Africa. Mr. Gavshon has over 21 years of experience in the retail industry. Mr. Gavshon resigned as a member of the Audit Committee on August 22, 2002, pursuant to the provisions of the
recently enacted Sarbanes-Oxley Act of 2002 and related regulations which made it mandatory for membership of this Committee to be comprised solely of independent directors as defined by such Act and regulations.



John Price joined us in 1981 as General Manager of
Wholesale and has served as Head of Product Management and Development since June 1989 and as a Director since November 1989. Prior to joining us, Mr. Price helped found and was Managing Director of, Cook-On-Gas Products Pty Limited, a developer and
manufacturer of consumer gas products which we acquired in 1981. Mr. Price has over 30 years of experience in the development and marketing of consumer gas products.



Sydney Selatihas served as a Director since July 1997 and President of Galore USA since May 1988.
From 1984 until 1988, Mr. Selati was President of Sussex Group Limited, a chain of retail furniture stores including Huffman-Koos, Colbys and Barker Brothers. Prior to that, Mr. Selati developed and managed a large chain of liquor stores and
hotels in South Africa in association with Mr. Linz. Mr. Selati has over 36 years of experience in the retail industry.



Edgar Bernerwas appointed as a non-executive Director on September 1, 1998. Mr. Berner is a private investor and consultant to
emerging companies. He is presently Vice President and on the Board of Directors of RealAge, Inc., a privately held internet health information company and also serves on the Board of Directors of Hot Topic, Inc., (NASDAQ), a teen-oriented retail
chain of stores and Garden Fresh, Inc., (NASDAQ), a national soup and salad buffet restaurant chain.



Martin Bloomwas appointed as a non-executive Director and member of the Audit Committee on November 19, 2002. He is a Chartered
Accountant (equivalent to a CPA) and has been a partner in two substantial accounting firms, Grant Thornton Kessel Feinstein, in South Africa, from 1964 to 1972 and Horwath Sydney, in Australia, from 1974 to date. Mr. Bloom acted as Managing
Director of Horwath Australia Limited and served for a number of years on the Council of Horwath International. His experience lies in the areas of auditing, corporate finance and litigation support. Mr. Bloom is also a member of the Disciplinary
Committee of the Institute of Chartered Accountants and has served on a number of other high-ranking professional accounting committees.



Gordon Howletthas served as a non-executive Director since August 1991 and as Chairman of our Audit Committee since November 1991.
Mr. Howlett is the Chief Executive Officer of Thorn Asia Pacific, Chairman of Kennards Hire Pty Limited and a non-executive Director of Arthur Yates Limited. Mr. Howletts previous business experience was as Executive General
ManagerOperations Qantas Airways from 1994 to 1997 and Managing Director of Avis Australia and Vice President of Avis throughout Asia Pacific, from 1981 to 1994.



David Glaserhas served as Company Secretary since March 1994. Mr. Glaser was the financial
administrator to certain of our subsidiaries from July 1989 to January 1996 and has also provided management accounting services for our retail subsidiary from February 1996 to April 1998. Mr. Glaser has extensive commercial experience in retail,
manufacturing and service industries, both locally and overseas.



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David Jamesjoined us in January 1992, serving in several group financial roles and ultimately as General ManagerFinance & Administration until his departure in September 1996. From September 1996 to July 1997, Mr. James was employed as Finance
Director by HMV Australia Pty Limited, a subsidiary of EMI plc.. He rejoined us in July 1997 as Chief Financial Officer. Prior to 1992, Mr. James served as a Senior Audit Manager for KPMG in Australia.



Kevin Ralphshas served as Chief Financial Officer of
Galore USA since February 1989. From May 1988 to February 1989, Mr. Ralphs served as Controller of Galore USA. Mr. Ralphs has also served as controller for American Digital Products, Inc., a distributor of computer peripherals in the Northeast
United States, treasurer for Hosken Intermediaries, Inc., a reinsurance brokerage firm, and financial manager for Royal Beech-Nut (Pty) Limited, a foreign subsidiary of Nabisco.



Monique Collisterjoined us in April 1997 as the Training and Development Manager for the Retail
Division. Since March 1999, Ms. Collister has served as the Group Organizational Development Manager for both the USA and Australian operations and has a mandate to ensure the development of employees at all levels of the organization. Ms. Collister
emigrated to Australia in 1996 and, prior to joining us, served as a Training and Development Specialist for Honeywell Australasia. Ms. Collister has had extensive overseas experience in personnel training with Walmart Canada, Pitney Bowes and
Kinney Canada.



Gary Headingjoined us in
1983 and served as National Operations Manager of Retail/Licensees since 1996 before his appointment in May 1999, to the position of General Manager of Retail/Licensees for Barbeques Galore (Aust) Pty Limited.



Steve Katsilisjoined us in 1985 where he initially
worked at our Kogarah store in Australia. In 1989 he was appointed store manager of our Silverwater store and the following year, moved to head office as Stock Control Manager prior to his appointment in 1993, as Information Technology Manager and
in 2002, as Group Information Technology Manager.



Kevin Meltzerjoined us in May 1999 and served as Operations Manager at Park-Tec Engineering Pty Limited and Australian Enamellers Pty Limited until September 2000 when he was appointed to the position of General Manager,
Manufacturing. Prior to joining us, Mr Meltzer worked at Cape Gate Fence and Wire Works Pty Limited in South Africa, from 1989 to 1999, as Industrial Engineer, Production Planner, Sales and Export Manager and Production Manager.



Ian Redmilejoined us in August 1992 as a State Manager
for an Australian state and has served as General Manager of Pricotech, our wholesaling subsidiary, since February 1997. Prior to joining us, Mr. Redmile served as Key Account/Sales Manager for Unilever Australia for 12 years.



Gary Whitehousejoined us in May 1990 as National
Warehouse Manager and has served as General Manager of Logistics since July 1996. Prior to joining us, Mr. Whitehouse served as Financial Systems Accountant for Qantas Airways. Prior to that, Mr. Whitehouse held managerial positions, including
commercial manager, state branch manager and warehousing/distribution manager.



Todd Buddejoined us in January 1998 as Business Process and Information Systems Manager. Prior to joining us, Mr. Budde served as Information Systems Manager with The Toro Company which has
more than 4,700 employees world-wide and is a leading provider of outdoor maintenance and beautification products for home, recreation and commercial landscapes. Mr. Budde also has over 15 years of experience in various Information System Management
roles with Toshiba America, Medtronic and Western Dental and Proton.



Benjamin Ramseyjoined us in March 1993 and held several management positions within Galore USA until August 1999 when he was appointed Executive Vice President. Mr Ramsey previously spent ten years associated with
7-Eleven Food Stores/Southland Corporation in managerial positions and was subsequently a franchise holder for a further four years.



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Michael
Varleyjoined us in January 1982 and served in a variety of sales- and buying-related positions, until May 1989 when he was appointed Vice President of Operations and Purchasing. Mr. Varley has served as Vice President of Purchasing,
Distribution and Product Development since May 1994. From 1978 to 1981, Mr. Varley served as manufacturing/production manager for Mistral Fans, Inc., a manufacturing company, in both the United States and Australia. Prior to that, Mr. Varley worked
as a product engineer and technical salesperson for several companies in the United Kingdom, South Africa and Australia.



B.    COMPENSATION



The aggregate annual compensation, including bonuses under the incentive program described below, paid by us to all our directors and
senior management as a group for services for the fiscal year ended January 31, 2003 (10 persons) was A$2,154,427. However, this aggregate compensation amount does not include any stock options granted to such individuals as more fully described
below in the section titled Item 6. Directors and Senior ManagementE. Share Ownership for Directors and Senior ManagementOptions to Purchase Securities from Registrant or Subsidiaries.



The total amount set aside by us and our subsidiaries to
provide pension benefits for directors and senior management for the fiscal year ended January 31, 2003 was A$198,936.



On February 1, 2002, we continued with an incentive program whereby certain executives would receive a bonus if certain budget objectives
were attained during fiscal year 2003. Under this program, Mr. Linz, Mr. Gavshon, Mr. Price, and Mr. James would each receive a bonus of 20% and Mr. Selati, Mr. Redmile and Mr. Whitehouse would each receive a bonus of 10%, of their respective base
salaries, if we achieved our budgeted pre-tax profit before trading contingencies for the fiscal year 2003. Mr. Selati, Mr. Redmile, Mr. Meltzer and Mr. Nicola would each receive an additional bonus of 10% of his respective base salary if his
division achieved its budgeted operating contribution, regardless of whether or not our budget was achieved. Additionally, Mr. Whitehouse would receive a bonus of 10% of his base salary if our inventory level budget for the fiscal year 2003 was
attained.



C.    BOARD PRACTICES



At least one-third of our Board of
Directors is elected at each annual meeting of shareholders. No director may serve for a period in excess of three years without submitting himself for re-election. Furthermore, our directors do not have contracts that provide for benefits upon
termination of their services with us. The Board of Directors has a Compensation Committee comprised of Messrs. Berner and Howlett that reviews and makes recommendations for remuneration packages for executive directors and senior executives, and an
Audit Committee presently comprised of Messrs. Howlett (Chairman), Berner and Bloom that advises on the establishment and maintenance of internal controls and ethical standards, the quality and reliability of financial information and information
provided by our independent auditors. Mr. Gavshon resigned as a member of the Audit Committee on August 22, 2002, pursuant to the provisions of the recently enacted Sarbanes-Oxley Act of 2002 and related regulations which made it mandatory for
membership of this Committee to be comprised solely of independent directors as defined by such Act and regulations. Mr. Bloom, who was appointed to the Board on November 19, 2002, was appointed in his stead.



The terms of our directors expire as of our annual meetings of
shareholders to be held in the years indicated below:



|Sam Linz       |  | 2005
|-------------- |  | ----
|Robert Gavshon |  | 2006
|John Price     |  | 2004
|Sydney Selati  |  | 2003
|Edgar Berner   |  | 2005
|Martin Bloom   |  | 2003
|Gordon Howlett |  | 2004



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On November
28, 1991, the Board of Directors adopted an Audit Committee Charter to govern the conduct and set forth the responsibilities of the Audit Committee. It was amended on March 25, 2003 to comply with recent changes in the United States securities laws
and anticipated changes in Nasdaq listing requirements. We are filing the amended Audit Committee Charter as Exhibit 99.3 to this Annual Report.



D.    EMPLOYEES



As of January 31, 2003, we employed a total of 1,202 persons, on a permanent, part-time or temporary basis of whom 756 were employed in
Australia and 446 in the United States. The number of temporary employees fluctuates depending on seasonal needs. Some of our employees at Park-Tec Engineering Pty Limited have become members of the Australian Metal Workers Union with whom we have
entered into an Enterprise Bargaining Agreement. We consider our relations with employees to be good and believe that our employee turnover rate is low.



E.    SHARE OWNERSHIP FOR DIRECTORS AND SENIOR MANAGEMENT



The following table provides certain information with respect to the beneficial ownership of our Ordinary
Shares, including Ordinary Shares held directly or in the form of ADSs as of April 29, 2003, based on an aggregate of 4,116,652 Ordinary Shares outstanding as of such date, for each of our directors and all of our directors and senior management as
a group as of such date.



|                                                            |  | Ordinary Shares (1), (2)Beneficially Owned | 
|----------------------------------------------------------- |  | ------------------------------------------ | 
|                                                            |  | Number                                     | 
|Sam Linz(3)                                                 |  | 1,263,382                                  | 
|Robert Gavshon                                              |  | 410,794                                    | 
|Sydney Selati                                               |  | 192,633                                    | 
|John Price                                                  |  | 81,940                                     | 
|Edgar Berner(4)                                             |  | *                                          | 
|Martin Bloom(4)                                             |  | *                                          | 
|Gordon Howlett(4)                                           |  | *                                          | 
|David Glaser(4)                                             |  | *                                          | 
|David James(4)                                              |  | *                                          | 
|Kevin Ralphs(4)                                             |  | *                                          | 
|All directors and senior management as a group (10 persons) |  | 1,998,862                                  | 

---

|* |  | Less than 1% of our outstanding shares.
|- |  | ---------------------------------------

|(1) |  | The number of Ordinary Shares listed in this table includes Ordinary Shares held directly or in the form of ADSs.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | Applicable percentage of ownership for each shareholder is based on 4,116,652 Ordinary Shares outstanding as of April 29, 2003, together with applicable options for
such shareholders but excludes 153,091 Ordinary Shares issuable upon the exercise of stock options granted under the 1997 Share Option Plan (the 1997 Plan). There are an additional 493,234 authorized and unissued Ordinary Shares reserved
for the grant of stock options under the 1997 Plan. Ordinary Shares subject to options exercisable within 60 days of April 29, 2003 are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding
for computing the percentage of any other person. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to Ordinary Shares. Unless otherwise indicated, the persons named in
the table have sole voting and investment control with respect to all Ordinary Shares shown as beneficially owned by them.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes 9,548 Ordinary Shares registered in the name of ANZ Nominees Limited.
|--- |  | ------------------------------------------------------------------------------

|(4) |  | Beneficially owns less than 1% of our outstanding shares.
|--- |  | ---------------------------------------------------------



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Share Options for Directors



The following table contains information
pertaining to share options held by directors as of April 29, 2003:



|               |  | Number of Ordinary Shares Issuable on Exercise of
Option |  | Per Share Exercise Price in US$ |                     | Exercisable Date/Period
|-------------- |  | -------------------------------------------------------- |  | ------------------------------- | ------------------- | -----------------------
|Sam Linz       |  | 15,000 20,200 27,438 38,412                              |  | $ $ $ $                         | 5.20 6.38 2.54 3.02 |                        
|              
|Robert Gavshon |  | 15,000 20,200 27,438 38,412                              |  | $ $ $ $                         | 5.20 6.38 2.54 3.02 |                        
|              
|John Price     |  | 3,750 6,425 9,067 12,883                                 |  | $ $ $ $                         | 5.20 6.38 2.54 3.02 |                        
|              
|Sydney Selati  |  | 7,500 10,100 13,829 19,096                               |  | $ $ $ $                         | 5.20 6.38 2.54 3.02 |                        
|              
|Edgar Berner   |  | 22,056 2,500                                             |  | $ $                             | 6.38 4.10           |                        
|              
|Gordon Howlett |  | 2,500 625 2,500                                          |  | $ $ $                           | 5.20 6.38 4.10      |                        



Options to Purchase
Securities from Registrant or Subsidiaries



As of April 29, 2003 there were outstanding options to purchase a total of 563,104 Ordinary Shares granted by us, of which our directors and senior management held 372,879. These outstanding options were granted under our 1997 Plan.
There were no other warrants or rights to purchase our Ordinary Shares outstanding as of April 29, 2003. The following table sets forth information concerning outstanding options as of April 29, 2003:



|                                               |  | Number OfOrdinary SharesUnder Option |  | Price Per Ordinary Share |      | Option Expiration Date
|---------------------------------------------- |  | ------------------------------------ |  | ------------------------ | ---- | ----------------------
|1997 Plan(1)                                   |  | 155,450                              |  | US$                      | 5.20 |                       
|1997 Plan(1)                                   |  | 140,516                              |  | US$                      | 6.38 |                       
|1997 Plan(1)                                   |  | 84,686                               |  | US$                      | 2.54 |                       
|1997 Plan(1)                                   |  | 64,100                               |  | US$                      | 4.10 |                       
|1997 Plan(1)                                   |  | 118,352                              |  | US$                      | 3.02 |                       
|Directors and senior management as a group (2) |  | 372,879                              |  |                          |     |                       

---

|(1) |  | Options under the 1997 Plan will generally expire on the earlier of the Expiration Date or three months after the cessation of employment of the optionee. For more
information, see the 1997 Share Option Plan description below.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Directors and senior management as a group received options under our 1997 Plan. For more information, see the 1997 Share Option Plan description below.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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Executive Share Option Plan



On January 31, 1997, we adopted the
Executive Plan, pursuant to which a total of 203,038 Ordinary Shares were reserved for issuance with the Board granting stock options comprising the entire share reserve under the Executive Plan, to certain directors and senior management, at an
exercise price of A$8.38 per Ordinary Share.



The
options granted under the Executive Plan expired by their terms on February 1, 2002, the day the Executive Plan lapsed. No options granted under the Executive Plan were exercised prior to its lapse.



1997 Share Option Plan



Our 1997 Plan was adopted by the Board of Directors on
October 1, 1997, and approved by shareholders as of October 7, 1997. As of January 31, 2003, a total of 1,056,338 Ordinary Shares have been authorized for issuance under the 1997 Plan. The number of Ordinary Shares reserved for issuance under the
1997 Plan will automatically increase on the first trading day of each calendar year, beginning with the 1999 calendar year, during the term of the 1997 Plan by an amount equal to one percent (1%) of the Ordinary Shares outstanding on December 31 of
the immediately preceding calendar year. Pursuant to a resolution of shareholders passed at our Annual General Meeting on June 14, 2002, the maximum number of options which may be granted to any single individual in the 1997 Plan, was increased to
200,000 Ordinary Shares per fiscal year.



The
1997 Plan consists of the Option Grant Program, under which eligible individuals in our employ or service (including our officers and other employees, non-employee Board members, consultants and other independent advisors, or any parent or
subsidiary) may, at the discretion of the Plan Administrator, be granted stock options to purchase Ordinary Shares at an exercise price not less than eighty-five percent (85%) of their fair market value on the option grant date.



The Board of Directors has determined that the Compensation
Committee shall be the Plan Administrator charged with administering the 1997 Plan. The Plan Administrator has complete discretion, within the scope of its administrative jurisdiction under the 1997 Plan, to determine which eligible individuals are
to receive stock option grants, the time or times when such grants are to be made, the number of shares subject to each such grant, the exercise and vesting schedule to be in effect for the grant, the maximum term for which any granted stock option
is to remain outstanding and the status of any granted stock option as either an incentive stock option or a non- statutory stock option under the U.S. Federal tax laws.



Options granted under the 1997 Plan will generally become exercisable either in three equal annual
installments measured from the option grant date or in full, on or after a specified date. The exercise price for options granted under the 1997 Plan may be paid in cash or in Ordinary Shares valued at fair market value on the exercise date. We are
in the process of establishing a procedure pursuant to which options under the 1997 Plan may be exercised through a same-day sale program without any cash outlay by the optionee. In addition, the Plan Administrator may provide financial assistance
to one or more optionees in the exercise of their outstanding stock options by allowing such individuals to deliver a full-recourse, interest-bearing promissory note in payment of the exercise price and any associated withholding taxes incurred in
connection with such exercise.



In the event we
are acquired via a merger or an asset sale, each outstanding stock option under the 1997 Plan will immediately accelerate and become fully exercisable for all of the shares subject to such outstanding options, unless such stock options are to be
assumed or replaced by the successor corporation (or parent thereof). Any stock options that do not automatically accelerate upon the occurrence of a merger or asset sale, will immediately accelerate and such repurchase rights will accordingly
lapse, upon the involuntary termination of the optionee within 18 months after the effective date of the merger or asset sale. Stock options accelerated in connection with such involuntary termination will be exercisable as fully-vested shares until
the earlier of (i) the expiration of the stock option term or (ii) a one (1)-year period measured from the effective date of the involuntary termination.



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The Plan
Administrator has the authority to effect, with the consent of the affected option holders, the cancelation of outstanding stock options under the 1997 Plan in return for the grant of new stock options for the same or a different number of shares
with an exercise price per share based upon the fair market value of the Ordinary Shares on the new grant date.



The Board of Directors pursuant to a meeting on September 1, 1998, granted options to a non-executive director to purchase up to an
aggregate of 17,646 Ordinary Shares at a price of US$8.50 per Ordinary Share under the 1997 Plan, exercisable in three equal installments on September 1, 2001, September 1, 2002 and August 1, 2003. These options were subsequently canceled pursuant
to a circulating resolution of directors on January 10, 2000 and replaced with options granted to the same non-executive director, to purchase up to an aggregate of 17,646 Ordinary Shares at a price of US$6.38 per Ordinary Share under the 1997 Plan,
exercisable in three equal installments on January 7, 2003, (none of which were exercised), January 7, 2004 and December 7, 2004.



As a result of decreases in the market price of our Ordinary Shares during the latter part of 1998, the exercise price of those options
granted concurrently with the Offering at US$11.00 per Ordinary Share, was significantly higher than the market price. Consequently and in order to provide all employees with the continuing opportunity to acquire our Ordinary Shares at an attractive
purchase price, the Board of Directors at a meeting on November 9, 1998, resolved to implement a special option cancelation/re-grant program. Under that program, each option outstanding on that date with an exercise price of US$11.00 per Ordinary
Share (an Old Option) was canceled and simultaneously, a new option for the identical number of shares but with an exercise price of US$5.20 per Ordinary Share (a New Option), was granted in replacement thereof. The New
Options became/are exercisable in three equal installments on November 9, 2001 and November 9, 2002, respectively, (none of which were exercised) and October 9, 2003. All other terms and conditions of the New Options are substantially the same as
the Old Options. In the aggregate, Old Options to purchase 177,200 Ordinary Shares were canceled and re-granted under the program. In addition to the cancelation and re-grant program on November 9, 1998, the Board of Directors granted further
options to directors, a member of senior management and employees to purchase up to an aggregate of 48,250 Ordinary Shares at a price of US$5.20 per Ordinary Share under the 1997 Plan and exercisable on the same dates as above. During the fiscal
year ended January 31, 2003, a total of 20,800 in aggregate of New Options and options, exercisable at US$5.20 per Ordinary Share, were forfeited.



Pursuant to the aforementioned circulating resolution of directors, further options were granted to executive directors, senior management
and employees to purchase up to an aggregate of 143,820 Ordinary Shares at a price of US$6.38 per Ordinary Share under the 1997 Plan and exercisable in three equal installments on January 7, 2003, (none of which were exercised), January 7, 2004 and
December 7, 2004. During the fiscal year ended January 31, 2003, a total of 7,950 options, exercisable at US$6.38 per Ordinary Share, were forfeited.



The Board of Directors pursuant to a meeting on March 19, 2002, granted options to executive directors and senior management to purchase
up to an aggregate of 84,686 Ordinary Shares at a price of US$2.54 per Ordinary Share under the 1997 Plan, exercisable in full at any time on or after July 1, 2002 until expiration on October 1, 2007.



The Board of Directors pursuant to a meeting on April 16, 2002
granted options to non-executive directors and certain employees, to purchase up to an aggregate of 68,850 Ordinary Shares at a price of US$4.10 per Ordinary Share under the 1997 Plan, exercisable in full at any time on or after January 1, 2003
until expiration on October 1, 2007.



Pursuant to
a circulating resolution of directors on June 20, 2002, options were granted to directors and senior management to purchase up to an aggregate of 118,352 Ordinary Shares at a price of US$3.02 per Ordinary Share under the 1997 Plan, exercisable in
full at any time on or after July 1, 2002 until expiration on October 1, 2007.



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The Board may
amend or modify the 1997 Plan at any time. However, no such amendment or modification shall adversely affect the rights of any optionee without his or her consent. The 1997 Plan will terminate on October 1, 2007, unless sooner terminated by the
Board.



ITEM 7.    
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A.    MAJOR SHAREHOLDERS



The following table sets forth certain information with respect to each person or group of affiliated persons who is known by us to beneficially own 5% or more of our Ordinary Shares including Ordinary Shares held directly
or in the form of ADSs as of April 29, 2003, based on an aggregate of 4,116,662 Ordinary Shares outstanding as of such date:



|                                                               |  | Ordinary Shares (1)(2)Beneficially Owned
|-------------------------------------------------------------- |  | ----------------------------------------
|Name of beneficial holder                                      |  | Number                                  
|Sam Linz(3)                                                    |  | 1,263,382                               
|Strong Capital Management, Inc. jointly with Richard S. Strong |  | 414,120                                 
|Robert Gavshon                                                 |  | 410,794                                 

---

|(1) |  | The number of Ordinary Shares listed in this table includes Ordinary Shares held directly or in the form of ADSs.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | Applicable percentage of ownership for each shareholder is based on 4,116,652 Ordinary Shares outstanding as of April 29, 2003, together with applicable options for
such shareholders but excludes 153,091 Ordinary Shares issuable upon the exercise of stock options granted under the 1997 Share Option Plan (the 1997 Plan). There are an additional 493,234 authorized and unissued Ordinary Shares reserved
for the grant of stock options under the 1997 Plan. Ordinary Shares subject to options exercisable within 60 days of April 29, 2003 are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding
for computing the percentage of any other person. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to Ordinary Shares. Unless otherwise indicated, the persons named in
the table have sole voting and investment control with respect to all Ordinary Shares shown as beneficially owned by them.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes 9,548 Ordinary Shares registered in the name of ANZ Nominees Limited.
|--- |  | ------------------------------------------------------------------------------



We are not, to our knowledge, directly owned or controlled by any other corporation, foreign government or
other person or group of persons, severally or jointly and are not aware of any voting arrangements which may, at any subsequent date, result in a change of control. We are not aware of any arrangements which may at a subsequent date result in a
change in control in us. These shareholders do not have voting rights different from other shareholders.



As of April 29, 2003, there were 19 holders of record of ADSs and 24 additional holders of record of our Ordinary Shares. Of the Ordinary
Shares, to our knowledge, seven holders of record reside in the United States. Of the ADSs, to our knowledge, eight holders of record reside in the United States. We are unable to determine the number of beneficial owners of the ADSs residing in the
United States.



|B. |  | RELATED PARTY TRANSACTIONS
|-- |  | --------------------------



Company Policy Concerning Transactions with Affiliates



Under the Australian Corporations Law, directors are prohibited from entering into transactions with us that confer a benefit on any
director if the transaction is not on arms-length commercial terms, except where limited exemptions apply or detailed approval procedures are first observed. We have adopted a more stringent policy based on the Australian Corporations
Act 2001 that requires all transactions with directors, senior management and other affiliates be on terms that are believed to be at least as favorable to us as could be obtained from unaffiliated third parties and that such transactions must be
approved by a majority of our disinterested directors.



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We believe
that the following transactions with directors, senior management and other affiliates were completed on terms as favorable to us as could have been obtained from unaffiliated third parties.



Transactions with Affiliates



We hold a one-third ownership interest in Bromic which
supplies gas valves and related products to us. Bromic receives approximately 9% of its revenues from sales to us and we are Bromics third largest customer. During the year ended January 31, 2003, we purchased approximately A$2.2 million of
products from Bromic. We also hold a one-third equity interest in Renegade, an Australian company which operates as an industrial and domestic gas distributor.



We acquired the remaining 50% of the ordinary shares of GLG which acted as a buying office, supplying us and other third parties with
grills, burners and other products prior to cessation of that activity on December 31, 2001, as of May 2, 2002 as a result of which GLG is now a wholly-owned subsidiary. The buying office has been dismantled and the administration of the Asian
purchases is currently being handled from Hong Kong.



Transactions Involving Principal Shareholders



Messrs. Linz, Gavshon, Selati and Price beneficially own 30.21%, 9.82%, 4.64% and 1.98%, respectively, of our outstanding Ordinary Shares. Accordingly, these individuals may exert substantial influence over our business and
affairs, including the election of our directors and the outcome of corporate actions requiring shareholder approval.



From time to time in the past, Messrs. Linz, Gavshon and Selati and certain members of their respective families have advanced funds,
repayable on demand to us, to be used for general corporate purposes. Through these advances, we have been able to obtain funds at relatively attractive short-term borrowing rates of approximately 2% per annum below the overdraft rate charged to us
by our bankers. Prior to the Offering, we had repaid all amounts owing on such advances and terminated these borrowing arrangements. We have reinstated similar arrangements which the Board of Directors has determined are in our best interests.



We own the cars for the use of Messrs. Linz and
Gavshon, and lease cars for Messrs. Price and Selati, at a rate of approximately A$1,977 and US$1,531, respectively, per month per car.



Mr. Linzs sister, together with her husband and son, owns four entities (Related Franchisors), each of which operates
one franchised Barbeques Galore store in Orange County, California. The Related Franchisors franchise agreements provide the Related Franchisors with the exclusive right to open, upon our approval, additional Barbeques Galore stores within a
specified territory in Orange County.



Mr.
Selatis daughter, practising under the name of Romy Selati Loseke, Attorney at Law, currently provides legal services to us in connection with leasing and real estate issues in the State of California. During the fiscal year ended January 31,
2003, we paid fees of US$2,470 for the aforementioned services. Mr. Selatis daughter was previously with the law firm of Seltzer, Caplan, McMahon, Vitek to which we paid fees of US$18,833 during the fiscal year ended January 31, 2003, for
legal services rendered in connection with leasing matters.



Mr. Linzs wife currently provides editorial and consulting services to us in connection with our quarterly internal newsletter, Inside Galore. During the fiscal year ended January 31, 2003, we paid fees of A$7,250
for the aforementioned services.



Pursuant to his
appointment as a non-executive director on September 1, 1998, we granted options to purchase up to an aggregate of 17,646 Ordinary Shares at a price of US$8.50 per Ordinary Share to Mr. Edgar Berner under the 1997 Plan, exercisable in three equal
installments on September 1, 2001, September 1, 2002 and



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August 1, 2003. These options were subsequently canceled pursuant to a circulating resolution of directors on January 10, 2000 and replaced
with options to Mr. Berner, to purchase up to an aggregate of 17,646 Ordinary Shares at a price of US$6.38 per Ordinary Share under the 1997 Plan, exercisable in three equal installments on January 7, 2003, (none of which were exercised), January 7,
2004 and December 7, 2004. See Item 6. Directors, Senior Management and EmployeesE. Share Ownership for Directors and Senior Management1997 Share Option Plan.



On November 9, 1998, we granted options to purchase up to an aggregate of 46,250 Ordinary Shares at a price
of US$5.20 per Ordinary Share to directors and a member of senior management under the 1997 Plan, exercisable in three equal installments on November 9, 2001 and November 9, 2002, respectively, (none of which were exercised) and October 9, 2003. Mr.
Sam Linz and Mr. Robert Gavshon each received a grant of 15,000 Ordinary Shares, Mr. Sydney Selati received a grant of 7,500 Ordinary Shares, Mr. John Price received a grant of 3,750 Ordinary Shares and Mr. Gordon Howlett and Mr. David James each
received a grant of 2,500 Ordinary Shares. Pursuant to the aforementioned circulating resolution of directors, options to purchase up to an aggregate of 71,195 Ordinary Shares at a price of US$6.38 per Ordinary Share were granted to directors and
senior management under the 1997 Plan, exercisable in three equal installments on January 7, 2003, (none of which were exercised), January 7, 2004 and December 7, 2004. Mr. Sam Linz and Mr. Robert Gavshon each received a grant of 20,200 Ordinary
Shares, Mr. Sydney Selati received a grant of 10,100 Ordinary Shares, Mr. John Price received a grant of 6,425 Ordinary Shares, Mr. David James received a grant of 5,300 Ordinary Shares, Mr. Edgar Berner received a grant of 4,410 Ordinary Shares,
Mr. Kevin Ralphs received a grant of 3,185 Ordinary Shares, Mr. David Glaser received a grant of 750 Ordinary Shares and Mr. Gordon Howlett received a grant of 625 Ordinary Shares. See Item 6. Directors, Senior Management and EmployeesE.
Share Ownership for Directors and Senior Management1997 Share Option Plan.



On March 19, 2002, we granted options to purchase up to an aggregate of 84,686 Ordinary Shares at a price of US$2.54 per Ordinary Share to executive directors and senior management under the 1997 Plan,
exercisable in full at any time on or after July 1, 2002. Mr. Sam Linz and Mr. Robert Gavshon each received a grant of 27,438 Ordinary Shares, Mr. Sydney Selati received a grant of 13,829 Ordinary Shares, Mr. John Price received a grant of 9,067
Ordinary Shares, Mr. David James received a grant of 5,762 Ordinary Shares and Mr. Kevin Ralphs received a grant of 1,152 Ordinary Shares. See Item 6. Directors, Senior Management and EmployeesE. Share Ownership for Directors and Senior
Management1997 Share Option Plan.



On
April 16, 2002, we granted options to purchase up to an aggregate of 16,750 Ordinary Shares at a price of US$4.10 per Ordinary Share to non-executive directors and senior management under the 1997 Plan, exercisable in full at any time on or after
January 1, 2003. Mr. Gordon Howlett and Mr. Edgar Berner each received a grant of 2,500 Ordinary Shares, Mr. David James received a grant of 6,500 Ordinary Shares, Mr. Kevin Ralphs received a grant of 4,000 Ordinary Shares and Mr. David Glaser
received a grant of 1,250 Ordinary Shares. See Item 6. Directors, Senior Management and EmployeesE. Share Ownership for Directors and Senior Management1997 Share Option Plan.



Pursuant to a circulating resolution of directors on June 20,
2002, we granted options to purchase up to an aggregate of 118,352 Ordinary Shares at a price of US$3.02 per Ordinary Share to executive directors and senior management under the 1997 Plan, exercisable in full at any time on or after July 1, 2002.
Mr. Sam Linz and Mr. Robert Gavshon each received a grant of 38,412 Ordinary Shares, Mr. Sydney Selati received a grant of 19,096 Ordinary Shares, Mr. John Price received a grant of 12,883 Ordinary Shares, Mr. David James received a grant of 7,957
Ordinary Shares and Mr. Kevin Ralphs received a grant of 1,592 Ordinary Shares. See Item 6. Directors, Senior Management and EmployeesE. Share Ownership for Directors and Senior Management1997 Share Option Plan.



We also granted options to certain of our directors to
purchase up to an aggregate of 203,038 Ordinary Shares (none of which were exercised), at a price of A$8.38 per Ordinary Share pursuant to the Executive Plan which lapsed on February 1, 2002.



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C.    INTEREST OF EXPERTS AND COUNSEL



Not applicable.



|ITEM |  | 8.    
FINANCIAL INFORMATION
|---- |  | ----------------------------



|A. |  | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|-- |  | -------------------------------------------------------



Please see Item 18 for a list of the financial statements filed as part of this Annual Report.



Dividend Policy



We may pay dividends on the Ordinary Shares or ADSs in the
future. In addition, we are subject to restrictions on the declaration or payment of dividends under the ANZ Facility as well as the Merrill Lynch Facility as defined. See Item 5. Operating and Financial Review and ProspectsB. Liquidity
and Capital Resources.



Legal Proceedings



There are no material legal proceedings
pending against us. We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our business,
results of operations or financial condition.



B.    SIGNIFICANT CHANGES



There have been no significant subsequent events following the close of the last financial year up to the date of this Annual Report that are known to us and which require disclosure in this Annual Report and for which we
have not provided disclosure in this Annual Report.



ITEM
9.    
THE OFFER AND LISTING



Price Range
of our ADSs on the Nasdaq Stock Market®(Nasdaq)



Our Offering was completed in November 1997.



Effective October 11, 1999 our Ordinary Shares were traded on
Nasdaq under the symbol BBQZ, as represented by ADSs, pursuant to changes to Nasdaq requirements, in terms of which we were no longer required to add the letter Y to the end of our Nasdaq ticker symbol. The ADSs are represented by
American Depositary Receipts (ADRs) issued by the Depositary. Each ADS represents one Ordinary Share.



From April 1987 through December 1996, we listed our Ordinary Shares for trading on the ASE. In December 1996, we voluntarily delisted
from the ASE and since such time, there has been no established foreign public market for the Ordinary Shares or ADSs.



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The following
table sets forth the range of high and low closing sale prices of the ADSs on Nasdaq for the fiscal periods indicated:



|                                         |  | Price Per ADSon Nasdaq
|---------------------------------------- |  | ----------------------
|                                         |  | High                  
|(a) Annual high and low market prices    |  |                       
|                                        
|February 1, 1998 to January 31, 1999     |  | US$                   
|February 1, 1999 to January 31, 2000     |  |                       
|February 1, 2000 to January 31, 2001     |  |                       
|February 1, 2001 to January 31, 2002     |  |                       
|February 1, 2002 to January 31, 2003     |  |                       
|                                        
|(b) Quarterly high and low market prices |  |                       
|                                        
|Fiscal Year ended January 31, 2002       |  |                       
|First Quarter                            |  | US$                   
|Second Quarter                           |  |                       
|Third Quarter                            |  |                       
|Fourth Quarter                           |  |                       
|                                        
|Fiscal Year ended January 31, 2003       |  |                       
|First Quarter                            |  | US$                   
|Second Quarter                           |  |                       
|Third Quarter                            |  |                       
|Fourth Quarter                           |  |                       
|                                        
|(c) Monthly high and low market prices   |  |                       
|                                        
|October 2002                             |  | US$                   
|November 2002                            |  |                       
|December 2002                            |  |                       
|January 2003                             |  |                       
|February 2003                            |  |                       
|March 2003                               |  |                       



As of
April 29, 2003, there were 19 holders of record of ADSs and 24 additional holders of record of our Ordinary Shares. Of the Ordinary Shares, to our knowledge, seven holders of record reside in the United States. Of the ADSs, to our knowledge, eight
holders of record reside in the United States. We are unable to determine the number of beneficial owners of the ADSs residing in the United States.



ITEM 10.    
ADDITIONAL INFORMATION



|A. |  | SHARE CAPITAL
|-- |  | -------------



Not applicable.



|B. |  | MEMORANDUM AND ARTICLES OF ASSOCIATION
|-- |  | --------------------------------------



Previously filed as exhibit 3.1 in our Registration Statement on Form F-1 (Registration No. 333-56805), filed with the Commission on June
12, 1998 and incorporated by reference herein.



|C. |  | MATERIAL CONTRACTS
|-- |  | ------------------



With respect to our Executive Share Option Plan and our 1997 Share Option Plan, see Item 6. Directors, Senior Management and
EmployeesE. Share Ownership for Directors and Senior Management. With respect to our ANZ facility and our Merrill Lynch facility, see Item 5. Operating and Financial Review and ProspectsB. Liquidity and Capital
Resources.



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On January 18,
2002, we entered into a lease agreement with Arrowood Investments, Inc., a California Corporation. The agreement is for the lease of our warehouse and distribution facility located at 3355 East Cedar Street, Ontario, California 91761. The property
occupies a 98,821 square foot portion of a 436,945 square foot concrete building situated on approximately 18.23 acres of land. The five-year and seven-month lease with an option to renew for an additional five years, commenced on March 1, 2002 and
expires on September 30, 2007. The monthly rent for the first 33 months, payable with effect from July 1, 2002, is US$34,587, after which the monthly rent increases to US$36,564 for the remainder of the lease term.



On March 27, 2002, we entered into a lease agreement with Bake
Orchard Partners, LLC, a California limited liability company. The agreement is for the lease of our U.S. headquarters located at 10 Orchard Road, Suite 200, Lake Forest, California 92630. The office space is located on the second floor of the
building and occupies 12,696 square feet. The lease commenced on May 1, 2002 and expires on September 30, 2007. The annual rent is US$146,472, payable with effect from October 1, 2002, after which it escalates annually on the anniversary date by 4%.



All the foregoing contracts are listed as
exhibits hereto.



|D. |  | EXCHANGE CONTROL
|-- |  | ----------------



Restrictions on Foreign Ownership; Antitakeover Restrictions



Under Australian law, foreign persons are prohibited from acquiring more than a limited percentage of the
shares in an Australian company without approval from the Australian Treasurer (the Treasurer) or in certain other limited circumstances. These limitations are set forth in the Australian Foreign Acquisitions and Takeovers Act (the
Takeovers Act). Under the Takeovers Act, as currently in effect, any foreign person, together with associates, is prohibited from acquiring 15% or more of our outstanding shares (or else the Treasurer may make an order requiring the
acquiror to dispose of those shares within a specified period of time). In addition, if a foreign person acquires our shares and as a result the total holdings of all foreign persons and their associates exceeds 40% in the aggregate without the
approval of the Treasurer, then the Treasurer may make an order requiring the acquiror to dispose of those shares within a specified time if the Treasurer finds that the acquisition is contrary to the national interest. The same rule applies if the
total holdings of all foreign persons and their associates already exceeds 40% and a foreign person (or our associate) acquires any further shares, including in the course of trading, shares acquired in the secondary market of the ADSs. In addition,
if the level of foreign ownership exceeds 40% at any time, we would be considered a foreign person under the Takeovers Act. In such event, we would be required to obtain the approval of the Treasurer for us, together with our associates, to acquire
(i) more than 15% of an Australian company or business with assets totaling over A$50 million or (ii) any direct or indirect ownership interest in Australian urban real estate. In addition, the percentage of foreign ownership of Barbeques Galore
would also be included in determining the foreign ownership of any Australian company or business in which we may choose to invest. Since we have no current plans for any such acquisitions and only own commercial property, any such approvals that we
may be required to obtain as a foreign person under the Takeovers Act will not affect our current or planned future ownership or lease of property in Australia. However, there would be no material tax consequence to our shareholders (including
holders of ADSs) resulting from our being deemed a foreign person under the Takeovers Act. If foreign persons or their associates were to own all of the ADSs, then the level of foreign ownership of our equity securities would be approximately 67.2%.
The level of foreign ownership could also increase in the future if existing Australian investors decide to sell their shares into the U.S. market or if we were to sell additional Ordinary Shares or ADSs in the future.



We have additionally provided that all stock options
outstanding under our 1997 Plan at such time as we are acquired by merger or asset sale pursuant to which such stock options are not assumed or replaced by the successor corporation shall become immediately exercisable for a period of one (1) year
(or until the expiration of the stock option term, if earlier). There are 563,104 Ordinary Shares underlying stock options granted under our 1997 Plan, which barring acceleration, became/will become exercisable as to 155,450 in three equal
installments on November 9, 2001 and November 9, 2002, respectively, (none of which were exercised) and October 9, 2003, as to 140,516 in three equal installments on January 7, 2003 (none of which were exercised),



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January 7, 2004 and December 7, 2004, as to 84,686 in full at any time on or after July 1, 2002, (none of which have been exercised), as to
64,100 exercisable in full at any time on or after January 1, 2003, (none of which have been exercised) and as to 118,352 exercisable in full at any time on or after July 1, 2002, (none of which have been exercised), according to the terms of the
1997 Plan. Such investment restrictions and dilutive acceleration events discussed above could have a material adverse effect on our ability to raise capital as needed and could make more difficult or render impossible, attempts by certain entities
(especially foreign entities, in the case of the Takeovers Act), to acquire us, including attempts that might result in a premium over market price to holders of ADSs. See Item 6. Directors, Senior Management and EmployeesE. Share
Ownership for Directors and Senior Management 1997 Share Option Plan.



Our Constitution contains certain provisions that could impede any merger, consolidation, takeover or other business combination involving us or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of us. Provisions contained in the Constitution, among other things:



| |  |  | in effect divide the Board of Directors into three classes, which serve for staggered three-year terms;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | provide that the shareholders may amend or repeal special resolutions, including changes to the Constitution and extraordinary transactions, only by a vote of at
least 75% of the votes cast at a meeting at which a quorum is present;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require extended notice (of up to 28 days) for special resolutions considered by the Board of Directors; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | authorize the Board of Directors, without any vote or action by our shareholders, to issue, out of our authorized and unissued capital shares, shares in different
classes, or with special, preferred or deferred rights, which may relate to voting, dividend, return of capital or any other matter.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Although we currently have no plans to issue any preferred shares, the rights of the holders of Ordinary Shares or ADSs will be subject
to, and may be adversely affected by, the rights of the holders of any preferred or senior shares that may be issued in the future. The issuance of any preferred or senior shares, and the other provisions of the Constitution referred to above, could
have the effect of making it more difficult for a third-party to acquire control of us.



In certain circumstances, non-residents of Australia may be subject to Australian tax on capital gains made on the disposal of Ordinary Shares or ADSs. The rate of Australian tax on capital gains
realized by non-residents of Australia is 30% for companies for the 2003 income year (which for most taxpayers is the year ending June 30, 2003). For individuals, the rate of tax increases from 29% to a maximum of 47%. However, if the Ordinary
Shares or ADSs are held for 12 months or more, an individual should be entitled to an exemption of 50% of the otherwise taxable capital gain. These circumstances are described in Item 10. Additional InformationE. Taxation.



There are no legal or economic restrictions on
the ability of our USA subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. We are subject to restrictions on the declaration or payment of dividends under the ANZ Facility as well as the Merrill Lynch Facility as
defined on page 22.



|E. |  | TAXATION
|-- |  | --------



Dividends.    Fully franked dividends (i.e., dividends paid out of the Companys profits which have been
subject to Australian income tax at the maximum corporate tax rate) which are paid to shareholders who are U.S. residents will not be subject to Australian income or Australian withholding, taxes. Unfranked dividends (i.e., dividends that are paid
out of profits that have not been subject to Australian income tax) are subject to Australian withholding tax when paid to U.S. resident shareholders. In the event the Company pays partially franked dividends, shareholders will be subject to
withholding tax on the unfranked portion. Pursuant to the bilateral taxation convention between Australia and the United States (the Treaty), the withholding tax imposed on dividends paid by the Company to a U.S. resident is limited to
15%. Refer, however, to Proposed changes to the Treaty, below.



43



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Dividends
which are paid to the Company by a U.S. subsidiary out of the trading profits of that subsidiary will give rise to a credit in the Companys foreign dividend account (FDA). Where the Company has a credit balance in its
FDA and makes a written FDA declaration specifying that all or a portion of an unfranked dividend to be paid by the Company is an FDA dividend, the amount so specified will be exempt from Australian withholding tax. The payment of an FDA dividend
gives rise to a debit in the Companys FDA account. The Australian Federal Government is considering the extension of the dividend withholding tax exemption to all types of foreign income derived by an Australian company.



Sales of ADSs or Ordinary
Shares.    U.S. residents who do not hold and have not at any time in the five years preceding the date of disposal held (for their own account or together with associates) 10% or more of the issued share capital of a public
Australian company are not liable for Australian capital gains tax on the disposal of shares or ADSs of such company.



U.S. residents are subject to Australian capital gains tax on the disposal of shares or ADSs of a private Australian company where the
disposal consideration exceeds the cost base unless such a gain is exempt from Australian tax under the Treaty. The rate of Australian tax on taxable capital gains realized by U.S. residents is 30% for companies for the 2003 income year (for most
taxpayers, the year ending June 30, 2003). For individuals, the rate of tax increases from 29% to a maximum of 47%. However, if the Ordinary Shares or ADSs are held for 12 months or more, an individual should be entitled to an exemption of 50% of
the otherwise taxable capital gain. U.S. residents who are subject to Australian tax on capital gains made on the disposal of shares or ADSs are required to file an Australian income tax return for the year in which the disposal occurs.



A company listed on a stock exchange (a
Listed Company) will be treated as a private company in respect of a fiscal year for Australian tax purposes if it is closely held (i.e. at any time during that fiscal year, not less than 75% of the paid up capital of the Company, voting
power or dividend rights of such company are held by 20 or fewer persons), unless the Australian Commissioner of Taxation (the Commissioner), pursuant to the discretion granted to him, rules that such company will be treated as a public
company for such fiscal year. As the ADSs are listed for quotation on Nasdaq, the Company will be deemed a Listed Company. The Company currently qualifies as a public Australian company; however, because the ownership of the Company must be
continuously monitored, we cannot assure you that the Company will not become closely held, thereby losing its public company status. If the Company were to lose its public company status, it would become a private Australian company and the
paragraph immediately preceding this one, would apply to the Company.



Non-residents of Australia who are securities dealers or in whose hands a profit on disposal of ADSs or Ordinary Shares is regarded as ordinary income and not as a capital gain (such ADSs and Ordinary Shares are referred to
as revenue assets) will be subject to Australian income tax on Australian source profits arising on the disposal of the ADSs or Ordinary Shares, unless such profits are exempt from Australian tax under the Treaty. Prospective investors
should consult their own tax advisors in determining whether the ADSs or Ordinary Shares are revenue assets because such a conclusion depends on the particular facts and circumstances of the individual investor.



Pursuant to the Treaty, capital gains or profits arising on
the disposal of ADSs or Ordinary Shares which constitute business profits of an enterprise carried on by a U.S. resident who does not carry on business in Australia through a permanent establishment to which such gains or profits are
attributable are exempt from Australian tax. Refer, however, to Proposed changes to the Treaty, below. The term business profits is not defined in the Treaty and thus its meaning in the present context is that which
the term has under Australian tax law. The Australian Courts have held that the term business profits is not confined to profits derived from the carrying on of a business but must embrace any profit of a business nature or commercial character. The
term permanent establishment is defined in the Treaty to mean a fixed place of business through which an enterprise is carried on and includes an Australian branch of the U.S. resident and an agent (other than an agent of independent
status) who is authorized to conclude contracts on behalf of the U.S. resident and habitually exercises that authority in Australia. Any capital gains or profits derived by a U.S. resident from the disposal of



44



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the ADSs or Ordinary Shares held as revenue assets (including gains derived by a securities dealer) will constitute business profits under
the Treaty and, thus be exempt from Australian tax, provided that such holder does not carry on business in Australia through a permanent establishment to which such gains or profits are attributable.



The view of the Commissioner is that the Treaty in its current
form would not preclude Australia from taxing a capital gain realised by a U.S. resident on the sale of ADSs or Ordinary Shares.



U.S. residents with no taxable capital gains or income (or deductible losses) from sources in Australia other than dividends with respect
to the Ordinary Shares or ADSs are not required to file an Australian income tax return.



Proposed changes to the Treaty.    On September 27, 2001, the Governments of the United States and Australia signed a Protocol (the Protocol) amending the
existing Treaty. The Protocol will come into force once the U.S. ratifies it and will not have effect in Australia before July 1, 2003.



Broadly, subject to the two exceptions mentioned below, the existing tax treatment of dividends paid to U.S. residents will continue; that
is, no withholding tax will be imposed on the franked component of dividends paid to a U.S. resident shareholder and 15% withholding tax will be imposed on the unfranked component of dividends. The two exceptions are:



| | (a) |  | no withholding tax will be imposed on unfranked dividends paid to a U.S. resident company which is beneficially entitled to 80% of the voting power (for a 12 month
period prior to the date the dividend is declared) of the Company and the U.S. resident company satisfies a public listing requirement; and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | a withholding tax limit of 5% will apply to unfranked dividends paid to a U.S. resident company that holds at least 10% of voting power in the Company but does not
meet the 80% test mentioned above.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Protocol will also amend the Treaty to the effect that Australia will not be precluded by the Treaty from taxing capital gains derived by a U.S. resident on the sale of ADSs or Ordinary Shares.



Stamp Duty



Under the law as it currently stands, stamp duty is imposed
in the Australian Capital Territory on any transfer of shares in a company incorporated under the Corporations Act that is taken to be registered in the Australian Capital Territory and will be payable on the transfer of Ordinary Shares in the
Company. In the absence of a relevant exemption, duty will be payable on the transfer of Ordinary Shares in the Company at the rate of A$0.60 for each A$100.00 of the higher of the consideration paid or payable to acquire the Ordinary Shares and the
unencumbered value of the Ordinary Shares. This duty is payable by the transferee.



Duty is chargeable on a dutiable transaction relating to ADRs that create an interest in an Ordinary Share, whether or not that transaction is effected in writing. Dutiable transactions include a
transfer, an agreement for sale or transfer and a declaration of trust. The term ADR is specifically defined in the legislation and requires the depositary to hold the underlying Ordinary Shares as trustee for the ADR holder.



There are a number of other exemptions from duty on the
transfer of Ordinary Shares. The availability of exemptions depends upon the particular circumstances surrounding each transaction. These include exemptions relating to deceased estates, transfers between trustees and beneficiaries, bankrupt
estates, divorces and reconstructions of corporate groups. You should consult a legal adviser in relation to the precise terms and availability of any exemption.



Gift, Estate and Inheritance Taxes



There are no specific gift, estate or inheritance taxes in Australia. However, the transfer by a U.S.
resident of Ordinary Shares or ADSs by way of gift or upon death, may have Australian income tax and stamp duty implications.



45



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|F. |  | DIVIDENDS AND PAYING AGENTS
|-- |  | ---------------------------



Not applicable.



|G. |  | STATEMENTS BY EXPERTS
|-- |  | ---------------------



Not applicable.



|H. |  | DOCUMENTS ON DISPLAY
|-- |  | --------------------



All documents relating to us to which we referred in this Annual Report, are available at our principal executive and registered offices
at 327 Chisholm Road, Auburn, NSW 2144, Australia. Certain of our documents are also filed with the SEC and may be inspected on its website at www.sec.gov.



|I. |  | SUBSIDIARY INFORMATION
|-- |  | ----------------------



Not applicable.



|ITEM |  | 11.    
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|---- |  | ------------------------------------------------------------------



Market risks relating to our operations result primarily from changes in interest rates and changes in foreign exchange rates.



Foreign Currency Market Risk



Our functional currency is the Australian dollar, although we
transact a portion of our business in foreign currencies and accordingly have foreign currency exposure through our sales in the United States and purchases from overseas suppliers in U.S. dollars. We also have foreign currency exposure through our
sales in the United Kingdom in Pounds sterling.



Our Australian operations generally hedge a major portion of their imports against exchange rate fluctuations with respect to the Australian dollar. In our U.S. operations, however, we have not, and currently do not actively hedge
against exchange rate fluctuations as the vast majority of the U.S. operations purchases are transacted in U.S. dollars, although we may elect to do so in the future. Changes in exchange rates may have a material adverse effect on our net
sales, cost of goods sold, gross profit and net income (loss), any of which alone or in the aggregate may in turn have a material adverse effect on our business, operating results and financial condition.



We utilize foreign currency forward contracts as a means of
offsetting fluctuations in the dollar value of foreign currency accounts payable. The counter parties to the contracts are major financial institutions and the risk of loss to us in the event of non-performance by a counter party, is not
significant. The notional amount of foreign currency forward contracts and the weighted average rates, are as follows:



|                        |  | Year ended January 31, 2002 |  | Year ended January 31, 2003 |  | Year ended January 31, 2002 |     | Year ended January 31, 2003
|----------------------- |  | --------------------------- |  | --------------------------- |  | --------------------------- | --- | ---------------------------
|                        |  | (weighted average rate)     |  | (In A$ thousands)          
|Buy Pounds sterling     |  |                             |  |                             |  |                             |     |                            
|Not later than one year |  | Nil                         |  | 0.3529                      |  | $                           | Nil |                            
|                        |  |                             |  |                             |  |                             |     |                            
|Sell U.S. dollars       |  |                             |  |                             |  |                             |     |                            
|Not later than one year |  | Nil                         |  | 0.5632                      |  | $                           | Nil |                            
|                        |  |                             |  |                             |  |                             |     |                            



The fair
value of these contracts at balance date, is not significant.



46



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Interest Rate Risk



Because we have long term debt under the
facilities with ANZ and Merrill Lynch, we are exposed to changes in interest rates.



The ANZ facility includes bank bills which are generally taken out for periods varying from approximately 30 to 90 days and rolled over at the end of their respective terms. Overseas purchases are
generally refinanced for periods varying up to 165 days. As of January 31, 2002 and 2003, the weighted average interest rates accruing on the bank bills utilized under the ANZ Facility were as follows:



|               |  | January 31, 2002  |        | January 31, 2003          |   | January 31, 2002 |  | January 31, 2003
|-------------- |  | ----------------- | ------ | ------------------------- | - | ---------------- |  | ----------------
|               |  | (In A$ thousands) |        | (Interest rate per annum)
|Bank bills     |  | $                 | 16,626 |                           | $ | 12,682           |  | 5.6%            
|Property loans |  |                   | 8,450  |                           |   | 8,450            |  | 6.9% to 7.5%    



As of
January 31, 2003 the Merrill Lynch facility comprises a revolving line of credit amounting to US$1.0 million. Indebtedness under the revolving line of credit accrues interest at the 30-day commercial paper rate plus 2.70% and is payable monthly.



Our total long-term debt matures as follows:



|Year ending January 31, |  | (In A$ thousands)
|----------------------- |  | -----------------
|2003                    |  | $                
|2004                    |  |                  
|                        |  |                  
|                        |  | $                
|                        |  |                  



The
difference between the carrying value and fair value of long term debt is not significant.



|ITEM |  | 12.    
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|---- |  | --------------------------------------------------------------



Not applicable.



PART II



|ITEM |  | 13.    
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|---- |  | -------------------------------------------------------



We have not had any events of default under any of our existing credit facilities described in this Annual Report. We are not in arrears with regard to the payment of any dividends and have not issued
any preferred stock.



|ITEM 14.    MATERIAL |  | MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------------------- |  | -------------------------------------------------------------------



Changes in Securities



On December 3, 1999 we announced that our Board of Directors had authorized the repurchase of up to 450,000 ADRs of Barbeques Galore
Limited as market conditions become favorable. The repurchase program was to expire on January 31, 2002 or upon reaching an aggregate purchase quantity of 450,000 ADRs. Commencing March 23, 2001 and thereafter, we repurchased, at a cost of
US$1,122,063 and from available resources, 425,000 ADRs on the open market, pursuant to the repurchase program.



47



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|ITEM |  | 15.    
CONTROLS AND PROCEDURES
|---- |  | -------------------------------



(a) Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such
term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended, within the 90 day period preceding the filing date of this report. Based on this evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were effective as of that date.



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



|ITEM |  | 16.
|---- |  | ---



Not applicable.



PART III



|ITEM |  | 17.    
FINANCIAL STATEMENTS
|---- |  | ----------------------------



See Item 18 for a list of the Financial Statements filed as part of this Annual Report.



|ITEM |  | 18.    
FINANCIAL STATEMENTS
|---- |  | ----------------------------



The following financial statements are filed as part of this Annual Report, together with the report of the independent auditors:



Independent Auditors Report.



Consolidated Balance Sheets as of January 31, 2002 and 2003.



Consolidated Statements of Operations and Other Comprehensive (Loss) Income for the years ended January 31,
2001, 2002 and 2003.



Consolidated Statements of
Shareholders Equity for the years ended January 31, 2001, 2002 and 2003.



Consolidated Statements of Cash Flows for the years ended January 31, 2001, 2002 and 2003.



Notes to the Consolidated Financial Statements.



|ITEM |  | 19.    
EXHIBITS
|---- |  | ----------------



The following exhibits are filed as part of this Annual Report:



|Exhibit Number |  |                                                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|3.1            |  | Memorandum and Articles of Association.(1)                                                                                                                                                                                                                                                      
|              
|4.1            |  | Form of Specimen of American Depositary Receipt.(1)                                                                                                                                                                                                                                             
|              
|4.2            |  | Form of Deposit Agreement among the Registrant, Morgan Guaranty Trust Company of New
York, as Depositary, and holders from time to time of ADSs issued thereunder.(1)                                                                                                                           
|              
|10.1           |  | Executive Share Option Plan.(1)                                                                                                                                                                                                                                                                 
|              
|10.2           |  | 1997 Share Option Plan.(1)                                                                                                                                                                                                                                                                      
|              
|10.3           |  | Major Agreements relating to the Registrants credit facility with Australia and
New Zealand Banking Corporation Group Limited (ANZ), including the formal Letter of Offer from ANZ to Directors of the Company, dated May 25, 1998, approving the Letter of Offer from ANZ to the Company.(2)



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|Exhibit Number |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|10.4           |  | Major Agreements relating to the Registrants U.S. operating subsidiarys
credit facility with Merrill Lynch Business Financial Services Inc. (Merrill Lynch), including Term WCMA®Loan and Security Agreement No. 9502340701, dated as of February 23, 1995 by and between Galore USA and Merrill Lynch; WCMA®Note, Loan and Security Agreement No. 231-07T10, dated as of February 23, 1995 by and between Galore USA and Merrill Lynch; Unconditional Guaranty by the Registrant relating to WCMA®Note, Loan and Security Agreement No. 9502340701; Unconditional Guaranty by the Registrant relating to WCMA®Note, Loan and Security Agreement No. 231-07710; Term WCMA®Note No. 9502340701; Letter dated November 27, 1996 from Merrill Lynch to Galore USA re: WCMA®line of credit variation; Letter and Letter Agreement dated August 27, 1997 from Merrill Lynch to Galore USA re: WCMA®line of credit variation; Letter Agreement dated January 20, 1998 from Merrill Lynch to Galore USA re: amendment to WCMA®Note, Loan and Security Agreement No. 231-07T10, modifying locations of collateral and change in maturity date to
February 28, 1998.(1)
|              
|10.12          |  | Lease Agreement between the Company and Arrowood Investments, Inc., dated January 18,
2002 for the lease of real property located at 3355 East Cedar Street, Ontario, California 91761.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|              
|10.13          |  | Lease Agreement between the Company and Bake Orchard Partners, LLC, dated March 27,
2002 for the lease of real property located at 10 Orchard Road, Suite 200, Lake Forest, California 92630.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              
|21.1           |  | List of controlled entities as of April 29, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|              
|23.1           |  | Consent of KPMG.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              
|99.1           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for Sam Ruben Linz.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|              
|99.2           |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 for David Andrew James.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              
|99.3           |  | Amended Audit Committee Charter as of March 25, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|(1) |  | Previously filed in the Registrants Registration Statement on Form F-1 (Registration No. 333-56805), filed with the Commission on June 12, 1998, and
incorporated herein by reference.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Previously filed in the Registrants Post-Effective Amendment No. 1 to the Registration Statement on Form F-1 (Registration No. 333-56805), filed with the
Commission on September 21, 1998, and incorporated herein by reference.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Previously filed in the Registrants Annual Report on Form 20-F, filed with the Commission on May 1, 2002, and incorporated herein by reference.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf



|            |  | BARBEQUES GALORE LIMITED
|----------- |  | ------------------------
|           
|May 1, 2003 |  | By                      
|            |  |                         



50



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CERTIFICATION



I, Sam Ruben Linz,
certify that:



| | 1. |  | I have reviewed this annual report on Form 20-F of Barbeques Galore Limited;
| | -- |  | ----------------------------------------------------------------------------



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



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



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



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



| | 6. |  | The registrants other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



May 1, 2003



|                                                                           
|---------------------------------------------------------------------------
|/s/    SAM RUBEN
LINZ                                                      
|Sam Ruben LinzChairman of the Board and DirectorPrincipal Executive
Officer



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CERTIFICATION



I, David Andrew James,
certify that:



| | 1. |  | I have reviewed this annual report on Form 20-F of Barbeques Galore Limited;
| | -- |  | ----------------------------------------------------------------------------



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



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



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



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



| | 6. |  | The registrants other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



May 1, 2003



|                                                            
|------------------------------------------------------------
|/s/    DAVID ANDREW
JAMES                                   
|David Andrew JamesPrincipal Financial and Accounting
Officer



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FINANCIAL STATEMENTS INDEX



|                                                                            |  | Pages Numbers
|--------------------------------------------------------------------------- |  | -------------
|Independent Auditors Report                                                |  | 54           
|                                                                           
|Consolidated Balance Sheets                                                 |  | 55           
|                                                                           
|Consolidated Statements of Operations and Other Comprehensive Income
(Loss) |  | 56           
|                                                                           
|Consolidated Statements of Shareholders Equity                             |  | 57           
|                                                                           
|Consolidated Statements of Cash Flows                                       |  | 58           
|                                                                           
|Notes to Consolidated Financial Statements                                  |  | 59           



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INDEPENDENT AUDITORS REPORT



The Board of Directors and Shareholders

Barbeques Galore Limited



We have audited the accompanying consolidated balance sheets of Barbeques Galore Limited and subsidiaries as
of January 31, 2003 and 2002 and the related consolidated statements of operations and other comprehensive income (loss), shareholders equity and cash flows for the years ended January 31, 2003, 2002 and 2001. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Barbeques Galore Limited and subsidiaries as of January 31, 2003 and 2002 and the results of
their operations and their cash flows for the years ended January 31, 2003, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.



/s/    KPMGKPMG




March 20, 2003

Sydney, Australia



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                                                  |  | January 31, 2002                  |         |   | January 31, 2003                               |   |         | January 31, 2003 | 
|----------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | ---------------------------------------------- | - | ------- | ---------------- | 
|                                                                                                                  |  | (In A$ thousandsexcept sharedata) |         |   | (In US$ thousands except share dataUnaudited) |  
|ASSETS                                                                                                            |  |                                   |         |   |                                                |   |         |                  | 
|Current assets:                                                                                                   |  |                                   |         |   |                                                |   |         |                  | 
|Cash and cash equivalents                                                                                         |  |                                   | 35      |   |                                                |   | 38      |                  | 
|Accounts receivable, net                                                                                          |  |                                   | 13,238  |   |                                                |   | 9,489   |                  | 
|Inventories, net                                                                                                  |  |                                   | 63,259  |   |                                                |   | 62,903  |                  | 
|Deferred income taxes                                                                                             |  |                                   | 1,182   |   |                                                |   | 2,857   |                  | 
|Prepaid expenses and other current assets                                                                         |  |                                   | 2,009   |   |                                                |   | 1,445   |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total current assets                                                                                              |  |                                   | 79,723  |   |                                                |   | 76,732  |                  | 
|Non-current assets:                                                                                               |  |                                   |         |   |                                                |   |         |                  | 
|Receivables from affiliates                                                                                       |  |                                   | 896     |   |                                                |   | 1,244   |                  | 
|Property, plant and equipment, net                                                                                |  |                                   | 37,236  |   |                                                |   | 32,138  |                  | 
|Goodwill, net                                                                                                     |  |                                   | 1,126   |   |                                                |   | 1,126   |                  | 
|Deferred income taxes                                                                                             |  |                                   | 3,600   |   |                                                |   | 1,936   |                  | 
|Other non-current assets                                                                                          |  |                                   | 2,515   |   |                                                |   | 3,126   |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total assets                                                                                                      |  | $                                 | 125,096 |   |                                                | $ | 116,302 |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|                                                                                                                 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                              |  |                                   |         |   |                                                |   |         |                  | 
|Current liabilities:                                                                                              |  |                                   |         |   |                                                |   |         |                  | 
|Accounts payable and accrued liabilities                                                                          |  | $                                 | 29,278  |   |                                                | $ | 28,018  |                  | 
|Payables to related parties                                                                                       |  |                                   | 152     |   |                                                |   | 18      |                  | 
|Current portion of obligations under capital leases                                                               |  |                                   | 2,289   |   |                                                |   | 2,778   |                  | 
|Income tax payable                                                                                                |  |                                   |        |   |                                                |   | 1,314   |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total current liabilities                                                                                         |  |                                   | 31,719  |   |                                                |   | 32,128  |                  | 
|Non-current liabilities:                                                                                          |  |                                   |         |   |                                                |   |         |                  | 
|Long-term debt                                                                                                    |  |                                   | 25,076  |   |                                                |   | 21,132  |                  | 
|Obligations under capital leases, excluding current portion                                                       |  |                                   | 4,124   |   |                                                |   | 3,060   |                  | 
|Other long-term liabilities                                                                                       |  |                                   | 1,885   |   |                                                |   | 229     |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total liabilities                                                                                                 |  |                                   | 62,804  |   |                                                |   | 56,549  |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Shareholders equity:                                                                                             |  |                                   |         |   |                                                |   |         |                  | 
|Ordinary shares, no par valueauthorized 27,437,853 shares; 4,541,652 issued
shares; 4,116,652 outstanding shares |  |                                   | 40,733  |   |                                                |   | 40,733  |                  | 
|Accumulated other comprehensive income                                                                            |  |                                   | 8,725   |   |                                                |   | 2,804   |                  | 
|Retained earnings                                                                                                 |  |                                   | 15,030  |   |                                                |   | 18,412  |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|                                                                                                                  |  |                                   | 64,488  |   |                                                |   | 61,949  |                  | 
|Less: Treasury stock at cost425,000 ordinary shares                                                              |  |                                   | (2,196  | ) |                                                |   | (2,196  | )                | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total shareholders equity                                                                                        |  |                                   | 62,292  |   |                                                |   | 59,753  |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 
|Total liabilities and shareholders equity                                                                        |  | $                                 | 125,096 |   |                                                | $ | 116,302 |                  | 
|                                                                                                                  |  |                                   |         |   |                                                |   |         |                  | 



See
accompanying notes to Consolidated Financial Statements.



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE INCOME (LOSS)



|                                                                |  | Year endedJanuary 31, 2001                         |         | Year endedJanuary 31, 2002 |                                                            |         | Year endedJanuary 31, 2003 |  |   | Year endedJanuary 31, 2003 |  
|--------------------------------------------------------------- |  | -------------------------------------------------- | ------- | -------------------------- | ---------------------------------------------------------- | ------- | -------------------------- |  | - | -------------------------- | -
|                                                                |  | (In A$ thousands, except share and per share data) |         |                            | (In US$ thousands,except share
andper sharedataUnaudited) |        
|Net sales                                                       |  | $                                                  | 304,471 |                            | $                                                          | 333,276 |                            |  | $ | 325,551                    |  
|Cost of goods sold, warehouse, distribution and occupancy costs |  |                                                    | 207,175 |                            |                                                            | 235,345 |                            |  |   | 230,441                    |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Gross profit                                                    |  |                                                    | 97,296  |                            |                                                            | 97,931  |                            |  |   | 95,110                     |  
|Selling, general and administrative expenses                    |  |                                                    | 87,365  |                            |                                                            | 97,047  |                            |  |   | 89,679                     |  
|Store pre-opening costs                                         |  |                                                    | 639     |                            |                                                            | 137     |                            |  |   | 139                        |  
|Relocation and closure costs (gains)                            |  |                                                    |        |                            |                                                            | 2,207   |                            |  |   | (3,552                     | )
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Operating income (loss)                                         |  |                                                    | 9,292   |                            |                                                            | (1,460  | )                          |  |   | 8,844                      |  
|Equity in income of affiliates, net of tax                      |  |                                                    | 340     |                            |                                                            | 295     |                            |  |   | 462                        |  
|Interest expense                                                |  |                                                    | 2,920   |                            |                                                            | 2,785   |                            |  |   | 2,259                      |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Income (loss) before income tax                                 |  |                                                    | 6,712   |                            |                                                            | (3,950  | )                          |  |   | 7,047                      |  
|Income tax expense (benefit)                                    |  |                                                    | 2,229   |                            |                                                            | (1,412  | )                          |  |   | 2,526                      |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Net income (loss)                                               |  |                                                    | 4,483   |                            |                                                            | (2,538  | )                          |  |   | 4,521                      |  
|Other comprehensive income (loss)                               |  |                                                    | 4,826   |                            |                                                            | 2,794   |                            |  |   | (5,921                     | )
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Net income (loss) after other comprehensive income (loss)       |  | $                                                  | 9,309   |                            | $                                                          | 256     |                            |  | $ | (1,400                     | )
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Earnings (loss) per share:                                      |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Basic                                                           |  | $                                                  | 0.99    |                            | $                                                          | (0.60   | )                          |  | $ | 1.10                       |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Diluted                                                         |  | $                                                  | 0.96    |                            | $                                                          | (0.60   | )                          |  | $ | 1.09                       |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Weighted average shares outstanding (in thousands):             |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Basic                                                           |  |                                                    | 4,542   |                            |                                                            | 4,231   |                            |  |   | 4,117                      |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  
|Diluted                                                         |  |                                                    | 4,689   |                            |                                                            | 4,231   |                            |  |   | 4,150                      |  
|                                                                |  |                                                    |         |                            |                                                            |         |                            |  |   |                            |  







See accompanying notes to Consolidated Financial Statements.



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



|                                             |  | SharesOutstanding |   |  | OrdinaryShares                       |        | AccumulatedOtherComprehensiveIncome |   |        | RetainedEarnings |  |   | TreasuryStock |   |  | TotalShareholdersEquity |       
|-------------------------------------------- |  | ----------------- | - |  | ------------------------------------ | ------ | ----------------------------------- | - | ------ | ---------------- |  | - | ------------- | - |  | ------------------------ | ------
|                                             |  | (000)            |   |  | (In A$ thousands, except share data) |       
|Balances at January 31, 2000                 |  | 4,542             |   |  | $                                    | 40,733 |                                     | $ | 1,105  |                  |  | $ | 13,085        |   |  | $                        |      
|Net income                                   |  |                  |   |  |                                      |       |                                     |   |       |                  |  |   | 4,483         |   |  |                          |      
|Foreign currency translation adjustment      |  |                  |   |  |                                      |       |                                     |   | 4,826  |                  |  |   |              |   |  |                          |      
|                                             |  |                   |   |  |                                      |        |                                     |   |        |                  |  |   |               |   |  |                          |       
|Balances at January 31, 2001                 |  | 4,542             |   |  |                                      | 40,733 |                                     |   | 5,931  |                  |  |   | 17,568        |   |  |                          |      
|Net (loss)                                   |  |                  |   |  |                                      |       |                                     |   |       |                  |  |   | (2,538        | ) |  |                          |      
|Foreign currency translation adjustment      |  |                  |   |  |                                      |       |                                     |   | 2,794  |                  |  |   |              |   |  |                          |      
|Repurchase of ordinary sharestreasury stock |  | (425              | ) |  |                                      |       |                                     |   |       |                  |  |   |              |   |  |                          | (2,196
|                                             |  |                   |   |  |                                      |        |                                     |   |        |                  |  |   |               |   |  |                          |       
|Balances at January 31, 2002                 |  | 4,117             |   |  |                                      | 40,733 |                                     |   | 8,725  |                  |  |   | 15,030        |   |  |                          | (2,196
|Net income                                   |  |                  |   |  |                                      |       |                                     |   |       |                  |  |   | 4,521         |   |  |                          |      
|Dividend of A$0.2734 per share               |  |                  |   |  |                                      |       |                                     |   |       |                  |  |   | (1,139        | ) |  |                          |      
|Foreign currency translation adjustment      |  |                  |   |  |                                      |       |                                     |   | (5,921 | )                |  |   |              |   |  |                          |      
|                                             |  |                   |   |  |                                      |        |                                     |   |        |                  |  |   |               |   |  |                          |       
|Balances at January 31, 2003                 |  | 4,117             |   |  | $                                    | 40,733 |                                     | $ | 2,804  |                  |  | $ | 18,412        |   |  | $                        | (2,196
|                                             |  |                   |   |  |                                      |        |                                     |   |        |                  |  |   |               |   |  |                          |       









See accompanying notes to Consolidated Financial Statements.



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                   |  | Year endedJanuary 31,2001 |         |   | Year endedJanuary 31,2002 |   |         | Year endedJanuary 31,2003 | 
|-------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------------- | - | ------- | ------------------------- | 
|                                                                                                   |  | (In A$ thousands)         |        
|Cash flows from operating activities:                                                              |  |                           |         |   |                           |   |         |                           | 
|Net income (loss)                                                                                  |  | $                         | 4,483   |   |                           | $ | (2,538  | )                         | 
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating
activities: |  |                           |         |   |                           |   |         |                           | 
|Depreciation and amortization                                                                      |  |                           | 7,594   |   |                           |   | 7,712   |                           | 
|Deferred income taxes                                                                              |  |                           | 843     |   |                           |   | (1,611  | )                         | 
|Amounts set aside to provisions                                                                    |  |                           | (278    | ) |                           |   | 697     |                           | 
|Undistributed loss (income) of affiliates                                                          |  |                           | 105     |   |                           |   | 246     |                           | 
|(Gain) loss on sale of property, plant and equipment                                               |  |                           | (30     | ) |                           |   | 648     |                           | 
|Changes in operating assets and liabilities:                                                       |  |                           |         |   |                           |   |         |                           | 
|Receivables and prepaid expenses                                                                   |  |                           | (3,424  | ) |                           |   | 3,237   |                           | 
|Inventories                                                                                        |  |                           | (11,027 | ) |                           |   | 1,736   |                           | 
|Other assets                                                                                       |  |                           | 21      |   |                           |   | (33     | )                         | 
|Accounts payable and accrued liabilities                                                           |  |                           | 1,566   |   |                           |   | 4,127   |                           | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Net cash (used in) provided by operating activities                                                |  |                           | (147    | ) |                           |   | 14,221  |                           | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Cash flows from investing activities:                                                              |  |                           |         |   |                           |   |         |                           | 
|Proceeds from sale of property, plant and equipment                                                |  |                           | 332     |   |                           |   | 337     |                           | 
|Capital expenditures                                                                               |  |                           | (7,558  | ) |                           |   | (4,214  | )                         | 
|Loan repayments received                                                                           |  |                           | 106     |   |                           |   |        |                           | 
|Loan repayments (paid)                                                                             |  |                           |        |   |                           |   | (254    | )                         | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Net cash (used in) investing activities                                                            |  |                           | (7,120  | ) |                           |   | (4,131  | )                         | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Cash flows from financing activities:                                                              |  |                           |         |   |                           |   |         |                           | 
|Repayment of long-term debt                                                                        |  |                           | (21,500 | ) |                           |   | (31,500 | )                         | 
|Proceeds from long-term debt                                                                       |  |                           | 31,257  |   |                           |   | 26,105  |                           | 
|Principal payments under capital leases                                                            |  |                           | (2,489  | ) |                           |   | (2,498  | )                         | 
|Dividend paid                                                                                      |  |                           |        |   |                           |   |        |                           | 
|Repurchase of ordinary sharestreasury stock                                                       |  |                           |        |   |                           |   | (2,196  | )                         | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Net cash provided by (used in) financing activities                                                |  |                           | 7,268   |   |                           |   | (10,089 | )                         | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Net increase in cash and cash equivalents                                                          |  |                           | 1       |   |                           |   | 1       |                           | 
|Cash and cash equivalents at beginning of period                                                   |  |                           | 33      |   |                           |   | 34      |                           | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 
|Cash and cash equivalents at end of period                                                         |  | $                         | 34      |   |                           | $ | 35      |                           | 
|                                                                                                   |  |                           |         |   |                           |   |         |                           | 





See accompanying notes to Consolidated Financial Statements.



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | Summary of Significant Accounting Policies
|-- |  | ------------------------------------------



|(a) |  | Description of business
|--- |  | -----------------------



Barbeques Galore Limited (Barbeques Galore or the Company) is an Australian resident company which is involved in
the manufacture of barbecues and heaters, and the wholesale and retail sale of barbecues, heaters, camping equipment, outdoor furniture, backyard products, leisure products and related accessories through Company-owned and licensed stores in
Australia. The Company is also involved in the retailing, through Company-owned and franchised stores, of barbecues, fireplace equipment and accessories and backyard products, in the United States of America. The Companys manufacturing
operations are located in Australia.



|(b) |  | Principles of consolidation
|--- |  | ---------------------------



The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated on consolidation.



|(c) |  | Inventories
|--- |  | -----------



Inventories are comprised of raw materials and stores, work in progress and finished goods. Inventories are valued at the lower of cost or
market using the first-in, first-out (FIFO) method.



|(d) |  | Derivative financial instruments
|--- |  | --------------------------------



The Company uses foreign currency forward contracts to offset earnings fluctuations from anticipated foreign currency cash flows. These
instruments are marked to market and the results recognized immediately as income or expense.



|(e) |  | Investments in affiliated companies
|--- |  | -----------------------------------



Investments in the ordinary shares of 20% to 50% owned companies are accounted for by the equity method.



|(f) |  | Property, plant and equipment
|--- |  | -----------------------------



Property, plant and equipment are stated at cost net of accumulated depreciation. Plant and equipment under capital leases are initially
recorded at the present value of minimum lease payments. The method of depreciation and estimable useful lives over which property, plant and equipment is depreciated, are as follows:



|                           |  | Method        |  | Years
|-------------------------- |  | ------------- |  | -----
|Buildings                  |  | Straight line |  | 40   
|Machinery and equipment    |  | Straight line |  | 812 
|Leasehold improvements     |  | Straight line |  | 520 
|Leased plant and equipment |  | Straight line |  | 35  



Plant
and equipment held under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Obligations under capital leases are reduced by payments of
principal. The interest components of the capital lease payments are charged to the consolidated statements of operations and other comprehensive income (loss).



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





|(g) |  | Goodwill
|--- |  | --------



Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, is no longer amortized but tested
instead for impairment at least annually, pursuant to Financial Accounting Standards Board (FASB) Statement No. 142, Goodwill and Intangible Assets (Statement 142) which the Company adopted on February 1, 2002. The
Company has also evaluated the impact of FASB Statement No. 141, Business Combinations which specifies the types of acquired intangible assets required to be recognized and reported separately from goodwill and those required to be included
in goodwill and believes there will be no material impact on its results of operations, financial position or liquidity.



|(h) |  | Product management and development, and advertising
|--- |  | ---------------------------------------------------



Product management and development, and advertising costs are expensed as incurred. Amounts expensed were as
follows:



|                                   |  | Year endedJanuary 31,2001 |        | Year endedJanuary 31,2002 |   | Year endedJanuary 31,2003
|---------------------------------- |  | ------------------------- | ------ | ------------------------- | - | -------------------------
|                                   |  | (In A$ thousands)        
|Product management and development |  | $                         | 1,044  |                           | $ | 1,076                    
|Advertising                        |  |                           | 13,588 |                           |   | 15,325                   
|                                   |  |                           |        |                           |   |                          



|(i) |  | Income taxes
|--- |  | ------------



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company does not provide for income tax on foreign currency translation adjustments since it does not provide for such taxes on undistributed earnings of foreign subsidiaries.



|(j) |  | Share option plan
|--- |  | -----------------



The Company adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, in 1996,
(SFAS No 123) under which it elected to continue following the provisions of Accounting Principles Board Opinion No 25, Accounting for Stock Issued to Employees, (APB Opinion No 25) and related interpretations for its
share option plan. Generally, compensation expense is recorded on the date of grant only if the market price of the underlying share exceeded the exercise price.



|(k) |  | Commitments and contingencies
|--- |  | -----------------------------



Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when
it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.



|(l) |  | Use of estimates
|--- |  | ----------------



Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





(m)Impairment of long-lived assets and long-lived assets to be disposed of



The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Impairment of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted operating net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.



|(n) |  | Rent expense, surplus leased space and lease incentives
|--- |  | -------------------------------------------------------



The Company leases certain store locations under operating leases, which provide for annual payments that
increase over the lives of the leases. Total payments under the leases are expensed on a straight-line basis over the lease term unless another systematic and rational allocation basis is more representative of the time pattern in which the leased
property is physically employed.



Where premises
under a non-cancelable operating lease become vacant during the lease term, a charge is recognized on that date equal to the present value of the expected future lease payments less any expected future sub-lease income.



If the Company receives incentives provided by a lessor to
enter into an operating lease agreement, these incentives are brought to account as reductions in rent expense over the term of the lease on a straight-line basis.



|(o) |  | Revenue recognition
|--- |  | -------------------



Revenue (net of returns and allowances) is recognized at the point of shipment for wholesale sales to external customers and the point of
sale for retail goods. Revenue from licensing fees and royalties are recognized as they accrue.



|(p) |  | Cash and cash equivalents
|--- |  | -------------------------



Cash includes cash on hand and at bank. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash equivalents.



|(q) |  | Store pre-opening costs
|--- |  | -----------------------



Store pre-opening costs are expensed when incurred.



|(r) |  | Earnings (loss) per share
|--- |  | -------------------------



Basic earnings (loss) per share are computed by dividing net income (loss) available to ordinary shareholders, by the weighted average
number of ordinary shares. Diluted earnings (loss) per share are computed by dividing net income (loss) available to ordinary shareholders, by the weighted average number of ordinary shares and dilutive ordinary share equivalents for the period. In
calculating the dilutive effect of share options, the Company uses the treasury stock method.



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





|(s) |  | Foreign currency translation
|--- |  | ----------------------------



Foreign currency transactions are converted to Australian currency at the rates of exchange applicable at the dates of the transactions.
Amounts receivable and payable in foreign currencies at balance date are converted at the year end rates. Gains and losses from conversion of monetary assets and liabilities, whether realized or unrealized, are included in income (loss) before
income taxes as they arise.



Assets and
liabilities of overseas subsidiaries are translated at year-end rates and operating results at the average rates ruling during the year.



|(t) |  | Convenience translation (unaudited)
|--- |  | -----------------------------------



The information in U.S. dollars in the consolidated balance sheets and consolidated statements of operations
and other comprehensive income (loss) is presented solely for the convenience of the reader and has been translated at the spot rate on January 31, 2003 of US$0.5884 per A$1.00 and at the average rate for each quarter in respect of the fiscal year
ended January 31, 2003 which equates to an annual equivalent of US$0.5509 per A$1.00, respectively. These translations should not be construed as representations that the Australian dollar amounts actually represent such U.S. dollar amounts or could
be converted into U.S. dollars at the rate indicated or at any other rate.



|(u) |  | Other comprehensive income (loss)
|--- |  | ---------------------------------



The only component of other comprehensive income (loss) that impacts the Company is foreign currency
translation adjustments pursuant to the translation of the assets and liabilities of the Companys overseas subsidiaries. The net gain (loss) associated with the foreign currency translation adjustments for the years ended January 31, 2001,
2002 and 2003 was A$4,826,000, A$2,794,000 and A$(5,921,000), respectively. Accumulated other comprehensive income at January 31, 2002 and 2003 consisted solely of foreign currency translation adjustments with credit balances of A$8.7 million and
A$2.8 million, respectively.



|(v) |  | Goods and Services Tax
|--- |  | ----------------------



A Goods and Services Tax (GST) was introduced in Australia from July 1, 2000. The GST is not included in reported sales since
July 1, 2000. A wholesale sales tax on sales in effect in Australia prior to July 1, 2000 was abolished as of that date. Sales tax amounts were included in sales and cost of goods sold for all periods presented prior to July 1, 2000.



Revenues, expenses and assets are recognized net of the amount
of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognized as part of the cost of acquisition of the asset or as part of an item of the expense.



Receivables and payables are stated with the
amount of GST included. The net amount of GST recoverable from, or payable to, the ATO, is included as a current asset or liability in the balance sheet.



Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the ATO, are classified as operating cash flows.



|2. |  | Derivative Financial Instruments
|-- |  | --------------------------------



The Company utilizes foreign currency forward contracts as a means of offsetting fluctuations in the dollar value of foreign currency
accounts payable. The counterparties to the contracts are major financial institutions



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and the risk of loss to the Company in the event of non-performance by a counterparty is not significant. The notional amount of foreign
currency forward contracts and the weighted average rates, are as follows:



|                        |  | Year endedJanuary 31,2002 |  | Year endedJanuary 31,2003 |  | Year endedJanuary 31,2002 |     | Year endedJanuary 31,2003
|----------------------- |  | ------------------------- |  | ------------------------- |  | ------------------------- | --- | -------------------------
|                        |  | (weighted average rate)   |  | (In A$ thousands)        
|Buy Pounds sterling     |  |                           |  |                           |  |                           |     |                          
|Not later than one year |  | Nil                       |  | 0.3529                    |  | $                         | Nil |                          
|                        |  |                           |  |                           |  |                           |     |                          
|Sell U.S. dollars       |  |                           |  |                           |  |                           |     |                          
|Not later than one year |  | Nil                       |  | 0.5632                    |  | $                         | Nil |                          
|                        |  |                           |  |                           |  |                           |     |                          



The fair
value of these contracts at balance date, is not significant.



|3. |  | Accounts Receivable
|-- |  | -------------------



Accounts receivable consists of the following:



|                                    |  | January 31,2002   |        |   | January 31,2003 |  
|----------------------------------- |  | ----------------- | ------ | - | --------------- | -
|                                    |  | (In A$ thousands) |       
|Trade accounts receivable           |  | $                 | 13,088 |   |                 | $
|Less: Reserve for doubtful accounts |  |                   | (270   | ) |                 |  
|                                    |  |                   |        |   |                 |  
|                                    |  |                   | 12,818 |   |                 |  
|Other receivables                   |  |                   | 420    |   |                 |  
|                                    |  |                   |        |   |                 |  
|                                    |  | $                 | 13,238 |   |                 | $
|                                    |  |                   |        |   |                 |  



|4. |  | Inventories
|-- |  | -----------



The major classes of inventories are as follows:



|                               |  | January 31,2002   |        |   | January 31,2003 |  
|------------------------------ |  | ----------------- | ------ | - | --------------- | -
|                               |  | (In A$ thousands) |       
|Finished goods                 |  | $                 | 58,575 |   |                 | $
|Work in progress               |  |                   | 1,705  |   |                 |  
|Raw materials                  |  |                   | 3,451  |   |                 |  
|                               |  |                   |        |   |                 |  
|                               |  |                   | 63,731 |   |                 |  
|Less: Reserve for obsolescence |  |                   | (472   | ) |                 |  
|                               |  |                   |        |   |                 |  
|                               |  | $                 | 63,259 |   |                 | $
|                               |  |                   |        |   |                 |  



|5. |  | Investments in Affiliated Companies
|-- |  | -----------------------------------



Investments in affiliated companies consist of a one-third ownership of the ordinary shares in each of Bromic Pty Limited and subsidiaries
(Bromic), an Australian group which imports and distributes componentry to the gas and appliance industries and Renegade Gas Pty Limited (Renegade), an Australian industrial and gas distributor. The remaining 50% of the
ordinary shares of GLG Trading Pte Limited (GLG), a



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Singapore company which acted as a buying office for the Company and other third parties until cessation of that activity on December 31,
2001, was acquired by the Company as of May 2, 2002 as a result of which, GLG is now a wholly-owned subsidiary. The buying office has been dismantled and the administration of Asian purchases is currently being handled from Hong Kong.



Bromic provides liquid petroleum gas cylinders and related
products such as manifolds, bundy tubes, glass and barbecue ignitions to the Company. Renegade supplies the L.P. gas which is used to power the gas-operated forklifts at the Companys manufacturing and distribution sites. Sales to affiliated
companies are not significant. Interest is also charged on amounts owing by affiliates at commercial rates but is not significant. Amounts owing by affiliates are in relation to cash advances.



Prices charged between the Company and its affiliates are set
at the level of prices that are charged to unrelated parties. Trading with affiliates for each period and amounts outstanding at each period end, are as follows:



|                                                          |  | Year endedJanuary 31,2001 |        | Year endedJanuary 31,2002 |   | Year endedJanuary 31,2003
|--------------------------------------------------------- |  | ------------------------- | ------ | ------------------------- | - | -------------------------
|                                                          |  | (In A$ thousands)        
|Purchases from affiliates:                                |  |                           |        |                           |   |                          
|Bromic Pty Limited                                       |  | $                         | 2,777  |                           | $ | 2,207                    
|GLG Trading Pte Limited                                  |  |                           | 12,403 |                           |   | 15,728                   
|Renegade Gas Pty Limited                                 |  |                           |       |                           |   |                         
|                                                          |  |                           |        |                           |   |                          
|                                                          |  | $                         | 15,180 |                           | $ | 17,935                   
|                                                          |  |                           |        |                           |   |                          
|Dividends received or due and receivable from affiliates: |  |                           |        |                           |   |                          
|Bromic Pty Limited                                       |  | $                         | 200    |                           | $ | 340                      
|GLG Trading Pte Limited                                  |  |                           | 226    |                           |   | 202                      
|                                                          |  |                           |        |                           |   |                          
|                                                          |  | $                         | 426    |                           | $ | 542                      
|                                                          |  |                           |        |                           |   |                          



|                                   |  | January 31, 2002  |     | January 31, 2003
|---------------------------------- |  | ----------------- | --- | ----------------
|                                   |  | (In A$ thousands)
|Receivables from affiliates (net): |  |                   |     |                 
|Bromic Pty Limited                |  | $                 | 648 |                 
|GLG Trading Pte Limited           |  |                   | 248 |                 
|                                   |  |                   |     |                 
|                                   |  | $                 | 896 |                 
|                                   |  |                   |     |                 
|Investments in affiliates          |  | $                 | 703 |                 
|                                   |  |                   |     |                 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Investments in affiliates are included in the balance sheet as other non-current assets. The investments in these companies are carried at the equity accounted value representing cost plus the Companys share of undistributed
profits, less dividends. Combined summarized and unaudited financial data as at and for the years ended January 31, 2001, 2002 and 2003, is as follows:



|                                   |  | January 31, 2001  |        |   | January 31, 2002 |   |        | January 31, 2003 | 
|---------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | ---------------- | 
|                                   |  | (In A$ thousands) |       
|Current assets                     |  | $                 | 10,102 |   |                  | $ | 11,748 |                  | 
|Current liabilities                |  |                   | (5,711 | ) |                  |   | (9,893 | )                | 
|                                   |  |                   |        |   |                  |   |        |                  | 
|Working capital                    |  |                   | 4,391  |   |                  |   | 1,855  |                  | 
|Property, plant and equipment, net |  |                   | 1,237  |   |                  |   | 6,618  |                  | 
|Other assets                       |  |                   | 684    |   |                  |   | 964    |                  | 
|Long-term debt                     |  |                   | (2,194 | ) |                  |   | (5,532 | )                | 
|                                   |  |                   |        |   |                  |   |        |                  | 
|Shareholders equity               |  | $                 | 4,118  |   |                  | $ | 3,905  |                  | 
|                                   |  |                   |        |   |                  |   |        |                  | 
|Sales                              |  | $                 | 21,396 |   |                  | $ | 24,199 |                  | 
|                                   |  |                   |        |   |                  |   |        |                  | 
|Gross profit                       |  | $                 | 3,923  |   |                  | $ | 6,916  |                  | 
|                                   |  |                   |        |   |                  |   |        |                  | 
|Net income                         |  | $                 | 777    |   |                  | $ | 1,085  |                  | 
|                                   |  |                   |        |   |                  |   |        |                  | 



Income
statement information has been presented for the respective twelve-month periods ended January 31, 2003. The year-end dates of Bromic and Renegade are June 30 and that of GLG, December 31.



|6. |  | Property, Plant and Equipment
|-- |  | -----------------------------



|                                            |  | January 31, 2002  |         |   | January 31, 2003 |  
|------------------------------------------- |  | ----------------- | ------- | - | ---------------- | -
|                                            |  | (In A$ thousands) |        
|Land and buildings                          |  | $                 | 9,546   |   |                  | $
|Machinery and equipment                     |  |                   | 31,630  |   |                  |  
|Leasehold improvements                      |  |                   | 19,403  |   |                  |  
|Assets under capital leases                 |  |                   | 12,573  |   |                  |  
|                                            |  |                   |         |   |                  |  
|                                            |  |                   | 73,152  |   |                  |  
|Less: Accumulated depreciation/amortization |  |                   | (35,916 | ) |                  |  
|                                            |  |                   |         |   |                  |  
|                                            |  | $                 | 37,236  |   |                  | $
|                                            |  |                   |         |   |                  |  



|7. |  | Goodwill
|-- |  | --------



|                               |  | January 31, 2002  |       |   | January 31, 2003 |  
|------------------------------ |  | ----------------- | ----- | - | ---------------- | -
|                               |  | (In A$ thousands) |      
|Goodwill                       |  | $                 | 1,724 |   |                  | $
|Less: Accumulated amortization |  |                   | (598  | ) |                  |  
|                               |  |                   |       |   |                  |  
|                               |  | $                 | 1,126 |   |                  | $
|                               |  |                   |       |   |                  |  



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The
following table presents reported net income (loss) adjusted to exclude goodwill amortization which is no longer recorded pursuant to Statement 142, effective February 1, 2002.



|                                           |  | Year ended January 31,                 
|------------------------------------------ |  | ---------------------------------------
|                                           |  | 2001                                   
|                                           |  | (In A$ thousands,except per share data)
|Net income (loss)                          |  |                                        
|As reported                                |  | $                                      
|Goodwill amortization (net of tax)         |  |                                        
|                                           |  |                                        
|Adjusted net income (loss)                 |  | $                                      
|                                           |  |                                        
|Basic earnings (loss) per share            |  |                                        
|As reported                                |  | $                                      
|Goodwill amortization                      |  |                                        
|                                           |  |                                        
|Adjusted basic earnings (loss) per share   |  | $                                      
|                                           |  |                                        
|Diluted earnings (loss) per share          |  |                                        
|As reported                                |  | $                                      
|Goodwill amortization                      |  |                                        
|                                           |  |                                        
|Adjusted diluted earnings (loss) per share |  | $                                      
|                                           |  |                                        



|8. |  | Leases
|-- |  | ------



The Company is obligated under various capital leases for store improvements and certain machinery and equipment that expire in the main,
at various dates during the next five years. The capital leases for store improvements relate to the purchase of furniture and fixtures installed in retail stores. These retail stores are all managed under operating leases. Machinery and equipment
under capital leases include leased machinery, office furniture and fixtures and certain motor vehicles. All capital lease liabilities are secured by the asset to which the lease relates. The gross amount of store improvements and machinery and
equipment and related accumulated amortization recorded under capital leases is as follows:



|                               |  | January 31, 2002  |        |   | January 31, 2003 |  
|------------------------------ |  | ----------------- | ------ | - | ---------------- | -
|                               |  | (In A$ thousands) |       
|Store improvements             |  | $                 | 4,185  |   |                  | $
|Machinery and equipment        |  |                   | 8,388  |   |                  |  
|                               |  |                   |        |   |                  |  
|                               |  |                   | 12,573 |   |                  |  
|Less: Accumulated amortization |  |                   | (5,524 | ) |                  |  
|                               |  |                   |        |   |                  |  
|                               |  | $                 | 7,049  |   |                  | $
|                               |  |                   |        |   |                  |  





The Company also has entered into non-cancelable operating leases, primarily for retail stores. These leases generally contain renewal
options for periods ranging in the main, from three to five years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (except those with lease terms of a month or less that were
not renewed) consisted of the following:



|                |  | January 31, 2001  |        | January 31, 2002 |   | January 31, 2003
|--------------- |  | ----------------- | ------ | ---------------- | - | ----------------
|                |  | (In A$ thousands)
|Rental expenses |  | $                 | 23,071 |                  | $ | 26,939          
|                |  |                   |        |                  |   |                 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Future
minimum capital lease payments and future minimum lease payments under non-cancelable operating leases as of January 31, 2003 are:



|                                                            |  | Capital leases    |       |   | Operating leases
|----------------------------------------------------------- |  | ----------------- | ----- | - | ----------------
|                                                            |  | (in A$ thousands)
|Year ending January 31,                                     |  |                   |       |   |                 
|2004                                                        |  | $                 | 3,115 |   |                 
|2005                                                        |  |                   | 1,804 |   |                 
|2006                                                        |  |                   | 984   |   |                 
|2007                                                        |  |                   | 446   |   |                 
|2008                                                        |  |                   | 197   |   |                 
|Years subsequent to 2008                                    |  |                   |      |   |                 
|                                                            |  |                   |       |   |                 
|Total minimum lease payments                                |  |                   | 6,546 |   |                 
|                                                            |  |                   |       |   |                 
|Less: Amounts representing interest                         |  |                   | (708  | ) |                 
|                                                            |  |                   |       |   |                 
|Present value of net minimum capital lease payments         |  |                   | 5,838 |   |                 
|Less: Current portion of obligations under capital leases   |  |                   | 2,778 |   |                 
|                                                            |  |                   |       |   |                 
|Obligations under capital leases, excluding current portion |  | $                 | 3,060 |   |                 
|                                                            |  |                   |       |   |                 



|9. |  | Accounts Payable and Accrued Liabilities
|-- |  | ----------------------------------------



Accounts payable and accrued liabilities consist of the following:



|                       |  | January 31, 2002  |        | January 31, 2003
|---------------------- |  | ----------------- | ------ | ----------------
|                       |  | (In A$ thousands)
|Trade accounts payable |  | $                 | 14,570 |                 
|Accrued liabilities    |  |                   | 11,077 |                 
|Employee benefits      |  |                   | 2,662  |                 
|Other                  |  |                   | 969    |                 
|                       |  |                   |        |                 
|                       |  | $                 | 29,278 |                 
|                       |  |                   |        |                 



|10. |  | Long-Term Debt
|--- |  | --------------



Long-term debt consists of the following:



|               |  | January 31, 2002  |        | January 31, 2003
|-------------- |  | ----------------- | ------ | ----------------
|               |  | (In A$ thousands)
|Non-current:   |  |                   |        |                 
|Bank bills     |  | $                 | 16,626 |                 
|Property loans |  |                   | 8,450  |                 
|               |  |                   |        |                 
|               |  | $                 | 25,076 |                 
|               |  |                   |        |                 



The
Company and its subsidiaries have access to a facility with Australia and New Zealand Banking Group Limited (ANZ) (the ANZ Facility) up to A$55,800,000, comprising real property loans in principal amount of A$8,450,000
(secured by registered first mortgages over the respective freehold properties of the Company),



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



overdraft, leasing, interchangeable and commercial bill acceptance discount facilities in principal amount of A$39,600,000 and foreign
currency and other facilities in principal amount of A$7,750,000. As of January 31, 2003 the Company had not utilized A$29,692,718 of the total facility. The ANZ Facility is secured by a first security interest over the Companys present and
future Australian assets and a second security interest (subordinate to a lien under the Merrill Lynch Facility detailed below) in all the Companys assets in the United States. The ANZ Facility is further guaranteed by each subsidiary of the
Company as well as The Galore Group (USA), Inc. and Barbeques Galore, Inc. (referred to collectively as Galore USA).



The ANZ facility includes bank bills which are generally taken out for periods varying from approximately 30 to 90 days and rolled over at
the end of their respective terms. Overseas purchases are generally refinanced for periods varying up to approximately 165 days. As of January 31, 2002 and 2003, the weighted average interest rates accruing on the bank bills utilized under the ANZ
Facility were as follows:



|               |  | January 31, 2002  |        | January 31, 2003          |   | January 31, 2002 |  | January 31, 2003
|-------------- |  | ----------------- | ------ | ------------------------- | - | ---------------- |  | ----------------
|               |  | (In A$ thousands) |        | (Interest rate per annum)
|Bank bills     |  | $                 | 16,626 |                           | $ | 12,682           |  | 5.6%            
|Property loans |  |                   | 8,450  |                           |   | 8,450            |  | 6.9% to 7.5%    



All
committed facilities are provided subject to the standard Australian practice of regular annual review of required limits, the Companys performance and the normal terms and conditions, including financial covenants, applicable to bank lending.
Historically, the Company has renegotiated its credit facilities on similar terms and conditions and, as the Company is able to roll-over bank bills (generally taken out for periods varying from approximately 30 to 90 days), the outstanding balance
relating to bank bills and property loans is classified as a non-current liability.



Barbeques Galore, Inc., the Companys U.S. operating subsidiary, has access to a credit facility with Merrill Lynch Business Financial Services, Inc. (Merrill Lynch). As currently in
effect, such facility comprises a revolving line of credit in aggregate principal amount of US$1.0 million (the Merrill Lynch Facility). Indebtedness under the revolving line of credit accrues interest at the 30-day commercial paper rate
plus 2.70% and is payable monthly. The Merrill Lynch Facility is secured by a first security interest in all Galore USA present and future assets and is guaranteed by the Company and The Galore Group (USA), Inc., the parent of Barbeques Galore, Inc.
As at January 31, 2003, there were no drawings against this facility.



The Companys total long-term debt matures as follows:



|Year ending January 31, |  | (In A$ thousands)
|----------------------- |  | -----------------
|2004                    |  | $                
|2005                    |  |                  
|                        |  |                  
|                        |  | $                
|                        |  |                  



|11. |  | Income Taxes
|--- |  | ------------



Income (loss) before income tax was taxed under the following jurisdictions:



|              |  | Year ended January 31, 2001 |       | Year ended January 31, 2002 |   |        | Year ended January 31, 2003 | 
|------------- |  | --------------------------- | ----- | --------------------------- | - | ------ | --------------------------- | 
|              |  | (In A$ thousands)           |      
|Australia     |  | $                           | 6,396 |                             | $ | 767    |                             | 
|United States |  |                             | 316   |                             |   | (4,717 | )                           | 
|              |  |                             |       |                             |   |        |                             | 
|              |  | $                           | 6,712 |                             | $ | (3,950 | )                           | 
|              |  |                             |       |                             |   |        |                             | 



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The income
tax expense (benefit) is presented below:



|              |  | Year ended January 31, 2001 |       |   | Year ended January 31, 2002 |   |        | Year ended January 31, 2003 | 
|------------- |  | --------------------------- | ----- | - | --------------------------- | - | ------ | --------------------------- | 
|              |  | (In A$ thousands)           |      
|Current:      |  |                             |       |   |                             |   |        |                             | 
|Australia     |  | $                           | 1,125 |   |                             | $ | 1,263  |                             | 
|United States |  |                             | 262   |   |                             |   | (1,064 | )                           | 
|              |  |                             |       |   |                             |   |        |                             | 
|              |  |                             | 1,387 |   |                             |   | 199    |                             | 
|              |  |                             |       |   |                             |   |        |                             | 
|Deferred:     |  |                             |       |   |                             |   |        |                             | 
|Australia     |  |                             | 1,148 |   |                             |   | (954   | )                           | 
|United States |  |                             | (306  | ) |                             |   | (657   | )                           | 
|              |  |                             |       |   |                             |   |        |                             | 
|              |  |                             | 842   |   |                             |   | (1,611 | )                           | 
|              |  |                             |       |   |                             |   |        |                             | 
|              |  | $                           | 2,229 |   |                             | $ | (1,412 | )                           | 
|              |  |                             |       |   |                             |   |        |                             | 



Income
tax expense (benefit) differed from the amounts computed by applying the Australian federal income tax rate of 30% (year ended January 31, 2002: 30%; year ended January 31, 2001: 34%) to pretax income (loss) as a result of the following:



|                                                               |  | Year ended January 31, 2001 |       |   | Year ended January 31, 2002 |   |        | Year ended January 31, 2003 | 
|-------------------------------------------------------------- |  | --------------------------- | ----- | - | --------------------------- | - | ------ | --------------------------- | 
|                                                               |  | (In A$ thousands)           |      
|Computed expected tax expense (benefit)                      |  | $                           | 2,282 |   |                             | $ | (1,185 | )                           | 
|Increase (reduction) in income taxes resulting from:           |  |                             |       |   |                             |   |        |                             | 
|Write-off of deferred tax assets to reflect recoverable amount |  |                             |      |   |                             |   |       |                             | 
|State taxes, net of federal tax benefit                        |  |                             | 37    |   |                             |   | (181   | )                           | 
|Equity in earnings of affiliates not subject to taxation       |  |                             | (141  | ) |                             |   | (89    | )                           | 
|Prior year adjustment                                          |  |                             |      |   |                             |   |       |                             | 
|Other, net                                                     |  |                             | 51    |   |                             |   | 43     |                             | 
|                                                               |  |                             |       |   |                             |   |        |                             | 
|                                                               |  | $                           | 2,229 |   |                             | $ | (1,412 | )                           | 
|                                                               |  |                             |       |   |                             |   |        |                             | 



The tax
effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liability is presented below:



|                                                                        |  | January 31, 2002  |       |   | January 31, 2003 |  
|----------------------------------------------------------------------- |  | ----------------- | ----- | - | ---------------- | -
|                                                                        |  | (In A$ thousands) |      
|Deferred tax assets:                                                    |  |                   |       |   |                  |  
|Provisions not presently deductible                                     |  | $                 | 1,710 |   |                  | $
|Plant and equipment, due to differences in depreciation                 |  |                   | 1,662 |   |                  |  
|Inventories, due to capitalized costs                                   |  |                   | 1,225 |   |                  |  
|Leases, due to differences in lease payments, interest and amortization |  |                   | (133  | ) |                  |  
|Net operating loss carryforward                                         |  |                   | 113   |   |                  |  
|Other                                                                   |  |                   | 254   |   |                  |  
|                                                                        |  |                   |       |   |                  |  
|Total deferred tax assets                                               |  | $                 | 4,831 |   |                  | $
|                                                                        |  |                   |       |   |                  |  
|Deferred tax liability:                                                 |  |                   |       |   |                  |  
|Prepayments                                                             |  |                   | 49    |   |                  |  
|                                                                        |  |                   |       |   |                  |  
|Total deferred tax liability                                            |  | $                 | 49    |   |                  | $
|                                                                        |  |                   |       |   |                  |  
|Net deferred tax asset                                                  |  | $                 | 4,782 |   |                  | $
|                                                                        |  |                   |       |   |                  |  



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. Based upon projections for future taxable income over the periods during which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these
deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.



12.    Share Option Plans



(a)    Executive Share Option Plan
(the Executive Plan)



On
January 31, 1997, the Company adopted the Executive Plan pursuant to which, the Board of Directors granted options to certain members of management, to purchase Ordinary Shares in the Company. A total of 203,038 options were issued under the
Executive Plan with an exercise price of A$8.38 per Ordinary Share.



The fair value of each share option grant was estimated to be A$1.12 on the date of grant using the Black-Scholes option-pricing model with the following assumptions: weighted average risk-free interest rate of 6.49%; no
dividend yield; expected life of 2.5 years and volatility of 17.97%.



The options granted under the Executive Plan expired by their terms on February 1, 2002, the day the Executive Plan lapsed. No options granted under the Executive Plan were exercised prior to its lapse.



(b)    1997 Share Option Plan (the
1997 Plan)



Under the terms
of the Companys 1997 Plan, a total of 1,056,338 Ordinary Shares have been authorized for issuance. The 1997 Plan was adopted by the Board of Directors on October 1, 1997 and approved by shareholders as of October 7, 1997.



The number of Ordinary Shares reserved for issuance under the
1997 Plan will automatically increase on the first trading day of each calendar year, beginning with the 1999 calendar year, during the term of the 1997 Plan by an amount equal to one per cent (1%) of the Ordinary Shares outstanding on December 31
of the immediately preceding calendar year. In no event may any one participant in the 1997 Plan receive option grants for more than 200,000 Ordinary Shares per calendar year. Pursuant to a resolution of shareholders passed at the Companys
Annual General Meeting on June 14, 2002, the maximum number of options which may be granted to any single individual in the 1997 Plan, was increased to 200,000 Ordinary Shares per fiscal year.



The 1997 Plan consists of the Option Grant Program, under
which eligible individuals in the Companys employ or service (including officers and other employees, non-employee Board members, consultants and other independent advisers of the Company, or any parent or subsidiary) may, at the discretion of
the Plan Administrator, be granted stock options to purchase Ordinary Shares at an exercise price not less than eighty-five per cent (85%) of their fair market value on the option grant date.



The Compensation Committee administers the 1997 Plan. The Plan
Administrator has complete discretion, within the scope of its administrative jurisdiction under the 1997 Plan, to determine which eligible individuals are to receive stock option grants, the time or times when such grants are to be made, the number
of shares subject to each such grant, the exercise and vesting schedule to be in effect for the grant, the maximum term for

which any
granted stock option is to remain outstanding and the status of any granted stock option as either an incentive stock option or a non-statutory stock option under the U.S. Federal tax laws.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The Board
of Directors, pursuant to a meeting on September 1, 1998, granted options to a Director to purchase up to an aggregate of 17,646 Ordinary Shares at a price of US$8.50 per Ordinary Share under the 1997 Plan, exercisable in three equal installments on
September 1, 2001, September 1, 2002 and August 1, 2003. These options were subsequently canceled pursuant to a circulating resolution of the directors on January 10, 2000 and replaced with options granted to the same Director, to purchase up to an
aggregate of 17,646 Ordinary Shares at a price of US$6.38 per Ordinary Share under the 1997 Plan, exercisable in three equal installments on January 7, 2003, (none of which were exercised), January 7, 2004 and December 7, 2004.



As a result of decreases in the market price of the
Companys Ordinary Shares during the latter part of 1998, the exercise price of those options granted concurrently with the Offering at US$11.00 per Ordinary Share, was significantly higher than the market price. Consequently and in order to
provide all employees with the continuing opportunity to acquire Ordinary Shares of the Company at an attractive purchase price, the Board of Directors at a meeting on November 9, 1998, resolved to implement a special option cancelation/re-grant
program. Under that program, each option outstanding on that date with an exercise price of US$11.00 per Ordinary Share (an Old Option) was canceled and simultaneously, a new option for the identical number of shares but with an exercise
price of US$5.20 per Ordinary Share (a New Option), was granted in replacement thereof. The New Options became/are exercisable in three equal installments on November 9, 2001 and November 9, 2002, respectively, (none of which were
exercised) and October 9, 2003. All other terms and conditions of the New Options are substantially the same as the Old Options. In the aggregate, Old Options to purchase 177,200 Ordinary Shares were canceled and re-granted under the program. In
addition to the cancelation and re-grant program on November 9, 1998, the Board of Directors granted further options to directors, a member of senior management and employees to purchase up to an aggregate of 48,250 Ordinary Shares at a price of
US$5.20 per Ordinary Share under the 1997 Plan and exercisable on the same dates as above. During the fiscal year ended January 31, 2003, a total of 20,800 in aggregate of New Options and options, exercisable at US$5.20 per Ordinary Share, were
forfeited.



Pursuant to the aforementioned
circulating resolution of directors, further options were granted to directors, senior management and employees to purchase up to an aggregate of 143,820 Ordinary Shares at a price of US$6.38 per Ordinary Share under the 1997 Plan and exercisable in
three equal installments on January 7, 2003, (none of which were exercised), January 7, 2004 and December 7, 2004. During the fiscal year ended January 31, 2003, a total of 7,950 options, exercisable at US$6.38 per Ordinary Share, were forfeited.



The incremental value of the 177,200 regranted
New Options was A$1.54 per option, which, when added to the compensation cost per the original option of A$8.04, resulted in a total compensation cost from the date of re-grant, of A$9.58. The fair value of the 48,250 share option grant was
estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: weighted average risk-free interest rate of 4.7%; no dividend yield and volatility of 84.42%.



The fair value of the 17,646 and 143,820 share option grants
was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions: weighted average risk-free interest rate of 6.7%; no dividend yield and volatility of 78.35%.



The fair value of the share option grants during the fiscal
year ended January 31, 2003, was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:



| |  |  | 84,686 share options; weighted average risk-free interest rate of 5.29%; no dividend yield and volatility of 41.93%.
| | - |  | --------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





| |  |  | 68,850 share options; weighted average risk-free interest rate of 5.18%; no dividend yield and volatility of 41.93%.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | 118,352 share options; weighted average risk-free interest rate of 4.72%; no dividend yield and volatility of 41.93%.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



The expected lives and fair value of the options as at grant
date are as hereunder:



|Number of Options |  | Expected Lives (yrs) |  | Weighted Average Fair Value Per Option
|----------------- |  | -------------------- |  | --------------------------------------
|155,450           |  | 4.8                  |  | A$8.47                                
|140,516           |  | 4.9                  |  | 6.60                                  
|84,686            |  | 5.5                  |  | 2.04                                  
|64,100            |  | 5.4                  |  | 3.20                                  
|118,352           |  | 5.3                  |  | 2.13                                  
|                  |  |                      |  |                                       
|563,104           |  |                      |  | A$5.10                                
|                  |  |                      |  |                                       



A
summary of the status of the Companys Executive Plan and 1997 Plan as of January 31, 2001, 2002 and 2003 and changes during the periods ended on those dates is presented below:



|                                        |  | Options  |   |  | Weighted- average exercise price |      | Options exercisable at year end |        
|--------------------------------------- |  | -------- | - |  | -------------------------------- | ---- | ------------------------------- | -------
|Outstanding balance at January 31, 2000 |  | 578,154  |   |  |                                  | 8.70 |                                 | 203,038
|                                        |  |          |   |  |                                  |      |                                 |        
|Forfeited                               |  | (12,900  | ) |  |                                  | 8.58 |                                 |        
|                                        |  |          |   |  |                                  |      |                                 |        
|Outstanding balance at January 31, 2001 |  | 565,254  |   |  |                                  | 8.70 |                                 | 203,038
|                                        |  |          |   |  |                                  |      |                                 |        
|Forfeited                               |  | (37,500  | ) |  |                                  | 8.61 |                                 |        
|                                        |  |          |   |  |                                  |      |                                 |        
|Outstanding balance at January 31, 2002 |  | 527,754  |   |  | A$                               | 8.71 |                                 | 203,038
|                                        |  |          |   |  |                                  |      |                                 |        
|Lapsed(Executive Plan)                 |  | (203,038 | ) |  |                                  | 8.38 |                                 |        
|Granted                                 |  | 271,888  |   |  |                                  | 5.79 |                                 |        
|Forfeited                               |  | (33,500  | ) |  |                                  | 8.51 |                                 |        
|                                        |  |          |   |  |                                  |      |                                 |        
|Outstanding balance at January 31, 2003 |  | 563,104  |   |  | A$                               | 7.43 |                                 | 267,138
|                                        |  |          |   |  |                                  |      |                                 |        

---

|(1) |  | Relates to the Executive Plan which lapsed on February 1, 2002.
|--- |  | ---------------------------------------------------------------



The weighted average fair value of options granted during the years ended January 31, 2001, 2002 and 2003 was
A$nil, A$nil and A$2.37, respectively.



The
following table summarizes information about share options outstanding at January 31, 2003:



|Number outstanding at January 31, 2003 |  | Weighted-average remaining contractual life (years) |  | Weighted- average exercise price
|-------------------------------------- |  | --------------------------------------------------- |  | --------------------------------
|155,450                                |  | 0.8                                                 |  | A$8.20                          
|140,516                                |  | 1.9                                                 |  | 9.75                            
|64,100                                 |  | 4.7                                                 |  | 7.72                            
|84,686                                 |  | 4.7                                                 |  | 4.85                            
|118,352                                |  | 4.7                                                 |  | 5.34                            
|                                       |  |                                                     |  |                                 
|563,104                                |  | 2.9                                                 |  | A$7.43                          
|                                       |  |                                                     |  |                                 



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BARBEQUES GALORE LIMITED AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The
Company applies APB Opinion No. 25 in accounting for its share option plans and, accordingly, no compensation cost has been recognized for its share options in the years ended January 31, 2001, 2002 and 2003 respectively.



The following table summarizes the pro forma net income (loss)
had compensation costs been determined based on the fair value at grant date for the Companys share options under SFAS No. 123:



|                                                                                                                              |  | Year ended January 31,                  |      
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | -----
|                                                                                                                              |  | 2001                                    |      
|                                                                                                                              |  | (In A$ thousands,except per share data) |      
|Net income (loss)                                                                                                             |  |                                         |      
|As reported                                                                                                                   |  | $                                       | 4,483
|Total stock-based employee compensation expense determined under fair value method for
all awards, net of related tax effects |  |                                         | (482 
|                                                                                                                              |  |                                         |      
|Pro forma                                                                                                                     |  | $                                       | 4,001
|                                                                                                                              |  |                                         |      
|Basic earnings (loss) per share                                                                                               |  |                                         |      
|As reported                                                                                                                   |  | $                                       | 0.99 
|Pro forma                                                                                                                     |  | $                                       | 0.88 
|Diluted earnings (loss) per share                                                                                             |  |                                         |      
|As reported                                                                                                                   |  | $                                       | 0.96 
|Pro forma                                                                                                                     |  | $                                       | 0.85 



|13. |  | Commitments and Contingencies
|--- |  | -----------------------------



There are no material legal proceedings pending against the Company. The Company is involved in various product liability claims and legal
actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Companys business, results of operations or financial condition.



The Company placed a major portion of its
insurances with HIH Casualty and General Insurance Limited (HIH) during the 12 months ending June 30, 2001 and earlier periods. HIH Insurance Limited and 17 of its subsidiaries (HIH Group) have been placed into liquidation.
The Company has replaced its insurances with other insurers and has some claims against it on foot in relation to the period during which it enjoyed cover with HIH, the outcome of which, in the opinion of management, is not likely to have a material
adverse effect on the Companys business, results of options or financial condition. Furthermore, to the best of its knowledge and belief, it is unaware of any further material claims which may arise against it in relation to any events during
the period of cover with HIH. It is also unknown at this stage when and what amounts, if any, would be recoverable from the Liquidators of the HIH Group, were such claims to arise.



Barbeques Galore, Inc., has been served with proposed assessments of additional General Excise Tax, including
penalties and interest, from the Department of TaxationState of Hawaii, amounting in aggregate to US$264,570 in relation to a store operated on a Military Naval Base on Hawaii. The matter has been referred to Counsel and in the opinion of
management, based on the preliminary advice received, the Company has viable defences to the proposed assessments such that the ultimate disposal of these assessments will not have a material adverse effect on the business, results of operations or
financial condition.



|14. |  | Segments and Related Information
|--- |  | --------------------------------



The Company is engaged in the retail industry and operates through stores located in two geographic segments, Australia and the United
States.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The
accounting policies of the reportable segments are the same as those described in note 1 of Notes to Consolidated Financial Statements. The Company measures the performance of its operating segments based on gross profit and operating income, which
is defined as income before equity income of affiliates, net of tax, interest expense and income taxes. In addition, the operating income of the United States does not include all the income (loss) attributable to it for product manufactured and
purchased for the United States by the Australian subsidiaries.



Summarized financial information concerning the Companys reportable segments is as follows:



|                                 |  | Australia         |         | United States |   |         | Total | 
|-------------------------------- |  | ----------------- | ------- | ------------- | - | ------- | ----- | 
|                                 |  | (In A$ thousands) |        
|12 months to January 31, 2003    |  |                   |         |               |   |         |       | 
|Revenues from external customers |  | $                 | 139,731 |               | $ | 185,820 |       | 
|                                 |  |                   |         |               |   |         |       | 
|Gross profit                     |  | $                 | 42,579  |               | $ | 52,531  |       | 
|                                 |  |                   |         |               |   |         |       | 
|Operating income (loss)          |  | $                 | 11,208  |               | $ | (2,364  | )     | 
|                                 |  |                   |         |               |   |         |       | 
|Depreciation and amortization    |  | $                 | 3,777   |               | $ | 3,005   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Capital expenditures             |  | $                 | 1,730   |               | $ | 1,081   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Total assets                     |  | $                 | 66,058  |               | $ | 50,244  |       | 
|                                 |  |                   |         |               |   |         |       | 
|12 months to January 31, 2002    |  |                   |         |               |   |         |       | 
|Revenues from external customers |  | $                 | 141,806 |               | $ | 191,470 |       | 
|                                 |  |                   |         |               |   |         |       | 
|Gross profit                     |  | $                 | 42,185  |               | $ | 55,746  |       | 
|                                 |  |                   |         |               |   |         |       | 
|Operating income (loss)          |  | $                 | 2,965   |               | $ | (4,425  | )     | 
|                                 |  |                   |         |               |   |         |       | 
|Depreciation and amortization    |  | $                 | 4,010   |               | $ | 3,702   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Capital expenditures             |  | $                 | 626     |               | $ | 3,588   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Total assets                     |  | $                 | 64,460  |               | $ | 60,636  |       | 
|                                 |  |                   |         |               |   |         |       | 
|12 months to January 31, 2001    |  |                   |         |               |   |         |       | 
|Revenues from external customers |  | $                 | 141,701 |               | $ | 162,770 |       | 
|                                 |  |                   |         |               |   |         |       | 
|Gross profit                     |  | $                 | 47,074  |               | $ | 50,222  |       | 
|                                 |  |                   |         |               |   |         |       | 
|Operating income                 |  | $                 | 8,962   |               | $ | 330     |       | 
|                                 |  |                   |         |               |   |         |       | 
|Depreciation and amortization    |  | $                 | 4,332   |               | $ | 3,262   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Capital expenditures             |  | $                 | 1,766   |               | $ | 5,792   |       | 
|                                 |  |                   |         |               |   |         |       | 
|Total assets                     |  | $                 | 73,861  |               | $ | 57,636  |       | 
|                                 |  |                   |         |               |   |         |       | 



15.    Related Party Transactions



Messrs Linz, Gavshon and Selati and certain members of their respective families have advanced funds, repayable on demand, to the Company to be used for general corporate purposes at rates
approximately 2% per annum below the overdraft rate charged to the Company by its bankers.



|                                                                                                 |  | Year ended January 31,
|------------------------------------------------------------------------------------------------ |  | ----------------------
|                                                                                                 |  | 2001                  
|                                                                                                 |  | (In A$ thousands)     
|Interest costs incurred in respect of amounts advanced by directors or director related
entities |  | $                     
|                                                                                                 |  |                       



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





16.    Supplemental Disclosure of Cash Flow Information



|                                 |  | Year ended January 31,
|-------------------------------- |  | ----------------------
|                                 |  | 2001                  
|                                 |  | (In A$ thousands)     
|Cash paid during the period for: |  |                       
|Interest                         |  | $                     
|Income taxes                     |  |                       
|                                 |  |                       



The
Company acquired plant and equipment by means of capital leases, which are not reflected in the consolidated statements of cash flows with an aggregate fair value of:



|                                        |  | Year ended January 31,
|--------------------------------------- |  | ----------------------
|                                        |  | 2001                  
|                                        |  | (In A$ thousands)     
|Equipment acquired under capital leases |  | $                     
|                                        |  |                       



17.    Pension Plans



The Company has two superannuation funds, Barbeques Galore CustomSuper Plan (for all permanent full time and part time employees) and Barbeques Galore SuperLeader Plan (for all casual employees) which are managed under the AMP
CustomSuper and SuperLeader Master Trust Deeds respectively. Both funds are successors to the defined contribution pension plans established by the Company and its Australian subsidiaries for the provision of benefits to its Australian employees on
retirement, death or disability.



The Company
also sponsors a defined contribution plan in the United States covering substantially all employees who meet specified age and service requirements. Company contributions are discretionary.



Contributions expensed under these plans were as follows:



|                     |  | Year ended January 31,
|-------------------- |  | ----------------------
|                     |  | 2001                  
|                     |  | (In A$ thousands)     
|Contribution expense |  | $                     
|                     |  |                       



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





|18. |  | Earnings (Loss) Per Share
|--- |  | -------------------------



|                                                                            |  | Year endedJanuary 31, 2001                         |       | Year endedJanuary 31, 2002 |       |                  | Year endedJanuary 31, 2003
|--------------------------------------------------------------------------- |  | -------------------------------------------------- | ----- | -------------------------- | ----- | ---------------- | --------------------------
|                                                                            |  | Income                                             |       | Shares                     |       | Per share amount |                           
|                                                                            |  | (In A$ thousands, except share and per share data)
|Net income (loss)                                                           |  | $                                                  | 4,483 |                            |       |                  |                           
|                                                                            |  |                                                    |       |                            |       |                  |                           
|Basic earnings (loss) per share:                                            |  |                                                    |       |                            |       |                  |                           
|Net income (loss) available to common shareholders                          |  |                                                    | 4,483 |                            | 4,542 |                  | $                         
|                                                                            |  |                                                    |       |                            |       |                  |                           
|Effect of dilutive securities:                                              |  |                                                    |       |                            |       |                  |                           
|Options deemed exercised                                                    |  |                                                    |       |                            | 147   |                  |                           
|                                                                            |  |                                                    |       |                            |       |                  |                           
|Diluted earnings per share:                                                 |  |                                                    |       |                            |       |                  |                           
|Net income (loss) available to common shareholders plus assumed
conversions |  | $                                                  | 4,483 |                            | 4,689 |                  | $                         
|                                                                            |  |                                                    |       |                            |       |                  |                           



|19. |  | Relocation and Closure Costs (Gains)
|--- |  | ------------------------------------



During the year ended January 31, 2002, the Company incurred closure costs totaling A$2,207,000 as a result of a decision to close seven
U.S. stores, two of which were closed during the 2002 fiscal year, one during February 2002 and a further four due for closure prior to January 2003. These stores were identified as requiring closure as a result of historic underperformance. Closure
costs of A$1.2 million were incurred comprising A$611,000 in relation to the write down of leasehold improvements, A$194,000 in relation to lease buy-out costs, A$248,000 in relation to future contractual lease costs to be incurred following closure
and prior to sub-lease and A$125,000 in relation to commission expenses associated with sub-leasing the stores.



In addition costs amounting to A$1.0 million were provided for as of January 31, 2002 in respect of those stores to be closed during the
forthcoming fiscal year. These costs comprising the following:



| |  |  | write-down of leasehold improvements totaling A$407,000;
| | - |  | --------------------------------------------------------



| |  |  | lease buyout costs of A$291,000;
| | - |  | --------------------------------



| |  |  | A$186,000 set aside to cover contractual rental costs to be incurred following closure of the stores and prior to sub-lease; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | A$145,000 in commission expenses relating to the sub-leasing of these stores.
| | - |  | -----------------------------------------------------------------------------



The provision for store closure costs as of January 31, 2003 has been arrived at as follows:



|                                  |  | Asset impairment  |      |   | Lease buyout |    | Rent |  |    | Commission |   | Total |   
|--------------------------------- |  | ----------------- | ---- | - | ------------ | -- | ---- |  | -- | ---------- | - | ----- | --
|                                  |  | (In A$ thousands) |     
|Opening balance                   |  | A$                | 407  |   |              | A$ | 291  |  | A$ | 186        |   |       | A$
|Additional store closure costs(1) |  |                   | 153  |   |              |    |     |  |    | 54         |   |       |   
|Additional amounts provided       |  |                   |     |   |              |    |     |  |    | 171        |   |       |   
|Utilized during the year          |  |                   | (560 | ) |              |    |     |  |    | (96        | ) |       |   
|                                  |  |                   |      |   |              |    |      |  |    |            |   |       |   
|Closing balance                   |  | A$                |     |   |              | A$ | 291  |  | A$ | 315        |   |       | A$
|                                  |  |                   |      |   |              |    |      |  |    |            |   |       |   



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



---

|(1) |  | During August 2002, a further one U.S. store was identified for closure in fiscal 2004 pursuant to historical underperformance.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



The closure provision of A$787,000 relates to two remaining
U.S. stores identified for closure during fiscal 2003 that will now be closed during fiscal 2004 amounting to A$681,000 and the further one U.S. store identified for closure during fiscal 2004 amounting to A$106,000.



During the year ended January 31, 2003, the Company received
A$4.1 million from the State Rail Authority in relation to the expropriation of leasehold property occupied by the Chatswood, Australia store. This was offset by an additional A$0.4 million in connection with a further amount required in relation to
a store identified for closure during fiscal 2003, pursuant to historical underperformance, a further one U.S. store identified for closure in fiscal 2004 for similar reasons and A$0.2 million of professional fees, advertising expenses and asset
write-offs relating to the Chatswood store.



|20. |  | Post Balance Sheet Events
|--- |  | -------------------------



Subsequent to the fiscal year end, the Company determined to downsize its manufacturing operation in Sydney, Australia. This downsizing is
part of the Companys plan for implementing potentially significant cost savings and margin enhancement opportunities with the sourcing of a number of its proprietary barbecues from China. The cost of this downsizing and the benefits which will
flow have not been fully quantified at this time. The benefits are anticipated to begin to flow through during fiscal 2004. The full financial impact of this determination will be recognized in fiscal 2004 pursuant to SFAS 146, Accounting for
costs associated with exit or disposal activities.



On April 5, 2003, a Company-owned store in Keswick, South Australia was totally destroyed by fire. The Company believes that it is adequately covered by insurance and is currently looking at options to re-establish the store at the
same or other locations.



77