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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 20-F
 
   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
(Mark One)
 
[_]REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (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, 1999
                                      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 333-37259
 
                           BARBEQUES GALORE LIMITED
            (Exact name of registrant as specified in its charter)
 
    Australian Capital Territory,          327 Chisholm Road, Auburn, Sydney,
              Australia                            NSW 2144 Australia
   (State or other jurisdiction of           (Address of principal executive
   incorporation or organization)                       offices)
 
  Securities registered or to be registered pursuant to Section 12(b) of the
                                     Act:
 
<TABLE>
<CAPTION>
                                                        (Name of each exchange
           (Title of each class)                         on which registered)
           ---------------------                        ----------------------
<S>                                         <C>
                   None                                     Not Applicable
</TABLE>
 
          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)
 
  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:
 
                                   4,541,652
 
  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. Yes    X  No
 
  Indicate by check mark which financial statement item the registrant has
elected to follow: Item 17     Item 18  X
 
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                               TABLE OF CONTENTS
 
<TABLE>
<S>                                                                         <C>
PART I.....................................................................   1
 Item  1. DESCRIPTION OF BUSINESS..........................................   1
 Item  2. DESCRIPTION OF PROPERTY..........................................  14
 Item  3. LEGAL PROCEEDINGS................................................  15
 Item  4. CONTROL OF REGISTRANT............................................  15
 Item  5. NATURE OF TRADING MARKET.........................................  16
 Item  6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITYHOLDERS............................................................  17
 Item  7. TAXATION.........................................................  18
 Item  8. SELECTED FINANCIAL DATA..........................................  21
 Item  9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS......................................................  23
 Item 9A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........  32
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............  34
 Item 11. COMPENSATION OF DIRECTORS AND OFFICERS...........................  36
 Item 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES...  36
 Item 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS...................  39
PART II....................................................................  41
 Item 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.......................  41
PART III...................................................................  41
 Item 15. DEFAULTS UPON SENIOR SECURITIES..................................  41
 Item 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED
SECURITIES AND USE OF PROCEEDS.............................................  41
PART IV....................................................................  42
 Item 17. FINANCIAL STATEMENTS.............................................  42
 Item 18. FINANCIAL STATEMENTS.............................................  42
 Item 19. FINANCIAL STATEMENTS AND EXHIBITS................................  67
SIGNATURES.................................................................  70
</TABLE>
 
                                  TRADEMARKS
 
  BARBEQUES GALORE(R), TURBO(R), CAPT N COOK(R), COOK-ON(R) and BAR-B-CHEF(R)
are federally registered trademarks and/or service marks in the United States.
The Company also uses the phrase AMERICA'S LARGEST CHAIN OF BARBEQUE STORES^
as a common-law trademark in the United States. BARBEQUES GALORE and COOK-ON
are also registered with the State of California. In Australia, the Company or
its subsidiaries have registered, among others, the names NORSEMAN and KENT,
and additionally use the phrase YOUR OUTDOOR COOKING AND CAMPING STORE as a
common-law trademark. This report contains other trade names, trademarks and
service marks of the Company and other organizations.
<PAGE>
 
This 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. Readers are cautioned that such statements are
only predictions and that actual events or results may differ materially. In
evaluating such statements, readers should specifically consider the various
factors identified in this report, including the matters set forth under the
caption "Item 9--Management's Discussion and Analysis of Financial Conditions
and Results of Operations--Factors that May Affect Quarterly or Annual
Operating Results," which could cause events or actual results to differ
materially from those indicated by such forward-looking statements. In
addition, readers should carefully review other information contained in this
Annual Report on Form 20-F ("Annual Report") and in the Company's periodic
reports and other documents filed with the Securities and Exchange Commission
("SEC").
 
                                    PART I
 
ITEM 1.  DESCRIPTION OF BUSINESS.
 
  Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States,
based on number of stores and sales volume. The Company's belief is based on
its years of experience in the barbecue retail industry as well as its
contacts with other industry retailers, suppliers and trade associations.
Organized as an Australian corporation in 1982, the Company opened its first
store in Sydney, Australia in 1977 and opened its first U.S. store in Los
Angeles in 1980. Barbeques Galore stores carry a wide assortment of barbecues
and related accessories which are displayed in a store format that emphasizes
social activities and healthy outdoor lifestyles. Its stores also carry a
comprehensive line of fireplace products and, in Australia, home heating
products, camping equipment and outdoor furniture. As of January 31, 1999, the
Company owned and operated 33 stores in all six states in Australia and 46
stores (including three U.S. Navy concession stores) in nine states in the
United States. In addition, as of such date, there were 48 licensed stores in
Australia and seven franchised stores in the United States, all of which
operate under the "Barbeques Galore" name.
 
  The Company's unique retailing concept differentiates Barbeques Galore from
its 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. These competitive strengths are enhanced by the Company's barbecue and
home heater manufacturing operations, which enable the Company to realize
higher margins, control product development and improve inventory flexibility
and supply.
 
  The Company's growth strategy is to continue expansion of its U.S. store
base and to continue refurbishing (through relocating or remodeling) existing
stores in Australia. During the twelve months ended January 31, 1999, the
Company grew from 37 to 46 Company-owned stores (including three U.S. Navy
concession stores), representing a 24% increase in the number of owned stores
in the United States. The Company currently plans to open approximately 16 new
stores in the United States in calendar 1999 comprising 12 Company-owned
stores and four franchise stores. The majority of the new stores will open in
existing markets whilst the new franchise stores belong to existing
franchisees. Of the 12 new Company-owned stores three have already opened as
of March 8, 1999, five are under construction and the remaining four are in
lease negotiation. The Company also currently intends to open approximately 15
new stores in the United States in calendar 2000. In addition, the Company has
initiated a major refurbishment plan for its Australian store base to enhance
store productivity. During the twelve months ended January 31, 1999, three
stores have been refurbished in Australia with an average increase in sales of
approximately 27.9% during that period for those stores.
 
Company History
 
  Barbeques Galore opened its first store in Sydney, Australia in 1977 to
serve an unfilled niche in the retail market for versatile, well-designed
barbecues. Since then, the Company has become the leading barbecue retailer
 
                                       1
<PAGE>
 
in Australia, with an estimated 90% consumer awareness level and an
approximately 30% retail market share. In 1980, the Company opened its first
U.S. store in Los Angeles.
 
  During the 1980s, the Company vertically integrated its 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. In Australia, the Company further
diversified its product line through the addition of camping equipment and
outdoor furniture, both of which complement the Company's main barbecue line.
 
  In April 1987, the Company listed its Ordinary Shares on the Australian
Stock Exchange (the "ASE"). In October 1996, as part of its plans to
accelerate new store expansion in the United States, the Company announced its
intention to repurchase shares from the public and delist from the ASE
(pursuant to a transaction which was consummated as of December 31, 1996) and
to seek capital in the United States. The Company consummated its initial
public offering (the "Offering") in the United States in November 1997.
 
Seasonality; Weather; Fluctuations In Results
 
  The Company's business is subject to substantial seasonal variations which
have caused, and are expected to continue to cause, its quarterly results of
operations to fluctuate significantly. Historically, the Company has realized
a major portion of its net sales and a substantial portion of its net income
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 its peak selling seasons (late spring and early summer),
the Company substantially increases its inventory levels and hires 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,
the Company regularly experiences monthly losses. These seasonal trends result
in the Company experiencing a loss in its first fiscal quarter. The Company
believes this is the general pattern associated with its segment of the retail
industry and expects this pattern will continue in the future. Partially
offsetting the effects of seasonality, the Company operates in both the
Southern and Northern hemispheres, which have opposite seasons, and offers
fireplace products and (in Australia) home heaters in the fall and winter
months. However, sales of any of the Company's 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. The Company's 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. The
Company has in the past experienced quarterly losses, particularly in its
fiscal first quarter, and expects that it will 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 the Company's sales or gross margins during peak seasons or periods
were substantially below expectations, the Company's quarterly and annual
results would be adversely affected.
 
Manufacturing
 
  In its Australian factory facilities, the Company manufactures barbecues
under its proprietary Turbo, Capt N Cook, Cook-On and Bar-B-Chef brands and
certain private label brands, as well as home heaters under its proprietary
Norseman and Kent brands. During the twelve months ended January 31, 1999,
proprietary barbecue retail sales represented approximately 35% and 29% of the
Company's total net sales in the United States and Australia, respectively.
The Company believes that controlling its own manufacturing operations allows
it to realize higher margins, control product development and improve
inventory flexibility and supply, without affecting its relationships with
third party vendors. The Company's manufacturing operations are closely
coordinated with its research and development activities. The Company has a
research and development team which is dedicated to barbecue market analysis
and product development. The ten members of this research and development team
have an average of over 13 years of industry experience. The team continuously
studies sales
 
                                       2
<PAGE>
 
data, customer feedback, consumer trends and product designs, working closely
with the Company's other departments (in both the United States and Australia)
and suppliers to develop the annual Barbeques Galore product line. The Company
expended approximately A$1.0 million during the twelve-month period ended
January 31, 1999, on research and development activities.
 
  In the manufacturing process, metal barbecue frames are fabricated and,
where required, vitreous enameled at the Company's factory, located at its
headquarters in Sydney, Australia. Automated inhouse powder coating and
painting facilities commenced during mid-November 1998 after successful trials
during the previous month and replaced the outside powder coating and painting
contractors. Gas barbecue manifolds are assembled by hand and tested
individually at the factory for compliance with Australian Gas Association and
American Gas Association standards. On completion of the decorative, surface
finishing processes, the barbecue frames are delivered to the assembly and
packaging area where they are assembled in the Company's automated production
line from the completed frames, burners and other parts (or, in certain cases,
shipped to the Company's U.S. distribution center for assembly). Barbeques
Galore maintains strict quality control standards and its barbecues are under
limited warranty for one to ten years from the date of retail purchase,
depending on the part being warranted.
 
  Management believes that the Company's existing manufacturing and enameling
operations are sufficient to meet anticipated production increases that may
arise from its current store expansion and refurbishment programs. The Company
estimates that its plants currently have the capacity to increase barbecue
output by approximately 30% without any material capital expenditures, and
believes this is sufficient to meet its expansion needs through 1999. The
Company further believes it could approximately double current output through
the addition of six new steel presses (at an aggregate cost of A$1.5 million
to A$2.0 million) and extra worker shifts.
 
  In order to streamline its manufacturing operations to enhance production
efficiencies, in July 1996, the Company relocated its barbecue manufacturing
operations to the location of its corporate headquarters and distribution
center in Sydney, Australia. The Company has completed the relocation of its
enameling operations, which are now operational, to the same facilities as its
barbecue and home heater manufacturing operations adjacent to its Australian
headquarters, with the in-line powder coating operation commencing mid-
November 1998 after successful trials during the previous month. In addition,
the Company rearranged the assembly, warehouse and Australian distribution
operations to further improve its production flow, inventory control and
distribution management. The relocation of the Company's enameling operations
and related changes resulted in the incurring of approximately A$454,000 in
costs and required additional capital expenditures of approximately A$2.8
million. See "Factors That May Affect Quarterly or Annual Operating Results--
Management of Operational Changes".
 
Purchasing
 
  The Company believes that it has good relationships with its merchandise
vendors and suppliers of parts and raw materials and does not anticipate that,
as the number of its stores or its manufacturing volume increases, there will
be any significant difficulty in obtaining adequate sources of supply in a
timely manner and on satisfactory economic terms.
 
  Retail. The Company deals with its merchandise vendors principally on an
order-by-order basis and does not maintain any long-term purchase contracts
with any vendor. Merchandise mix is purchased for its U.S. and Australian
stores by the Company's central buying staffs in its respective headquarters.
In selecting merchandise, the buying staffs obtain input from a variety of
sources, including the Company's research and development team, store
employees, focus groups, customer surveys, industry conventions and trade
shows. During the twelve months ended January 31, 1999, the Company purchased
its 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 the Company considers certain barbecue brands to be
significant to its business, especially in the United States. The Company does
not believe that the loss of any single brand, including those made by
 
                                       3
<PAGE>
 
Weber-Stephen Products Co., Onward Multi-Corp or Fiesta Gas Grills Inc., would
have a material adverse effect on its operating results. Approximately 25% of
the Company's merchandise purchases were obtained in such period from the
Company's ten largest vendors. See "Factors That May Affect Quarterly or
Annual Operating Results--Risks Associated with International Operations;
Dependence on Significant Vendors and Suppliers."
 
  Manufacturing. The Company also purchases parts and raw materials for use in
its manufacturing and enameling operations. During the twelve months ended
January 31, 1999, the Company's 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 Horan's Steel Pty Ltd ("Horan's
Steel"), an Australian steel distributor, Bromic Pty Ltd ("Bromic"), an
Australian gas components importer, Sheet Metal Supplies Pty Ltd ("SMS"),
Bright & Bartholomew Pty Ltd ("Bright") and Amcor Fibre Packaging Australia
("Amcor"), (a member of the Amcor Ltd Group), which accounted for
approximately 10%, 15%, 15%, 7% and 6% of these purchases, respectively. There
are no formal supply contracts between the Company and any of its suppliers.
In the case of SMS and Amcor, prices are fixed for a year in advance. In
December 1997, the Company appointed SMS as its steel supplier with full
effect from May 1998. Other major suppliers of barbecue components include
G.L.G. Trading Pte. Ltd. ("GLG Taiwan"), a Taiwanese company that purchases
grills, burners and other products directly from factories in China and
Taiwan. The Company has a 50% ownership interest in GLG Taiwan and a one-third
ownership interest in Bromic. Approximately 79% of the Company's factory parts
and raw material purchases were obtained in such twelve-month period from the
Company's ten largest suppliers. In order to set production budgets, the price
of certain parts and raw materials such as steel is negotiated and fixed well
in advance of production usage. The Company uses back-up suppliers to ensure
competitive pricing. In addition, some of the Company's key suppliers
currently provide the Company with certain purchasing incentives, such as
volume rebates and trade discounts. See "Factors That May Affect Quarterly or
Annual Operating Results--Risks Associated with International Operations;
Dependence on Significant Vendors and Suppliers."
 
Distribution
 
  The Company maintains a 44,000 square foot distribution center at its U.S.
headquarters in Irvine, California and a 151,000 square foot combined
distribution and warehousing facility at, and nearby its Australian
headquarters. In May 1998, the Company purchased, for approximately A$1.75
million, with an additional A$1.3 million (including A$320,000 for racking)
needed to upgrade the property, a distribution facility nearby its existing
Australian distribution facilities which replaces a leased distribution
facility and eliminates the necessity to utilize public warehousing space in
Sydney, in the foreseeable future. The purchase of this property closed in
June 1998. The Company also uses smaller warehouses in Perth (operated by an
independent distributor) and Brisbane, Australia, for its wholesale and
licensee distribution operations and leases additional public warehouse space
in Sydney, Los Angeles and Texas as necessary.
 
  Merchandise is delivered by vendors and suppliers to the Company's
distribution facilities and, in certain instances, directly to stores, where
it is inspected and logged into the Company's centralized inventory management
systems. Merchandise is then shipped by Company trucks or third party surface
freight weekly or twice weekly, providing stores with a steady flow of
merchandise. Shipments by the Company's Australian operations to its Irvine
distribution center are made by third party sea freight, so that its Irvine
distribution center can maintain about three months of Company-manufactured
inventory at all times, which the Company believes is sufficient to meet
expected U.S. store requirements for such products.
 
  The Company maintains separate inventory management systems in Australia and
the United States which allow it 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 its inventory. The
Company estimates that its inventory shrinkage represents no more than 0.5% of
its aggregate retail sales. The Company and its advisors are not aware of any
barbecue industry source from which an industry average shrinkage rate can be
derived. However, the Company believes that the general shrinkage rate for
retailers is approximately 1.5% to 2.0%, and that the Company's rate compares
favorably to that of other retailers.
 
                                       4
<PAGE>
 
  As the Company expands into new regions or accelerates the rate of its U.S.
store expansion, it may eventually need additional warehouse capacity. In
order to meet such needs and to minimize the impact of freight costs, the
Company intends to secure another distribution center, expand its current
warehouse facilities in the United States or utilize public warehousing space.
Management believes that there is an ample supply of warehousing space
available at commercially reasonable rates. Wherever possible, the Company
also solicits the cooperation of its vendors, through drop shipments to public
warehouses and/or stores, in order to reduce its freight and handling costs.
The Company believes that its existing Australian distribution arrangements,
together with public warehousing space as needed, are sufficient to meet its
current needs.
 
Wholesale Operations
 
  In Australia, the Company distributes proprietary and private brand name
products and other imported merchandise, on a wholesale basis, through a
wholly-owned Australian subsidiary, Pricotech Leisure Brands Pty Ltd.
("Pricotech"). Wholesale products offered by Pricotech include Cook-On
barbecues, Companion gas camping equipment, Igloo coolers and Kent home
heaters. Pricotech distributes these products primarily to Australian mass
merchants, chains and buying groups. Customers typically buy these products
based on price. In the twelve months ended January 31, 1999, the five largest
customers of Pricotech accounted for approximately 59% of its net sales of
A$24.0 million. The Company's wholesale operations, in which its investment
consists primarily of inventory and receivables, currently fill excess
production capacity at the Company's manufacturing and enameling plants. The
Company currently has no plans to operate a wholesale distribution business in
the United States.
 
Licensing and Franchising
 
  As of January 31, 1999, the Company licensed 48 Barbeques Galore stores,
generally in rural areas of Australia, and franchised seven Barbeques Galore
stores in the United States. The Company receives annual licensing fees and
franchising royalties, and benefits 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
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, 1999, total net sales to licensee and franchisee stores was A$17.5
million and US$5.5 million, respectively. The Company estimates that the
retail sales of Barbeques Galore products alone by licensees and franchisees
was approximately A$27.5 million and US$3.2 million, respectively, in the same
period. A number of the Company's existing licensees have refurbished their
stores in accordance with the Company's established criteria (although no
licensee is required to do so), and the Company maintains an assistance
program to provide advice relating to these enhancements. The Company may
license additional Barbeques Galore stores in Australia on a selective basis,
although it does 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 the Company's other
product offerings are highly competitive in both the United States and
Australia. The Company's 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 and mail order companies. The Company's
manufacturing and wholesale operations compete with many other manufacturers
and distributors throughout the world, including high-volume manufacturers of
barbecues and home heaters. Many of the Company's competitors have greater
financial, marketing, distribution and other resources than the Company, and
particularly in the United States, may have greater name recognition than the
Company.
 
                                       5
<PAGE>
 
Furthermore, the lack of significant barriers to entry into the Company's
segment of the retail industry may also result in new competition in the
future. Barbeques Galore competes for retail customers primarily based on its
broad assortment of competitively priced, quality products (including
proprietary and exclusive products), convenience, customer service and the
attractive presentation of merchandise within its stores. The Company believes
that the following business strengths have contributed significantly to its
past success and intends to further capitalize on those strengths in executing
its growth strategy.
 
  Selection of Merchandise. Barbeques Galore offers an extensive selection of
quality barbecues and barbecue accessories designed to suit consumer
lifestyles, preferences and price points. Its stores offer a variety of
barbecues, with a range of styles, finishes and special features, including
the Company's proprietary brands as well as more than 60 other barbecues under
different brand names. Accompanying these barbecues are an assortment of
barbecue replacement parts and accessories which generate high margins. As the
leading retail chain specializing in barbecues and related merchandise,
Barbeques Galore offers consumers one-stop shopping convenience for virtually
all of their barbecue cooking needs.
 
  Store Environment. The Company's stores offer a shopping environment which
is consistent with its outdoor lifestyle image and promotes the total
barbecuing experience. The Company's 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 the
Company's product lines. An array of barbecues is displayed on the selling
floor complete with accessories to provide the consumer the opportunity to
compare and contrast different models. Store presentation is based on a
detailed and comprehensive store plan regarding visual merchandising to assure
that all stores provide a consistent portrayal of the Barbeques Galore image.
Average store retail selling area is approximately 3,300 square feet in the
United States and 9,300 square feet in Australia.
 
  Customer Service. The Company recognizes that customer service is
fundamental to its success. The Company has a "satisfaction guaranteed" return
policy and honors all manufacturer warranties for products sold at its 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. The Company monitors each store's service
performance and rewards high quality customer service both on a team and
individual level. The Company believes that its employees' knowledge of its
product offerings and the overall barbecue market, and their understanding of
customer needs, are critical components of providing customer service and
distinguish it from its competitors.
 
  Convenient Store Locations. The Company positions its 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 its site selection criteria, the Company believes it has been effective in
identifying successful new store locations.
 
  Integrated Manufacturing Operation; New Product Development. Through its
vertically integrated operations, the Company manufactures a proprietary line
of barbecues and home heaters for its retail stores. In addition, the Company
has an experienced in-house research and development team dedicated to
barbecue and home heater market analysis and product development that can
identify and respond to changing consumer trends. The Company believes that
controlling its own manufacturing operations allows it to realize higher
margins, control product development and improve inventory flexibility and
supply.
 
  Experienced Management Team. The Company's senior management team has an
average of more than 29 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 134 stores (including 55 licensed or franchised
stores) as of January 31, 1999. The Company believes that management's
experience positions it to execute its business and growth strategies. The
directors and executive officers of the Company beneficially own approximately
41.1% of the Company's outstanding Ordinary Shares.
 
                                       6
<PAGE>
 
Employees
 
  As of January 31, 1999, the Company employed a total of 1,025 persons, on a
permanent, part-time or temporary basis. The number of temporary employees
fluctuates depending on seasonal needs. None of the Company's employees is
covered by a collective bargaining agreement, although to the Company's
knowledge, six workers in its enameling plant belong to a labor union. The
Company considers its relations with employees to be good and believes that
its employee turnover rate is low.
 
Trademarks and Patents
 
  "Barbeques Galore," "Turbo," "Capt N Cook," "Bar-B-Chef" and "Cook-On" are
federally registered trademarks and/or service marks in the United States. In
addition, the Company owns a federal trademark registration for the
distinctive configuration of its Turbo grill. The Company also uses the phrase
"America's Largest Chain of Barbecue Stores" as a common-law trademark in the
United States. "Barbeques Galore" and "Cook-On" are registered trademarks with
the State of California. In Australia only, the Company uses the phrase "Your
Outdoor Cooking and Camping Store" as a common-law trademark and, among
others, the names "Norseman" and "Kent" as registered trademarks. The Company
further utilizes a number of different trademarks relating to various
barbecues, barbecue accessories, home heaters, camping equipment and outdoor
furniture manufactured or offered by the Company. The Company is not presently
aware of any claims of infringement or other challenges to the Company's right
to use its marks and the Company's name in the United States.
 
  The Company owns an Australian patent with respect to a weighing stand
apparatus for gas containers. The Company has a patent application pending in
Australia for its "Flamethrower" gas grill ignition system. The Company also
owns a number of copyrighted works, including brochures and other literature
about its products and many drawings and designs that it uses in marketing
those products.
 
Governmental Regulation
 
  Many of the Company's 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, the
Company's 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. The Company believes that it is in substantial compliance
with such regulations. The Company's 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 "Factors That
May Affect Quarterly or Annual Operating Results--Product Liability and
Governmental and Other Regulations".
 
  In addition, if the Company's level of foreign ownership exceeds 40%, the
Company would be considered a foreign person and would require certain
governmental approvals in connection with certain acquisitions in Australia.
See "Item 6--Exchange Controls and other Limitations Affecting
Securityholders."
 
Factors That May Affect Quarterly or Annual Operating Results
 
  The following are certain factors that should be considered in evaluating
the business, financial conditions and results of operations of the Company.
However, these factors should not be considered to be exclusive, and readers
are urged to consider the statements made elsewhere in this Annual Report on
Form 20-F.
 
  Implementation of Growth Strategy. The growth of the Company is dependent,
in large part, upon the Company's ability to successfully execute its Company-
owned store expansion program in the United States and
 
                                       7
<PAGE>
 
its store refurbishment plan in Australia. Pursuant to the U.S. store
expansion program, the Company opened 10 new stores in calendar 1997 and
opened 10 new stores and closed one store in calendar 1998. The Company also
currently intends to open approximately 16 new stores (including four
franchise stores) in calendar 1999 and approximately 15 new stores in calendar
2000 in the United States. The Company incurred capital expenditures relating
to this program in the United States of approximately US$1.8 million and
US$1.9 million in calendar 1997 and 1998 respectively and expects to incur
approximately US$2.8 million and US$3.5 million in each of calendar 1999 and
2000. Pursuant to the Company's Australian store refurbishment program, in
calendar 1997, the Company remodeled five existing stores, opened one new
store, relocated one store and closed one store. In calendar 1998, the Company
refurbished one store, relocated two stores and in March 1998, opened its one
planned new store. The Company further intends to refurbish one store,
relocate three stores and open two new stores in calendar 1999. The Company
incurred capital expenditures relating to this program in Australia of
approximately A$2.5 million and A$1.4 million in calendar 1997 and 1998
respectively and expects to incur approximately A$2.2 million in calendar
1999. The proposed expansion is substantially more rapid than the Company's
historical growth. The success of these store expansion and refurbishment
efforts will be dependent upon, among other things, the identification of
suitable markets and sites for new stores, negotiation of leases on acceptable
terms, construction or renovation of sites, receipt of all necessary permits
and governmental approvals therefor, and, if necessary, obtaining additional
financing for those sites. In addition, the Company must be able to hire,
train and retain competent managers and personnel and manage the systems and
operational components of its growth. There can be no assurance that the
Company will be able to locate suitable store sites or enter into suitable
lease agreements. In addition, there can be no assurance that, as the Company
opens new stores in existing markets, these new stores will not have an
adverse effect on comparable store net sales at existing stores in these
markets. The failure of the Company to open new stores or relocate or remodel
existing stores on a timely basis, obtain acceptance in markets in which it
currently has limited or no presence, attract qualified management and
personnel or appropriately adjust operational systems and procedures would
adversely affect the Company's future operating results.
 
  The success of the Company's growth strategy may also depend upon factors
beyond its immediate control. The Company has retained outside real estate
consultants to assist in site selection and lease negotiations and may depend,
to an increasing extent, on the services of such consultants and other real
estate experts as it accelerates the rate of new store expansion. The failure
of any such consultants or experts to render needed services on a timely basis
could adversely affect the Company's new store expansion. Similarly, changes
in national, regional or local real estate and market conditions could limit
the ability of the Company to expand into target markets or sites.
 
  As part of its growth strategy, the Company intends to open stores in new
markets where it will not initially benefit from knowledge of local market
conditions, pre-existing retail brand name recognition or marketing,
advertising, distribution and regional management efficiencies made possible
by its store networks in existing markets. Expansion into new markets may
present operating and marketing challenges that are different from those
encountered in the past by the Company in its existing markets. As a result of
its expansion program and its entry into new markets, primarily in the United
States, and its refurbishment program in Australia, the Company has
experienced, and expects to continue to experience, an increase in store pre-
opening costs and refurbishment-related expenses. There can be no assurance
that the Company will anticipate all of the challenges and changing demands
that its expansion will impose on its management or operations and the failure
to adapt thereto, would adversely affect the Company's implementation of its
growth strategy.
 
  If the Company determined to, or was required to, close a Barbeques Galore
store, the Company would attempt to sublet the vacated store space in order to
cover ongoing lease costs. Even if the Company were able to sublet such store,
the Company may incur significant costs in writing off leasehold improvements.
 
  In addition, the Company's proposed expansion plans will result in increased
demand on the Company's managerial, operational and administrative resources.
As a result of the foregoing, there can be no assurance that the Company will
be able to successfully implement its growth strategies, continue to open new
stores or
 
                                       8
<PAGE>
 
maintain or increase its current growth levels. The Company's failure to
achieve its expansion plan could have a material adverse effect on its future
business, operating results and financial condition. See "--Management of
Operational Changes" and "--Reliance on Systems".
 
  Effect of Economic Conditions and Consumer Trends. The success of the
Company's 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 existing economic conditions were to deteriorate, consumer spending may
decline, thereby adversely affecting the Company's business and results of
operations. Such effects may be exacerbated by the significant current
regional concentration of the Company's business in Australia and the Pacific
West, Southwestern and East coast U.S. markets.
 
  The success of the Company depends on its ability to anticipate and respond
to changing merchandise trends and consumer demands in a timely manner. The
Company believes it has benefited from a lifestyle trend toward consumers
spending more quality time together in outdoor family gatherings and social
activities. Any change in such trend could adversely affect consumer interest
in the Company's major product lines. Moreover, the Company's 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 the Company
misjudges either the market for its merchandise or its customers' purchasing
habits, it may experience a material decline in sales or be required to sell
inventory at reduced margins. The Company could also suffer a loss of customer
goodwill if its manufacturing operations or stores do not adhere to its
quality control or service procedures or otherwise fail to ensure satisfactory
quality of the Company's products. These outcomes may have a material adverse
effect on the Company's business, operating results and financial condition.
 
  Management of Operational Changes. The Company has identified a number of
areas for improvement in its operations which will have a significant impact
on the implementation of its growth strategy. The Company has, in recent
years, replaced or upgraded its management information systems and integrated
its central inventory management systems with point-of-sale terminals in
Barbeques Galore stores, and currently plans to introduce automated
replenishment of store inventory in Australia in the near term. In the United
States, the Company is currently upgrading to the latest version of software
by JDA Software Group Inc. ("JDA") and is using both outside consultants and
the vendor to assist with the process. The total expected capital expenditure
for such project is not expected to be significant. In addition, the Company
intends to transfer its general ledger and accounts payable functions from its
existing computer system to the above-mentioned JDA software system in the
near future. The Company has completed the relocation of its enameling
operations which are now operational, to the same facilities as its barbecue
and home heater manufacturing operations adjacent to its Australian
headquarters, with the in-line powder coating operation commencing mid-
November 1998 after successful trials during the previous month. In addition,
the Company rearranged the assembly, warehouse and Australian distribution
operations to further improve its production flow, inventory control and
distribution management. The relocation of the Company's enameling operations
and related changes resulted in the incurring of approximately A$454,000 in
costs required additional capital expenditures of approximately A$2.8 million
and the obtaining of a number of building, environmental and other
governmental permits. In addition, as the Company expands into new regions or
accelerates the rate of its U.S. store expansion, the Company may need
additional warehouse capacity. In order to meet such needs, the Company
intends to secure another distribution center or expand its current warehouse
facilities in the United States or utilize public warehousing space, in each
case depending on availability and cost at such time. There can be no
assurance as to whether or when the Company will be able to effect its systems
upgrades, enameling plant relocation plans, any expansion or replacement of
distribution facilities, or any other necessary operational changes that may
arise, or that the Company will not incur cost overruns or disruptions in its
operations in connection therewith. The failure of the Company to effect these
and any other necessary operational changes on a timely basis would adversely
affect the ability of the Company to implement its growth strategy and,
therefore, its business, financial condition and operating results.
 
 
                                       9
<PAGE>
 
  Competition. The retail and distribution markets for barbecues and the
Company's other product offerings are highly competitive in both the United
States and Australia. The Company's 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 and mail order companies. The
Company's manufacturing and wholesale operations compete with many other
manufacturers and distributors throughout the world, including high-volume
manufacturers of barbecues and home heaters. Barbeques Galore competes for
retail customers primarily based on its broad assortment of competitively
priced, quality products (including proprietary and exclusive products),
convenience, customer service and the attractive presentation of merchandise
within its stores. Many of the Company's competitors have greater financial,
marketing, distribution and other resources than the Company, and particularly
in the United States, may have greater name recognition than the Company.
Furthermore, the lack of significant barriers to entry into the Company's
segment of the retail industry may also result in new competition in the
future.
 
  Seasonality; Weather; Fluctuations in Results. The Company's business is
subject to substantial seasonal variations which have caused and are expected
to continue to cause, its quarterly results of operations to fluctuate
significantly. Historically, the Company has realized a major portion of its
net sales and a substantial portion of its net income 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
its peak selling seasons (late spring and early summer), the Company
substantially increases its inventory levels and hires 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, the Company regularly
experiences monthly losses. These seasonal trends result in the Company
experiencing a loss in its first fiscal quarter. The Company believes this is
the general pattern associated with its segment of the retail industry and
expects this pattern will continue in the future. Partially offsetting the
effects of seasonality, the Company operates in both the Southern and Northern
hemispheres, which have opposite seasons, and offers fireplace products and
(in Australia) home heaters in the fall and winter months. However, sales of
any of the Company's 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. The Company's 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. The Company has in the
past experienced quarterly losses, particularly in its fiscal first quarter,
and expects that it will 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 the Company's
sales or gross margins during peak seasons or periods were substantially below
expectations, the Company's quarterly and annual results would be adversely
affected.
 
  Reliance on Systems. In the United States, the Company has installed a JDA
system on an IBM AS400 platform, which allows it to manage distribution,
inventory control, purchasing, sales analysis, warehousing and financial
applications. The Company currently runs its general ledger and accounts
payable applications on its pre-existing computer system, but intends to
transfer these functions to the more powerful JDA system in the near future.
At the store level, the Company has installed Point of Sale ("POS") computer
terminals as its cash registers in all stores. Each POS terminal is equipped
with a bar code scanner for ease of product input and validation. Each store's
transaction data is captured by its Point-of-Sale 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, margin 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, the existing Wang VS system is being replaced by a SUN Systems
Ultra 60 running a UNIX environment. The Company has also installed a
Microsoft NT Server for all its desktop applications which in the future will
be the Microsoft suite of software.
 
                                      10
<PAGE>
 
  The Company's 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
registers which manage all sales transactions and store based purchasing
transactions. At the end of each day's processing, the data from each register
is consolidated onto one register which has an attached modem and which is
polled daily to upload the data to the head office system. The Company relies
upon its existing management information systems in operating and monitoring
all major aspects of the Company's business, including sales, gross margins,
warehousing, distribution, purchasing, inventory control, financial accounting
and human resources. Any disruption in the operation of the Company's
management information systems, or the Company's failure to continue to
upgrade, integrate or expend capital on such systems as its business expands,
could have a material adverse effect upon the Company's business, operating
results and financial condition.
 
  As the head office system was not able to handle dates beyond January 1,
2000, the Company has decided to replace its existing hardware and software
rather than reworking the existing software to be Year 2000 compatible. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Readiness Disclosure." The Company has appointed Berger
Software, an Australian software house, specializing in distribution and
warehouse management software to supply the main business application
software. The new system will also handle financial accounting functions and
the Company will also be integrating an Executive Information system to
provide additional interrogation capabilities. The existing store POS software
is Year 2000 compatible and runs in a DOS environment on stand alone store-
based PCs. These systems are 486MHz PCs, some of which are almost five years
old. The Company is proposing the replacement of these superseded PCs with
Windows based PCs and Windows NT Servers in each store. The application
software will be converted to run in a Windows environment. This new platform
will enable the Company to create a Company Intranet and allow for
implementation of the latest in software applications.
 
  Envisaged benefits flowing therefrom include the introduction of E-Commerce,
sophisticated customer loyalty programs and the combination of EFTPOS into the
new POS hardware which will improve customer throughput and reduce bank
charges. It is anticipated that this upgrade to the stores' POS systems at an
approximate cost of A$1.3 million will be undertaken during 1999, thus
ensuring that the POS hardware is Year 2000 compatible. The store systems will
continue to be polled on a daily basis and the data transmitted back to head
office, for loading into the new Berger software system, producing all the
necessary management reporting.
 
  The Company expects that the Information Systems replacement and upgrade
which will be customized to its requirements will necessitate capital
expenditures of approximately A$0.9 million. Work is currently underway and
implementation is scheduled for mid-1999, although no assurance can be given
that these issues can be resolved in a cost-effective or timely manner or that
the Company will not incur significant expense in resolving these issues. The
Company's newly installed computer system in the United States has been
designed to avoid the occurrence of such problems with the year 2000.
 
  Dependence on Key Employees. The Company's success is largely dependent on
the efforts and abilities of its executive officers, particularly, Sam Linz,
Chairman of the Board, Robert Gavshon, Deputy Chairman of the Board, John
Price, Head of Research and Product Development and Director, and Sydney
Selati, President of Barbeques Galore, Inc., the Company's U.S. operating
subsidiary and Director. These individuals have an average of 16 years of
experience with the Company and have chief responsibility for the development
of the Company's current business and growth strategies. L.D. "Chip" Brown's
employment terminated on August
24, 1998 and The Galore Group (USA), Inc. and Barbeques Galore, Inc. (referred
to collectively as "Galore USA") is seeking a suitable replacement to take on
the functions of Chief Operating Officer for the Company's U.S. Operations.
The Company does not have employment contracts with any of its executive
officers. The loss of the services of these individuals or other key employees
could have a material adverse effect on the Company's business, operating
results and financial condition. The Company's success is also dependent upon
its ability to continue to attract and retain qualified employees to meet the
Company's needs for its new store expansion program in the United States and
its store refurbishment plans in Australia.
 
 
                                      11
<PAGE>
 
  Risks Associated with International Operations; Dependence on Significant
Vendors and Suppliers. Barbeques Galore, with its headquarters, manufacturing,
enameling, wholesale and non-U.S. store operations in Australia, transacts a
majority of its business in Australia and obtains a significant portion 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, delays from customs
brokers or government agencies, seasonal reductions in business activity,
subjection to multiple taxation regimes and potentially adverse tax
consequences, any of which could materially adversely affect the Company's
business, operating results and financial condition.
 
  The Company purchases certain of its finished inventory and manufacturing
parts and all of its raw materials from numerous vendors and suppliers and
generally has no long-term purchase contracts with any vendor or supplier.
During the twelve months ended January 31, 1999, the Company purchased
inventory from over 500 vendors in the United States, Australia and Asia. In
such period, approximately 25% of the Company's merchandise purchases were
obtained from the Company's ten largest vendors. Although no vendor accounted
for more than 5% of the Company's merchandise purchases in such period, the
Company considers certain barbecue brands to be significant to its business,
especially in the United States. Also during such period, the Company
purchased barbecue and home heater parts from over 90 suppliers in Asia,
Australia and North America. Horan's Steel, Bromic, SMS, Bright and Amcor
supplied the Company with approximately 10%, 15%, 15%, 7% and 6% respectively,
of the Company's factory parts and raw material purchases during this period
and approximately 79% of the Company's factory parts and raw material
purchases were obtained from the Company's ten largest suppliers. The
Company's 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 such parts or raw materials, especially the price of steel, which
has fluctuated in the past. In addition, some of the Company's key suppliers
currently provide the Company with certain incentives, such as volume and
trade discounts as well as other purchasing incentives. A reduction or
discontinuance of these incentives could have an adverse effect on the
Company. Although the Company believes that its relationships with its vendors
and suppliers are good, any vendor or supplier could discontinue selling to
the Company at any time.
 
  Product Liability and Governmental and Other Regulations. Many of the
Company's 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, the Company's
products and the 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. Compliance with such regulations has not in the past
had, and is not anticipated to have, a material adverse effect on the
Company's business, operating results and financial condition. Nonetheless,
such regulations have had, and can be expected to have, an increasing
influence on product claims, manufacturing, contents, packaging and heater
usage. In addition, 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 a Company product. 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. Even if such
circumstances were beyond the Company's control, the Company's business,
operating results and financial condition could be materially adversely
affected. In the event of such an occurrence, the Company could incur
substantial litigation expense, receive adverse publicity, suffer a loss of
sales or all or any of the foregoing. Although the Company maintains liability
insurance in both Australia and the United States, there can be no assurance
that such insurance will provide sufficient coverage in any particular case.
In Australia, the limit of the Company's product liability coverage is A$100
million, any one claim and in the aggregate. In the United States, the
Company's U.S. operating subsidiary is covered by a policy having general
liability coverage limited at US$11 million. There is no assurance that
certain jurisdictions in which the Company operates will not impose additional
restrictions on the sale or use of the Company's products.
 
                                      12
<PAGE>
 
  In addition, the Company's 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. The Company's distribution facilities
are also subject to workplace safety and labor relations regulations. The
Company believes that it is in substantial compliance with such regulations.
The sale of certain products by the Company may result in technical violations
of certain of the Company's leases which prohibit the sale of flammable
materials in or on the leased premises. As a barbecue and barbecue accessories
store, the Company sells lighter fluid, lighters, matches and similar products
which may be considered flammable when in contact with open flame or
activated. The Company does not store containers of gas for barbecue grills in
its stores. The Company stores matches, lighters and the like in closed
containers or in displays where the chance of activation is remote, and does
not store such items near open flames. Over the Company's operating history,
the Company's landlords have been made aware that the Company sells such
products. To date, no landlord has terminated or threatened termination of any
lease due to such sales.
 
  The foregoing regulations and restrictions could have a material adverse
effect on the Company's business, operating results or financial condition.
 
  Uncertainties Regarding Manufacturing and Distribution of Merchandise. The
Company manufactures a substantial portion of the barbecues and home heaters
sold in its stores and distributes merchandise to Barbeques Galore stores
primarily from its distribution centers located at its headquarters in
Australia and Irvine, California. Throughout the manufacturing process, the
Company utilizes heavy machinery and equipment to produce and assemble
barbecues and home heaters from parts and raw materials supplied from numerous
third party suppliers. In distributing merchandise, the Company relies upon
third party sea carriers to ship its manufactured products from Australia to
the United States, as well as third party surface freight carriers to
transport all its merchandise from its distribution centers and warehouses to
stores. Accordingly, the Company is subject to numerous risks associated with
the manufacturing and distribution of its merchandise, including supply
interruptions, mechanical risks, labor stoppages or strikes, inclement
weather, import regulation, changes in fuel prices, changes in the prices of
parts and raw materials, economic dislocations and geopolitical trends. In
addition, the Company believes that, while its distribution facilities are
sufficient to meet Barbeques Galore's current needs, the Company may need
another distribution center or larger facilities in the United States or
Australia to support the further growth and expansion of stores.
 
  Risks Related to Franchised and Licensed Stores. As of January 31, 1999,
there were 48 licensed stores in Australia and seven franchised stores in the
United States, all of which are operated under the "Barbeques Galore" name by
independent licensees or franchisees who purchase proprietary and other store
products, and receive support services, from the Company. 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. The Company monitors its licensed and franchised stores to assure
their conformity to Barbeques Galore's standards and image and requires the
licensees and franchisees to comply with Barbeques Galore's merchandising and
advertising guidelines. Although the Company believes that its licensees and
franchisees are presently in substantial compliance with Company guidelines
and that its license and franchise arrangements have not been problematic in
any material respect in the past, serious or protracted failures by licensees
or franchisees to adhere to Company standards could adversely affect customer
loyalty and diminish the Company's brand name or reputation for quality
products and services, and could require the Company to devote significant
management attention and resources to enforcing its rights under such
agreements. Conversely, if the Company fails to provide adequate support
services or otherwise breaches its 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 thereunder. The licensing agreements in
Australia are terminable at will (absent fraud) by the licensees only,
generally upon sixty days' notice.
 
  Currency Fluctuations. The Company prepares its consolidated financial
statements in Australian dollars, but a substantial portion of the Company's
revenues and expenses are denominated in U.S. dollars and, to a lesser
 
                                      13
<PAGE>
 
extent, other foreign currencies. Accordingly, the Company is 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 the Company
transacts its business. This currency imbalance has resulted in, and may
continue to result in, foreign currency transaction gains and losses. Prior to
the current fiscal year, the Company's Australian operations have hedged a
major portion of its imports against exchange rate fluctuations with respect
to the Australian dollar. During the twelve months ended January 31, 1999, the
Company has hedged a portion of its imports against exchange rate
fluctuations. However, in its U.S. operations, the Company has not, and it
currently does not, actively hedge against exchange rate fluctuations,
although it may elect to do so in the future. Accordingly, changes in exchange
rates may have a material adverse effect on the Company's net sales, cost of
goods sold, gross margin and net income, any of which alone or in the
aggregate may in turn have a material adverse effect on the Company's
business, operating results and financial condition. Such currency issues
could, thus, affect the market price for the American Depositary Shares
("ADSs"). Although the Company does not anticipate paying any regular cash
dividends on the Ordinary Shares or the ADSs in the foreseeable future, the
above exchange rate fluctuations would affect the conversion into U.S. dollars
(for payment to holders of ADSs) by Morgan Guaranty Trust Company as
Depositary, of any cash dividends paid in Australian dollars on the Ordinary
Shares represented by the ADSs. See "Exchange Rate Information", "Item 5--
Nature of Trading Market" and "Item 6--Exchange Controls and Other Limitations
Affecting Securityholders."
 
ITEM 2. DESCRIPTION OF PROPERTY.
 
  The Company currently leases all of its stores and expects that its policy
of leasing, rather than owning, store properties will continue as it expands.
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 ten years at increased rents. Certain of the leases provide for
scheduled rent increases or for contingent rent (based upon store sales
exceeding stipulated amounts). The Company guarantees two franchised store
leases, one of which is secured by the franchisee's rights in its Barbeques
Galore franchise.
 
  In Sydney, Australia, the Company owns its headquarters and a 151,000 square
foot combined distribution and warehousing facility, a 75,000 square foot
portion of which was purchased by the Company in the second quarter of 1999
for approximately A$1.75 million, with an additional A$1.3 million (including
A$320,000 for racking) needed to upgrade prior to full usage. The Company
additionally owns its own assembly facility in Australia, measuring 51,000
square feet which was purchased for A$3.5 million during the first quarter of
1999 and which also accommodates part of the Company's administrative
facilities. The additional Company-owned space replaces the distribution
facility that the Company previously leased in Australia and eliminates the
necessity to utilize public warehousing space in Sydney, in the foreseeable
future. The Company leases the adjacent 75,000 square foot barbecue and home
heater factory (under a five-year lease with four successive five-year renewal
options for a total maximum lease term of 25 years) and a 20,000 square foot
wholesale and license store distribution center in Brisbane (under a five-year
lease with one five-year renewal option) which will continue until May 31,
1999 whereafter the Company will be using limited public warehousing space in
Brisbane and the majority of its distribution for Queensland will be
undertaken from Sydney. In addition, the Company has completed the relocation
of its enameling operations, which are now operational, to the same facilities
as its barbecue and home heater manufacturing operations adjacent to its
Australian headquarters, with the in-line powder coating operation commencing
mid-November 1998 after successful trials during the previous month. In
Irvine, California, the Company leases its home office and a 44,000 square
foot U.S. distribution center under leases scheduled to expire in 2002. As in
Australia, additional public warehouse space is leased for short terms. See
"Description of Business--Manufacturing."
 
  The Company's ownership interest in its Sydney headquarters and all of its
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 the Company. See Exhibit No. 10.3 in "Item 19--
Financial Statements and Exhibits."
 
                                      14
<PAGE>
 
ITEM 3. LEGAL PROCEEDINGS.
 
  There are no material pending legal proceedings against the Company. The
Company is 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 the
business, results of operations or financial condition of the Company.
 
ITEM 4. CONTROL OF REGISTRANT.
 
  The Company is not, to its knowledge, directly owned or controlled by any
other corporation or foreign government.
 
  The Company is not aware of any voting arrangements which may, at any
subsequent date, result in a change of control of the Company.
 
  The following table sets forth certain information regarding the beneficial
ownership of the Ordinary Shares as of April 13, 1999 by (i) each person or
entity known to the Company to own beneficially 10% or more of the outstanding
Ordinary Shares, and (ii) all directors and executive officers of the Company
as a group:
 
<TABLE>
<CAPTION>
                                                         Amount and Nature
Title of Class         Name of Beneficial Owner       of Beneficial Ownership Percent of Class
--------------         ------------------------       ----------------------- ----------------
<S>              <C>                                  <C>                     <C>
Ordinary Shares  Sam Linz............................        1,303,439(2)          28.9%
                 All directors and executive officers
                 as a group (9 persons)..............        1,745,826             41.1%
</TABLE>
 
(1) Applicable percentage of ownership for each shareholder is based on
    4,541,652 Ordinary Shares outstanding as of April 13, 1999, together with
    applicable options for such shareholders. Includes 203,038 Ordinary Shares
    issuable upon the exercise of stock options granted under the Executive
    Share Option Plan but excludes 243,096 Ordinary Shares issuable upon the
    exercise of stock options to be granted under the 1997 Share Option Plan
    concurrently with the Initial Public Offering (the "Offering"). There are
    an additional 131,575 authorized and unissued Ordinary Shares reserved for
    the grant of stock options under the 1997 Share Option Plan. Beneficial
    ownership is determined in accordance with the rules of the Securities and
    Exchange Commission and generally includes voting or investment power with
    respect to securities. Ordinary shares subject to options exercisable
    within sixty (60) days of the date hereof, 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.
    Except as indicated by footnote, the persons named in the table have sole
    voting and investment power with respect to all Ordinary Shares shown as
    beneficially owned by them.
 
(2) Includes 162,205 Ordinary Shares held by Wispjune Pty Limited
    ("Wispjune"), a company in which Mr. Linz owns a 72.5% interest, with Mr.
    Robert Gavshon and Mr. John Price, (or companies associated with them),
    each a director of the Company, owning the remaining 22.5% and 5.0%,
    respectively, 167,402 Ordinary Shares held by Geblon Pty Limited
    ("Geblon"), a company in which Mr. Linz and Mr. Gavshon each have a 50%
    ownership interest, with Mr. Linz retaining voting control of the company
    Geblon and 9,548 Ordinary Shares registered in the name of ANZ Nominees
    Limited. Excludes 78,912 Ordinary Shares previously held by ANZ Nominees
    Limited on behalf of members of Mr. Linz's immediate family, 10,756
    Ordinary Shares previously held by Bosmana Pty Limited ("Bosmana"), on
    behalf of The Galore Management Superannuation Fund, for which Mr. Linz,
    Mr. Gavshon, Mr. James and a fourth Company employee serve as the four
    trustees (the group having voting and dispositive power) and 3,567
    Ordinary Shares previously held by Galore Group Nominees Pty Ltd. ("Galore
    Nominees"), on behalf of The Galore Staff Superannuation Fund, for which
    Mr. Linz, Mr. Gavshon and two other Company employees serve at the four
    trustees (the group having voting and dispositive power). Mr. Linz
    disclaims beneficial ownership of the foregoing Ordinary Shares held by
    ANZ Nominees Limited, Bosmana and Galore Nominees, except to the extent of
    his pecuniary interest therein. None of Messrs. Linz, Gavshon or James
    individually or by agreement has voting or investment control over the
    securities held by ANZ Nominees, Bosmana or Galore Nominees.
 
                                      15
<PAGE>
 
                           EXCHANGE RATE INFORMATION
 
  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 29, 1999, the
Noon Buying Rate was US$0.6297 = A$1.00. The following table sets forth, for
the periods indicated, certain information concerning Noon Buying Rates for
Australian dollars.
 
  Fluctuations in the exchange rate between the Australian dollar and the U.S.
dollar may affect the Company's earnings, the book value of its assets and its
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 the Depositary of cash
dividends, if any, paid in Australian dollars on the Ordinary Shares
represented by the ADSs. See "Item 5--Nature of Trading Market" and "Item 6--
Exchange Controls and Other Limitations Affecting Security holders."
 
<TABLE>
<CAPTION>
                                                                           Period
Twelve Months Ended January 31,                   Average(1)  High   Low    End
-------------------------------                   ---------- ------ ------ ------
<S>                                               <C>        <C>    <C>    <C>
1995
  First Quarter..................................   0.7143   0.7248 0.7016 0.7155
  Second Quarter.................................   0.7312   0.7452 0.7041 0.7395
  Third Quarter..................................   0.7400   0.7458 0.7303 0.7425
  Fourth Quarter.................................   0.7649   0.7780 0.7404 0.7566
1996
  First Quarter..................................   0.7383   0.7590 0.7229 0.7282
  Second Quarter.................................   0.7248   0.7442 0.7088 0.7385
  Third Quarter..................................   0.7508   0.7704 0.7312 0.7595
  Fourth Quarter.................................   0.7427   0.7607 0.7339 0.7463
1997
  First Quarter..................................   0.7717   0.7915 0.7483 0.7875
  Second Quarter.................................   0.7926   0.8025 0.7727 0.7727
  Third Quarter..................................   0.7895   0.7998 0.7731 0.7917
  Fourth Quarter.................................   0.7908   0.8162 0.7623 0.7623
1998
  First Quarter..................................   0.7786   0.7982 0.7574 0.7806
  Second Quarter.................................   0.7572   0.7866 0.7349 0.7478
  Third Quarter..................................   0.7279   0.7508 0.6866 0.7011
  Fourth Quarter.................................   0.6709   0.7126 0.6357 0.6845
1999
  First Quarter..................................   0.6650   0.6868 0.6440 0.6520
  Second Quarter.................................   0.6082   0.6520 0.5867 0.6070
  Third Quarter..................................   0.5985   0.6328 0.5550 0.6250
  Fourth Quarter.................................   0.6279   0.6457 0.6070 0.6297
</TABLE>
--------
(1) Determined by averaging the closing price for each date in the period.
 
ITEM 5. NATURE OF TRADING MARKET.
 
Market Information
 
  The Company's Ordinary Shares are traded on The Nasdaq Stock Market(R)
("NASDAQ") under the symbol BBQZY, as represented by ADSs. The ADSs are
represented by American Depositary Receipts issued by Morgan Guaranty Trust
Company as Depositary. Each American Depositary Share represents one Ordinary
Share of the Company.
 
                                      16
<PAGE>
 
  From April 1987 through December 1996, the Company listed its Ordinary
Shares for trading on the ASE. In December 1996, the Company voluntarily
delisted from the ASE and since such time, there had been no established
foreign public market for the Ordinary Shares or ADSs.
 
  The following table sets forth the range of high and low closing sale prices
of the American Depositary Shares on the Nasdaq National Market for the fiscal
periods indicated.
 
<TABLE>
<CAPTION>
Fiscal Period                High     Low
-------------              -------- --------
<S>                        <C>      <C>
Fiscal Year ended January
 31, 1998
  First Quarter...........      N/A      N/A
  Second Quarter..........      N/A      N/A
  Third Quarter...........      N/A      N/A
  Fourth Quarter (November
   7, 1997 through January
   31, 1998).............. US$9.375 US$5.750
Fiscal Year ended January
 31, 1999
  First Quarter........... US$11.00  US$6.38
  Second Quarter..........    10.19     7.25
  Third Quarter...........     7.50     2.63
  Fourth Quarter..........     7.63     4.50
</TABLE>
 
  As of March 31, 1999, there were 26 holders of record of American Depositary
Shares and 38 additional holders of record of the Company's Ordinary Shares.
Of the Ordinary Shares, to the Company's knowledge, 10 holders of record
reside in the United States. The Company is unable to determine how many
holders of record of American Depositary Shares reside in the U.S.
 
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITYHOLDERS.
 
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 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 the outstanding shares of the Company
(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 shares in the Company and as a result the total holdings of
all foreign persons and their associates exceeds 40% in the aggregate without
the approval of the Australian Treasurer, then the Treasurer may make an order
requiring the acquiror to dispose of those shares within a specified time. The
Company has been advised by its Australian counsel, Freehill, Hollingdale &
Page, that under current foreign investment policy, however, it is unlikely
that the Treasurer would make such an order where the level of foreign
ownership exceeds 40% in the ordinary course of trading, unless 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 its associate) acquires any
further shares, including in the course of trading in the secondary market of
the ADSs. In addition, if the level of foreign ownership exceeds 40% at any
time, the Company would be considered a foreign person under the Takeovers
Act. In such event, the Company would be required to obtain the approval of
the Treasurer for the Company, together with its associates, to acquire (i)
more than 15% of an Australian company or business with assets totaling over
A$5 million or (ii) any direct or indirect ownership interest in Australian
residential real estate. In addition, the percentage of foreign ownership of
the Company would also be included in determining the foreign ownership of any
Australian company or business in which it may choose to invest. Since the
Company has no current plans for any such acquisitions and only owns
commercial property, any such approvals required to be obtained by the Company
as a foreign person under the Takeovers Act will not affect the Company's
current or future ownership or lease of property in Australia. However, there
would be no material tax consequence to shareholders of the Company (including
 
                                      17
<PAGE>
 
holders of ADSs) resulting from the Company being deemed a foreign person
under the Takeovers Act. If all of the ADSs are owned by foreign persons or
their associates then the level of foreign ownership of the Company's equity
securities will be approximately 64.8%. 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 the Company were to sell additional
Ordinary Shares or ADSs in the future.
 
  The Company has additionally provided that all stock options outstanding
under the Company's Executive Share Option Plan at such time as the Company
becomes subject to a takeover bid pursuant to which the offeror acquires at
least thirty percent (30%) of the outstanding Ordinary Shares of the Company
shall become immediately exercisable for a period of up to 120 days, measured
from the date the Board notifies the optionee of the takeover bid. Similarly,
the Company has provided that all stock options outstanding under the
Company's 1997 Share Option Plan at such time as the Company is 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 203,038 Ordinary Shares underlying stock options
outstanding pursuant to the Executive Share Option Plan, which, barring
acceleration, will become exercisable on February 1, 1999 and 243,096 Ordinary
Shares underlying stock options granted under the Company's 1997 Share Option
Plan, which, barring acceleration, will become exercisable as to 225,450 in
three equal installments on November 9, 2001, November 9, 2002 and October 9,
2003 and as to 17,646 in three equal installments on September 1, 2001,
September 1, 2002 and August 1, 2003 according to the terms of the 1997 Share
Option Plan. Such investment restrictions and dilutive acceleration events
could have a material adverse effect on the Company's 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 the Company, including attempts that might result in a premium
over market price to holders of ADSs. See "Item 12--Executive Share Option
Plan" and "Item 12--1997 Share Option Plan."
 
  The Constitution of the Company contains certain provisions that could
impede any merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of the Company. Provisions
contained in the Constitution, among other things, (i) in effect divide the
Board of Directors of the Company into three classes, which serve for
staggered three-year terms, (ii) 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, (iii) require extended notice (of
up to 28 days) for special resolutions considered by the Board of Directors,
and (iv) authorize the Board of Directors, without any vote or action by
shareholders of the Company, to issue, out of the Company's 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 the Company currently has 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 share 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 the Company.
 
  In certain circumstances, non-residents of Australia may be subject to
Australian tax on capital gains made on the disposal of shares or ADSs. The
rate of Australian tax on taxable gains realized by non-residents of Australia
is 36% for companies. For individuals, the rate of tax increases from 29% to a
maximum of 47%. These circumstances are described in "Item 7--Taxation."
 
ITEM 7. TAXATION.
 
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
 
                                      18
<PAGE>
 
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%.
 
  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.
 
  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 (indexed for inflation where the shares or
ADSs are held for 12 months or more) 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 36% for companies. For individuals, the
rate of tax increases from 29% to a maximum of 47%. 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 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 the Nasdaq National Market, 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, there can be no assurance that the Company will not
become closely held, thereby losing its public company status.
 
  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. 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
 
                                      19
<PAGE>
 
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 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.
 
  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.
 
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 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.
 
  The current stamp duty legislation in the Australian Capital Territory
imposes stamp duty on a dutiable transaction relating to "ADRs", 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.
 
  The stamp duty legislation contains a number of exemptions from ad valorem
duty, including an exemption from duty for certain transfers to foreign
residents of "ADRs" which are listed on a "recognized stock exchange." NASDAQ
is such an exchange. The term "foreign resident" is specifically defined in
the stamp duty legislation. A person is a foreign resident if they are not
resident or domiciled in Australia. A company is a foreign resident if it is
incorporated outside Australia, does not have its central management and
control in Australia, and does not have its voting power controlled by
shareholders resident in Australia.
 
  There are a number of other exemptions from duty on the transfer of Ordinary
Shares or ADRs. 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, securities lending transactions 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.
 
                                      20
<PAGE>
 
ITEM 8. SELECTED FINANCIAL DATA.
 
                      Selected Consolidated Financial Data
 
<TABLE>
<CAPTION>
                                                           Seven Months Ended         Twelve Months Ended
                           Fiscal Year Ended June 30,        January 31,(1)             January 31,(1)
                          ------------------------------  --------------------  --------------------------------
                            1994      1995       1996        1996       1997       1997       1998       1999
                          --------- ---------  ---------  ----------- --------  ----------- ---------  ---------
                                                          (Unaudited)           (Unaudited)
                                                 In thousands, except per share data
<S>                       <C>       <C>        <C>        <C>         <C>       <C>         <C>        <C>
Statement of Operations
 Data:
Net sales...............  A$124,635 A$138,057  A$141,691   A$92,074   A$98,752   A$148,369  A$179,325  A$224,984
Cost of goods sold(2)...     84,104    92,290     98,158     62,789     67,955     103,324    122,072    152,708
                          --------- ---------  ---------   --------   --------   ---------  ---------  ---------
Gross profit............     40,531    45,767     43,533     29,285     30,797      45,045     57,253     72,276
Selling, general and
 administrative
 expenses...............     35,462    40,058     39,339     24,328     25,740      40,751     48,992     61,796
Store pre-opening
 costs..................        135        64        153        114        200         239        435        810
Relocation and closure
 costs(3)...............        --        --         875        --         461       1,336         20        --
                          --------- ---------  ---------   --------   --------   ---------  ---------  ---------
Operating income........      4,934     5,645      3,166      4,843      4,396       2,719      7,806      9,670
Equity in income of
 affiliates, net of
 tax....................        660       963        836        709        252         379        547        514
Interest expense........      1,999     2,230      2,262      1,619      1,593       2,236      3,334      2,163
Other expense
 (income)(4)............        --        --      (2,303)    (2,303)     1,132       1,132        --         --
                          --------- ---------  ---------   --------   --------   ---------  ---------  ---------
Income (loss) before
 income tax.............      3,595     4,378      4,043      6,236      1,923        (270)     5,019      8,021
Income tax expense
 (benefit)..............      1,278       573         98      1,286        366        (822)     1,488      2,814
                          --------- ---------  ---------   --------   --------   ---------  ---------  ---------
Net income..............  A$  2,317 A$  3,805  A$  3,945   A$ 4,950   A$ 1,557   A$    552  A$  3,531  A$  5,207
                          ========= =========  =========   ========   ========   =========  =========  =========
Basic earnings per
 share(5)...............  A$   0.53 A$   0.86  A$   0.89   A$  1.11   A$  0.38   A$   0.13  A$   1.43  A$   1.15
                          ========= =========  =========   ========   ========   =========  =========  =========
Diluted earnings per
 share(5)...............  A$   0.53 A$   0.86  A$   0.89   A$  1.11   A$  0.38   A$   0.13  A$   1.18  A$   1.13
                          ========= =========  =========   ========   ========   =========  =========  =========
Weighted average shares
 outstanding(5).........      4,358     4,450      4,450      4,450      4,073       4,228      2,473      4,542
                          ========= =========  =========   ========   ========   =========  =========  =========
In thousands
Balance Sheet Data:
Working capital.........  A$ 25,400 A$ 26,856  A$ 24,710   A$25,139   A$22,552   A$ 22,552  A$ 36,917  A$ 39,994
Total assets............     60,538    67,624     66,562     67,544     67,970      67,970     82,074    101,212
Total long-term debt....     16,988    17,690     15,819     11,631     34,276      34,276     18,121     29,030
Shareholders' equity....     24,385    26,326     27,817     30,349     10,165      10,165     43,927     49,113
Selected U.S. Operating
 Data:
Stores open at period-
 end....................         17        17         21         19         25          25         34         43
Average net sales per
 store (in
 thousands)(6)..........  A$  1,389 A$  1,630  A$  1,572   A$   862   A$   822   A$  1,579  A$  1,731  A$  2,292
Comparable store sales
 increase(7)............        --       21.2%      10.0%      10.0%       4.1%        6.5%      18.9%      10.9%
Selling square feet (in
 thousands).............       49.3      51.3       59.5       55.7       72.7        70.2       96.6      129.8
Sales per selling square
 foot...................  A$    437 A$    519  A$    489   A$   279   A$   251   A$    469  A$    538  A$    637
Selected Australian
 Operating Data:
Stores open at period-
 end....................         32        31         31         32         32          32         32         33
Average net sales per
 store (in
 thousands)(6)..........  A$  1,719 A$  1,844  A$  2,081   A$ 1,446   A$ 1,658   A$  2,222  A$  2,411  A$  2,702
Comparable store sales
 increase(8)............        --        4.3%       8.1%       6.0%      10.6%       11.6%       5.0%       8.8%
Selling square feet (in
 thousands).............      275.3     273.9      279.9      272.3      281.3       276.6      291.2      307.1
Sales per selling square
 foot...................  A$    206 A$    216  A$    230   A$   165   A$   182   A$    256  A$    265  A$    282
</TABLE>
--------
(1) As of April 9, 1997, the Company changed its fiscal year end from June 30
    to January 31 (effective January 31, 1997).
 
 
                                       21
<PAGE>
 
(2) Cost of goods sold includes the cost of merchandise sold during the
    periods, warehouse, distribution and store-level occupancy costs.
(3) Includes A$262,000 incurred during the year ended June 30, 1996 in
    connection with the restructuring of the Company's Australian licensing
    division, A$613,000 incurred in June 1996 in connection with the
    relocation of the Company's barbecue manufacturing operations and a
    A$369,000 provision accrued in January 1997 in connection with the planned
    relocation of the Company's enameling facilities.
(4) Includes a A$2.3 million gain during the year ended June 30, 1996, related
    to the Company's sale of its equity interest in GLG New Zealand and a
    A$1.1 million charge incurred in December 1996 in connection with the
    Capital Reduction and delisting.
(5) Basic earnings per share are computed by dividing net income by the
    weighed average number of ordinary shares. Diluted earnings per share are
    computed by divided net earnings available to ordinary shareholders, as
    adjusted for the effect of the elimination of after-tax interest expense
    related to assumed conversion of the convertible notes, by the weighted
    average number of Ordinary Shares and dilutive ordinary share equivalents
    for the period.
(6) For store open at beginning of period indicated.
(7) The number of comparable stores used to compute such percentages was 17
    for each of fiscal 1995 and 1996, 16 and 19 for the seven-month periods
    ended January 31, 1996 and 1997, respectively, and 19, 25 and 33 for the
    fiscal years ended January 31, 1997, 1998 and 1999 respectively.
(8) The number of comparable stores used to compute such percentages was 32
    and 31 for fiscal 1995 and 1996, respectively, 31 and 33 for the seven-
    month periods ended January 31, 1996 and 1997, respectively, and 33, 34
    and 33 for the fiscal years ended January 31, 1997, 1998 and 1999
    respectively.
 
  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 the Company's last eight fiscal
quarters. The quarterly statement of operations data and selected operating
data set forth below were derived from unaudited financial statements of the
Company, which in the opinion of management of the Company contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation thereof.
 
<TABLE>
<CAPTION>
                                                       Quarter Ended
                          ---------------------------------------------------------------------------
                          Apr. 30,  July 31,  Oct. 31, Jan. 31, Apr. 30,  July 31, Oct. 31,  Jan. 31,
                            1997      1997      1997     1998     1998      1998     1998      1999
                          --------  --------  -------- -------- --------  -------- --------  --------
                                            In thousands, except per share data
<S>                       <C>       <C>       <C>      <C>      <C>       <C>      <C>       <C>
Statement of Operations
 Data:
Net sales...............  A$30,366  A$40,028  A$43,539 A$65,392 A$36,744  A$54,433 A$58,102  A$75,705
Cost of goods sold,
 warehouse, distribution
 and occupancy costs....    20,891    27,529    29,815   43,836   25,117    36,492   40,258    50,841
                          --------  --------  -------- -------- --------  -------- --------  --------
Gross profit............     9,475    12,499    13,724   21,556   11,627    17,941   17,844    24,864
Selling, general and
 administrative
 expenses...............     9,798    11,930    12,384   14,874   12,462    15,273   16,028    18,054
Store pre-opening
 costs..................       114        95        37      189      147       282      243       138
Relocation and closure
 costs..................       --        --        --        20       15       --       (11)      (25)
                          --------  --------  -------- -------- --------  -------- --------  --------
Operating income
 (loss).................      (437)      474     1,303    6,473     (997)    2,386    1,584     6,697
Equity in income of
 affiliates net of tax..        50       138       153      206       96       138      196        84
Interest expense........       879       881     1,111      463      388       446      666       663
                          --------  --------  -------- -------- --------  -------- --------  --------
Income (loss) before
 income tax.............    (1,266)     (269)      345    6,216   (1,289)    2,078    1,114     6,118
Income tax expense
 (benefit)..............      (566)      (83)      143    1,996     (502)      802      255     2,259
                          --------  --------  -------- -------- --------  -------- --------  --------
Net income (loss).......  A$  (700) A$  (186) A$   202 A$ 4,220 A$  (787) A$ 1,276 A$   859  A$ 3,859
                          ========  ========  ======== ======== ========  ======== ========  ========
Basic earnings per
 share..................  A$ (0.38) A$ (0.10) A$  0.11 A$  0.97 A$ (0.17) A$  0.28 A$  0.19  A$  0.85
                          ========  ========  ======== ======== ========  ======== ========  ========
Diluted earnings per
 share..................  A$ (0.38) A$ (0.10) A$  0.11 A$  0.96 A$ (0.17) A$  0.28 A$  0.19  A$  0.83
                          ========  ========  ======== ======== ========  ======== ========  ========
Weighted average shares
 outstanding............     1,844     1,844     1,844    4,336    4,542     4,542    4,542     4,542
                          ========  ========  ======== ======== ========  ======== ========  ========
</TABLE>
 
 
                                      22
<PAGE>
 
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.
 
  Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "--Factors That May Affect Quarterly
or Annual Operating Results" contained in "Item I--Description of Business"
and elsewhere in the Annual Report.
 
Overview
 
  Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States,
based on number of stores and sales volume. The Company's belief is based on
its years of experience in the barbecue retail industry as well as its
contacts with other industry retailers, suppliers and trade associations. The
Company opened its first store in Sydney, Australia in 1977 and opened its
first U.S. store in Los Angeles in 1980. Barbeques Galore stores carry a wide
assortment of barbecues and related accessories, a comprehensive line of
fireplace products and, in Australia, home heating products, camping equipment
and outdoor furniture. As of January 31, 1999, the Company owned and operated
33 stores in all six states in Australia and 46 stores (including three U.S.
Navy concession stores) in nine states in the United States. In addition, as
of such date, there were 48 licensed stores in Australia and seven franchised
stores in the United States, all of which operate under the "Barbeques Galore"
name.
 
  The Company derives its 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 38.4%, 42.2%, 7.9% and
10.7% respectively, of the Company's net sales for the twelve months ended
January 31, 1999, representing an 11.9%, 53.9%, 12.2% and 3.6% increase over
their respective net sales levels for the twelve months ended January 31,
1998.
 
  The Company believes the majority of its future growth will result from the
continuing expansion of its U.S. retail business, primarily through the
opening of new stores, and the refurbishment of its Australian store base.
Through its vertically integrated operations, the Company manufactures a
proprietary line of barbecues and home heaters for its retail stores and
licensees as well as other barbecue and home heater products for its wholesale
customers.
 
                                      23
<PAGE>
 
Results of Operations
 
  The following table sets forth for the periods indicated, certain selected
statement of operations data as a percentage of net sales:
 
<TABLE>
<CAPTION>
                           Twelve Months      Seven Months          Twelve Months
                          Ended June 30,     Ended Jan. 31,        Ended Jan. 31,
                          ----------------  -----------------  ------------------------
                           1995     1996       1996     1997      1997     1998   1999
                          -------  -------  ----------- -----  ----------- -----  -----
                                            (Unaudited)        (Unaudited)
<S>                       <C>      <C>      <C>         <C>    <C>         <C>    <C>
Statement of Operations
 Data:
Net sales...............    100.0%   100.0%    100.0%   100.0%    100.0%   100.0% 100.0%
Cost of goods sold,
 warehouse, distribution
 and occupancy costs....     66.8     69.3      68.2     68.8      69.6     68.1   67.9
                          -------  -------     -----    -----     -----    -----  -----
Gross profit............     33.2     30.7      31.8     31.2      30.4     31.9   32.1
Selling, general and
 administrative
 expenses...............     29.0     27.8      26.4     26.1      27.5     27.3   27.5
Store pre-opening
 costs..................      0.0      0.1       0.1      0.2       0.2      0.2    0.3
Relocation and closure
 costs..................      0.0      0.6       0.0      0.5       0.9      0.0    0.0
                          -------  -------     -----    -----     -----    -----  -----
Operating income........      4.2      2.2       5.3      4.4       1.8      4.4    4.3
Equity in income of af-
 filiates, net of tax...      0.7      0.6       0.8      0.3       0.3      0.3    0.2
Interest expense........      1.6      1.6       1.8      1.6       1.5      1.9    0.9
Other expense (income)..      0.0     (1.6)     (2.5)     1.1       0.8      0.0    0.0
                          -------  -------     -----    -----     -----    -----  -----
Income (loss) before in-
 come tax...............      3.3      2.8       6.8      2.0      (0.2)     2.8    3.6
Income tax expense (ben-
 efit)..................      0.4      0.1       1.4      0.4      (0.6)     0.8    1.3
                          -------  -------     -----    -----     -----    -----  -----
Net income..............      2.9%     2.7%      5.4%     1.6%      0.4%     2.0%   2.3%
                          =======  =======     =====    =====     =====    =====  =====
</TABLE>
 
  There has been no material impact of inflation and changing prices on the
Company's net sales and operating income for the twelve months ended January
31, 1997 through 1999, respectively.
 
Twelve Months ended January 31, 1999 compared to Twelve Months ended January
31, 1998
 
  Net sales increased by approximately A$45.7 million, or 25.5%, to A$225.0
million for the fiscal year ended January 31, 1999 from A$179.3 million for
the fiscal year ended January 31, 1998. Ten new stores were opened and one
store closed in the United States during the twelve months ended January 31,
1999 of which three were in existing markets and the remaining seven in
Greensboro and Cary, North Carolina, Sterling, Fairfax Fredricksburg and
Springfield, Virginia and White Marsh, Maryland. In Australia, one new store
was opened and three stores refurbished or relocated. Comparable store sales
increased 17.3% and contributed A$21.9 million to the increase in net sales.
Comparable store sales increased 10.9% in the United States and 8.8% in
Australia. Increased sales also resulted from stores not forming part of the
comparative store sales, including new stores opened in the U.S. in the
previous twelve months. The balance of the increased sales was primarily
attributable to a A$1.9 million increase in Australian licensing and a A$0.8
million increase in Australian wholesale.
 
  Gross profit increased approximately A$15.0 million, or 26.2%, to A$72.3
million for the fiscal year ended January 31, 1999 from A$57.3 million for the
fiscal year ended January 31, 1998. Gross margin (gross profit as a percentage
of sales) increased to 32.1% during the fiscal year ended January 31, 1999
from 31.9% during the fiscal year ended January 31, 1998. The increase in
gross margin was primarily attributable to the reduced cost of goods arising
from the weak Australian dollar, purchased by the U.S. operation from
Australia. This was partially offset by product sales mix at the Company's
newer U.S. stores and pricing pressures on lower end barbecues in Australia.
 
  Selling, general and administrative expenses (which exclude store pre-
opening expenses) increased approximately A$12.8 million, or 26.1%, to A$61.8
million for the fiscal year ended January 31, 1999 from A$49.0 million for the
fiscal year ended January 31, 1998. As a percentage of net sales, selling,
general and
 
                                      24
<PAGE>
 
administrative expenses increased to 27.5% during the fiscal year ended
January 31, 1999 from 27.3% during the comparable period in 1998 primarily due
to an increase in payroll costs in the home office in the United States.
 
  Store pre-opening costs increased A$375,000 to A$810,000 for the fiscal year
ended January 31, 1999 from A$435,000 for the fiscal year ended January 31,
1998, primarily due to the number and timing of United States' store opening
expenditure.
 
  Relocation and closure costs decreased by A$20,000 to A$0 for the fiscal
year ended January 31, 1999, from A$20,000 for the fiscal year ended January
31, 1998.
 
  Operating income (excluding relocation and closure costs) increased by A$1.8
million to A$9.6 million for the fiscal year ended January 31, 1999 from A$7.8
million for the fiscal year ended January 31, 1998. As a percentage of net
sales, operating income (excluding relocation and closure costs) decreased to
4.3% in the fiscal year ended January 31, 1999 from 4.4% in the fiscal year
ended January 31, 1998.
 
  Income from affiliates decreased by A$33,000 to A$514,000 in the fiscal year
ended January 31, 1999 from A$547,000 in the fiscal year ended January 31,
1998. This decrease resulted mainly from a decrease in profitability of the
Company's affiliate, Bromic.
 
  Interest expense decreased by A$1.2 million to A$2.2 million in the fiscal
year ended January 31, 1999 from A$3.3 million in the fiscal year ended
January 31, 1998. The decrease reflects the reduced debt usage of the Company
following the capital raising in November 1997 and the conversion into
Ordinary Shares in November 1997 of the convertible notes of A$10.0 million
which carried interest at 10.25% per annum. This reduction was partially
offset by the interest cost related to the acquisition of warehouse and
distribution properties in Australia during the fiscal year ended January 31,
1999 and increased working capital requirements.
 
  The Company's effective tax rate was 35.1% in the fiscal year ended January
31, 1999 and 29.6% during the comparable period in 1998 due to a higher
effective tax rate.
 
Twelve Months ended January 31, 1998 compared to Twelve Months ended January
31, 1997 (unaudited)
 
  Net sales increased by approximately A$30.9 million, or 20.9%, to A$179.3
million for the fiscal year ended January 31, 1998 from A$148.4 million for
the twelve months ended January 31, 1997. Eleven new stores were opened in the
United States during the twelve months ended January 31, 1998 of which eight
were in existing markets, including one franchise store in Atlanta, and the
remaining three in San Antonio, Texas, Mandarin, Florida and Pearl Harbor,
Hawaii (a U.S. Navy concession store). In Australia, one new store was opened
and four refurbished or relocated. Comparable store sales increased 13% and
contributed A$13.1 million to the increase in net sales. Comparable store
sales increased 18.9% in the United States and 5.0% in Australia. Increased
sales also resulted from stores not forming part of the comparative store
sales, including new stores opened in the U.S. in the previous twelve months.
The balance of the increased sales was primarily attributable to an A$3.8
million increase in Australian wholesale sales, mainly to mass merchandisers.
 
  Gross profit increased approximately A$12.3 million, or 27.1%, to A$57.3
million for the fiscal year ended January 31, 1998 from A$45.0 million for the
fiscal year ended January 31, 1997. Gross margin (gross profit as a percentage
of sales) increased to 31.9% during the twelve months ended January 31, 1998
from 30.4% during the comparable period in 1997. The increase in gross margin
was primarily due to production efficiencies gained in the Australian
manufacturing operation. The increase was partially offset by a reduction in
gross margin in the United States as a result mainly of a change in product
mix and newer stores with a typically lower gross margin in their first year
of operation and additional distribution costs incurred to support the store
expansion program.
 
 
                                      25
<PAGE>
 
  Selling, general and administrative expenses (which exclude store pre-
opening expenses) increased approximately A$8.2 million, or 20.2%, to A$49.0
million for the fiscal year ended January 31, 1998 from A$40.8 million for the
twelve months ended January 31, 1997. As a percentage of net sales, selling,
general and administrative expenses decreased to 27.3% during the twelve
months ended January 31, 1998 from 27.5% during the comparable period in 1997.
 
  Store pre-opening expenses increased A$196,000 to A$435,000 due to three
more company-owned stores opening in the fiscal year ended January 31, 1998
than in the comparable period in 1997.
 
  Relocation and closure costs decreased by $1.3 million to A$20,000 for the
fiscal year ended January 31, 1998. These costs mainly relate to the
restructuring of the Licensee and Wholesale Divisions and the relocation of
manufacturing operations.
 
  Operating income (excluding relocation and closure costs) increased by A$3.8
million to A$7.8 million for the fiscal year ended January 31, 1998 from A$4.1
million for the twelve months ended January 31, 1997. As a percentage of net
sales, operating income (excluding relocation and closure costs) increased to
4.4% in the fiscal year ended January 31, 1998 from 2.7% in the comparable
period in 1997.
 
  Income from affiliates increased by A$168,000 to A$547,000 in the fiscal
year ended January 31, 1998 from A$379,000 in the twelve months ended January
31, 1997. This increase resulted mainly from an increase in profitability of
the Company's Taiwanese affiliate.
 
  Interest expense increased by A$1.1 million to A$3.3 million in the twelve
months ended January 31, 1998 from A$2.2 million in the twelve months ended
January 31, 1997. The increase resulted from the interest at 10.25% per annum
payable on convertible notes of A$10.0 million that were issued on December
31, 1996 and converted to Ordinary Shares concurrent with the Offering on
November 7, 1997.
 
  The Company's effective tax rate was 29.6% in the twelve months ended
January 31, 1998 and 304.4% during the comparable period in 1997 due,
primarily, to a reduction in the valuation allowance in relation to the net
deferred tax asset of the United States operation. The valuation allowance was
fully written back during the twelve months ended January 31, 1997, as the
Company believed it would recoup the benefit of the tax losses and temporary
differences which gave rise to the net deferred tax asset.
 
Seven Months ended January 31, 1997 compared to Seven Months ended January 31,
1996 (unaudited)
 
  Net sales increased approximately A$6.7 million, or 7.3%, to A$98.8 million
for the seven months ended January 31, 1997, from A$92.1 million for the seven
months ended January 31, 1996. Four new stores were opened in the United
States and one new store was opened in Australia during the seven months ended
January 31, 1997, contributing approximately A$941,000 and A$610,000,
respectively, to the increase in net sales. In addition, refurbishment was
completed on two stores in Australia during the same period with these stores
adding a further A$1.1 million to the increase in net sales. Comparable store
sales increased 7.2% and contributed A$4.3 million of the increase in net
sales for the seven months ended January 31, 1997. Comparable store sales
increased 4.1% in the United States and 10.6% in Australia. A generally poor
U.S. retail environment during the 1996 Olympic season impacted U.S.
comparable store sales. The remaining portion of the increase in sales was
attributable to sales resulting from two new stores opened in the United
States in the preceding two quarters, a one-time close-out sale of wood
heaters to Australian licensees and an increase in barbecue sales to
Australian licensees. This increase in sales was partially offset by the loss
of a major Australian wholesale customer and the Company's decision to
discontinue third party enameling work.
 
  Gross profit increased approximately A$1.5 million, or 5.2%, to A$30.8
million for the seven months ended January 31, 1997 from A$29.3 million for
the seven months ended January 31, 1996. Gross margin decreased to 31.2%
during the seven months ended January 31, 1997 from 31.8% during the
comparable period in 1996. The decrease in gross margin was primarily due to
the Company's pursuit of increased market share in the high-
 
                                      26
<PAGE>
 
volume, low-margin end of the Australian barbecue market. In addition, sales
by new U.S. stores include a large portion of lower-margin sales during
initial periods of operation. This, combined with increased freight costs for
new stores located outside of California, also contributed to the decrease in
gross margin.
 
  Selling, general and administrative expenses increased approximately A$1.4
million, or 5.8%, to A$25.7 million for the seven months ended January 31,
1997 from A$24.3 million for the seven months ended January 31, 1996. As a
percentage of net sales, selling, general and administrative expenses
decreased to 26.1% for the seven months ended January 31, 1997 from 26.4% for
the seven months ended January 31, 1996. The decrease was primarily due to
improved operating leverage in the Australian store base and cost savings in
the Australian licensee and wholesale divisions brought about by the
restructuring of the licensee division. This decrease was partially offset by
increased infrastructure spending in the United States related to Company
expansion.
 
  Store pre-opening expenses increased A$86,000 to A$200,000 for the seven
months ended January 31, 1997 from A$114,000 for the seven months ended
January 31, 1996, primarily due to the opening of four new stores in the
United States.
 
  Relocation and closure costs increased to A$461,000 for the seven months
ended January 31, 1997 from A$0 for the seven months ended January 31, 1996 in
connection with the organizational restructuring of the licensee and wholesale
divisions and the provision for certain costs for the planned relocation of
its enameling plant in 1998.
 
  Operating income (excluding relocation and closure costs) increased by
A$14,000 to A$4,857,000 for the seven months ended January 31, 1997 from
A$4,843,000 for the seven months ended January 31, 1996. As a percentage of
net sales, operating income (excluding relocation and closure costs) decreased
to 4.9% in the seven months ended January 31, 1997 from 5.3% in the comparable
period in 1996.
 
  Income from affiliates decreased by A$457,000 to A$252,000 in the seven
months ended January 31, 1997 from A$709,000 in the seven months ended January
31, 1996. This decrease resulted from the Company's sale of its equity
interest in its New Zealand affiliate in December 1995.
 
  Interest expense remained constant at approximately A$1.6 million for the
seven months ended January 31, 1997 and the seven months ended January 31,
1996.
 
  Other expense (income) increased to an expense of A$1.1 million for the
seven months ended January 31, 1997 from income of A$2.3 million for the seven
months ended January 31, 1996. In the 1997 period, the Company incurred
expenses of approximately A$1.1 million related to the Capital Reduction,
while in the 1996 period, the Company recognized a gain of A$2.3 million from
the sale of its equity interest in its New Zealand affiliate, as described
above.
 
  The Company's effective tax rate was 19.0% in the seven months ended January
31, 1997 and 20.6% in the seven months ended January 31, 1996. The difference
in rates compared to the expected rate of 36% is a result of the exclusion
from Australian taxation of equity in income from affiliates, the gain on sale
of its equity in a New Zealand affiliate and a reduction in the valuation
allowance in relation to the net deferred tax asset of the United States
operation. The valuation allowance was fully written back in the seven months
ended January 31, 1997 as the Company believed that it would recoup the
benefit of the tax losses and temporary differences which gave rise to the net
deferred tax asset. Excluding the effect of these items, the effective tax
rate would have been 43.9% in the seven months ended January 31, 1997 and
37.1% in the seven months ended January 31, 1996. The difference is mainly
attributable to increased state taxes in the United States for the seven
months ended January 31, 1997.
 
Twelve Months ended June 30, 1996 compared to Twelve Months ended June 30,
1995
 
  Net sales increased approximately A$3.6 million, or 2.6%, to A$141.7 million
for the fiscal year ended June 30, 1996 from A$138.1 million for the fiscal
year ended June 30, 1995. Comparable store sales increased 5.0%
 
                                      27
<PAGE>
 
and contributed approximately A$4.1 million of the increase in net sales for
the 1996 fiscal year. Comparable store sales increased 10.0% in the United
States and 8.1% in Australia. The combined comparable store sales increase was
impacted by a decrease in the US$/A$exchange rate of approximately 13.0% in
that period. Sales during fiscal 1996 also increased as a result of the
opening of four new Company-owned stores and two franchised stores in the
United States, the opening of one new store in Australia and increases in
other stores not included in the comparable store calculation. The combined
sales increases were partially offset by decreases in the Australian licensee
and wholesale divisions, primarily due to the declining wood heating market
and overall softness in the Australian rural economy.
 
  Gross profit decreased approximately A$2.3 million, or 4.9%, to A$43.5
million for fiscal 1996 from A$45.8 million for fiscal 1995. As a percentage
of net sales, gross margin decreased to 30.7% during fiscal 1996 from 33.2%
during fiscal 1995. The decrease in gross margin in the 1996 period was
primarily due to an increase in the cost of the Company's manufactured
products as a result of the factory relocation, the one-time close-out sales
of the Company's wood heating inventory and general pressure on margins in the
Australian retail sector. In the United States, gross margin increased as a
result of a change in sales mix towards higher margin proprietary products.
 
  Selling, general and administrative expenses decreased approximately
A$719,000, or 1.8%, to A$39.3 million for fiscal 1996 from A$40.1 million for
fiscal 1995. As a percentage of net sales, selling, general and administrative
expenses decreased to 27.8% during fiscal 1996 from 29.0% during fiscal 1995.
The decrease was primarily due to increased operating leverage in its
Australian store base resulting from store refurbishment and the restructuring
of the Australian licensee division. This decrease was partially offset by
infrastructure spending related to the opening of five new U.S. stores,
including new hiring and staff training expenses.
 
  Store pre-opening expenses increased A$89,000 to A$153,000 during fiscal
1996 from A$64,000 for fiscal 1995, primarily due to the opening of four new
stores in the United States.
 
  Relocation and closure costs increased to A$875,000 for fiscal 1996 from A$0
for fiscal 1995, primarily due to the relocation of the Company's
manufacturing operation and the restructuring of the Company's Australian
licensing division.
 
  Operating income (excluding relocation and closure costs) decreased A$1.6
million to A$4.0 million for fiscal 1996 from A$5.6 million for fiscal 1995.
As a percentage of net sales, operating income (excluding relocation and
closure costs) decreased to 2.8% in fiscal 1996 from 4.2% in fiscal 1995.
Approximately A$2.3 million of the decrease was due to an increase in the cost
of the Company's manufactured products following the factory relocation, the
one-time close-out sales of the Company's wood heating inventory and general
pressure on margins in the Australian retail sector. This decrease in gross
profits was partially offset by a decrease in selling, general and
administrative expenses of approximately A$719,000.
 
  Income from affiliates decreased A$127,000 to A$836,000 in fiscal 1996 from
A$963,000 in fiscal 1995, due to the loss of income from the GLG New Zealand
after the Company sold its equity interest therein in December 1995.
 
  Interest expense increased by A$32,000 to A$2,262,000 in fiscal 1996 from
A$2,230,000 in fiscal 1995.
 
  Other income increased to A$2.3 million in fiscal 1996 from A$0 in fiscal
1995, due to the gain on the sale of the Company's New Zealand affiliate.
 
  The Company's effective tax rate was 2.4% in fiscal 1996 and 13.1% in fiscal
1995. The difference in rates is primarily the result of the exclusion from
Australian taxation of both equity in income from affiliates and gain on the
sale of its New Zealand affiliate, as well as a reduction in the valuation
allowance for deferred tax assets due to the realization of net operating loss
carryforwards against U.S. taxes. Excluding these items, the effective tax
rate would have been 46.8% for the year ended June 30, 1996 and 31.2% for the
year ended June 30, 1995.
 
                                      28
<PAGE>
 
Liquidity and Capital Resources
 
  The Company has historically financed its operations through cash flow from
operations and bank borrowings. In November 1997, the Company completed the
Offering, raising net proceeds of approximately US$13.8 million (approximately
A$19.7 million). These funds have been used as set forth in this Annual Report
in the section titled "Item 16--Changes in Securities, Changes in Security for
Registered Securities and Use of Proceeds".
 
  In June 1998, the Company and ANZ entered into a credit facility (the "ANZ
Facility"), revised from a previous facility entered into in July 1994. The
ANZ Facility is subject to annual review and modification, in accordance with
standard Australian practice. Under this revised facility, the Company and its
subsidiaries have access to facilities up to A$47.6 million comprising a
multi-purpose facility in principal amount of A$16.6 million, a trade finance
facility in principal amount of A$16.5 million, real property loans in
principal amount of A$8.5 million and a further seasonal trade finance
facility of A$6.0 million. 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 as
defined in the paragraph following) in all the Company's assets in the United
States. The ANZ Facility is further guaranteed by each subsidiary of the
Company and Galore USA. The property loans accrue interest at rates varying
from 6.9% to 9.6% per annum and are secured by registered first mortgages over
the respective freehold properties of the Company.
 
  In February 1995, Barbeques Galore Inc., the Company's U.S. operating
subsidiary, entered into a five year credit facility with Merrill Lynch
Business Financial Services, Inc., ("Merrill Lynch") which has been amended
from time to time. As of January 31, 1999, such facility includes a term loan
in aggregate principal amount of US$375,000 (the "Term Loan") and a revolving
line of credit in aggregate principal amount of US$1.0 million (the "Revolving
Line," and collectively with the Term Loan, the "Merrill Lynch Facility").
Indebtedness under the Revolving Line and Term Loan accrues interest at the
30-day commercial paper rates 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.
 
  In October 1996, the Company, Warburg Dillon Read Australia Limited
("Warburg Australia"), as representative of the holders of convertible notes
of the Company, and certain principal shareholders of the Company entered into
certain debt instruments, pursuant to which the Company issued and sold A$10.0
million in aggregate principal amount of convertible notes (the "Convertible
Notes" or "Notes") in December 1996. All of the Convertible Notes were
converted into 1,197,926 Ordinary Shares of the Company in connection with the
consummation of the Offering in the United States in November 1997. Certain
holders of Ordinary Shares acquired upon conversion of the Convertible Notes
were Selling Shareholders in the Offering, selling an aggregate of 200,000
Ordinary Shares acquired upon conversion of the Convertible Notes
 
  During 1998, pursuant to an agreement with certain holders of the
Convertible Notes (all of which were converted into Ordinary Shares in
connection with the Company's Offering), the Company registered 1,044,845
Ordinary Shares on Form F-1 (the "Resale F-1"), each having a par value of
A$3.64 and each represented by one American Depositary Share (each, a "Resale
ADS") for resale by shareholders of the Company under the Securities Act of
1933, as amended. 997,926 of these Ordinary Shares were received upon the
conversion of the Convertible Notes. The remainder of these Ordinary Shares
were registered voluntarily by the Company and are presently held by long-term
shareholders of the Company who may wish to divest all or a portion of their
holdings in the Company. On or about April 22, 1999, the Company removed from
registration 979,731 Resale ADSs that remained unsold as of December 15, 1998,
the date at which all shareholders listed on the Resale F-1 became entitled to
sell their Resale ADSs pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended.
 
  For the fiscal years ended January 31, 1999 and 1998, the seven months ended
January 31, 1997 and the twelve-month period ended June 30, 1996, cash flow
provided by (used in) operating activities was
 
                                      29
<PAGE>
 
A$6.5 million, A$(1.1) million, A$7.2 million and A$4.6 million, respectively.
The cash used by operations primarily reflects the increase in inventory
levels related to the Company's build-up of inventories and the increased
number of stores in the United States.
 
  Net cash flows used in investing activities for the fiscal years ended
January 31, 1999 and 1998, the seven months ended January 31, 1997, and the
twelve-month period ended June 30, 1996 were A$13.1 million, A$4.5 million,
A$2.8 million and A$0.06 million, respectively. The cash flows used in
investing activities have resulted primarily from capital expenditures related
to new store openings in the United States, store refurbishments in Australia
and the acquisition of properties as detailed in "Item 2--Description of
Property." The Company anticipates that it will continue to incur significant
capital commitments in connection with further expansion.
 
  The cash flows used in operations and investing activities have been largely
sourced from long term borrowings under the ANZ and Merrill Lynch Facilities
and from the net proceeds from the Offering.
 
  At January 31, 1999 the Company had working capital of A$40.0 million. At
January 31, 1999 the Company maintained minimal amounts in cash and cash
equivalents, relying instead on undrawn facilities under its borrowing
arrangements with ANZ and Merrill Lynch.
 
  The Company believes the ANZ and Merrill Lynch Facilities are sufficient to
meet its presently anticipated working capital and capital expenditure
requirements for at least the next twelve months.
 
Year 2000 Readiness Disclosure
 
  The Company established a Year 2000 compliance team in 1997, under the
guidance of the Chief Financial Officer, which reports periodically to the
Board of Directors and Audit Committee. To date, a full evaluation of
potential Year 2000 risks has been completed and a comprehensive compliance
program developed.
 
  While the Company cannot be certain that the consequence of Year 2000
compliance issues will not have a material effect on its business, results of
operation or financial condition, it has established and is well advanced
with, a rigorous program aimed at minimizing or negating any such effects. As
part of the ongoing Year 2000 compliance process, the Company has examined the
key risk areas and considered the degree of application to its business
activities and future operations.
 
  Information Technology ("IT") Systems": In Australia, the Company is
currently replacing its entire core IT system, along with the majority of
peripheral hardware and software components such as personal computers,
printers and desktop applications. The replacement core IT system has been
represented as Year 2000 compliant and should be operational by mid-1999.
 
  In the USA, the Company's recently installed computer system has been
represented to avoid the occurrence of Year 2000 problems. Minor modifications
and upgrades are currently being undertaken and full compliance is anticipated
by July 1999.
 
  Non-IT Systems: As with any modern business operation, the Company expects
that some degree of non-compliance will be identified in certain technology
assets such as telephone systems, office equipment and security systems. All
potential systems at risk have been identified and an inventory of equipment
and the vendors involved, compiled. The Company is currently in the process of
contacting these vendors to ascertain whether each item of equipment is Year
2000 compliant or, if necessary, what remedial action (and cost) is required
to achieve compliance.
 
  Products: The Company's products do not utilize embedded technology and the
risk, therefore, associated with holding or repairing non-compliant products,
is negligible. The Company does not believe it will encounter any significant
product warranty or obsolete inventory write-offs arising from Year 2000
issues.
 
                                      30
<PAGE>
 
  Third Party Relationships: The majority of the Company's customers and,
therefore, revenue base, is from retail sales from which little credit risk
arises. Those customers to whom credit facilities are provided are currently
being contacted by mail questionnaire, to allow the Company to assess their
state of readiness in relation to Year 2000 issues. This program is expected
to be completed by mid-1999. Further follow-up may be required in cases where
the Company is not satisfied with a customers' level of compliance.
 
  The Company is dependent on a large number of vendors from various countries
for a significant proportion of its merchandise, parts and raw materials.
While there are generally no long term purchase contracts, (and no vendor
accounts for more than 5% of the Company's merchandise), its results from
operations could be adversely affected by a disruption of supply from key
vendors. It has been widely reported that such disruptions could occur if a
vendor was to experience major Year 2000 compliance problems. A mail
questionnaire program is also being conducted to assess the level of
compliance of all current vendors. Again, Company policy will be to
discontinue supply arrangements with any vendor who is unable to demonstrate
adequate compliance after mid-1999.
 
  The Company has also included service providers and other key business
partners such as banks, telecommunication providers, transport and shipping
companies in the compliance program. While the Company expects that most of
this group is likely to achieve compliance, its status will be monitored for
any adverse indications of risk to the Company.
 
 Costs to Address the Company's Year 2000 Issues
 
  Based on the preceding evaluation of the Company's state of readiness and
having regard to the most likely outcomes in relation to each area of risk,
the Company has estimated that the total cost to address Year 2000 issues will
be approximately A$0.9 million. The vast majority of this estimate relates to
the replacement of the Australian IT systems and also includes allowances for
minor non-IT systems remediation.
 
  To date, less than A$0.4 million of the above estimate has been expended.
There has been no material impact on the Company's results from operations to
date.
 
 Risks of the Company's Year 2000 Issues
 
  The risks which the Company faces in relation to Year 2000 issues have been
referred to above. Although the Company has no reason to expect that any
significant third party impact will arise, given the compliance program now in
place, no assurance can be made that the impact of these risk areas will not
be greater than currently identified, nor that no other risk issues may arise.
The Company is unable to estimate whether there will be any additional
significant costs arising from Year 2000 issues.
 
 The Company's Contingency Plans for Year 2000 Issues
 
  At the present time the Company has not developed a detailed contingency
plan. As the outcome of its compliance program becomes known, the Company will
re-evaluate the need for, and extent of, any contingency plans.
 
New Pronouncements by Financial Accounting Standards Board
 
  Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("Statement 133") was issued by
the Financial Accounting Standards Board in June 1998 and is effective for the
Company's quarter ending July 31, 1999. Statement 133 standardizes the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts. Under the standard, entities are
required to carry all derivative instruments in the statement of financial
position at fair value. The accounting for changes in the fair value (i.e.
gains or losses) of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and, if so, on the
reason for holding it. If
 
                                      31
<PAGE>
 
certain conditions are met, entities may elect to designate a derivative
instrument as a hedge of exposures to changes in fair values, cash flows, or
foreign currencies. If the hedged exposure is a fair value exposure, the gain
or loss on the derivative instrument is recognized in earnings in the period
of change together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. If the hedged exposure is a cash flow
exposure, the effective portion of the gain or loss on the derivative
instrument is reported initially as a component of other comprehensive income
(outside earnings) and subsequently reclassified into earnings when the
forecasted transaction affects earnings. Any amounts excluded from the
assessment of hedge effectiveness as well as the ineffective portion of the
gain or loss is reported in earnings immediately. Accounting for foreign
currency hedges is similar to the accounting for fair value and cash flow
hedges. If the derivative instrument is not designated as a hedge, the gain or
loss is recognized in earnings in the period of change.
 
  The Company has not determined the impact that Statement 133 will have on
its financial statements and believes that such determination will not be
meaningful until closer to the date of initial adoption.
 
Unaudited Quarterly Results and Seasonality
 
  The Company's 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 the Company's merchandise mix and
overall economic conditions also contribute to fluctuations in the Company's
quarterly results. The Company believes this is the general pattern associated
with its segment of the retail industry and expects this pattern will continue
in the future. In order to partially offset the effects of seasonality, the
Company operates in both the Southern and Northern hemispheres which have
opposite seasons, and offers fireplace products and (in Australia) home
heaters in the fall and winter months. In anticipation of its peak selling
season, the Company substantially increases its inventory levels and hires a
significant number of part-time and temporary employees. In non-peak periods,
such as late winter and early fall, the Company has regularly experienced
monthly losses. Because of these fluctuations in net sales and net income
(loss), the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year or any
future quarter. See "Item 1--Description of Business--Factors That May Affect
Quarterly or Annual Operating Results."
 
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
  Market risks relating to the Company's operations result primarily form
changes in interest rates and changes in foreign exchange rates.
 
Foreign Currency Market Risk
 
  The Company's functional currency is the Australian dollar although it
transacts a portion of its business in foreign currencies and accordingly has
foreign currency exposure through its sales in the United States and purchases
from overseas suppliers in U.S. dollars.
 
  Prior to the current fiscal year, the Company's Australian operations have
hedged a major portion of its imports against exchange rate fluctuations with
respect to the Australian dollar. During the twelve months ended January 31,
1999, the Company has hedged a portion of its imports against exchange rate
fluctuations. However, in its U.S. operations, the Company has not, and it
currently does not, actively hedge against exchange rate fluctuations,
although it may elect to do so in the future. Accordingly, changes in exchange
rates may have a material adverse effect on the Company's net sales, cost of
goods sold, gross margin and net income, any of which alone or in the
aggregate may in turn have a material adverse effect on the Company's
business, operating results and financial condition.
 
                                      32
<PAGE>
 
  The notional amount of foreign currency forward contracts used as a means of
offsetting fluctuations in the dollar value of foreign currency accounts
payable amounted to A$609,000 as of January 31, 1999. The counterparties to
the contracts (expressed in United States dollars and which expire within one
year), are major financial institutions and the risk of loss to the Company in
the event of non-performance by a counterparty, is not significant.
 
  In addition, the Company had entered into certain "Converting Forward"
transactions as of January 31, 1999 amounting in total to US$1,500,000 with
expiration dates varying from February 26, 1999 through to June 30, 1999 and a
uniform strike rate of US$0.63.
 
  The notional value of foreign currency contracts approximates the fair
value.
 
Interest Rate Risk
 
  As the Company has long-term debt under the facilities with the Australia
and New Zealand Group Limited ("ANZ") and Merrill Lynch Business Financial
Services, Inc. ("Merrill Lynch"), it is exposed to changes in interest rates.
 
  The ANZ facility comprises bank bills which are generally taken out over a
90-day period and rolled over at the end of their respective terms. As of
January 31, 1999, the weighted average interest rate accruing on the bank
bills utilized under the ANZ Facility was 5.7% per annum. In addition,
property loans under the facility accrue interest at rates varying from 6.9%
to 9.6% per annum.
 
  The Merrill Lynch facility includes a term loan of US$375,000 and a
revolving line of credit amounting to US$1.0 million. Indebtedness under the
term loan and revolving line of credit accrues interest at the 30-day
commercial paper rates plus 2.70% and is payable monthly.
 
  The Company's total long-term debt matures as follows:
 
<TABLE>
<CAPTION>
        Year ending January 31,                               (in A$ thousands)
        -----------------------                               -----------------
        <S>                                                   <C>
        2000.................................................      $   172
        2001.................................................       24,171
                                                                   -------
                                                                   $24,343
</TABLE>
 
                                      33
<PAGE>
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  The executive officers, directors and key employees of the Company are as
follows:
 
<TABLE>
<CAPTION>
          Name            Age                              Position
          ----            ---                              --------
<S>                       <C> <C>
Directors and Executive
 Officers of the Company
Sam Linz................   59 Chairman of the Board
Robert Gavshon(1)(2)....   51 Deputy Chairman of the Board and General Counsel
John Price..............   48 Head of Research and Product Development and Director
Sydney Selati...........   60 President--Galore USA and Director
Edgar Berner(1).........   67 Director
Gordon Howlett (1)(2)...   57 Director
David Glaser............   50 Company Secretary
David James.............   38 Chief Financial Officer
Kevin Ralphs............   45 Chief Financial Officer--Galore USA
 
Key Employees--Australia
William Lyons...........   56 Managing Director of Manufacturing--Park-Tec
                              Engineering Pty Limited and Australian Enamellers Pty Limited
Ian Redmile.............   47 General Manager--Pricotech Leisure Brands Pty Limited
Peter Spring............   40 General Manager of Retail/Licensees--Barbeques Galore
                              (Aust) Pty Limited
Gary Whitehouse.........   49 General Manager of Logistics
 
Key Employees--United
 States
Michael Varley..........   52 Vice President of Purchasing, Distribution and Product Development
Austin Yeh..............   51 Vice President and Director of Operations
</TABLE>
--------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
 
  SAM LINZ has served as Chairman of the Board since joining the Company 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 was a major
shareholder until he sold his interest in July 1997. Prior to joining the
Company, 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 32
years of experience in the retail industry.
 
  ROBERT GAVSHON joined the Company 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 was a shareholder until he sold his interest
in July 1997. Prior to joining the Company, 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 17 years of experience in the
retail industry.
 
  JOHN PRICE joined the Company in 1981 as General Manager of Wholesale and
has served as Head of Research and Product Development since June 1989, and as
Director of the Company since November 1989. Prior to joining the Company, Mr.
Price helped found and was Managing Director of Cook-On-Gas Products Pty
Limited, a developer and manufacturer of consumer gas products which was
acquired by the Company in 1981. Mr. Price has over 26 years of experience in
the development and marketing of consumer gas products.
 
  SYDNEY SELATI has served as Director of the Company 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 32 years of
experience in the retail industry.
 
                                      34
<PAGE>
 
  EDGAR BERNER was appointed as a non-executive Director of the Company on
September 1, 1998. Mr Berner is a private investor and consultant to emerging
companies. He is presently Vice President of RealAge, Inc., an internet health
information company and also serves on the Board of Directors of Hot Topic,
Inc., a music oriented retail chain of stores and Garden Fresh, Inc., a
national soup and salad buffet restaurant chain.
 
  GORDON HOWLETT has served as a non-executive Director of the Company since
August 1991. Mr. Howlett is the Chief Executive Officer of Thorn Asia Pacific
and is a non-executive Director of Arthur Yates & Company Limited, Kennards
Hire Pty Limited and George Norman & Co Pty 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 GLASER has served as Company Secretary since March 1994. Mr. Glaser
has also provided retail management accounting services for the retail
subsidiary of the Company from February 1996 to April 1998 and, from July 1988
to February 1994, was the financial administrator to certain other of the
Company's subsidiaries. Prior to joining the Company, Mr. Glaser was a partner
at Arthur Andersen in South Africa. Mr. Glaser has extensive commercial
experience in retail, manufacturing and service industries both locally and
overseas.
 
  DAVID JAMES joined the Company in January 1992, serving the Company in
several group financial roles, ultimately as General Manager-Finance &
Administration until his departure in September 1996. From September 1996 to
July 1997, Mr. James was employed by HMV Australia Pty Ltd., a subsidiary of
EMI plc, as Finance Director. He rejoined the Company in July 1997 as Chief
Financial Officer of the Company. Prior to 1992, Mr. James served as a Senior
Audit Manager for KPMG in Australia.
 
  KEVIN RALPHS has 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) Ltd., a foreign
subsidiary of Nabisco.
 
  WILLIAM LYONS has served as Managing Director of Manufacturing for Park-Tec
Engineering Pty Limited, an operating subsidiary of the Company since
September 1987. Prior to joining the Company, Mr. Lyons served as the Manager
of Quintrex Marine, a division of Alcan, and as the Manager of Vass Electrical
Engineering. Prior to managing Quintrex Marine and Vass Electrical
Engineering, Mr. Lyons was involved in Design, Production and Factory
Management of Cope Allman for 17 years.
 
  IAN REDMILE joined the Company in August 1992 as a State Manager for an
Australian state and has served as General Manager of Pricotech, the Company's
wholesaling subsidiary, since February 1997. Prior to joining the Company, Mr.
Redmile has served as Key Account/Sales Manager for Unilever Australia for 12
years.
 
  PETER SPRING has served as General Manager of Retail/Licensees for Barbeques
Galore (Aust) Pty Limited, an operating subsidiary of the Company since
October 1995. Prior to that, Mr. Spring served as General Manager of the
Operations of Pricotech and has served the Company since its inception in
1977.
 
  GARY WHITEHOUSE joined the Company in May 1990 as National Warehouse Manager
and has served as General Manager of Logistics for the Company since July
1996. Prior to joining the Company, 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.
 
  MICHAEL VARLEY joined the Company 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.
 
                                      35
<PAGE>
 
  AUSTIN YEH has served as Vice President and Director of Operations for
Galore USA since May 1994. Prior to joining Galore USA, Mr. Yeh served for 15
years as Director of Operations for C&R Clothiers, a major menswear retailer.
 
  At least one-third of the Board of Directors of the Company 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. The Board of
Directors has a Compensation Committee comprised of Messrs. Gavshon, Howlett
and Linz that reviews and makes recommendations for remuneration packages for
executive directors and senior executives, and an Audit Committee presently
comprised of Messrs. Berner, Gavshon and Howlett that advises on the
establishment and maintenance of internal controls and ethical standards as
well as on the quality and reliability of financial information provided by
the Company's independent auditors.
 
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
 
  The aggregate annual compensation, including bonuses under the incentive
program described below, paid by the Company to all directors and executive
officers of the Company (nine persons) as a group for services (i) for the
twelve-month period ended June 30, 1996 was A$1,258,896, (ii) for the twelve-
month period ended January 31, 1997 was A$1,277,085, (iii) for the twelve-
month period ended January 31, 1998 was A$1,462,568 and for the twelve-month
period ended January 31, 1999 was A$1,671,241. 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 12--
Options to Purchase Securities from Registrant or Subsidiaries".
 
  The total amount set aside by the Company and its subsidiaries to provide
superannuation benefits for such officers and directors for the twelve-month
period ended January 31, 1999 was A$107,711.
 
  On February 1, 1998, the Company instituted an incentive program whereby
certain executives will receive a bonus if certain budget objectives are
attained during fiscal year 1999. Under this program, Mr. Linz, Mr. Gavshon,
Mr. Price, and Mr. James will each receive a bonus of 20%, and Mr. Selati, Mr.
Lyons, Mr. Spring, Mr. Redmile and Mr. Whitehouse will each receive a bonus of
10%, of their respective base salaries if the Company achieves its budgeted
pre-tax profit before trading contingencies for the fiscal year ended January
31, 1999. Mr. Selati, Mr. Lyons, Mr. Spring and Mr. Redmile will each receive
an additional bonus of 10% of his base salary if his division achieves its
budgeted operating contribution, regardless of whether or not the Company's
budget is achieved. Additionally, Mr. Whitehouse will receive a bonus of 10%
of his base salary if the Company's inventory level budget for fiscal 1999 is
attained.
 
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
 
  As of April 13, 1999 there were outstanding options to purchase a total of
446,134 Ordinary Shares granted by the Company, of which 284,934 were held by
directors and officers of the Company. These outstanding options were granted
under both the Company's Executive Share Option Plan and the 1997 Share Option
Plan. There were no other warrants or rights to purchase the Company's
Ordinary Shares outstanding as of April 13, 1999. The following table sets
forth information concerning outstanding options as of April 13, 1999:
 
<TABLE>
<CAPTION>
                                  Number Of
                               Ordinary Shares   Price Per         Option
                                Under Option   Ordinary Share Expiration Date
                               --------------- -------------- ----------------
<S>                            <C>             <C>            <C>
Executive Share Option Plan
 (1)..........................     203,038         A$8.38     February 1, 2002
1997 Share Option Plan (2)....      17,646        US$8.50     August 31, 2003
1997 Share Option Plan (2)....     225,450        US$5.20     November 8, 2003
Directors and Officers as a
 Group (3)....................     284,934            --            --
</TABLE>
--------
(1) Options under the Executive Share Option Plan will generally expire on the
    earlier of the Expiration Date or thirty days after the cessation of
    employment of the optionee or the executive controlling the optionee is an
    entity (an "Entity Optionee"). For more information, see the "Executive
    Share Option Plan" description below.
 
 
                                      36
<PAGE>
 
(2) Options under the 1997 Share Option 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.
(3) Directors and Officers as a group received options under both the
    company's Executive Share Option Plan and the 1997 Share Option Plan. For
    more information on these plans, please see the "Executive Share Option
    Plan" and the "1997 Share Option Plan" descriptions below.
 
Executive Share Option Plan
 
  On January 31, 1997, the Company adopted the Executive Share Option Plan
(the "Executive Plan"). Under the Executive Plan, a total of 203,038 Ordinary
Shares were reserved for issuance. On January 31, 1997, the Board granted
stock options comprising the entire share reserve under the Executive Plan.
Each such stock option has an exercise price of A$8.38 per Ordinary Share. The
Executive Plan terminated on December 31, 1997. Accordingly, no additional
stock options will be granted under the Executive Share Option Plan. However,
all options granted prior to the termination date of the Executive Plan are
subject to the terms and conditions of the documents evidencing each such
option.
 
  All stock options granted under the Executive Plan became exercisable on
February 1, 1999. The stock options will generally lapse thirty days after the
cessation of the employment of the optionee (or the executive controlling the
optionee, if the optionee is an entity (an "Entity Optionee")), whether or not
exercisable. In addition, the stock options will automatically lapse (i) if
the optionee or Entity Optionee transfers, assigns, or encumbers any right or
interest in the options without the Company's consent (except for a one-time
exemption for a transfer by a director or Entity Optionee controlled by a
director to an employee of the Company or its related entities) or (ii) for
Entity Optionees, if the Entity Optionee ceases to be controlled by the
employee or director of the Company who controlled the Entity Optionee on the
date of grant. Each stock option will terminate five years after the grant
date (the "Expiration Date"), if such options do not lapse or are not
exercised prior to the Expiration Date. The stock options will automatically
accelerate and become immediately exercisable, for the thirty days prior to
their lapse, in the event the optionee (or executive controlling the Entity
Optionee) ceases to be employed by the Company or a related entity due to
death, permanent disability or ill health. In addition, the Board, in its sole
discretion, may accelerate any outstanding stock option or extend the period
until lapse, even if expired (but in no event to a date later than the
Expiration Date), upon any other event terminating the employment of the
optionee or the executive controlling the Entity Optionee. In the event the
Company is subject to a takeover bid pursuant to which the offeror acquires at
least thirty percent of the outstanding Ordinary Shares of the Company, the
Board may accelerate stock options outstanding at that time for a period of up
to 120 days measured from the date the Board notifies the optionee of the
takeover bid. Any stock option exercised under the Executive Plan must be for
a minimum of twenty percent of the stock options included in the relevant
grant.
 
  In the event of changes to the Company's capital structure, appropriate
adjustments will be made to the stock option exercise price and the number of
shares subject to each outstanding stock option.
 
1997 Share Option Plan
 
  The Company's 1997 Share Option Plan (the "1997 Plan") was adopted by the
Board of Directors on October 1, 1997, and was approved by the shareholders as
of October 7, 1997. A total of 374,671 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.
In no event may any one participant in the 1997 Plan receive stock option
grants for more than 27,438 Ordinary Shares per calendar year.
 
                                      37
<PAGE>
 
  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
advisors 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 percent (85%) of their
fair market value on the option grant date.
 
  The 1997 Plan will be administered by the Compensation Committee. The Plan
Administrator will have 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 in
three equal annual installments measured from the option grant 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. The
Company is 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 that the Company is acquired by merger or 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 of the
Company, 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. The Plan Administrator has the
authority to effect, with the consent of the affected option holders, the
cancellation 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 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.
 
  As a result of recent decreases in the market price of the Company's
Ordinary Shares, the exercise price of those options granted concurrently with
the Offering at US$11.00 per Ordinary Share, was significantly higher than the
current 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 cancellation/regrant 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 cancelled 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 are exercisable in three equal
installments on November 9, 2001, November 9, 2002 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 cancelled and regranted under the program.
 
  In addition to the cancellation and regrant program on November 9, 1998, the
Board of Directors granted further options to directors, an officer 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.
 
                                      38
<PAGE>
 
  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 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
 
Delisting Transaction and Note Conversion
 
  In December 1996, the Company delisted from the ASE after repurchasing
Ordinary Shares pursuant to a "Capital Reduction" program for a total
consideration of A$20.1 million, exclusive of transaction costs, financed
through the issuance and sale of A$10.0 million in aggregate principal amount
of Convertible Notes (the "Notes") and the borrowing of A$11.2 million under
the ANZ Facility. In connection with the Offering, the Company converted all
of the Notes into 1,197,926 Ordinary Shares, 200,000 of which were sold in the
Offering by the holders thereof. Certain holders of the Notes, including
Fagume Pty Ltd., an affiliate of Gordon Howlett, a director of the Company,
National Australia Trustees Ltd., on behalf of Philip Gardiner, a former
director of the Company, Michael Varley, an employee of the Company, Don and
Mary McLeod, a former employee of the Company and his wife, Sarah Gavshon, the
mother of Robert Gavshon, a director and executive officer of the Company, and
Mildred Pogorelsky, the mother-in-law of Sam Linz, a director and executive
officer of the Company, received Ordinary Shares pursuant to such conversion
on the same terms as all other Noteholders. Upon conversion of the Notes, all
debt instruments relating to the Notes by and among the Company, Warburg
Australia, as representative of the holders of the Notes, and Sam Linz, Robert
Gavshon, Sydney Selati, John Price and affiliates of such individuals were
terminated.
 
  Warburg Australia, a financial advisor to a group of shareholders holding,
in the aggregate, more than five percent of the outstanding Ordinary Shares of
the Company, received underwriting and advising fees of A$750,000 in
connection with the Offering and a one-time fee of A$15,000 in connection with
the original issuance of the Notes.
 
  In connection with the issuance and sale of the Notes, the Company granted
stock options to purchase up to an aggregate of 203,038 Ordinary Shares under
the Executive Share Option Plan to Messrs. Sam Linz, Robert Gavshon, Sydney
Selati and John Price, who are directors and executive officers of the Company
and to David James and Kevin Ralphs who are executive officers of the Company.
See "Item 12-Options to Purchase Securities and Registrant or Subsidiaries."
 
Transactions with Affiliates
 
  The Company holds a one-third ownership interest in Bromic, which supplies
gas valves and related products to the Company. Bromic receives approximately
20% of its revenues from sales to the Company, which in turn is Bromic's
second largest customer. In the year ended January 31, 1999, the Company
purchased approximately A$2.7 million of products from Bromic.
 
  In addition, the Company holds a 50% equity interest in GLG Taiwan, which
supplies the Company with grills, burners and other products. GLG Taiwan
receives approximately 80% of its revenues from sales to the Company, which in
turn is GLG Taiwan's largest customer. In the year ended January 31, 1999, the
Company purchased approximately A$8.6 million of products from GLG Taiwan.
 
Transactions Involving Principal Shareholders
 
  Messrs. Linz, Gavshon, Selati and Price beneficially own 28.9%, 6.1%, 3.8%
and 2.0%, respectively, of the outstanding Ordinary Shares of the Company.
Accordingly, these individuals may exert substantial influence over the
business and affairs of the Company, including the election of the Company's
directors and the outcome of corporate actions requiring shareholder approval.
 
                                      39
<PAGE>
 
  From time to time in the past, Messrs. Linz, Gavshon and Selati and certain
members of their respective families have advanced funds, re-payable on
demand, to the Company to be used for general corporate purposes. As of
January 31, 1997, the aggregate balance of these advances was A$1,231,000.
Through these advances, the Company has been able to obtain funds at
relatively attractive short-term borrowing rates of approximately 2% per annum
below the overdraft rate received by the Company. As of July 31, 1997, the
Company had repaid all amounts owing on such advances and terminated these
borrowing arrangements. The Company has reinstated similar arrangements which
the Board of Directors has determined are in the best interests of the
Company.
 
  The Company leases cars for the use of Messrs. Linz, Gavshon, Price and
Selati, at a rate of approximately A$3,909, A$3,910, A$1,620 and US$912,
respectively, per month per car.
 
  The Company pays the premiums on a disability insurance policy naming Mr.
Selati as the insured. If benefits were paid to Mr. Selati under this policy,
he would receive approximately US$7,900 per month until he reaches age 65.
 
  In connection with the Capital Reduction, the Company acquired from Mr.
Selati, who is the President of Galore USA and a Director of the Company, his
15% interest in the company, in exchange for the issuance to Mr. Selati of
137,189 Ordinary Shares, valued at A$1,000,000. The Company elected Mr. Selati
to its Board of Directors on July 21, 1997.
 
  Mr. Linz's sister, together with her husband in one instance and her husband
and son in the other instance, owns two 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 Company approval,
additional Barbeques Galore stores within a specified territory in Orange
County.
 
  Pursuant to his appointment as a non-executive Director of the Company on
September 1, 1998, options to purchase up to an aggregate of 17,646 Ordinary
Shares at a price of US$8.50 per Ordinary Share were granted by the Company to
Mr. Edgar Berner under the 1997 Plan, exercisable in three equal installments
on September 1, 2001, September 1, 2002 and August 1, 2003. See "Item 12--
Options to Purchase Securities from Registrant or Subsidiaries."
 
  Pursuant to the cancellation and regrant program on November 9, 1998, option
to purchase up to an aggregate of 46,250 Ordinary Shares at a price of US$5.20
per Ordinary Share were granted by the Company to Directors and an Executive
Officer of the Company under the 1997 Plan, excerisable in three equal
installments on November 9, 2001, November 9, 2002 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. See "Item 12--
Options to Purchase Securities from Registrant or Subsidiaries."
 
  The Company leases certain retail facilities to Rebel Sport Ltd. ("Rebel")
under an arms-length landlord-tenant relationship. For the seven months ended
January 31, 1997, the twelve months ended January 31, 1998 and the twelve
months ended January 31, 1999, Rebel reimbursed the Company A$352,000,
A$260,000 and A$710,000, respectively, for these leases. Until July 10, 1997,
Messrs. Linz and Gavshon were directors and significant shareholders of Rebel.
 
Company Policy Concerning Transactions With Affiliates
 
  Under the Australian Corporations Law, directors are prohibited from
entering into transactions with the Company conferring a benefit on any
director which are not on "arms-length" commercial terms, except where limited
exemptions apply or detailed approval procedures are first observed. The
Company has adopted a more stringent policy based on the Australian
Corporations Law that requires that all transactions with directors,
 
                                      40
<PAGE>
 
executive officers and other affiliates will be on terms that are believed to
be at least as favorable to the Company as could be obtained from unaffiliated
third parties and that such transactions must be approved by a majority of the
Company's disinterested directors.
 
  The Company believes that the foregoing transactions with directors,
executive officers and other affiliates were completed on terms as favorable
to the Company as could have been obtained from unaffiliated third parties.
 
                                    PART II
 
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
 
  Not applicable.
 
                                   PART III
 
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
 
  Not applicable.
 
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS.
 
Dividends
 
  Since the Ordinary Shares were delisted from the ASE on December 31, 1996,
the Company has not declared or paid any cash dividends on its Ordinary Shares
other than a dividend in an aggregate amount equal to A$500,000 paid on April
21, 1997. The Company does not anticipate paying any regular dividends on the
Ordinary Shares or ADSs in the foreseeable future. In addition, the Company is
subject to certain restrictions on the declaration or payment of dividends
under the ANZ Facility, as well as the Merrill Lynch Facility.
 
Changes in Securities
 
  The Company convened a duly noticed special meeting of shareholders on
October 7, 1997, at which a quorum was present. The shareholders voted to
authorize the effectiveness of a reverse share split of Ordinary Shares of the
Company to take effect immediately before consummation of the Offering and to
authorize the Pricing Committee of the Board of Directors to determine the
final ratio of such reverse share split. As a result, every 18.223 Ordinary
Shares were exchanged for one Ordinary Share immediately prior to the Offering
in November 1997.
 
  In addition, at the same meeting, the shareholders approved the 1997 Share
Option Plan, to serve as the successor to its previous equity incentive plan.
Immediately prior to the Offering, all holders of Notes of the Company
converted such Notes into Ordinary Shares. Thereafter, all agreements defining
the terms and conditions of the Notes were terminated.
 
Use of Proceeds
 
  In November 1997, the Company registered, issued and sold 1,700,000 American
Depositary Shares (each representing one Ordinary Share of the Company) at a
price of US$11.00 per share, for an aggregate offering amount of US$18,700,000
including 1,500,000 ADSs sold by the Company for an aggregate offering amount
of US$16.5 million and 200,000 ADSs registered for the selling security
holders, at $11.00 per share for an aggregate offering amount of US$2.2
million. The ADSs were registered on a Form F-1 registration statement,
Commission file number 333-37259 with the Securities and Exchange Commission,
which registration statement became effective on November 3, 1997. The
managing underwriters were J.P. Morgan & Co. and Warburg Dillon Read Inc. The
Company did not receive any of the proceeds from the offering of ADSs on
behalf of the selling security holders.
 
                                      41
<PAGE>
 
  In connection with the offering, the Company incurred approximately
A$493,580 in registration expenses, approximately A$1,652,597 for underwriting
expenses and approximately A$1,749,506 for other related expenses.
Approximately A$83,703 of other related expenses consisted of direct or
indirect reimbursement to directors or officers of the Company for expenses in
connection with the offering. The net proceeds of the offering, after
deducting the foregoing expenses, were approximately US$13.8 million
(approximately A$19.7 million).
 
  The Company has used a portion of the net proceeds of the offering as
follows:
 
  Approximately US$8.4 million (approximatelyA$12.0 million) was used to repay
indebtedness incurred under the ANZ Facility. Approximately US$1.8 million was
used to repay all outstanding indebtedness under the Merrill Lynch Facility.
The remaining funds, approximately US$3.6 million (approximately A$5.1
million), have been used to fund a portion of the Company's operations and
investing activities and to continue the expansion of the Company's operations
in the United States.
 
                                    PART IV
 
ITEM 17. FINANCIAL STATEMENTS.
 
  The Company has elected to provide financial statements pursuant to Item 18
of Form 20-F.
 
ITEM 18. FINANCIAL STATEMENTS.
 
  The Company has elected to provide financial statements pursuant to Item 18
of Form 20-F. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles.
 
  The financial statements and independent auditors' reports are included on
pages 43 to 66 of this Annual Report.
 
                                      42
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Shareholders
 Barbeques Galore Limited
 
  We have audited the accompanying consolidated statement of operations,
shareholders' equity and cash flows of Barbeques Galore Limited and
subsidiaries for the year ended June 30, 1996. We have also previously audited
the consolidated balance sheet of Barbeques Galore Limited and subsidiaries as
of June 30, 1996, not presented herein. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
 
  We conducted our audit in accordance with auditing standards generally
accepted in Australia, that are substantially equivalent to auditing standards
generally accepted in the United States. 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
audit provides a reasonable basis for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Barbeques
Galore Limited and subsidiaries as of June 30, 1996, and the results of their
operations and their cash flows for the year ended June 30, 1996, in
conformity with generally accepted accounting principles in the United States.
 
/s/ Horwath Sydney Partnership
Horwath Sydney Partnership
March 10, 1999
Sydney, Australia
 
                                      43
<PAGE>
 
                         INDEPENDENT AUDITORS' 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, 1999 and 1998 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended January 31, 1999 and 1998 and the seven months ended
January 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
 
  We conducted our audits in accordance with auditing standards generally
accepted in Australia which are substantially equivalent to auditing standards
generally accepted in the United States. 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, 1999 and 1998 and the
results of their operations and their cash flows for the years ended January
31, 1999 and 1998 and the seven months ended January 31, 1997, in conformity
with generally accepted accounting principles in the United States.
 
/s/ KPMG
KPMG
March 10, 1999
Sydney, Australia
 
                                      44
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
                       CONSOLIDATED FINANCIAL STATEMENTS
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                      January 31, January 31,    January 31,
                                         1998        1999           1999
                                      ----------- ----------- -----------------
                                          (in A$thousands
                                        except share data)    (in US$thousands)
<S>                                   <C>         <C>         <C>
Assets
Current assets:
Cash and cash equivalents...........    $   166    $    811        $   510
Accounts receivable, net............      9,862      11,916          7,490
Receivables from affiliates.........        143         --             --
Inventories, net....................     43,030      47,095         29,604
Deferred income taxes...............      2,031       2,238          1,407
Prepaid expenses and other current
 assets.............................      1,079       1,346            846
                                        -------    --------        -------
Total current assets................     56,311      63,406         39,857
Non-current assets:
Receivables from affiliates.........        642         848            533
Property, plant and equipment, net..     21,038      32,620         20,505
Goodwill, net.......................      1,507       1,418            891
Deferred income taxes...............      1,194       1,030            648
Other non-current assets............      1,382       1,880          1,182
                                        -------    --------        -------
Total assets........................    $82,074    $101,202        $63,616
                                        =======    ========        =======
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabil-
 ities..............................    $16,648    $ 17,813        $11,197
Payables to affiliates..............        --          168            106
Current maturities of long-term
 debt...............................        198         172            108
Current portion of obligations under
 capital leases.....................      1,729       2,029          1,275
Income taxes payable................        819       2,062          1,296
                                        -------    --------        -------
Total current liabilities...........     19,394      22,244         13,982
Non-current liabilities:
Long-term debt......................     14,716      24,171         15,194
Obligations under capital leases,
 excluding current portion..........      3,405       4,859          3,055
Other long-term liabilities.........        632         815            512
                                        -------    --------        -------
Total liabilities...................     38,147      52,089         32,743
                                        -------    --------        -------
Shareholders' equity:
Ordinary shares--authorized
 27,437,853 shares; 4,541,652 issued
 shares.............................     16,532      40,733         25,605
Additional paid-in capital..........     24,554         --             --
Accumulated other comprehensive in-
 come...............................      1,177       1,509            949
Retained earnings...................      1,664       6,871          4,319
                                        -------    --------        -------
Total shareholders' equity..........     43,927      49,113         30,873
                                        -------    --------        -------
Total liabilities and shareholders'
 equity.............................    $82,074    $101,202        $63,616
                                        =======    ========        =======
</TABLE>
 
          See accompanying notes to Consolidated Financial Statements.
 
                                       45
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                          Year ended 7 months to Year ended  Year ended  Year ended      Year ended
                           June 30,  January 31, January 31, January 31, January 31,    January 31,
                             1996       1997        1997        1998        1999            1999
                          ---------- ----------- ----------- ----------- ----------- ------------------
                                                 (unaudited)                         (in US$ thousands)
                              (in A$ thousands, except share and per share data)
<S>                       <C>        <C>         <C>         <C>         <C>         <C>
Net sales...............   $141,691    $98,752    $148,369    $179,325    $224,984        $140,255
Cost of goods sold,
 warehouse, distribution
 and occupancy costs....     98,158     67,955     103,324     122,072     152,708          95,198
                           --------    -------    --------    --------    --------        --------
Gross profit............     43,533     30,797      45,045      57,253      72,276          45,057
Selling, general and
 administrative
 expenses...............     39,339     25,740      40,751      48,992      61,796          38,524
Store pre-opening
 costs..................        153        200         239         435         810             505
Relocation and closure
 costs..................        875        461       1,336          20         --              --
                           --------    -------    --------    --------    --------        --------
Operating income........   $  3,166    $ 4,396    $  2,719    $  7,806    $  9,670        $  6,028
                           --------    -------    --------    --------    --------        --------
Equity in income of
 affiliates, net of
 tax....................        836        252         379         547         514             320
Interest expense........      2,262      1,593       2,236       3,334       2,163           1,348
Other expenses
 (income)...............     (2,303)     1,132       1,132         --          --              --
                           --------    -------    --------    --------    --------        --------
Income (loss) before
 income taxes...........      4,043      1,923        (270)      5,019       8,021           5,000
Income tax expense
 (benefit)..............         98        366        (822)      1,488       2,814           1,754
                           --------    -------    --------    --------    --------        --------
Net income..............      3,945      1,557         552       3,531       5,207           3,246
Other comprehensive
 income (loss)..........       (629)       197        (113)        977         332             207
                           --------    -------    --------    --------    --------        --------
Net income after other
 comprehensive income
 (loss).................   $  3,316    $ 1,754    $    439    $  4,508    $  5,539        $  3,453
                           ========    =======    ========    ========    ========        ========
Earnings per share (A$
 per share):
Basic earnings per
 share..................   $   0.89    $  0.38    $   0.13    $   1.43    $   1.15        $   0.72
                           ========    =======    ========    ========    ========        ========
Diluted earnings per
 share..................   $   0.89    $  0.38    $   0.13    $   1.18    $   1.13        $   0.70
                           ========    =======    ========    ========    ========        ========
Weighted average shares
 outstanding (in
 thousands).............      4,450      4,073       4,228       2,473       4,542           4,542
                           ========    =======    ========    ========    ========        ========
</TABLE>
 
 
          See accompanying notes to Consolidated Financial Statements.
 
                                       46
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
                CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                               Additional     Other     Retained      Total
                           Shares    Ordinary   Paid-In   Comprehensive Earnings  Shareholders'
                         Outstanding  Shares    Capital      Income     (Deficit)    Equity
                         ----------- --------  ---------- ------------- --------- -------------
                           ('000)       (in A$ thousands, except share and per share data)
<S>                      <C>         <C>       <C>        <C>           <C>       <C>
Balances at June 30,
 1995...................     4,451   $ 16,220   $ 14,113     $  632      $(4,639)   $ 26,326
Net income..............       --         --         --         --         3,945       3,945
Dividend of $0.1367 per
 share..................       --         --         --         --          (608)       (608)
Dividend of $0.2733 per
 share..................       --         --         --         --        (1,217)     (1,217)
Foreign currency
 translation
 adjustment.............       --         --         --        (629)         --         (629)
                           -------   --------   --------     ------      -------    --------
Balances at June 30,
 1996...................     4,451     16,220     14,113          3       (2,519)     27,817
Net income..............       --         --         --         --         1,557       1,557
Dividend of $0.0911 per
 share..................       --         --         --         --          (406)       (406)
Foreign currency
 translation
 adjustment.............       --         --         --         197          --          197
Repurchase of ordinary
 shares.................    (2,744)   (10,000)   (10,000)       --           --      (20,000)
Issuance of ordinary
 shares.................       137        500        500        --           --        1,000
                           -------   --------   --------     ------      -------    --------
Balances at January 31,
 1997...................     1,844      6,720      4,613        200       (1,368)     10,165
Net income..............       --         --         --         --         3,531       3,531
Dividend of $0.2715 per
 share..................       --         --         --         --          (499)       (499)
Foreign currency
 translation
 adjustment.............       --         --         --         977          --          977
Issuance of ordinary
 shares.................     1,500      5,460     18,149        --           --       23,609
Conversion of
 convertible notes......     1,198      4,360      5,682        --           --       10,042
Initial public offering
 (the "Offering")
 costs..................       --         --      (3,898)       --           --       (3,898)
Other...................       --          (8)         8        --           --          --
Balances at January 31,
 1998...................     4,542     16,532     24,554      1,177        1,664      43,927
Net income..............       --         --         --         --         5,207       5,207
Foreign currency
 translation
 adjustment.............       --         --         --         332          --          332
Offering costs..........       --         --        (353)       --           --         (353)
Transfer of balance of
 additional paid-in
 capital to ordinary
 shares on July 1, 1998
 resulting from
 amendments to the
 Australian Corporations
 Law....................       --      24,201    (24,201)       --           --          --
                           -------   --------   --------     ------      -------    --------
Balances at January 31,
 1999...................     4,542   $ 40,733   $    --      $1,509      $ 6,871    $ 49,113
                           =======   ========   ========     ======      =======    ========
</TABLE>
 
  The Australian Company Law Review Act (the "Act") came into effect on July
1, 1998. The Act abolished par value shares and any amounts standing to the
credit of "Additional Paid-In Capital" became part of the value of Ordinary
Shares on that date. Effective July 1, 1998, Ordinary Shares do not have a
nominal or par value.
 
          See accompanying notes to Consolidated Financial Statements
 
                                      47
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                          Year ended 7 months to    Year ended    Year ended  Year ended
                           June 30,  January 31,   January 31,    January 31, January 31,
                             1996       1997           1997          1998        1999
                          ---------- ----------- ---------------- ----------- -----------
                                                   (unaudited)
                                                 (in A$thousands)
<S>                       <C>        <C>         <C>              <C>         <C>
Cash flows from operat-
 ing activities:
 Net income.............   $  3,945   $  1,557       $    552      $  3,531    $  5,207
 Adjustments to
  reconcile net income
  to net cash provided
  by (used in) operating
  activities:
 Depreciation and
  amortization..........      3,080      2,633          4,031         4,236       5,975
 Deferred income taxes..       (536)    (1,389)        (1,794)          118         (42)
 Amounts set aside to
  provisions............        270       (269)          (703)         (925)        602
 Gain on sale of
  affiliate.............     (2,303)       --             --            --          --
 Undistributed income of
  affiliates............        124       (252)            (6)         (219)       (317)
 Loss (gain) on sale of
  property, plant and
  equipment.............         76        663            707           (52)         73
 Debt issue costs.......        --       1,132          1,132           --          --
 Changes in operating
  assets and
  liabilities:
 Receivables and prepaid
  expenses..............        275       (421)         1,292        (2,316)     (2,510)
 Inventories............      1,547      3,219          3,039        (9,185)     (3,800)
 Other assets...........         (6)        (1)           (45)          (81)        (59)
 Accounts payable and
  accrued liabilities...     (1,901)       332          2,425         3,755       1,392
                           --------   --------       --------      --------    --------
Net cash provided by
 (used in) operating
 activities.............      4,571      7,204         10,630        (1,138)      6,521
                           --------   --------       --------      --------    --------
Cash flows from invest-
 ing activities:
 Proceeds from sale of
  affiliate.............      2,222        173            173           --          --
 Proceeds from sale of
  property, plant and
  equipment.............         63         51             84           322          28
 Capital expenditures...     (4,609)    (3,201)        (6,602)       (5,000)    (13,181)
 Loan repayments
  received..............      2,270        140            320           181          43
                           --------   --------       --------      --------    --------
Net cash (used in) in-
 vesting activities.....        (54)    (2,837)        (6,025)       (4,497)    (13,110)
                           --------   --------       --------      --------    --------
Cash flows from financ-
 ing activities:
 Repayment of long-term
  debt..................    (12,661)    (4,304)        (4,711)      (34,111)    (10,021)
 Proceeds from long-term
  debt..................      9,429     21,534         19,522        24,274      19,450
 Debt issue costs.......        --      (1,132)        (1,132)          --          --
 Bank overdraft proceeds
  (repayments)..........      1,445        381          1,826        (1,826)        --
 Principal payments
  under capital leases..       (827)      (443)          (874)       (1,782)     (1,844)
 Dividends paid.........     (1,825)      (406)        (1,623)         (499)        --
 Repurchase of ordinary
  shares................        --     (20,000)       (20,000)          --          --
 Proceeds from issuance
  of ordinary shares....        --         --             --         23,609         --
 Offering costs.........        --         --             --         (3,898)       (353)
 Net cash (used in)
  provided by financing
  activities............     (4,439)    (4,370)        (6,992)       (5,767)     (7,232)
                           --------   --------       --------      --------    --------
Effects of exchange rate
 fluctuations...........        (60)         7            (24)            4           2
                           --------   --------       --------      --------    --------
Net increase (decrease)
 in cash and cash
 equivalents............         18          4         (2,411)          136         645
                           --------   --------       --------      --------    --------
Cash and cash
 equivalents at
 beginning of period....        519         26          2,441            30         166
                           --------   --------       --------      --------    --------
Adjustment to opening
 cash balance arising
 from deconsolidation of
 former subsidiary......       (511)       --             --            --          --
                           --------   --------       --------      --------    --------
Cash and cash equiva-
 lents at end of peri-
 od.....................   $     26   $     30       $     30      $    166    $    811
                           ========   ========       ========      ========    ========
</TABLE>
 
          See accompanying notes to Consolidated Financial Statements.
 
                                       48
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
                  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 wholesale and retail sales of barbecues, heaters, camping
equipment, outdoor furniture, 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 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. 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 are depreciated, is as follows:
 
<TABLE>
<CAPTION>
                                                                Method     Years
                                                             ------------- -----
<S>                                                          <C>           <C>
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
</TABLE>
 
  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.
 
(g) Goodwill
 
  Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, generally 20 years. The Company
 
                                      49
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
assesses the recoverability of this intangible asset by determining whether
the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using an appropriate discount
rate. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
 
(h) Research and development, and advertising
 
  Research and development, and advertising costs are expensed as incurred.
Amounts expensed were as follows:
 
<TABLE>
<CAPTION>
                            Year ended 7 months to Year ended  Year ended  Year ended
                             June 30,  January 31, January 31, January 31, January 31,
                               1996       1997        1997        1998        1999
                            ---------- ----------- ----------- ----------- -----------
                                                   (unaudited)
                                                (in A$ thousands)
   <S>                      <C>        <C>         <C>         <C>         <C>
   Research and develop-
    ment...................   $1,260     $  541      $1,070      $  924      $1,047
   Advertising.............    7,478      5,319       7,547       8,397       9,605
                              ======     ======      ======      ======      ======
</TABLE>
 
(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 (loss) 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 ("SFAS") No.
123, Accounting for Stock-Based Compensation, in 1996, under which the Company
elected to continue following the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations for its share option plan. Usually, 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.
 
                                      50
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            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. Recoverability 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 as incurred over the lease terms.
 
  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.
 
 (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 per share
 
  Basic earnings per share are computed by dividing net earnings available to
ordinary shareholders by the weighted average number of ordinary shares.
Diluted earnings per share are computed by dividing net earnings available to
ordinary shareholders, as adjusted for the effect of the elimination of after-
tax interest expense related to assumed conversion of the convertible notes,
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.
 
 (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
 
                                      51
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
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.
 
  The information in US dollars in the consolidated balance sheets and
consolidated statements of operations is presented solely for the convenience
of the reader and has been translated at the spot rate on January 29, 1999 of
US$0.6286 per A$1.00 and at the average rate for the fiscal year ended January
31, 1999 of US$0.6234 per A$1.00 respectively. These translations should not
be construed as representations that the Australian dollar amounts actually
represent such US dollar amounts or could be converted into US dollars at the
rate indicated or at any other rate.
 
 (t) Comprehensive income
 
  During 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income". This Statement establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. The only
component of comprehensive income that impacts the Company is foreign currency
translation adjustments. The net gain (loss) associated with the foreign
currency translation adjustments for the year ended June 30, 1996, the seven
months ended January 31, 1997 and the twelve months ended January 31, 1997,
1998 and 1999 was A$(629,000), A$197,000, A$(113,000), A$977,000 and A$332,000
respectively. Accumulated other comprehensive income at January 31, 1998 and
1999 consisted solely of foreign currency translation adjustments with credit
balances of A$1.2 million and A$1.5 million respectively. The adoption of this
standard had no impact on the Company's results of operations or shareholders'
equity. Prior year financial statements have been reclassified to conform to
SFAS No. 130 requirements.
 
2. Derivative Financial Instruments
 
  The notional amount of foreign currency forward contracts used as a means of
offsetting fluctuations in the dollar value of foreign currency accounts
payable totaled:
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$ thousands)
   <S>                                                   <C>         <C>
   Foreign exchange contracts...........................    $--         $609
                                                            ====        ====
</TABLE>
 
  The fair value of these contracts at each balance date is not significant.
All of the currency derivatives expire within one year and are for United
States dollars. The counterparties to the contracts are major financial
institutions. The risk of loss to the Company in the event of non-performance
by a counterparty is not significant.
 
3. Accounts Receivable
 
  Accounts receivable consists of the following:
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$ thousands)
   <S>                                                   <C>         <C>
   Trade accounts receivable............................   $9,929      $11,682
   Less: Reserve for doubtful accounts..................     (497)        (424)
                                                           ------      -------
                                                            9,432       11,258
   Receivables from related parties.....................       88          --
   Other receivables....................................      342          658
                                                           ------      -------
                                                           $9,862      $11,916
                                                           ======      =======
</TABLE>
 
 
                                      52
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
4. INVENTORIES
 
  The major classes of inventories are as follows:
 
<TABLE>
<CAPTION>
                                                         JANUARY 31, JANUARY 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (IN A$THOUSANDS)
   <S>                                                   <C>         <C>
   Finished goods.......................................   $37,999     $42,524
   Work in progress.....................................     1,328       1,542
   Raw materials........................................     4,222       3,283
                                                           -------     -------
                                                            43,549      47,349
   Less: Reserve for obsolescence.......................      (519)       (254)
                                                           -------     -------
                                                           $43,030     $47,095
                                                           =======     =======
</TABLE>
 
5. INVESTMENTS IN AFFILIATED COMPANIES
 
  Investments in affiliated companies consist of 33.33 percent of the ordinary
shares of Bromic Pty Limited and subsidiaries ("Bromic"), an Australian Group
which imports and distributes componentry to the gas and appliance industries,
and 50 percent of the ordinary shares of GLG Trading Pte Limited ("GLG"), a
Singapore company which acts as a buying office for Barbeques Galore and other
third parties. The shareholding in this company was originally 100 percent but
was reduced to 50 percent on July 1, 1995 by issuing shares in that company to
a Director of GLG who is also the General Manager of that company, during the
year ended June 30, 1996.
 
  The Company also previously held a 50 percent interest in GLG (NZ) Limited
("GLG NZ"). This investment was sold in December 1995 for total consideration
of A$2,395,000. A gain on sale of A$2,303,000 has been recognized in the
income statement and is included in other expenses (income) during the year
ended June 30, 1996.
 
  Bromic provides liquid petroleum gas cylinders and related products such as
manifolds, bundy tubes, glass and barbecue ignitions to the Company. GLG
supplies cast iron used in the manufacture of burners, hot plates and grills,
small assembled barbecues and certain accessories such as tongs and warming
racks. Purchasing from GLG NZ consisted mainly of cowls, flue kits, spare
parts and other heating equipment.
 
  Sales to affiliated companies are not significant. Interest is also charged
on amounts owing from affiliates at commercial rates but is not significant.
Amounts owing from affiliates are in relation to cash advances.
 
                                      53
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  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:
<TABLE>
<CAPTION>
                             Year ended 7 months to Year ended  Year ended  Year ended
                              June 30,  January 31, January 31, January 31, January 31,
                                1996       1997        1997        1998        1999
                             ---------- ----------- ----------- ----------- -----------
                                                    (unaudited)
                                                  (in A$thousands)
   <S>                       <C>        <C>         <C>         <C>         <C>
   Purchases from
    affiliates:
   --Bromic................    $3,769     $2,320      $3,476      $ 4,019     $ 2,729
   --GLG NZ................       188        --          188          --          --
   --GLG Trading Pte Ltd...     5,446      3,336       3,840        7,148       8,562
                               ------     ------      ------      -------     -------
                               $9,403     $5,656      $7,504      $11,167     $11,291
                               ======     ======      ======      =======     =======
   Dividends received or
    due and receivable from
    affiliates:
   --Bromic................    $  175     $  --       $  175      $   250     $   --
   --GLG NZ................       495        --          --           --          --
   --GLG Trading Pte Ltd...       198        --          198           83         197
                               ------     ------      ------      -------     -------
                               $  868     $  --       $  373      $   333     $   197
                               ======     ======      ======      =======     =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$thousands)
   <S>                                                   <C>         <C>
   Receivable from affiliates (net):
   --Bromic                                                 $592       $  432
   --GLG Trading Pte Ltd................................     193          248
                                                            ----       ------
                                                            $785       $  680
                                                            ====       ======
   Investment in affiliates.............................    $710       $1,027
                                                            ====       ======
</TABLE>
 
  Investments in affiliates are included in the balance sheet as other non-
current assets. The investment in these companies is carried at the equity
accounted value representing cost plus the Company's share of undistributed
profits. Combined summarized financial data as at June 30, 1996 and 1997 and
January 31, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
                                   June 30,  June 30,  January 31, January 31,
                                     1996      1997       1998        1999
                                   --------  --------  ----------- -----------
                                               (in A$thousands)
   <S>                             <C>       <C>       <C>         <C>
   Current assets................. $ 7,229   $ 6,925     $ 7,414     $ 7,605
   Current liabilities............   4,778     3,666       4,038       3,334
                                   -------   -------     -------     -------
   Working capital................   2,451     3,259       3,376       4,271
   Property, plant and equipment,
    net...........................   1,307     1,215       1,224       1,157
   Other assets...................     549       408         223          61
   Long-term debt.................  (2,498)   (2,412)     (2,417)     (2,312)
                                   -------   -------     -------     -------
   Shareholders' equity........... $ 1,809   $ 2,470     $ 2,406     $ 3,177
                                   =======   =======     =======     =======
   Sales.......................... $22,926   $18,034     $18,460     $17,806
                                   =======   =======     =======     =======
   Gross profit................... $ 9,025   $ 4,637     $ 4,571     $ 4,307
                                   =======   =======     =======     =======
   Net income..................... $ 1,484   $   963     $ 1,176     $ 1,164
                                   =======   =======     =======     =======
</TABLE>
 
                                      54
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Income statement information has been presented for the respective twelve-
month periods. The balance date of all affiliates is June 30.
 
6. Property, Plant and Equipment
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$ thousands)
   <S>                                                   <C>         <C>
   Land and buildings...................................  $  3,218    $  9,275
   Machinery and equipment..............................    18,001      21,097
   Leasehold improvements...............................     8,262      11,153
   Assets under capital leases..........................     8,298      11,587
                                                          --------    --------
                                                            37,779      53,112
   Less: Accumulated depreciation / amortization........   (16,741)    (20,492)
                                                          --------    --------
                                                          $ 21,038    $ 32,620
                                                          ========    ========
</TABLE>
 
7. Goodwill
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$ thousands)
   <S>                                                   <C>         <C>
   Goodwill.............................................   $1,800      $1,800
   Less: Accumulated amortization.......................     (293)       (382)
                                                           ------      ------
                                                           $1,507      $1,418
                                                           ======      ======
</TABLE>
 
8. Leases
 
  The Company is obligated under various capital leases for store improvements
and certain machinery and equipment that expire 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:
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$ thousands)
   <S>                                                   <C>         <C>
   Store improvements...................................   $ 4,966     $ 6,155
   Machinery and equipment..............................     3,332       5,432
                                                           -------     -------
                                                             8,298      11,587
   Less: Accumulated amortization.......................    (3,473)     (4,836)
                                                           -------     -------
                                                           $ 4,825     $ 6,751
                                                           =======     =======
</TABLE>
 
                                      55
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  The Company also has entered into non-cancelable operating leases, primarily
for retail stores. These leases generally contain renewal options for periods
ranging 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:
 
<TABLE>
<CAPTION>
                      Year ended 7 months to Year ended  Year ended Year ended
                       June 30,  January 31, January 31,  January   January 31,
                         1996       1997        1997      31, 1998     1999
                      ---------- ----------- ----------- ---------- -----------
                                       (unaudited)
                                          (in A$ thousands)
   <S>                <C>        <C>         <C>         <C>        <C>
   Rental expenses...   $9,867     $6,181      $10,153    $11,948     $15,667
                        ======     ======      =======    =======     =======
</TABLE>
 
  Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of January 31, 1999 are:
 
<TABLE>
<CAPTION>
                                                            Capital  Operating
                                                            leases    leases
                                                            -------  ---------
                                                            (in A$ thousands)
   <S>                                                      <C>      <C>
   Year ending January 31,
   2000.................................................... $ 2,548   $13,195
   2001....................................................   2,215    11,621
   2002....................................................   1,371    10,253
   2003....................................................     983     8,248
   2004....................................................     958     6,856
   Years subsequent to 2004................................     --     18,890
                                                            -------   -------
   Total minimum lease payments............................   8,075   $69,063
                                                                      =======
   Less: Amounts representing interest (at rates ranging
    from 7.1% to 13.5%)....................................  (1,187)
                                                            -------
   Present value of net minimum capital lease payments.....   6,888
                                                            -------
   Less: Current portion of obligations under capital
    leases.................................................  (2,029)
                                                            -------
   Obligations under capital leases, excluding current
    portion................................................ $ 4,859
                                                            =======
</TABLE>
 
9. Accounts Payable and Accrued Liabilities
 
  Accounts payable and accrued liabilities consist of the following:
 
<TABLE>
<CAPTION>
                                                       January 31, January 31,
                                                          1998        1999
                                                       ----------- -----------
                                                          (in A$ thousands)
   <S>                                                 <C>         <C>
   Trade accounts payable.............................   $ 6,477     $ 7,394
   Accrued liabilities................................     7,416       6,831
   Employee benefits..................................     1,976       2,123
   Other..............................................       779       1,465
                                                         -------     -------
                                                         $16,648     $17,813
                                                         =======     =======
</TABLE>
 
                                      56
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
10. Long-Term Debt
 
  Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                         January 31, January 31,
                                                            1998        1999
                                                         ----------- -----------
                                                            (in A$thousands)
   <S>                                                   <C>         <C>
   Current:
   Bank bills...........................................   $   198     $   172
                                                           =======     =======
   Non-current:
   Bank bills...........................................   $12,566     $15,721
   Property loans.......................................     2,150       8,450
                                                           -------     -------
                                                           $14,716     $24,171
                                                           =======     =======
</TABLE>
 
  Effective June 1998, the Company and its subsidiaries have access to a
facility with the Australia and New Zealand Banking Group Limited ("ANZ") (the
"ANZ Facility") revised from a previous facility entered into in July 1994.
Under this revised facility, the Company and its subsidiaries have access to
facilities up to A$47,600,000, comprising a multi-purpose facility in
principal amount of A$16,650,000, a trade finance facility in principal amount
of A$16,500,000, real property loans in principal amount of A$8,450,000 and a
further seasonal trade finance facility of A$6.0 million. As at January 31,
1999 the Company had not utilized A$22,762,000 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").
 
  Bank bills are generally taken out over a 90-day period and rolled over at
the end of their respective terms. As at January 31, 1999, the weighted
average interest rate accruing on the bank bills utilized under the ANZ
Facility was 5.7% per annum.
 
  The property loans accrue interest at rates varying from 6.9% to 9.6% per
annum and are secured by registered first mortgages over the respective
freehold properties of the Company.
 
  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. The Company was in compliance with the
financial covenants set out in the ANZ Facility agreement as at January 31,
1999.
 
  The Company has historically renegotiated its credit facilities on similar
terms and conditions. For this reason, the majority of the outstanding balance
relating to bank bills and term loans is classified as a non-current
liability.
 
  In February 1995, Barbeques Galore, Inc., the Company's U.S. operating
subsidiary, entered into a five-year credit facility with Merrill Lynch
Business Financial Services, Inc. ("Merrill Lynch") which has been amended
from time to time. As currently in effect, such facility includes a term loan
in aggregate principal amount of US$375,000 (the "Term Loan") and a revolving
line of credit in aggregate principal amount of US$1.0 million (the "Revolving
Line," and collectively with the Term Loan, the "Merrill Lynch Facility").
Indebtedness under the Revolving Line and Term Loan accrues interest at the
30-day commercial paper rates 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 of January 31, 1999
Barbeques Galore, Inc. had not utilized US$281,000 of this facility.
 
                                      57
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  The Company's total long-term debt matures as follows:
 
<TABLE>
<CAPTION>
         Year ending January 31,                  (in A$thousands)
         -----------------------                  ----------------
         <S>                                      <C>
         2000....................................     $   172
         2001....................................      24,171
                                                      -------
                                                      $24,343
                                                      =======
</TABLE>
 
11. Income Taxes
 
  Income (loss) before income taxes was taxed under the following
jurisdictions:
 
<TABLE>
<CAPTION>
                     Year ended 7 months to Year ended  Year ended  Year ended
                      June 30,  January 31, January 31, January 31, January 31,
                        1996       1997        1997        1998        1999
                     ---------- ----------- ----------- ----------- -----------
                                            (unaudited)
                                          (in A$thousands)
   <S>               <C>        <C>         <C>         <C>         <C>
   Australia........   $2,730     $3,091       $(755)     $4,614      $7,822
   United States....    1,313     (1,168)        485         405         199
                       ------     ------       -----      ------      ------
                       $4,043     $1,923       $(270)     $5,019      $8,021
                       ======     ======       =====      ======      ======
</TABLE>
 
  The expense (benefit) for income taxes is presented below:
 
<TABLE>
<CAPTION>
                     Year ended 7 months to Year ended  Year ended  Year ended
                      June 30,  January 31, January 31, January 31, January 31,
                        1996       1997        1997        1998        1999
                     ---------- ----------- ----------- ----------- -----------
                                            (unaudited)
                                          (in A$thousands)
   <S>               <C>        <C>         <C>         <C>         <C>
   Current:
   Australia........   $ 477      $ 1,670     $   738     $1,107      $2,697
   United States....     157           85         234        263         159
                       -----      -------     -------     ------      ------
                         634        1,755         972      1,370       2,856
                       -----      -------     -------     ------      ------
   Deferred:
   Australia........    (536)        (499)       (904)       286          38
   United States....     --          (890)       (890)      (168)        (80)
                       -----      -------     -------     ------      ------
                        (536)      (1,389)     (1,794)       118         (42)
                       -----      -------     -------     ------      ------
                       $  98      $   366     $  (822)    $1,488      $2,814
                       =====      =======     =======     ======      ======
</TABLE>
 
                                       58
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Income tax expense (benefit) differed from the amounts computed by applying
the Australian federal income tax rate of 36% to pretax income (loss) as a
result of the following:
 
<TABLE>
<CAPTION>
                            Year ended 7 months to Year ended  Year ended  Year ended
                             June 30,  January 31, January 31, January 31, January 31,
                               1996       1997        1997        1998        1999
                            ---------- ----------- ----------- ----------- -----------
                                                   (unaudited)
                                                (in A$ thousands)
   <S>                      <C>        <C>         <C>         <C>         <C>
   Computed "expected" tax
    expense (benefit)......   $1,455      $ 692      $   (97)    $1,807      $2,888
   Increase (reduction) in
    income taxes resulting
    from:
   State taxes, net of
    federal tax benefit....      157         56          208         29          11
   Change in the valuation
    allowance..............     (663)      (388)      (1,109)       (79)        --
   Equity in earnings of
    affiliates not subject
    to taxation............     (301)       (91)        (136)      (196)       (185)
   Capital profit on sale
    of affiliate...........     (829)       --           --         --          --
   Other, net..............      279         97          312        (73)        100
                              ------      -----      -------     ------      ------
                              $   98      $ 366      $  (822)    $1,488      $2,814
                              ======      =====      =======     ======      ======
</TABLE>
 
  The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liability is presented
below:
 
<TABLE>
<CAPTION>
                                                        January 31, January 31,
                                                           1998        1999
                                                        ----------- -----------
                                                           (in A$ thousands)
   <S>                                                  <C>         <C>
   Deferred tax assets:
   Provisions not presently deductible................    $1,521      $1,294
   Plant and equipment, due to differences in depreci-
    ation.............................................       637         867
   Inventories, due to capitalized costs..............       263         490
   Leases, due to differences in lease payments, in-
    terest and amortization...........................       113          78
   Net operating loss carry forward...................       299          92
   Other..............................................       585         612
                                                          ------      ------
   Total deferred tax assets..........................    $3,418      $3,433
                                                          ------      ------
   Deferred tax liability:
   Prepayments........................................       193         165
                                                          ------      ------
   Total deferred tax liability.......................    $  193      $  165
                                                          ------      ------
   Net deferred tax asset.............................    $3,225      $3,268
                                                          ======      ======
</TABLE>
 
  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. In order
to fully realize the deferred tax asset associated with the net operating loss
carryforwards, the company will need to generate future taxable income of
approximately A$273,624 prior to the expiration of the net operating loss
carryforwards in 2012. Based upon projections for future taxable income over
the periods which the deferred tax assets are deductible, management believes
it is more likely than not the Company will realize the benefits of these
deductible
 
                                      59
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
differences. The amount of the deferred tax asset 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
 
 Executive Share Option Plan
 
  Effective January 31, 1997, the Company adopted an executive share option
plan (the "Executive Plan") under which the Board of Directors granted certain
members of management options 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 share. The options vest from February 1, 1999 after which
each Optionholder is entitled to subscribe for one fully paid ordinary share.
The options are not quoted and are due to expire on the earlier of the 5th
anniversary from the issue date or, subject to certain conditions, on
cessation of employment.
 
  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%.
 
 1997 Share Option Plan
 
  Under the terms of the Company's 1997 Share Option Plan (the "1997 Plan"), a
total of 374,671 Ordinary Shares have been authorized for issuance. The 1997
Plan received approval from the Board of Directors of the Company on October
1, 1997 and was approved by the shareholders as of October 7, 1997.
 
  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-employees Board members and independent consultants) may, at
the discretion of the Plan Administrator, be granted options to purchase
Ordinary Shares at an exercise price not less than eight-five per cent (85%)
of their fair market value on the grant date.
 
  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 option grants, the time or times when such option
grants are to be made, the number of shares subject to each such grant, the
vesting schedule to be in effect for the option grant, the maximum term for
which any granted option is to remain outstanding and the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the Federal tax laws.
 
  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.
 
  As a result of recent decreases in the market price of the Company's
Ordinary Shares, the exercise price of those options granted concurrently with
the Offering at US$11.00 per Ordinary Share, was significantly higher than the
current 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 cancellation/regrant 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 cancelled 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 are exercisable in three equal
installments on November 9, 2001, November 9, 2002 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 cancelled and regranted under the program.
 
 
                                      60
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
  In addition to the cancellation and regrant program on November 9, 1998, the
Board of Directors granted further options to directors, officer 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.
 
  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. In no event may any
one participant in the 1997 Plan receive option grants for more than 27,438
Ordinary Shares per calendar year.
 
  The fair value of the 17,646 and 48,250 share option grants 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 incremental value of 177,200
regranted options was A$1.54 per option. Due to unrecognized compensation
costs per original option of A$8.04, the total compensation cost to be
recognized from the date of regrant is A$9.58. The expected lives and fair
value of the options as at grant date are as hereunder:
 
<TABLE>
<CAPTION>
       Number of                 Expected                             Weighted Average Fair
        Options                 Lives (yrs)                             Value Per Option
       ---------                -----------                           ---------------------
       <S>                      <C>                                   <C>
         17,646                     4.6                                      A$5.20
        177,200                     4.8                                        9.58
         48,250                     4.8                                        5.44
        -------                                                              ------
        243,096                                                              A$8.44
        =======                                                              ======
</TABLE>
 
  A summary of the status of the Company's Executive and share option plans as
of June 30, 1996, and January 31, 1997, 1998 and 1999 and changes during the
periods ended on those dates is presented below:
 
<TABLE>
<CAPTION>
                                                      Weighted --     Options
                                                        average     exercisable
                                           Options   exercise price at year end
                                           --------  -------------- -----------
   <S>                                     <C>       <C>            <C>
   Outstanding balance at July 1, 1995...   107,007      A$5.83       107,007
                                                         ------       -------
   Granted...............................    27,438        5.65
   Forfeited.............................   (32,925)       5.83
                                           --------      ------       -------
   Outstanding balance at June 30, 1996..   101,520        5.78       101,520
                                                         ------       -------
   Granted...............................   203,038        8.38
   Cancelled.............................  (101,520)       5.78
                                           --------      ------       -------
   Outstanding balance at January 31,
    1997.................................   203,038        8.38           --
                                                         ------       -------
   Granted...............................   199,400       16.44
                                           --------      ------       -------
   Outstanding balance at January 31,
    1998.................................   402,438       12.37           --
                                                         ------       -------
   Granted...............................    65,896       10.00
   Forfeited.............................   (22,200)      16.44
   Cancelled.............................  (177,200)      16.44
   Regranted.............................   177,200        8.20
                                           --------      ------       -------
   Outstanding balance at January 31,
    1999.................................   446,134      A$8.55       203,038
                                           ========      ======       =======
</TABLE>
 
  The options exercisable at June 30, 1996 were in relation to the 1993 share
option plan, which was terminated during the period ended January 31, 1997.
The weighted average fair value of options granted during the period ended
January 31, 1997 and the years ended January 31, 1998 and 1999 were A$2.28,
A$10.76 and
 
                                      61
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
A$5.38, respectively. As 177,200 options were cancelled and re-priced in the
current year, they did not form part of the weighted average fair value of
options granted during the year ended January 31, 1999.
 
  The following table summarizes information about share options outstanding
at January 31, 1999:
 
<TABLE>
<CAPTION>
                                     WEIGHTED-AVERAGE                 WEIGHTED --
       NUMBER OUTSTANDING          REMAINING CONTRACTUAL                 AVERAGE
       AT JANUARY 31, 1999             LIFE (YEARS)                  EXERCISE PRICE
       -------------------         ---------------------             --------------
       <S>                         <C>                               <C>
             203,038                        2.5                          A$8.38
              17,646                        4.6                           14.91
             225,450                        4.8                            8.20
             -------                        ---                          ------
             446,134                        3.8                          A$8.55
             =======                        ===                          ======
</TABLE>
 
  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 seven month period to January 31, 1997 and the years ended
January 31, 1997, 1998 and 1999, respectively. Had the Company determined
compensation cost based on the fair value at the grant date for its share
options under SFAS 123 the Company's net income would have been reduced to the
pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                7 MONTHS TO YEAR ENDED  YEAR ENDED  YEAR ENDED
                                JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
                                   1997        1997        1998        1999
                                ----------- ----------- ----------- -----------
                                            (UNAUDITED)
                                    (IN A$THOUSANDS, EXCEPT PER SHARE DATA)
   <S>                          <C>         <C>         <C>         <C>
   Net income
     As reported...............   $1,557       $ 552      $3,531      $5,207
     Pro forma.................   $1,557       $ 552      $3,239      $4,830
   Primary earnings per share
     As reported...............   $ 0.38       $0.13      $ 1.43      $ 1.15
     Pro forma.................   $ 0.38       $0.13      $ 1.31      $ 1.06
   Diluted earnings per share
     As reported...............   $ 0.38       $0.13      $ 1.18      $ 1.13
     Pro forma.................   $ 0.38       $0.13      $ 0.94      $ 1.05
</TABLE>
 
13. COMMITMENTS AND CONTINGENCIES
 
  Product liability claims have been made against certain companies in the
group which are not expected to result in any material loss to the Company.
 
14. SEGMENTS AND RELATED INFORMATION
 
  The Company is engaged in the retail industry and operated through stores
located in two geographic segments, Australia and the United States.
 
  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 margin and
operating income, which is defined as income before equity income of
affiliates, net of tax, interest expense, other expenses (income) and income
taxes. In addition, the operating income of the United States does not include
all the income attributable to it for product manufactured and purchased for
the United States by the Australian subsidiaries.
 
                                      62
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
  Summarized financial information concerning the Company's reportable segments
are as follows:
 
<TABLE>
<CAPTION>
                                               Australia United States  Total
                                               --------- ------------- --------
                                                       (in A$thousands)
   <S>                                         <C>       <C>           <C>
   12 months to January 31, 1999
   Revenues from external customers........... $130,011     $94,973    $224,984
                                               ========     =======    ========
   Gross margin............................... $ 42,827     $29,449    $ 72,276
                                               ========     =======    ========
   Operating income........................... $  9,438     $   232    $  9,670
                                               ========     =======    ========
   Total assets............................... $ 68,449     $32,753    $101,202
                                               ========     =======    ========
   12 months to January 31, 1998
   Revenues from external customers........... $117,613     $61,712    $179,325
                                               ========     =======    ========
   Gross margin............................... $ 38,468     $18,785    $ 57,253
                                               ========     =======    ========
   Operating income........................... $  7,309     $   497    $  7,806
                                               ========     =======    ========
   Total assets............................... $ 59,560     $22,514    $ 82,074
                                               ========     =======    ========
   12 months to January 31, 1997 (unaudited)
   Revenues from external customers........... $108,003     $40,366    $148,369
                                               ========     =======    ========
   Operating income........................... $  2,076     $   643    $  2,719
                                               ========     =======    ========
   Total assets............................... $ 53,162     $14,808    $ 67,970
                                               ========     =======    ========
   7 months to January 31, 1997
   Revenues from external customers........... $ 75,997     $22,755    $ 98,752
                                               ========     =======    ========
   Operating income (loss).................... $  5,537     $(1,141)   $  4,396
                                               ========     =======    ========
   Total assets............................... $ 53,162     $14,808    $ 67,970
                                               ========     =======    ========
   12 months to June 30, 1996
   Revenues from external customers........... $104,737     $36,954    $141,691
                                               ========     =======    ========
   Operating income........................... $  1,828     $ 1,338    $  3,166
                                               ========     =======    ========
   Total assets............................... $ 53,225     $13,337    $ 66,562
                                               ========     =======    ========
</TABLE>
 
                                       63
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
15. Related Party Transactions
 
  The Company shares premises and incurs rent and operating expenses on behalf
of Rebel Sport Limited. Mr. Linz and Mr. Gavshon were directors and
significant shareholders of Rebel Sport Limited up until July 10, 1997. These
amounts are payable to the Company on 30 day terms.
 
<TABLE>
<CAPTION>
                         Year ended 7 months to Year ended  Year ended  Year ended
                          June 30,  January 31, January 31, January 31, January 31,
                            1996       1997        1997        1998        1999
                         ---------- ----------- ----------- ----------- -----------
                                                (unaudited)
                                             (in A$ thousands)
<S>                      <C>        <C>         <C>         <C>         <C>
Interest costs incurred
 in respect of amounts
 advanced by directors
 or director related
 entities...............    $ 97       $ 50        $ 96        $ 44        $ 38
Amounts advanced to
 Rebel Sport Limited....     678        410         713         320         --
Amounts reimbursed by
 (to) Rebel Sport
 Limited................     703        352        (641)        260         --
                            ====       ====        ====        ====        ====
</TABLE>
 
16. Supplemental Disclosure of Cash Flow Information
 
<TABLE>
<CAPTION>
                         Year ended 7 months to Year ended  Year ended  Year ended
                          June 30,  January 31, January 31, January 31, January 31,
                            1996       1997        1997        1998        1999
                         ---------- ----------- ----------- ----------- -----------
                                                (unaudited)
                                             (in A$ thousands)
<S>                      <C>        <C>         <C>         <C>         <C>
Cash paid during the
 period for:
Interest................   $2,327     $1,528      $2,432      $3,362      $2,273
Income taxes............      968        423         812       2,163       2,114
                           ======     ======      ======      ======      ======
</TABLE>
 
  During the seven-month period ended January 31, 1997 the Company acquired
Mr. Sydney Selati's 15% interest in Galore USA for consideration of
A$1,000,000. The transaction was effected by the issuance of 137,189 Ordinary
Shares (A$7.29 per share) of the Company.
 
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:
 
<TABLE>
<CAPTION>
                          Year ended 7 months to Year ended  Year ended  Year ended
                           June 30,  January 31, January 31, January 31, January 31,
                             1996       1997        1997        1998        1999
                          ---------- ----------- ----------- ----------- -----------
                                                 (unaudited)
                                              (in A$ thousands)
<S>                       <C>        <C>         <C>         <C>         <C>
Equipment acquired under
 capital leases.........    $1,682     $1,471      $1,893      $1,729      $3,589
                            ======     ======      ======      ======      ======
</TABLE>
 
  On July 1, 1995, the Company's interest in GLG Trading Pte Limited was
reduced from 100% to 50% by the issue of additional shares in GLG Trading Pte
Limited. The deconsolidation of GLG Trading Pte Limited has resulted in the
reversal of the opening cash balance of GLG Trading Pte Limited in the
Statement of Cash Flows as the Company has accounted for its investment on an
equity basis from July 1, 1995.
 
                                      64
<PAGE>
 
                           BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
 
17. Pension Plans
 
  During the fiscal year, the Company resolved to establish two new
superannuation funds, Barbeques Galore CustomSuper Plan (for all permanent
full time and part time employees) and Barbeques Galore SuperLeader Plan (for
all casual employees) and managed under the AMP CustomSuper and SuperLeader
Master Trust Deeds respectively. Both new funds are successors to the defined
contribution pension plans established by the Company and its Australian
subsidiaries for the provision of benefits to their 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:
 
<TABLE>
<CAPTION>
                            Year ended 7 months to Year ended  Year ended  Year ended
                             June 30,  January 31, January 31, January 31, January 31,
                               1996       1997        1997        1998        1999
                            ---------- ----------- ----------- ----------- -----------
                                                   (unaudited)
                                                (in A$ thousands)
   <S>                      <C>        <C>         <C>         <C>         <C>
   Contribution expense....   $1,015      $600        $996       $1,113      $1,355
                              ======      ====        ====       ======      ======
</TABLE>
 
18. Earnings Per Share
 
<TABLE>
<CAPTION>
                                    Year ended                   7 months to
                                  June 30, 1996                January 31, 1997
                            ----------------------------  ----------------------------
                                                  Per                           Per
                                                 share                         share
                             Income    Shares    amount    Income    Shares    amount
                            --------- --------  --------  --------- --------  --------
                             (in A$ thousands, except share and per share data)
   <S>                      <C>       <C>       <C>       <C>       <C>       <C>
   Income.................. $   3,945                     $   1,557
                            ---------                     ---------
   Basic EPS
   Income available to
    common shareholders....     3,945    4,450  $   0.89      1,557    4,073  $   0.38
                                                ========                      ========
   Effect of Dilutive
    Securities
   Convertible shares net
    of tax.................       --       --                    56       79
   Options deemed
    exercised..............       --       --                   --        93
                            --------- --------            --------- --------
   Diluted EPS
   Income available to
    common shareholders
    plus assumed
    conversions............ $   3,945    4,450  $   0.89  $   1,613    4,245  $   0.38
                            ========= ========  ========  ========= ========  ========
</TABLE>
 
 
                                      65
<PAGE>
 
                            BARBEQUES GALORE LIMITED
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
<TABLE>
<CAPTION>
                                   Year ended              Year ended           Year ended
                                January 31, 1997        January 31, 1998     January 31, 1999
                            ------------------------- -------------------- --------------------
                                                Per                  Per                  Per
                                               share                share                share
                            Income   Shares    amount Income Shares amount Income Shares amount
                            ------ ----------- ------ ------ ------ ------ ------ ------ ------
                                   (unaudited)
                                     (in A$thousands, except share and per share data)
   <S>                      <C>    <C>         <C>    <C>    <C>    <C>    <C>    <C>    <C>    
   Income..................  $552                     $3,531               $5,207
                             ----                     ------               ------
   Basic EPS
   Income available to
    common shareholders....   552     4,228    $0.13   3,531 2,473  $1.43   5,207 4,542  $1.15
                                               =====                =====                =====
   Effect of Dilutive
    Securities
   Convertible shares net
    of tax.................    56        79              504   919            --    --
   Options deemed
    exercised..............   --         93              --     41            --     53
                             ----     -----           ------ -----         ------ -----
   Diluted EPS
   Income available to
    common shareholders
    plus assumed
    conversions............  $608     4,400    $0.13  $4,035 3,433  $1.18  $5,207 4,595  $1.13
                             ====     =====    =====  ====== =====  =====  ====== =====  =====
</TABLE>
 
                                       66
<PAGE>
 
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
 
(a) The following documents are filed as part of this Annual Report on Form 20-
F:
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
                                                                          ------
   <S>                                                                    <C>
   Independent Auditors' Reports.........................................   43
   Consolidated Balance Sheets...........................................   45
   Consolidated Statements of Operations.................................   46
   Consolidated Statement of Shareholders' Equity........................   47
   Consolidated Statements of Cash Flows.................................   48
   Notes to Consolidated Financial Statements............................   49
</TABLE>
 
(b) Exhibits
 
<TABLE>
<CAPTION>
   EXHIBIT
   NUMBER
   -------
   <C>        <S>
      3.1*    Memorandum and Articles of Association.
      4.1*    Form of Specimen of American Depositary Receipt.
      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.
     10.1*    Executive Share Option Plan.
     10.2*    1997 Share Option Plan.
     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.
     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(R) Loan and Security Agreement No. 9502340701, dated as of
              February 23, 1995 by and between Galore USA and Merrill Lynch;
              WCMA(R) 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(R) Note, Loan and Security Agreement No. 9502340701;
              Unconditional Guaranty by the Registrant relating to WCMA(R)
              Note, Loan and Security Agreement No. 231-07710; Term WCMA(R)
              Note No. 9502340701; Letter dated November 27, 1996 from
              Merrill Lynch to Galore USA re: WCMA(R) line of credit
              variation; Letter and Letter Agreement date August 27, 1997
              from Merrill Lynch to Galore USA re: WCMA(R) 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.
     10.5*    Deeds of purchase of Registrant's headquarters facility and
              assembly operations facility.
     10.6*    Lease dated as of March 6, 1992 by and between Galore USA and
              Phoenix Business Center Partners re: Irvine, California U.S.
              headquarters and distribution facility.
     10.7+    Contract for the sale of land for the Registrant's warehousing
              and distribution facility.
     10.8**   WCMA Note, Loan and Security Agreement No. 231-07T10, as
              amended.
     10.9**   Deeds of purchase of Registrant's headquarters facility and
              assembly operations facility, as amended.
     10.10*** 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 Registrant, dated May 25, 1998; resolutions
              of the Directors of the Registrant, dated June 26, 1998
              approving the Letter of Offer from ANZ to the Registrant.
</TABLE>
 
                                       67
<PAGE>
 
<TABLE>
<CAPTION>
   Exhibit
   Number
   -------
   <C>        <S>
     10.11*** Contract for the sale of land for the Registrant's wharehousing
              and distribution operations.
     23.1     Consent of Horwath Sydney Partnership.
     23.2     Consent of KPMG.
     24.1     Powers of Attorney (see page 70).
</TABLE>
--------
  * 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 by reference herein.
 ** Previously filed in the Registrant's Report of Foreign Issuer on Form 6-K,
    filed with the Commission on June 15, 1998, and incorporated by reference
    herein.
*** Previously filed in the Registrant's Report of Foreign Issuer on Form 6-K,
    filed with the Commission on September 14, 1998, and incorporated by
    reference herein.
  + 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 by reference
    herein.
 
                                      68
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
   Exhibit
   Number
   -------
   <C>      <S>
    3.1*    Memorandum and Articles of Association.
    4.1*    Form of Specimen of American Depositary Receipt.
    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.
   10.1*    Executive Share Option Plan.
   10.2*    1997 Share Option Plan.
   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.
   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(R) Loan and
            Security Agreement No. 9502340701, dated as of February 23, 1995 by
            and between Galore USA and Merrill Lynch; WCMA(R) 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(R) Note, Loan and Security
            Agreement No. 9502340701; Unconditional Guaranty by the Registrant
            relating to WCMA(R) Note, Loan and Security Agreement No. 231-
            07710; Term WCMA(R) Note No. 9502340701; Letter dated November 27,
            1996 from Merrill Lynch to Galore USA re: WCMA(R) line of credit
            variation; Letter and Letter Agreement date August 27, 1997 from
            Merrill Lynch to Galore USA re: WCMA(R) 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.
   10.5*    Deeds of purchase of Registrant's headquarters facility and
            assembly operations facility.
   10.6*    Lease dated as of March 6, 1992 by and between Galore USA and
            Phoenix Business Center Partners re: Irvine, California U.S.
            headquarters and distribution facility.
   10.7+    Contract for the sale of land for the Registrant's warehousing and
            distribution facility.
   10.8**   WCMA Note, Loan and Security Agreement No. 231-07T10, as amended.
   10.9**   Deeds of purchase of Registrant's headquarters facility and
            assembly operations facility, as amended.
   10.10*** 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 Registrant, dated May 25, 1998; resolutions of the Directors
            of the Registrant, dated June 26, 1998 approving the Letter of
            Offer from ANZ to the Registrant.
   10.11*** Contract for the sale of land for the Registrant's wharehousing and
            distribution operations.
   23.1     Consent of Horwath Sydney Partnership.
   23.2     Consent of KPMG.
   24.1     Powers of Attorney (see page 70).
</TABLE>
--------
 
  * 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 by reference herein.
 ** Previously filed in the Registrant's Report of Foreign Issuer on Form 6-K,
    filed with the Commission on June 15, 1998, and incorporated by reference
    herein.
*** Previously filed in the Registrant's Report of Foreign Issuer on Form 6-K,
    filed with the Commission on September 14, 1998, and incorporated by
    reference herein.
  + 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 by reference
    herein.
 
                                      69
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Barbeques Galore, a corporation
organized and existing under the laws of the Commonwealth of Australia, has
duly caused this Annual Report on Form 20-F to be signed on its behalf by the
undersigned, thereunto duly authorised on May 3, 1999.
 
                                          BARBEQUES GALORE LIMITED
 
                                                    /s/ Robert Gavshon
                                          By___________________________________
                                                      Robert Gavshon
                                              Deputy Chairman of the Board of
                                               Directors and General Counsel
 
                               POWER OF ATTORNEY
 
  KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Robert Gavshon and
Sydney Selati, and each one of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Annual Report on Form
20-F, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute, may lawfully do or cause to be done by virtue hereof.
 
  IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report on Form 20-F has been signed by the following in the
capacities and on the dates indicated:
 
 
            /s/ Sam Linz               Chairman of the             May 3, 1999
-------------------------------------   Board and Director
              Sam Linz                  (Principal
                                        Executive Officer)
 
           /s/ David James             Principal Financial         May 3, 1999
-------------------------------------   Officer and
             David James                Accounting Officer
 
         /s/ Robert Gavshon            Deputy Chairman of          May 3, 1999
-------------------------------------   the Board and
           Robert Gavshon               Director
 
           /s/ John Price              Director                    May 3, 1999
-------------------------------------
             John Price
 
          /s/ Edgar Berner             Director                    May 3, 1999
-------------------------------------
            Edgar Berner
 
         /s/ Gordon Howlett            Director                    May 3, 1999
-------------------------------------
           Gordon Howlett
 
          /s/ Sydney Selati            Director and                May 3, 1999
-------------------------------------   Authorized U.S.
            Sydney Selati               Representative
 
 
                                      70