UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C 20549
                                   ----------
                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended  December 31, 2002
                               -------------------

                                       OR

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

     For the transition period from  _____________ to  ____________

                         Commission file number 0-11877
                                                -------

                                ELXSI CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                    77-0151523
   ---------------------------------                ---------------------
    (State or other jurisdiction                      (I.R.S. Employer
   of incorporation or organization)                 Identification No.)


   3600 Rio Vista Avenue, Suite A, Orlando FL               32805
   -------------------------------------------      ---------------------
     (Address of principal executive offices)             (Zip Code)


Registrant's telephone number, including area code:     (407) 849-1090
                                                    ---------------------

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


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

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

   Common Stock, par value $0.001, and associated Common Stock Purchase Rights
   ---------------------------------------------------------------------------
                                (Title of class)


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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). [ ] Yes  [X] No

The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing price of the Common
Stock on March 10, 2003, as reported by The Nasdaq Stock Market was
approximately $6,050,000. On March 10, 2003, the Registrant had outstanding
4,012,197 shares of Common Stock.


              DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement to be filed on or before
April 30, 2003 in connection with the registrant's Annual Meeting of
Stockholders scheduled to be held in June 2003 are incorporated by reference
into Part III of this report.

                                       1
<PAGE>

This Annual Report on Form 10-K (this "10-K") includes forward-looking
statements, particularly in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section (Item 7 herein).
Additional written or oral forward-looking statements may be made by or on
behalf of the Company from time to time, in filings with the Securities and
Exchange Commission, in press releases and other public announcements, or
otherwise. All such forward-looking statements are within the meaning of that
term in Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Such statements may include,
but not be limited to, projections of revenue, income, losses and cash flows,
plans for future capital and other expenditures, plans for future operations,
financing needs or plans, plans relating to products or services, estimates
concerning the effects of litigation or other disputes, as well as expectations
and assumptions relating to any or all of the foregoing, relating to the
Company, its subsidiaries and/or divisions.

Although the Company believes that its forward-looking statements are based on
expectations and assumptions that are reasonable, forward-looking statements are
inherently subject to risks and uncertainties, some of which can not be
predicted. Accordingly, no assurance can be given that such expectations or
assumptions will prove to have been correct, and future events and actual
results could differ materially from those described in or underlying the
forward-looking statements. Among the factors that could cause future events and
actual results to differ materially are: the demand for the Company's products
and services and other market acceptance risks; the presence in the Company's
markets of competitors with greater financial resources, and the impact of
competitive products and services and pricing; the loss of any significant
customers or group of customers; general economic and market conditions
nationally and (in the case of Bickford's) in New England; the ability of Cues
to develop new products; capacity and supply constraints or difficulties; the
emergence of future opportunities; the Company's ability to collect certain
related party notes receivable; changes in the value of certain investments
pledged to secure related party receivables; the Company's ability to obtain new
financing necessary to replace outstanding borrowings before they mature in less
than one year; the Company's ability to meet certain covenant requirements under
its borrowing agreements; the ability of the Company to utilize its deferred tax
assets; the Company's ability to collect outstanding accounts receivable; and
the effects of the Company's accounting policies.

More detail regarding these and other important factors that could cause actual
results to differ materially from such expectations, assumptions and
forward-looking statements ("Cautionary Statements") may be disclosed in this
10-K, other Securities and Exchange Commission filings and other public
announcements of the Company. All subsequent written and oral forward-looking
statements attributable to the Company, its subsidiaries or divisions or persons
acting on their behalf are expressly qualified in their entirety by the
Cautionary Statements.

The Company assumes no obligation to update its forward-looking statements or
advise of changes in the expectations, assumptions and factors on which they are
based.

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<PAGE>

                                     PART I

ITEM 1.  BUSINESS

GENERAL

ELXSI Corporation (together with its subsidiaries, the "Company") is a Delaware
corporation that operates principally through its two wholly-owned subsidiaries,
ELXSI, a California corporation ("ELXSI"), and Bickford's Family Restaurants,
Inc., a Delaware corporation ("BFRI"). Operations consist of two business
segments: restaurant operations and equipment manufacturing.

On July 1, 1991, ELXSI acquired 30 restaurants operating under the Bickford's or
Bickford's Family Fare ("Bickford's Restaurants") names and 12 restaurants
operating under the Howard Johnson's name from Marriott Family Restaurants, Inc.
These Bickford's restaurants were located in Massachusetts, Vermont, New
Hampshire, Rhode Island and Connecticut.

On December 30, 2000, EXLSI contributed and transferred to a newly-formed,
wholly owned subsidiary, Bickford's Holding Company, Inc. ("BHC"), the
Bickford's Restaurants and substantially all of their related operations, assets
and liabilities. Immediately thereafter, the existing Bickford's Restaurants,
operations, assets and liabilities were contributed and transferred by BHC to
another newly-formed, wholly-owned subsidiary, BFRI.

During 2002, we reopened one Bickford's Restaurant in Worcester, MA, we closed
three Bickford's Restaurants and we subleased one Bickford's Restaurant to
another restaurant chain. As of December 31, 2002, the Company had 63 Bickford's
Restaurants owned and operated by BFRI (the "Restaurants" or "Restaurant
Operations").

On October 30, 1992, ELXSI acquired Cues, Inc., of Orlando, Florida and its two
wholly-owned subsidiaries, Knopafex, Ltd., of Toronto, Canada, and Cues B.V., of
Maastricht, the Netherlands. The Cues business in the United States is owned and
operated as a division of ELXSI ("Cues US"). Cues US, Knopafex Ltd. and Cues
B.V. are hereinafter collectively referred to as "Cues" or the "Cues Division".
Cues is principally engaged in the manufacturing and servicing of video
inspection and rehabilitation equipment for wastewater and drainage systems
which we sell primarily to municipalities, service contractors and industrial
users.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Reference is made to the information set forth in Note 13 (Segment Reporting) to
the Consolidated Financial Statements included herein, which information is
hereby incorporated by reference herein.

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<PAGE>

RESTAURANT OPERATIONS

Restaurant Operation sales were $68,928,000, $73,159,000 and $76,284,000 in
2002, 2001 and 2000, respectively, representing 69.7%, 69.4% and 73.6% of the
total net sales of the Company during 2002, 2001 and 2000, respectively.

The Restaurants, which are all located in New England, are family-oriented
facilities that offer full-service meals. Featuring a breakfast-anytime menu
that is available all day long as well as lunch and dinner items, Bickford's
appeals to customers who are interested in a high quality, casual, low-to
moderately priced meal. The Company has been successful in marketing the
breakfast menu concept to customers regardless of the time of day, and has
expanded lunch and dinner patronage by also offering improved traditional lunch
and dinner items. Most menu items are priced between $2.99 and $12.99. The
average guest check in 2002 was $7.01 compared to $6.60 and $6.26 in 2001 and
2000, respectively. With the recent introduction of a new lunch and dinner menu,
we intend to alter the consumer's perception of our Restaurants as primarily a
breakfast chain, so that they begin to recognize our Restaurants as serving
traditional lunch and dinner fare in addition to breakfasts. Breakfast items and
coffee have historically accounted for approximately 70% of food sales in each
of the past three fiscal years. Coffee alone has accounted for approximately 10%
of sales.

The Bickford's Restaurants have "specials" for senior citizens that provide a
discount on the entire menu during the period of 2 p.m. to 6 p.m. every day.
Consequently seniors have proven to be a loyal part of our repeat customer base.
Additionally, our Restaurants offer 2 for 1 pancake nights on Tuesday nights and
2 for 1 Omelet nights on Thursdays. These discounts apply to every pancake,
waffle, French toast and omelet item on the menu during these periods.

During the fourth quarter of 2002 and continuing into 2003, we enhanced our
Restaurant's dinner offerings to include a selection of exciting top quality
dinner products including high quality fresh (never frozen) seafood. Our seafood
offerings now include broiled and fried haddock and scallop dinners, jumbo
shrimp cocktail, fresh clam strips, lobster rolls and lobster casserole dinners
along with a homemade fresh clam chowder. Our breakfast menu is now featuring
already popular new lobster omelet and lobster benedict dishes. Complementing
these items are high quality choice 12-ounce sirloin strip steaks and a totally
fresh approach on all vegetables served. In addition, we are undertaking a
renewed focus on all aspects of the Restaurant Operations. Operationally, we
have chosen to focus attention on improving the customer's experience in order
to reverse the continued negative customer count trend. A combination of food,
service and facility improvements is being heavily emphasized throughout the
chain. Our goal is to make the Bickford's Restaurants the best value, high
quality lunch and dinner destinations available in the New England market. By
dramatically repositioning our lunch and dinner offerings and generally
improving our execution during the daytime hours, we expect to attract a new
level of customers. Although it will take some time to implement and see
results, we expect that this strategy will have a positive impact on customer
counts and profits going forward.

Each Restaurant is open seven days a week. Most Restaurants are open from 7:00
a.m. to 11:00 p.m. during the week and later on weekends, with some open 24
hours on the weekends and others open 24 hours every day. Approximately 60% of
weekly sales volume has been generated Friday through Sunday in each of the past
three fiscal years.

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<PAGE>

While the Company believes that the Restaurants appeal to a wide variety of
customers, they primarily cater to families, and, to a lesser extent, senior
citizens, who tend to be attracted to the high-quality, moderately-priced meals.
Each Restaurant generally draws its customers from within a five-mile radius
and, consequently, repeat business is extremely important to the Restaurants'
success. The Company believes that repeat business accounts for a majority of
Restaurant sales.

Each of the Bickford's Restaurants generally consists of a free-standing
building that covers approximately 2,700 to 7,400 square feet. They are
typically located adjacent to major roads, highways and/or shopping malls and a
few are adjacent to or connected to hotels. Nearly all of the Restaurants
located in communities that permit smoking contain dining areas designated as
smoking and non-smoking. At December 31, 2002, 16 of the Restaurant buildings
were owned, while the remaining 47 Restaurants were either leased or owned
buildings on leased land.

Each Restaurant has a kitchen equipped with grill space and ovens for service of
baked foods. Seating capacity ranges from 90 to 257 people. Eight of the
Bickford's Restaurants provide limited counter service.

Restaurant Expansion and Renovation

Capital expenditures during the years ended December 31, 2002, 2001 and 2000
were as follows:

                                         2002           2001           2000
                                      ----------     ----------     ----------
      Expansion                       $  316,000     $  629,000     $3,392,000
      Conversions                           --             --          316,000
      Purchase leased property              --             --          240,000
      Renovation                         291,000        554,000           --
      Refurbishment & equipment
        replacements                   2,840,000      2,677,000      2,234,000
                                      ----------     ----------     ----------
                                      $3,447,000     $3,860,000     $6,182,000
                                      ==========     ==========     ==========

Earnings from operations funded the majority of the above capital expenditures.
The Company currently plans to spend approximately $3,075,000 for renovations,
refurbishments and equipment replacements and approximately $425,000 for
Restaurant expansion during 2003. Management believes that earnings from
operations will be sufficient to fund this planned program in addition to other
funding requirements.

In addition, the Company expects that increased profitability of the Restaurants
will come mainly from gaining market share by continuing its programs to improve
food products and service, and through its programs of refurbishing existing
units, opening new units and, to a lesser extent, from price increases.

Sales at the same Bickford's Restaurants for comparable weeks decreased 4.8% in
2002 (57 restaurants), decreased 4.4% in 2001 (54 Restaurants), and increased
2.1% in 2000 (56 Restaurants) over the prior year's sales. Customer counts at
these same Restaurants decreased 10.3% in 2002, decreased 9.3% in 2001 and
decreased 3.1% in 2000 as compared to the prior year's counts.

                                       5
<PAGE>

The Company takes an opportunistic approach to the expansion of the Restaurant
Operations. Management evaluates both purchase and lease opportunities, and, in
most instances, the Company favors opening new Restaurants utilizing leased
properties. The Company will generally open a new Restaurant only if it can
reasonably be expected to meet the Company's return on investment criteria,
which is generally an annual return on the investment of approximately 25% to
30%.

Restaurant Management and Supervision

Each Restaurant has a manager and one to three assistant managers, at least one
of whom must be on duty at all times during Restaurant hours. The managers are
responsible for hiring all personnel at the Restaurant level, managing the
payroll and employee hours and ordering necessary food and supplies. Bickford's
has eight district managers who between them cover all the Restaurants. The
district managers are responsible for the complete operation of the Restaurants
located in assigned geographical areas, including responsibility for sales,
profits and compliance with all operational policies and procedures. The
district managers, managers and assistant managers are all salaried personnel,
but are also compensated with performance incentives, which can provide a
significant portion of their total compensation. Bonuses paid under the program
are based principally upon monthly sales volume, attainment of certain cost
targets and restaurant profitability.

Sources and Availability of Materials

Food supplies are distributed by various Company-approved wholesalers and
purveyors, who deliver directly to each Restaurant based on the quoted cost of
individual food items. Essential supplies and raw materials are available from
several sources, and the Company is not dependent upon any one supplier for its
food supplies. These purchases from suppliers are generally done on a verbal
purchase order basis and without any long-term commitments or contracts; however
in 2002, the Company did enter a long-term arrangement with its juice and soda
supplier. The Company does not maintain or engage in any warehousing or
commissary operations.

Seasonality

The Restaurants generally experience slightly higher revenues in the summer
months.

Customers

The Restaurants are not dependent upon a single customer or group of customers,
although a large portion of each Restaurant's customers live within a five-mile
radius thereof and, accordingly, repeat customers are important to Bickford's
success.

Competition

The Restaurants are in direct competition with many local restaurants providing
family-oriented meals, some of which are owned, operated and/or franchised by
national and regional chains, and many of which are larger and have greater
financial resources than the Company. The restaurant business is highly
competitive with respect to price, service, location and food quality. The
Company believes that its attention to quality and service, along with its low-
to moderately-priced menu items, will continue to attract customers. In recent
years the Restaurants have faced

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<PAGE>

increased competition from the expansion of upscale casual dining chains. The
Company believes that the freshness of its food and its reasonable pricing
compare favorably to these concepts.

Employees

At December 31, 2002, the Restaurants employed 2,550 persons, of which 2,000
were part-time hourly employees, 320 were full-time hourly employees and 230
were salaried personnel. This represents a decline from 2,650 persons employed
as of December 31, 2001. None of the Restaurant's employees are represented by a
union.

Trademarks and Service Marks

The Company has registered certain trademarks in the United States Patent and
Trademark office including "Bickford's"(R) and "Breakfast Anytime"(R) . The
Company believes that these and other related marks are of material importance
to the Restaurants's business. Our trademarks and service marks expire at
various times from 2004 to 2008 and we generally intend to renew trademarks and
service marks which expire.

Environmental Matters

The Restaurants are subject to various federal, state and local laws, rules and
regulations relating to the protection of the environment, which are considered
by management to be typical for companies operating in the restaurant industry.
Management believes that compliance therewith will have no material effect on
its capital expenditures, earnings or competitive position.

CUES DIVISION

The Cues Division sales were $29,900,000, $32,239,000 and $27,426,000 in 2002,
2001 and 2000, respectively, representing 30.3%, 30.6%, and 26.4% of the total
net sales of the Company during 2002, 2001 and 2000, respectively.

Cues manufactures systems utilizing closed circuit television and highly
specialized rehabilitation equipment to inspect and repair underground sewer
lines. The infiltration of groundwater into sewer pipelines through leaking
joints and pipe fractures burdens the capacity of sewage treatment plants by
increasing the volume of fluids being treated. Without a tightly maintained pipe
network a treatment plant may become overwhelmed, resulting in raw sewage
flowing into rivers, harbors, lakes or other bodies of water. The U.S.
Environmental Protection Agency through the Clean Water Act imposes severe fines
and penalties for such pollution. Leaking joints and pipe fractures can also
contribute to sewer line damage that can be repaired, in severe cases, only by
costly excavation. Cues mounts its systems in specially designed trucks and
vans, which are sold as mobile units. Cues also designs and sells a range of
portable systems that may be hand-carried or mounted on a wheeled dolly for ease
of transport for use in difficult to access locations. In addition, Cues
provides product servicing and replacement parts for its customers. Cues's
principal customers are municipalities and contractors engaged in sewer
inspection and repair. Cues is not directly engaged in the service business of
maintaining and repairing sewer lines, but rather, primarily focuses on
designing and manufacturing equipment for these uses.

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<PAGE>

Inspection and Rehabilitation Equipment

Cues's inspection and sealing equipment are integrated systems that provide the
capability of inspecting underground sewer lines via remote control television
cameras. The integrated systems have the capability of creating a permanent
record on videotape of pipe conditions, recording distance, slope, defect
severity and location using various sensing instrumentation. In addition, the
Company manufactures a line of grout application equipment for detecting leaking
joints through an air pressure testing device and applying chemical sealant to
repair small pipe fractures and leaking joints.

Cues also manufactures and sells a line of remotely-operated robotic cutting
devices. These cutting devices reinstate or open lateral sewer lines, which are
smaller-diameter pipes leading from residences or businesses into the main sewer
pipes. The laterals become blocked during the in site process of relining the
walls of mainline pipes with various resin-based cured-in-place materials.

Cues's inspection, cutting and sealing systems are placed in sewer lines through
manholes. A television camera, positioned using either a motorized transporter
or pulled on a skid assembly, relays a television picture of the interior of the
sewer line via cable wire to a monitoring station in a mobile unit above ground.
The television inspection system employs a three-inch-diameter color camera that
can be remotely adjusted for close-up viewing of problem areas. By recording the
position of the camera as it moves through the sewer lines, Cues's inspection
and sealing equipment gives customers a permanent record of the condition of
their sewer lines. If the television camera inspection of a sewer line reveals a
leaking joint or pipe fracture, sealing equipment can be introduced and
positioned through use of the camera to make the repair. Once the sealing module
is positioned, inflatable packers seal off the line at either end of the damaged
area and a chemical sealant is applied that penetrates the leak or fracture as
well as the earth surrounding the pipe, hardening to seal the line. The sealing
module may also be used to determine the structural integrity of the joint by
applying air or water pressure against the walls of the joint. This pressure
test enables the customers to detect leaking joints that may not be easily
detected visually.

The sealing module manufactured by Cues is used to repair sewer lines where
infiltration or inflow of water occurs through leaking joints and pipe
fractures. Repairs can last 20 years or more, depending upon the structural
soundness of the sewer line or repaired joints. Cues's sealing equipment is not
designed to repair a severely damaged or collapsed pipe, which must be excavated
and replaced in the traditional manner or repaired by the use of other sewer
line repair technologies such as relining. However, Cues's Kangaroo (TM) cutting
system is used integrally in the structural, in-line methods of repairing
collapsed sewer lines. Cues has also developed a line of equipment for use in
the inspection, but not the repair, of underground water wells, dams, industrial
pipe, potable water lines and large-pipe storm drains.

Cues has designed and written DataCap 4.0(TM) software, a data collection
program, which offers the ability to capture full-length compressed video
inspections in electronic storage media along with the ability to electronically
capture still frame picture images of pipe conditions. The images, along with
other inspection data such as site address, manhole information, defect
severity, slope inclination or gradient, distance and chemical sealing
information, are stored in a database format and may be transmitted via internet
or facsimile for remote review. The data can

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<PAGE>

also be sorted, searched and printed in reports that include pictures, graphs
and text. The advantage of a computer program over the traditional videotape is
primarily time savings for the city engineers, contractors and other users who
are required to review inspection reports and catalog pipe conditions. The
DataCap(TM) software is designed to operate in Windows95, Windows98, WindowsNT
and Windows2000 operating system. By having in-house software engineers able to
design and write computer code, management believes that Cues has an advantage
over competitors due to the resulting ability of Cues to be more responsive to
customer requests for customized reports and features. The DataCap(TM) software
is installed on shock mounted computer hardware designed and built by Cues to be
rugged for the mobile-unit environment. During 1999, Cues signed a mutually
exclusive agreement with Hansen Information Technologies, Inc., a leading
provider of asset management software to municipalities. The agreement allows
the interchange of data between the DataCap(TM) and Hansen Infrastructure
Management Solution's software and will assure users the ability to easily
import and export files between the two database programs.

Product Servicing, Replacement Parts and Chemicals

Cues provides product servicing and repairs at its facilities in Orlando,
Florida; Montclair, California; Toronto, Canada; and Maastricht, the
Netherlands. In Orlando and Montclair, Cues also maintains an extensive
inventory of replacement parts for distribution and sale to customers. Cues
generally warrants that all parts, components and equipment that it manufactures
will be free from defects in material and workmanship under normal and intended
use for a period of twelve months from the date of shipment to the customer.
Major items of equipment such as vehicles and generators furnished to, but not
manufactured by, Cues, are covered under the warranty of the third-party
manufacturer of such equipment. Cues recorded warranty expense of approximately
$144,000, $346,000 and $320,000, during the years 2002, 2001 and 2000,
respectively. The decrease in warranty expense during 2002 resulted from a
settlement of approximately $168,000 received from a vendor related to a
specific product that caused excessive warranty in 1999.

Product Development

Cues has an ongoing program to improve its existing products and develop new
products. During the years ended December 31, 2002, 2001 and 2000, Cues expended
approximately $387,000, $266,000 and $282,000, respectively, for product
development, (excluding, in each case, the compensation and benefits expense of
engineering department personnel, which comprises a significant portion of
research and development efforts). Although Cues holds United States patents for
components of its products, management believes that the expiration or
invalidity of any or all of such patents will not have a material adverse effect
on its business. For 2003, Cues currently plans to spend approximately $400,000
(exclusive of such personnel expenses) for product development activities.

Source and Availability of Raw Materials

Cues manufactures certain components of its system and purchases others.
Purchased components include television camera modules, monitors, video
recorders, computer components, generators and vehicles, all of which are
available from a number of sources. These purchases from suppliers are done on a
purchase order basis and without any long-term commitments or contracts.

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<PAGE>

Cues has agreements with Orlando-area truck dealers to deliver truck bodies that
are used in the manufacture of its mobile units. Under these agreements, Cues
reimburses the dealers' floor plan financing costs for those vehicles held by
the dealer until delivery. Cues does not have any other commitments or contracts
with its truck dealers. Management believes that alternative sources for truck
chassis are available and that the loss of any of its current dealers would not
have a material adverse effect on Cues.

Marketing

Cues markets its products and services in the United States though 14 direct
salesmen. In certain geographic areas of the country Cues markets it products
and services through independent representatives which are non-exclusive (to
Cues), none of whom accounted for more than 5% of the Cues Division's revenues
in any of the last three years. The Company believes that the loss of any of
these salesman or representatives would not have a material adverse effect on
the Cues Division. Cues also employs technical service representatives located
in Orlando, Toronto and Maastricht.

Within North America, Cues's customers include municipalities and contractors
engaged in sewer line inspection and repair as well as privately-owned sewer
systems. No customer accounted for more than 5% of Cues's 2002, 2001 or 2000
sales. Cues participates in trade shows and uses trade magazine advertising in
the marketing of its products and services to North American customers. The Cues
name is well established within its industry, affording it and its products wide
recognition.

Outside North America, Cues markets its products on five continents, either
directly or through non-exclusive (to Cues) independent distributors, agents or
dealers, none of whom accounted for more than 5% of the Cues Division's revenue
in any of the last three years. During 2002, 2001 and 2000, export sales to
foreign countries represented approximately 10%, 10% and 14% of total Cues
sales, respectively. The vast majority of equipment sales to customers in
foreign countries are arranged under U.S. dollar-denominated letter of credit
arrangements and, therefore, currency and payment risks are minimized.

Competition

Competition for the types of product sold by Cues is based mostly on price,
features, service and reliability. Management believes that it competes
effectively in each of these respects. Management also believes that there are
five companies which produce and sell products that are competitive with those
produced by Cues. A significant portion of sales are generated through a bidding
process initiated by municipalities. This process is extremely price sensitive,
requiring Cues to meet or beat competitors' bids in order to secure sales.

Employees

At December 31, 2002, Cues had 169 full and part-time employees. This includes
five employees of Knopafex, Ltd. and four employees of Cues B.V. None of the
Cues Division employees are represented by a union.

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<PAGE>

Environmental

The Cues Division is subject to various federal, state and local laws, rules and
regulations relating to the protection of the environment, which are considered
by management to be typical for companies operating in the underground pipe
inspection industry. Management believes that compliance therewith will have no
material effect on its capital expenditures, earnings or competitive position.

ITEM 2.  PROPERTIES

Bickford's Restaurants leases land and/or buildings at 47 of its 63 locations,
under lease agreements expiring on various dates (including extension options)
through 2036. The majority of these leases are "triple net", requiring BFRI to
pay taxes, maintenance, insurance and other occupancy expenses related to the
leased premises. The rental payments for a majority of the Restaurant locations
are based upon minimum annual rental payments plus a percentage of their
respective sales.

Below is a summary of the Restaurant properties as of December 31, 2002:

                              Owned          Leased          Total
                             --------       --------       --------
    Massachusetts                  11             27             38
    Connecticut                     2              6              8
    Rhode Island                    1              6              7
    New Hampshire                   2              7              9
    Vermont                        --              1              1
                             --------       --------       --------
        Total                      16             47             63
                             --------       --------       --------

BFRI also owns a 4,000 square foot building in Boston, Massachusetts, which is
used for the Restaurant Operations management and administrative headquarters.
In addition, BFRI subleases one of its former restaurant locations in
Massachusetts. ELXSI owns a 48,000 square foot office and manufacturing facility
in Orlando, Florida, of which 36,000 square feet are currently being utilized by
its Cues Division for manufacturing, while the remaining 12,000 square feet are
being utilized for Cues and "Corporate" selling, general, and administrative
functions. The Cues Division's old facility, consisting of 26,000 square feet
also located in Orlando, Florida, is being partially used by Cues for
manufacturing and storage, while approximately 2,000 square feet are being
rented to a third party. In addition, Cues rents a 3,000 square foot facility in
Montclair, California for service and sales, Cues B.V. owns an office and
manufacturing facility in Maastricht, the Netherlands, and Knopafex, Ltd. rents
office and manufacturing space in Toronto, Canada.

In order to secure the Company's obligations under its senior bank credit
facility with Bank of America, N.A. ("BofA"), substantially all of the Company's
properties and assets have been pledged as collateral to BofA. In addition, a
different bank holds first mortgages on two Restaurants as to which it provided
certain financing.

                                       11
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

On November 25, 2002, James P. Shine ("Shine"), a former officer of the
Restaurant Operations, filed a lawsuit in the Superior Court of the Commonwealth
of Massachusetts, Middlesex County (the "Court") against ELXSI and BFRI (the
"Shine Litigation") seeking certain payments under a letter agreement with ELXSI
dated December 11, 2001 entered into in connection with his exercise of phantom
stock option rights granted to him in 1991. Shine has requested relief in the
form of damages, interest and costs and obtained a $580,000 prejudgement
attachment on three Restaurant properties owned by ELXSI in Middlesex County,
Massachusetts.

In March 2003, the Company reached an agreement-in-principal with Shine, who is
owed approximately $785,000 of which $589,000 was due on or before October 1,
2002. The agreement provides for the option holder to receive a second position
lien on the Kingston, MA restaurant and restructures the principal payments to
be due in 2007.

Other than the Shine Litigation, there are no material pending legal proceedings
(other than ordinary routine litigation incidental to the business) to which the
Company or any of its subsidiaries is a party or of which any of their
respective properties is the subject, nor are there any proceedings known by the
Company to be contemplated by governmental authorities against the Company or
any of its subsidiaries.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ELXSI Corporation held its Annual Meeting of Stockholders on November 8, 2002.
At the meeting, the stockholders:

o     approved the re-election of the Board of Directors of ELXSI Corporation;

o     approved the Company's 2002 Incentive Stock Option Plan; and

o     ratified the appointment of Tedder, James, Worden and Associates, P.A., as
      the Company's independent accountants for fiscal year 2002.

With regard to the re-election of the Board of Directors, the voting was as
follows:

                                                                Abstentions
                                                 Against/        and Broker
        Nominee                  For             Withheld        Non Votes
        -------            -------------       -------------   -------------
Farrokh H. Kavarana          2,372,266             211,089        1,444,682
Kevin P. Lynch               2,372,226             215,889        1,439,882
Alexander M. Milley          2,372,226             215,889        1,439,882
Denis M. O'Donnell           2,372,266             211,089        1,444,682
Robert C. Shaw               2,372,226             211,089        1,444,682

With regard to the resolution to approve the Company's 2002 Incentive Stock
Option Plan, holders of 2,370,436 shares of the Company's common stock voted for
the resolution to approve such Plan, while holders of 239,857 shares of common
stock voted against the resolution and holders of 750 shares of common stock
abstained from the vote.

                                       12
<PAGE>

Concerning the resolution to ratify the appointment of Tedder, James, Worden and
Associates, P.A. as the Company's independent accountants for fiscal year 2002,
holders of 2,371,279 shares of the Company's common stock voted to ratify such
appointment, while holders of 5,203 shares of common stock voted against the
resolution and holders of 2,506 shares of common stock abstained from the vote.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company's Common Stock is traded in the National Market System of The Nasdaq
Stock Market ("Nasdaq"), under the symbol ELXS. The following table sets forth
high and low closing sales prices for the fiscal quarters indicated, as reported
by Nasdaq.

<TABLE>
<CAPTION>

                                     2002                           2001
                          ---------------------------   ---------------------------
                              High           Low            High            Low
                          ------------   ------------   ------------   ------------

<S>                       <C>            <C>            <C>            <C>
    First Quarter         $     10.000   $      6.560   $     12.000   $      9.250
    Second  Quarter             10.250          5.150         10.500          7.700
    Third Quarter                6.600          3.500         11.500          6.020
    Fourth Quarter               4.050          1.570          8.379          5.700

</TABLE>

On March 10, 2003, the reported last sale price for the Company's Common Stock
was $2.51 per share. The above quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.

Holders

As of January 31, 2003, there were 275 holders of record of the Company's Common
Stock.

Dividend History

The Company has never paid a cash dividend. Management will consider paying
dividends depending on future earnings and cash flows of the Company and other
relevant considerations.

Stock Transfer Agent

The Company's stock transfer agent is Continental Stock Transfer & Trust Co., 2
Broadway, New York, New York 10004, (212) 509-4000.

                                       13
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                               -------------------------------------------------------------
                                                  2002         2001         2000         1999         1998
                                               ---------    ---------    ---------    ---------    ---------
<S>                                            <C>          <C>          <C>          <C>          <C>
Net Sales                                      $  98,828    $ 105,398    $ 103,710    $ 104,143    $  98,566
Costs and Expenses:
  Cost of sales                                  (82,099)     (87,437)     (83,594)     (81,703)     (77,327)
  General and administrative                     (10,125)     (11,874)      (9,544)      (9,014)      (9,269)
  Depreciation and amortization                   (4,235)      (4,579)      (4,318)      (3,870)      (3,529)
  Interest income                                     22        1,272        1,500          801          583
  Interest expense                                (1,550)      (1,844)      (1,303)        (832)        (807)
  Other income (expense)                             (88)          81         (272)        (293)        (193)
  (Provision) benefit for income taxes            (1,149)      (7,507)       6,890       11,118       (3,234)
  Cumulative effect of accounting change          (3,172)          --           --           --           --
                                               ---------    ---------    ---------    ---------    ---------

Net (loss) income                              $  (3,568)   $  (6,490)   $  13,069    $  20,350    $   4,790
                                               =========    =========    =========    =========    =========
Net (loss) income per common share
  Basic                                        $    (.89)   $   (1.61)   $    3.08    $    4.75    $    1.09
                                               =========    =========    =========    =========    =========
Diluted                                        $    (.89)   $   (1.61)   $    2.75    $    4.25    $     .98
                                               =========    =========    =========    =========    =========
Weighted average number of common and
 common equivalent shares
  Basic                                            4,027        4,043        4,246        4,283        4,400
  Assumed conversion of options and warrants          --           --          512          508          486
                                               ---------    ---------    ---------    ---------    ---------
  Diluted                                          4,027        4,043        4,758        4,791        4,886
                                               =========    =========    =========    =========    =========

Dividends                                              0            0            0            0            0
                                               =========    =========    =========    =========    =========

Other Data:

Working capital                                $   2,808    $  (2,767)   $   6,863    $  20,733    $  11,574
Total assets                                      78,699       88,454      102,522       89,851       66,636
Capitalized leases and long term debt             13,877       20,473       13,253       12,903        8,665
Stockholders' equity                              51,958       55,359       75,179       63,877       45,560

</TABLE>

                                                                              14
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

See Note 1 to the Consolidated Financial Statements for background on the
Company.

Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant's
fiscal years consist of four 13-week quarters (and, accordingly, one 52-week
period) ending on the last Saturday in December; this requires that every six or
seven years the Restaurant's add an extra week at the end of the fourth quarter
and fiscal year. The Restaurant's 2000 fiscal year included a 53rd week.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002

The Company's revenues and expenses resulted from the operation of the
Restaurant Operations and Cues Division and the Company's corporate expenses
("Corporate").

Restaurant Operations. The Restaurants had sales of $68,928,000, cost of sales
of $60,301,000, selling, general and administrative expenses of $2,467,000 and
depreciation and amortization expense of $3,723,000, which yielded operating
income of $2,437,000. In addition, the Restaurants had $139,000 of interest
expense, related primarily to mortgage loans and capital leases, and other
expense of $124,000, resulting in income before taxes of $2,174,000.

Cues Division. Cues had sales of $29,900,000, cost of sales of $21,798,000,
selling, general and administrative expenses of $6,710,000 and depreciation and
amortization expense of $512,000, which yielded an operating income of $880,000.
In addition, Cues had $79,000 of interest expense, $12,000 of interest income
and $5,000 of other income, resulting in income before taxes of $818,000.

Corporate. Corporate general and administrative expenses were $948,000. The
major components of these expenses were legal expenses, audit and tax compliance
expenses, shareholder services and bank fees. During 2002, the Company did not
record any expense or pay any fees to Cadmus Corporation ("Cadmus") under a
management agreement (see Note 6 to the Consolidated Financial Statements).

During 2002, the Company did not make any payments of principal to certain
persons currently or formerly employed by the Restaurant Operations in
connection with their phantom stock options, which they had exercised in full on
July 2, 2001 (see Note 12 to the Consolidated Financial Statements). Under an
agreed upon deferred payment schedule, these persons were to receive $3,638,000
in the aggregate of which not less than three-quarters of the balance was due to
be paid by October 1, 2002 and the balance on October 1, 2003. As a result of a
decrease in earnings and lack of borrowing availability, we did not make any
principal payments during 2002 under the deferred payment schedule. The unpaid
balance bears interest at 7% per annum.

                                       15
<PAGE>

During 2002, the Company recorded interest expense of $258,000. One of these
former employees initiated a lawsuit against ELXSI and BRFI in connection with
its non-payment of principal. See Item 3, "Legal Proceeding" above.

Corporate interest income was $10,000, which excludes all interest accrued
during 2002 on loans to related parties (see Note 7 to the Consolidated
Financial Statements). Interest accrued on these loans during 2002 was
$1,158,000, but the Company received no payments thereon and suffered a
deterioration in the value of the securities pledged as security thereof.
Corporate interest expense was $1,332,000, consisting primarily of the interest
charges on senior bank debt. The Company's senior bank debt lender is Bank of
America ("BofA"); Note 8 to Consolidated Financial Statements of the Company
includes information regarding the terms of the senior bank debt.

During 2002, the Company recorded a consolidated tax expense of $1,149,000,
consisting of a current tax expense of $253,000 and deferred tax expense of
$896,000.

Management periodically evaluates its future earnings likely to be realized
during the remaining life of its net operating loss and tax credit carryforwards
and the resulting anticipated level of realization of these tax loss
carryforwards in determining the amount of the deferred tax asset to record.
Taking into account reasonable and prudent tax planning strategies and future
income projections, the net deferred tax asset of $14,903,000 represents the
amount of net operating loss and tax credit carryforwards that management
believes more likely than not will be realized over their remaining lives. The
remaining valuation allowance is necessary due to the magnitude of these net
operating loss carryforwards and the uncertainty of future income estimates.
Failure to achieve forecasted taxable income would affect the ultimate
realization of the net deferred tax assets.

The Company's ability to utilize its net operating loss and tax credit
carryforwards may be impaired or reduced under certain other circumstances.
Events which may affect these carryforwards include, but are not limited to,
cumulative stock ownership changes of 50% or more over any three-year period, as
defined under the Internal Revenue Code (IRC). Management recognizes that it is
limited in its ability to prevent such cumulative changes in ownership from
occurring. If a change of ownership for tax purposes were to occur -- and no
assurance can be given that one will not occur -- factors such as the number of
common shares issued and outstanding, the market price of such shares, and short
term treasury rates would be used to determine the amount of the tax loss and
credit carryforwards that can be utilized each year under current tax laws.

Earnings Per Share. The 2002 basic and diluted loss per share was $0.89. The
2002 weighted average number of shares outstanding for the basic and diluted
earnings per share was 4,027,000. The average stock price during 2002 was $5.87
and the market price at December 31, 2002 was $2.55.

                                       16
<PAGE>

YEAR ENDED DECEMBER 31, 2001

The Company's revenues and expenses resulted from the operation of the
Restaurant Operations and Cues Division and the Company's corporate expenses
("Corporate").

Restaurant Operations. The Restaurants had sales of $73,159,000, cost of sales
of $63,818,000, selling, general and administrative expenses of $2,499,000 and
depreciation and amortization expense of $3,920,000, which yielded operating
income of $2,922,000. In addition, the Restaurants had $177,000 of interest
expense, related primarily to mortgage loans and capital leases, and other
income of $9,000, resulting in income before taxes of $2,754,000.

Cues Division. Cues had sales of $32,239,000, cost of sales of $23,619,000,
selling, general and administrative expenses of $8,056,000 and depreciation and
amortization expense of $659,000, which yielded an operating loss of $95,000. In
addition, Cues had $121,000 of interest expense, $71,000 of interest income and
$72,000 of other income, resulting in a loss before taxes of $73,000.

Corporate. Corporate general and administrative expenses were $1,319,000. The
major components of these expenses were $721,000 in management fees paid to
Cadmus under a management agreement (see Note 7 to the Consolidated Financial
Statements), legal expenses, audit expenses, and stockholder services and
financial reporting expenses.

Under the terms of the Cadmus management agreement, Cadmus provides ELXSI with
advice and services with respect to its business and financial management and
long-range planning. Specific examples of services historically rendered to the
Company under this management agreement include: (a) furnishing the services of
certain executive officers and other employees of Cadmus; (b) ongoing evaluation
of division management; (c) preparing and reviewing division operating budgets
and plans; (d) evaluating new restaurant locations and menu changes; (e)
identifying, and assisting in the divestiture of, under-performing assets; (f)
evaluating financing options and negotiating with lenders; (g) assisting in the
compliance with securities laws and other public reporting requirements; (h)
communicating with stockholders; (i) negotiating and arranging insurance
programs; (j) monitoring tax compliance; (k) evaluating and approving capital
spending; (l) cash management services; (m) preparing market research; (n)
developing and improving management reporting systems; and (o) identifying and
evaluating acquisition candidates and investment opportunities. It is through
the Cadmus management agreement that the Company is provided the non-director
services of Mr. Milley (except in his capacity as President of Cues, for which
he is directly compensated by ELXSI), the Company's Chairman of the Board,
President and Chief Executive Officer.

During 2001, the Company reached an agreement with certain persons currently and
formerly employed by the Restaurant Operations on the valuation of their phantom
stock options, which they had exercised in full on July 2, 2001 (see Note 12 to
the Consolidated Financial Statements). Under this agreement, the management
group was to receive $3,638,000 in the aggregate. A deferred payment schedule
was negotiated to provide for not less than three-quarters of the balance due to
be paid by October 1, 2002 and the balance on October 1, 2003. The unpaid

                                       17
<PAGE>

balance bears interest at 7% per annum. During 2001, the Company recorded
interest expense of $66,000 for the period October 1 to December 31, 2001.

Corporate interest income was $1,201,000, consisting primarily of interest on
loans to related parties (see Note 7 to the Consolidated Financial Statements).
Corporate interest expense was $1,546,000, consisting primarily of the interest
charges on senior bank debt. The Company's senior bank debt lender is BofA; Note
8 to Consolidated Financial Statements of the Company includes information
regarding the terms of the senior bank debt.

During 2001, the Company recorded a consolidated tax expense of $7,507,000,
consisting of a current tax benefit of $497,000 and deferred tax expense of
$8,004,000.

Earnings Per Share. The 2001 basic and diluted loss per share was $1.61. The
2001 weighted average number of shares outstanding for the basic and diluted
earnings per share was 4,043,000. The average stock price during 2001 was $8.44
and the market price at December 31, 2001 was $7.62.

YEAR ENDED DECEMBER 31, 2000

Restaurant Operations. The Restaurants had sales of $76,284,000, cost of sales
of $64,008,000, selling, general and administrative expenses of $2,469,000 and
depreciation and amortization expense of $3,550,000, which yielded operating
income of $6,257,000. In addition, the Restaurants had $158,000 of interest
expense, related primarily to mortgage loans and capital leases, and other
expense of $172,000, related to the write off and reserve for disposals of fixed
assets, resulting in income before taxes of $5,927,000.

Cues Division. Cues had sales of $27,426,000, cost of sales of $19,586,000,
selling, general and administrative expenses of $6,023,000 and depreciation and
amortization expense of $768,000, which yielded operating income of $1,049,000.
In addition, Cues had $164,000 of interest expense, $9,000 of interest income
and $76,000 of other income, resulting in income before taxes of $970,000.

Corporate. Corporate general and administrative expenses were $1,052,000. The
major components of these expenses were $690,000 in management fees paid to
Cadmus under a management agreement (see Note 7 to the Consolidated Financial
Statements), legal expenses, audit expenses, and stockholder services and
financial reporting expenses.

Corporate interest income was $1,491,000, consisting primarily of interest on
loans to related parties (see Note 7 to the Consolidated Financial Statements).
Corporate interest expense was $981,000, consisting primarily of the interest
charges on senior bank debt.

During 2000, the Company recorded a consolidated tax benefit of $6,890,000,
consisting of a current tax provision on pre-tax earnings, offset by a net tax
benefit generated by the

                                       18
<PAGE>

intercompany transfer of assets and utilization of net operating loss
carryforwards described in the following paragraph.

In December 2000, ELXSI transferred its Restaurants assets, liabilities and
operations in a taxable transaction, to a newly formed, wholly owned subsidiary.
The transfer of the Restaurants was structured to put in place a more efficient
corporate structure. Because the newly formed subsidiary has an ultimate
ownership structure identical to that of the Restaurant Division prior to the
transfer and the transfer occurred between entities under common control, there
is no impact on the consolidated financial statements other than the tax-related
impacts discussed herein. For tax purposes, the gain on the transfer of these
assets created a current state tax liability of $2,360,000 and a federal
alternative minimum tax liability of $592,000, which was reflected in the
current tax provision at December 31, 2000. For federal income tax purposes, the
gain was offset with net operating loss carryforwards, creating a deferred tax
benefit of $10,057,000. In accordance with FAS 109, $12,417,000 was recorded as
a deferred charge to reflect the federal and state tax impacts of inter-company
profits related to this transaction.

Recording the net tax benefit in 2000 resulted in an increase in net income and
basic earnings per share of $7,753,000 and $1.83 ($1.63 diluted earnings per
share), respectively.

Earnings Per Share. The 2000 basic and diluted earnings per share were $3.08 and
$2.75, respectively. The 2000 weighted average number of shares outstanding for
the basic and diluted earnings per share were 4,246,000 and 4,758,000,
respectively. The average stock price during 2000 was $11.83 and the market
price at December 31, 2000 was $9.25.

COMPARISON OF 2002 RESULTS TO 2001 RESULTS

Sales during 2002 decreased $6,570,000, or 6.2%, gross profit decreased by
$1,232,000, or 6.9%, selling, general and administrative expense decreased by
$1,749,000, or 14.7%, and depreciation and amortization decreased by $344,000,
or 7.5%, resulting in an increase in operating income of $861,000, or 57.1%, in
each case as compared to 2001. Interest expense decreased by $294,000, or 15.9%,
interest income decreased by $1,250,000, or 98.3%, and other expense increased
by $169,000, or 208.6%. As a result, pre-tax income decreased $264,000, or 26.0%
in 2002 compared to 2001. In 2002, the Company recorded income tax expense of
$1,149,000 compared to income tax expense of $7,507,000 in 2001. The result of
these changes was a decrease in the net loss before the cumulative effect of an
accounting change of $6,094,000 in 2002 compared to 2001.

Restaurants Operations. Restaurants sales decreased by $4,231,000, or 5.8%, in
2002 compared to 2001. Same store sales decreased $3,206,000, or 4.8%, in 2002
compared to 2001. Also contributing to the 2002 sales decrease were lost sales
of $1,313,000 due to four closed Restaurants partially offset by an increase in
sales at new and non-comparable Restaurants of $288,000. The same store
Restaurant sales decrease was mainly the result of a decrease in customer counts
of 10.3%, which was partially offset by menu price increases. The decrease in
customer counts was primarily due to new competition and the continuing effect
of the depressed

                                       19
<PAGE>

New England economy. Management is continuing to focus on improving sales at all
Restaurants through attention to customer service, food quality, new menu items
and Restaurant refurbishments.

Restaurants gross profit decreased by $714,000, or 7.6%, and gross profit as a
percentage of sales decreased .3% in 2002 compared to 2001. Food costs decreased
1.3% from 23.8% of sales in 2001 to 22.5% of sales in 2002 primarily as a result
of selectively changing food products and vendors resulting in lower costs while
maintaining quality. Labor costs as a percentage of sales increased by 0.5%,
from 40.1% in 2001 to 40.6% in 2002, due to competitive economic pressures
causing higher average rates of pay for employees, increased staffing during
peak business periods in order to enhance customer service, inefficiencies
caused by the customer declines and higher worker's compensation insurance
costs. Variable costs were approximately flat as a percentage of sales, while
fixed costs increased 1.2% as a percentage of sales due primarily to higher
liability and property insurance costs and the effect of the decline in
customers.

Restaurants selling, general and administrative expense decreased by $32,000, or
1.3%, during 2002 compared to 2001.

Restaurants depreciation and amortization expense decreased by $197,000, or
5.0%, during 2002 as compared to 2001.

As a result of the above, Restaurant operating income decreased by $485,000, or
16.6%, in 2002 compared to 2001.

Cues Division. Cues's sales decreased by $2,339,000, or 7.3%, in 2002 compared
to 2001. As a result of this sales decrease partially offset by a 0.4% increase
in Cues's gross profit percentage in 2002 compared to 2001, gross profit
decreased by $518,000, or 6.0%. The increase in the gross profit percentage was
primarily the result of reductions in health insurance expense in 2002 and the
inclusion in 2001 of a $514,000 charge to reduce the inventory carrying value to
its estimated market value as a result of closing the Moscow Russia office.
Despite the gross profit improvement as a result of the above items, reduction
in selling prices as a result of competitive pricing pressures continued in
2002.

Selling, general and administrative expenses decreased by $1,346,000, or 16.7%,
and depreciation and amortization expense decreased by $147,000, or 22.3%. The
decrease in selling, general and administrative expenses was primarily related
to a decrease in international selling expense of $997,000 as a result of the
decision in December 2001 to close the Russian operations, which was opened in
April 2001. In addition, selling expense decreased in 2002 compared to 2001 due
to variable expense related to sales volume and a reduction in salaries and
health insurance expenses. Warranty expense decreased as a result of receiving a
final settlement from a vendor related to product sold and warranted in previous
years. As a result of the above, operating income increased $975,000, or 1026%,
in 2002 compared to 2001.

                                       20
<PAGE>

Corporate. Corporate's general and administrative expenses decreased by
$371,000, or 28.1%, during 2002 compared to 2001, mainly due to the
discontinuance of the Cadmus management fee in 2002. This decrease, however, was
partially offset by an increase in professional fees and bank fees. Interest
expense decreased by $214,000, or 13.8%, in 2002 compared to 2001 as a result of
a lower average debt balance partially offset by higher borrowing rates.
Interest income decreased by $1,191,000, or 99.2%, in 2002 compared to 2001,
mainly due to a decrease in the amount of related party note receivable interest
income recorded in 2002.

COMPARISON OF 2001 RESULTS TO 2000 RESULTS

Sales during 2001 increased by $1,688,000, or 1.6%, gross profit decreased by
$2,155,000, or 10.7%, selling, general and administrative expense increased by
$2,330,000, or 24.4%, and depreciation and amortization increased by $261,000,
or 6.0%, resulting in a decrease in operating income of $4,746,000, or 75.9%, in
each case as compared to 2000. Interest expense increased by $541,000, or 41.5%,
interest income decreased by $228,000, or 15.2%, and other expense decreased by
$353,000, or 129.8%. In 2001, the Company recorded an income tax expense of
$7,507,000 compared to an income tax benefit of $6,890,000 in 2000. The above
changes resulted in a decrease in net income of $19,559,000 in 2001 compared to
2000.

Restaurants Operations. Restaurants sales decreased by $3,125,000, or 4.1%, in
2001, which had 52 weeks compared to 53 weeks in 2000. Excluding the effect of
the 53rd week in 2000, the sales decrease was $1,880,000, or 2.5%. Same store
sales decreased $2,876,000, or 4.4%, in 2001 compared to 2000, which included
the extra week. Also contributing to the 2001 sales decrease were lost sales of
$1,672,000 due to three closed Restaurants, a decrease in sales at
non-comparable Restaurants of $1,356,000 (including one restaurant closed as a
result of a fire and one closed for construction of a replacement facility) and
a decrease in sales of converted restaurants of $236,000. These decreases were
partially offset by sales at new Restaurants totaling $3,015,000. The same store
Restaurant sales decrease was mainly the result of a decrease in customer counts
of 9.3% partially offset by menu price increases. The 53rd week in 2000 added
approximately $1,245,000 in sales and 192,000 in customers. Excluding the 53rd
week in 2000, the 2001 same store sales and customer counts would have decreased
2.5% and 7.5%, respectively, compared to 2000. The decrease in customer counts
was primarily due to the worsening economy especially after the September 11,
2001 terrorist attack, new competition in certain market areas, the impact of
adverse weather, the negative effect of the implementation of local non-smoking
regulations and local shopping center closings.

Restaurants gross profit decreased by $2,935,000, or 23.9%, and gross profit as
a percentage of sales decreased 3.3% in the 52 weeks ended December 31, 2001
compared to the 53 weeks ended 2000. Labor costs as a percentage of sales
increased by 2.3%, from 37.8% in 2000 to 40.1% in 2001, due to competitive
economic pressures causing higher average rates of pay, increased staffing
during peak business periods in order to enhance customer service,
inefficiencies caused by the customer declines and higher worker's compensation
and medical insurance rates. Variable costs increased by 0.7% due mainly to
higher utility costs, while fixed costs increased

                                       21
<PAGE>

1.2% due to higher liability insurance costs and the effect of the decline in
customers. Food costs decreased by 0.5% as a percentage of sales in 2001
compared to 2000.

Restaurants selling, general and administrative expense increased by $30,000, or
1.2%, during 2001 compared to 2000.

Restaurants depreciation and amortization expense increased by $370,000, or
10.4%, during 2001 as compared to 2000.

As a result of the above, Restaurant operating income decreased by $3,335,000,
or 53.3%, in 2001 compared to 2000.

Cues Division. Cues's sales increased by $4,813,000, or 17.5%, in 2001 compared
to 2000. As a result of this increase and a 1.8% decrease in Cues's gross profit
percentage in 2001 compared to 2000, gross profit increased by $780,000, or
9.9%. In April 2001, Cues opened an office in Moscow, Russia to market and
demonstrate the Company's equipment. In December 2001, the Company decided to
close its Moscow operation. Included in cost of sales for 2001 is a $514,000
charge to reduce the inventory carrying value to its estimated market value as a
result of closing the Moscow office. Excluding this inventory charge, gross
profit would have increased $1,294,000, or 16.5%. The decrease in the gross
profit percentage was primarily the result of reductions in selling prices as a
result of competitive pricing pressures, the Russian inventory charge and, to a
lesser extent, increases in salaries and benefits resulting from rate and head
count increases.

Selling, general and administrative expenses increased by $2,033,000, or 33.8%,
and depreciation and amortization expense decreased by $109,000, or 14.2%. The
increase in selling, general and administrative expenses was primarily related
to an increase in international selling expense of $1,021,000. In December 2001,
in addition to the inventory charge discussed above, the Company recorded
charges for severance and other closing-related costs of approximately $356,000
related to the closing of the Moscow office. Prior to the closing decision,
approximately $665,000 was incurred in the sales and marketing effort in Russia.
The remaining increase in selling, general and administrative costs of
$1,012,000, was primarily due to an increase in domestic field sales and support
staff including headcount and benefits increases. As a result of the above,
operating income decreased $1,144,000, or 109.1%, in 2001 compared to 2000.

Corporate. Corporate's general and administrative expenses increased by
$267,000, or 25.4%, during 2001 compared to 2000, mainly due to an increase in
professional fees, bank fees and a slight increase in management fee expense.
Interest expense increased by $565,000, or 57.6%, in 2001 compared to 2000.
Included in the increase in interest expense is an increase in the amortization
of deferred debt costs of $272,000. The remaining increase in interest expense
is the result of a higher average debt balance during 2001 compared to 2000
partially offset by lower interest rates in 2001. Interest income decreased by
$290,000, or 19.5% in 2001 compared to 2000, mainly due to a decrease in the
average outstanding related party receivable from Cadmus.

                                       22
<PAGE>

INFLATION

Inflation and changing prices have not had a material impact on the Company's
results of operations during any of the last three fiscal years.

LIQUIDITY AND CAPITAL RESOURCES

Available Resources. The Company's consolidated unrestricted cash positions at
December 31, 2002 and 2001 was $777,000 and $1,194,000, respectively. The
Company's borrowing availability under its bank line of credit at December 31,
2002 and 2001 was $2,533,000 and $939,000, respectively. The Company has a cash
management system whereby cash generated by operations is used to immediately
reduce bank debt. The reduction of outstanding debt provides the Company with a
reduction in interest expense greater than the interest income that the cash
could safely earn from alternative investments. Working capital needs, when they
arise, are met by borrowings.

During 2002, the Company had cash flow from operations of $8,369,000. The cash
flow from operations, the proceeds from the sale of property, building and
equipment of $1,452,000 and the collection of notes receivable of $70,000 funded
the purchase of property, plant and equipment of $3,634,000, the payment of net
borrowings under the Bank line of credit and term loan of $5,873,000, principal
payments of other debt totaling $239,000, the purchases of common stock for
$52,000, the payments of deferred financing fees of $26,000 and the payment of
capital lease obligations of $484,000. During 2002, current assets decreased by
$2,713,000, primarily due to a decrease in cash and cash equivalents, a decrease
in Cues accounts receivable and a decrease in corporate taxes receivable which
was partially offset by an increase in prepaid expense and other current assets
and deferred tax assets. Current liabilities decreased $8,288,000 in 2002
compared to 2001 primarily as a result of reducing bank debt and reclassifying
the phantom option liability to a long-term liability at December 31, 2002.

Under the terms of its line of credit and term loan agreement with BofA, the
Company is required to meet certain covenants, including financial covenants
relating to the ratio of funded debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA"), fixed charge coverage ratio and
restrictions on capital expenditures. On April 22, 2002, the Company entered
into an Amended and Restated Loan and Security Agreement ("the New Credit
Agreement") with BofA. On December 30, 2002 and January 31, 2003, under
amendments to the New Credit Agreement, the Company converted its outstanding
Orange County Industrial Development Authority, Industrial Development Revenue
Bonds (ELXSI Project), Series 1997 (the "IDB Bonds"), into a second term loan
with BofA due June 30, 2003. At December 31, 2002, the Company was in violation
of the funded debt to EBITDA covenant and other non-financial covenants, and
therefore was in default under the provisions of the New Credit Agreement. On
January 31, 2003, the Company entered into an amendment to the New Credit
Agreement that included a waiver by BofA of all 2002 covenant violations. This
amendment also included the following terms, which represent changes from the
New Credit Agreement: (1) an extension of the maturity date of all BofA debt to
June 30, 2003 with the payment of a $50,000 extension fee;

                                       23
<PAGE>

(2) at the Company's option, a further extension of the maturity date of all
BofA debt until January 31, 2004 with the payment of an additional fee of
$50,000 in June 2003; (2) interest on all BofA debt at BofA's prime rate plus
3.5% (which interest rate will increase to BofA's prime rate plus 5% if the
Company exercises its option to extend the maturity date of all BofA debt until
January 31, 2004); (3) an increase in the interest rate on April 30, 2003 to
BofA's prime rate plus 5% and the requirement to pay a non-refundable $250,000
fee unless the Company has obtained by that date an acceptable loan commitment
letter from another lender or has hired an investment banker to sell either its
Cues Division or Restaurant Operations; and (4) the establishment of revised
covenants for 2003, including an EBITDA, net worth and capital expenditure
covenant.

The Company expects to be in compliance with the revised terms and covenants of
the New Credit Agreement as amended; however, the New Credit Agreement contains
provisions which allow BofA to accelerate payment of the amounts due under the
New Credit Agreement if they determine that a material adverse change has
occurred in the Company. The consolidated financial statements include an
independent auditor's report which indicates that these provisions raise
substantial doubt as to the Company's ability to continue as a going concern.
Management believes it will be successful in obtaining financing to replace the
amounts due under the New Credit Agreement prior to its maturity on January 31,
2004. In the event that sufficient additional financing cannot be obtained prior
to the maturity date to repay amounts due under the Agreement, the Company
believes several options are available to generate additional liquidity.

Future Needs for and Sources of Capital. Management believes that cash generated
by operations plus cash available under the New Credit Agreement, as amended,
will be sufficient to fund future operations, including interest payments on
bank debt and payments due under the phantom stock option plan. Management
believes that the bank line of credit and term loans with BofA will be
refinanced prior to their maturity date of June 30, 2003 or extended maturity
date of January 31, 2004.

Critical Accounting Policies. The Company's significant accounting policies are
more fully described in Note 1 to the Consolidated Financial Statements. Certain
of the Company's accounting policies require the application of significant
judgment by management in selecting the appropriate assumptions for calculating
financial estimates. As with all judgments, they are subject to an inherent
degree of uncertainty. These judgments are based on our historical experience,
current economic trends in the industry, information provided by customers and
vendors and information available from other outside sources, as appropriate.
The Company's significant accounting policies include:

Allowance for Doubtful Accounts. The Company evaluates the collectibility of
accounts receivable based on numerous factors, including past transaction
history with particular customers and their creditworthiness. Initially, the
Company estimates an allowance for doubtful accounts as a percentage of net
sales based on historical bad debt experience. This estimate is adjusted when
the Company becomes aware of a specific customer's inability to meet its
financial obligations, or as a result of changes in the overall aging of
accounts receivable. While the Company has a large customer base that is
geographically dispersed, a slowdown in the

                                       24
<PAGE>

markets in which the Company operates may result in higher than expected
uncollectible accounts, and therefore the need to revise the estimate for bad
debts. Generally, Cues has experienced relatively low bad debt expense partially
because customers depend on the Company to provide parts and labor to repair and
service equipment, which gives them a strong incentive to pay past due balances.
During 2002, the Company increased its allowance for doubtful accounts as a
result of a bankruptcy filing by a contractor-customer of Cues. The allowance
for doubtful accounts totaled $374,000 and $193,000 at December 31, 2002 and
2001, respectively.

Inventories. The Company evaluates its inventory balances at the end of each
quarter to ensure that they are carried at the lower of cost or market. This
evaluation includes a review for obsolete inventory and an analysis of slow
moving and potential excess inventory items. Events which could affect the
amount of reserves for obsolete or slow moving inventory include a decrease in
demand for Cues's products due to economic conditions, innovations or new
technologies introduced by Cues or its competitors, price decreases by
competitors on specific products or systems, and any discontinuance by a vendor
of a component part required in production requiring a re-design of a Cues
product. At December 31, 2002 and 2001, the reserve for obsolete and slow moving
inventory was $1,893,000 and $1,886,000, respectively.

Deferred Tax Assets. The Company's net deferred tax assets include substantial
amounts of net operating loss and tax credit carryforwards, totaling $12,634,000
and $11,394,000 at December 31, 2002 and 2001, respectively. The carrying value
of the Company's net deferred tax assets assumes that the Company will be able
to generate sufficient future taxable income based on estimates and assumptions.
If these estimates and assumptions change in the future, the Company may be
required to record additional valuation allowances against its deferred tax
assets, which would result in increased income tax expense. The Company
continually reviews the adequacy of the valuation allowance and recognizes
deferred tax asset benefits only as reassessment indicates that it is more
likely than not that the benefits will be realized. Failure to achieve
forecasted taxable income would affect the ultimate realization of the net
deferred tax assets.

The utilization of the Company's net operating loss and tax credit carryforwards
may be impaired or reduced under certain circumstances. Events which may affect
the Company's ability to utilize these carryforwards include, but are not
limited to, future profitability, cumulative stock ownership changes of 50% or
more over a given three-year period, as defined by Internal Revenue Code (IRC),
and the timing of the utilization of the tax benefit carryforwards. Such changes
in ownership would significantly restrict the Company's ability to utilize loss
and credit carryforwards in accordance with the IRC.

Related Party Notes Receivable. The Company is owed substantial amounts under
related party promissory notes receivable (see Note 7 to the Consolidated
Financial Statements). These notes have been reflected in the equity section of
the balance sheet as a contra-equity account at December 31, 2002 and 2001.
Alexander M. Milley and certain companies he controls have guaranteed payment of
these notes. In addition, Mr. Milley and these companies have pledged certain
assets, including shares of Company Common Stock, under pledge and security
agreements. A permanent decline in the value of the Company's stock or other
assets pledged as

                                       25
<PAGE>

collateral or a default in the payment of the principal and interest by these
related parties would have a negative effect on the Company's operating results
and potentially its ability to repay its outstanding debt.

Impairment of Long-Lived Assets. The Company's long lived-assets include
$1,785,000 and $4,989,000 of goodwill and trademarks at December 31, 2002 and
2001, respectively. In assessing the recoverability of the Company's intangible
assets, the Company must make assumptions regarding estimated future cash flows
and other factors to determine the fair value of the respective assets. If these
estimates or their related assumptions change in the future, the Company may be
required to record impairment charges for these assets not previously recorded.
The Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," ("FAS 142") in 2002. As a result of the
adoption of FAS 142 during the year ended December 31, 2002, the Company
recorded a loss for the cumulative effect of an accounting change related to the
goodwill impairment at the Cues Division in the amount of $3,172,000. The
Company did not record any impairment losses related to goodwill and or
trademarks in the Restaurant Operations Division during 2002.

Product Warranties. Our warranty reserve is established based on our best
estimate of the amounts necessary to settle future and existing claims on
products sold as of the balance sheet date. While we believe that our warranty
reserve is adequate and that the judgment applied is appropriate, such amounts
estimated to be due and payable could differ materially from what will actually
transpire in the future.

Recent Accounting Pronouncements

FAS No. 141, "Business Combinations" and FAS No. 142, "Goodwill and Other
Intangible Assets", were issued in July 2001. FAS 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting. FAS 141 also specifies the criteria which must be
met in order for certain acquired intangible assets to be recorded separately
from goodwill. FAS 142 became effective for the Company beginning with the
Company's first quarter of 2002. Under FAS 142, goodwill is no longer amortized
but rather will be tested for impairment annually, or more frequently if events
or changes in circumstances indicate that the asset might be impaired. This new
approach requires the use of valuation techniques and methodologies
significantly different than the previous undiscounted cash flow policy utilized
by the Company. During the year ended December 31, 2002, the Company recorded a
loss for the cumulative effect of an accounting change related to the goodwill
impairment at the Cues Division in the amount of $3,172,000. The Company did not
record any impairment losses related to goodwill and or trademarks in the
Restaurant Division during 2002. The new approach may result in impairment
charges and reductions in the carrying amount of the remaining goodwill on the
Company's Consolidated Balance Sheets and as a result, the Company may be
subject to earnings volatility if additional goodwill impairment occurs at a
future date.

FAS No. 143, "Accounting for Asset Retirement Obligations" was issued in June
2001. FAS 143, which became effective for the Company beginning in 2003,
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and

                                       26
<PAGE>

associated asset retirement costs. The Company does not expect the adoption of
FAS 143 to have a material impact its Consolidated Financial Statements.

FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
was issued in August 2001. FAS 144, which became effective for the Company
beginning with it's first quarter of 2002, establishes a single accounting model
for long-lived assets to be disposed of by sale, and also broadens the
presentation of discontinued operations to include more disposal transactions.
The adoption of FAS 144 did not have a material impact on the Company's
Consolidated Financial Statements.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of
Debt" and an amendment of that Statement, and SFAS No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds SFAS
No. 44, "Accounting for Intangible Assets for Motor Carriers." SFAS No. 145
amends SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. SFAS No. 145
is effective for fiscal years beginning after May 15, 2002. The Company does not
expect the adoption of SFAS No. 145 will have a material impact on its results
of operations or financial position.

In June 2002, the FASB issues SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses significant issues regarding
the recognition, measurement, and reporting of costs associated with exit and
disposal activities, including restructuring activities. SFAS No. 146 requires
that costs associated with exit or disposal activities be recognized when they
are incurred rather than at the date of a commitment to an exit or disposal
plan. SFAS No. 146 is effective for all exit or disposal activities initiated
after December 31, 2002. The Company does not expect the adoption of SFAS No.
146 to have a material impact on our results of operations or financial
position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

The Company is exposed to market risk from changes in interest rates on borrowed
funds, which could affect its results of operations and financial condition. At
December 31, 2002, the Company had approximately $12.6 million in variable,
market-rate based debt outstanding. The market risk is considered minimal (based
upon a 10% increase or decrease in interest rates from their December 31, 2002
levels).

                                       27
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company for each of the fiscal
years in the three-year period ended December 31, 2002, together with the report
thereon of Tedder, James, Worden & Associates, P.A. dated March 6, 2003 (except
for Notes 8 and 12 for which the date is March 31, 2003), are included in this
report commencing on page F-1 and are listed under Part IV, Item 15 in this
Report.

The Consolidated Financial Statements of the Company for each of the fiscal
years in the two-year period ended December 31, 2001, together with the report
thereon of PricewatehouseCoopers LLP dated April 23, 2002, are included in this
report commencing on page F-2 and are listed under Part IV, Item 15 in this
Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

On July 24, 2002, the Company changed its independent accountant to Tedder,
James, Worden and Associates, P.A. The Company's Form 8-K dated July 24, 2002
and filed with the Commission on July 30, 2002 discusses this action.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this item will be filed within 120 days after
December 31, 2002.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this item will be filed within 120 days after
December 31, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this item will be filed within 120 days after
December 31, 2002.

Equity Compensation Plan Information.

We maintain a number of equity compensation plans for employees, officers,
directors and others whose efforts contribute to our success. The table below
sets forth certain information as our fiscal year ended December 31, 2002
regarding the shares of our common stock available for grant or granted under
stock option plans that (i) were approved by our stockholders, and (ii) were not
approved by our stockholders.

                                       28
<PAGE>
<TABLE>
<CAPTION>

                          Number of securities          Weighted-average          Number of securities
                            to be issued upon           exercise price of        remaining available for
                              exercise of                  outstanding            future issuance under
        Plan               outstanding options          options, warrants         equity compensation
      Category             warrants and rights             and rights                     plans
   ---------------        -----------------------      --------------------      -----------------------
<S>                                       <C>                          <C>                       <C>
Equity compensation
plans approved by
security holders                          854,282                      7.20                      153,178

Equity compensation
plans not approved by
security holders                                0                         0                            0
                          -----------------------      --------------------      -----------------------
Total                                     854,282                      7.20                      153,178
                          =======================      ====================      =======================

</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this item will be filed within 120 days after
December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of this report, our Chief Executive
Officer and Chief Financial Officer performed an evaluation of the effectiveness
of our disclosure controls and procedures (as defined in SEC Rule 13a-14), which
have been designed to ensure that material information related to the Company is
timely disclosed. Based upon that evaluation, they concluded that the disclosure
controls and procedures were effective.

Since the last evaluation of the Company's internal controls and procedures for
financial reporting the Company has made no significant changes in those
internal controls and procedures or in other factors that could significantly
affect our internal controls and procedures for financial reporting.

                                       29
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K

(a) Documents filed as part of this report:

Index to Consolidated Financial Statements
------------------------------------------

                                                                         Page
                                                                       Number(s)
                                                                       ---------
1.  Financial Statements
      Independent Auditors' Report for the year ended
         December 31, 2002                                               F-1
      Report of Independent Certified Public Accountants for the
         years ended December 31, 2001 and 2000                          F-2
      Consolidated Balance Sheets at December 31, 2002 and 2001      F-3 to F-4
      Consolidated Statements of Income and Comprehensive
         Income for the three years ended December 31, 2002              F-5
      Consolidated Statements of Stockholders' Equity for the
         three years ended December 31, 2002                             F-6
      Consolidated Statements of Cash Flows for the three years
         ended December 31, 2002                                     F-7 to F-8
      Notes to Consolidated Financial Statements                     F-9 to F-33


                                                                         Page
                                                                         ----
2.  Financial Statement Schedules
      Independent Auditors' Report on Financial Statement
      Schedules for year ended December 31, 2002.                        S-1
      Independent Auditors' Report on Financial Statement
      Schedules for years ended December 31, 2001 and 2000.              S-2

      Schedule
       Number       Description                                          Page
       ------       -----------                                          ----

        II          Valuation and Qualifying Accounts and Reserves       S-3

All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the Consolidated Financial
Statements or Notes thereto.

                                       30
<PAGE>

3.  Exhibits

Exhibit
Number     Description
------     -----------

2.1        Agreement and Plan of Merger by and among ELXSI Corporation, ELXSI,
           Cadmus Corporation ("Cadmus") and Holdingcues, Inc. dated as of
           October 16, 1992, including form of Series C Warrant. (Incorporated
           herein by reference to Exhibit 2.7 to the Company's Current Report on
           Form 8-K filed November 13, 1992 (File No 000-11877)).

2.2        Family Restaurant Sale and Purchase Agreement, between Marriott
           Family Restaurants, Inc. ("Marriott") and the Company dated February
           28, 1991. (Incorporated herein by reference to Exhibit 2.1 to the
           Company's Current Report on Form 8-K, dated July 16, 1991 (File No.
           000-11877)).

2.3        Side Letter to the Family Restaurant Sale and Purchase Agreement
           between Marriott and the Company dated February 28, 1991.
           (Incorporated herein by reference to Exhibit 2.2 to the Company's
           Current Report on Form 8-K, dated July 16, 1991 (File No.
           000-11877)).

2.4        Assignment and Guaranty of Family Restaurants Sale and Purchase
           Agreement and Side Letter, between the Company, Marriott and ELXSI
           dated June 29, 1991. (Incorporated herein by reference to Exhibit 2.3
           to the Company's Current Report on Form 8-K, dated July 16, 1991
           (File No. 000-11877)).

2.5        Closing Side Letter Agreement Regarding Family Restaurants Sale and
           Purchase Agreement between ELXSI and Marriott dated July 1, 1991.
           (Incorporated herein by reference to Exhibit 2.4 to the Company's
           Current Report on Form 8-K, dated July 16, 1991 (File No.
           000-11877)).

2.6        Real Estate Closing Side Letter Agreement Regarding Family
           Restaurants Sale and Purchase Agreement between ELXSI and Marriott
           dated July 1, 1991. (Incorporated herein by reference to Exhibit 2.5
           to the Company's Current Report on Form 8-K, dated July 16, 1991
           (File No. 000-11877)).

2.7        Agreement Concerning Massachusetts and Connecticut Liquor Licenses
           between ELXSI and Marriott dated July 1, 1991. (Incorporated herein
           by reference to Exhibit 2.6 to the Company's Current Report on Form
           8-K, dated July 16, 1991 (File No. 000-11877)).

2.8        Contribution Agreement, dated as of December 29, 2000, by and among
           ELXSI, Bickford's Holdings Company, Inc. and Bickford's Family
           Restaurants, Inc., including forms of intercompany notes issued to
           ELXSI and Certificate of Designations for preferred stock issued to
           ELXSI. (Incorporated herein by reference to Exhibit 2.8 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2001 (File No. 000-11877)).

3.1        Restated Certificate of Incorporation of the Company, as amended.
           (Incorporated herein by reference to Exhibit 3.1 to the Company's
           Annual Report on Form 10-K for the fiscal year ended December 31,
           1989 (File No. 000-11877)).

3.2        Certificate of Amendment of Restated Certificate of Incorporation of
           the Company dated May 27, 1992. (Incorporated herein by reference to
           Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 1994 (File No. 000-11877)).

3.3        Certificate of Amendment of Restated Certificate of Incorporation of
           the Company dated May 19, 1998. (Incorporated herein by reference to
           Exhibit 3.3 to the Company's Current Report on form 8-K, dated March
           19, 1999 (File no. 000-11877)).

                                       31
<PAGE>

3.4        Certificate of Amendment of Restated Certificate of Incorporation of
           the Company dated June 9, 1999. (Incorporated herein by reference to
           the Company's Form S-8 Registration Statement filed March 27, 2000
           (Registration No. 333-33300)).

3.5        Bylaws of the Company. (Incorporated herein by reference to Exhibit
           3.3 to the Company's Current Report on Form 8-K dated June 24, 1997
           and filed on June 26, 1997 (File No. 000-11877)).

4.1        Series A Warrant No. A-7 to purchase 50,000 shares of Common Stock
           issued to Eliot Kirkland L.L.C. ("EKLLC"). (Incorporated herein by
           reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K
           for the fiscal year ended December 31, 1996 (File No. 000-11877)).

4.2        Form of Third Allonge and Amendment to Series A Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant. (Incorporated
           herein by reference to Exhibit 4.3 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2000 (File No.
           000-11877)).

4.3        Form of Fourth Allonge and Amendment to Series A Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant (Filed herewith).

4.4        Series A Warrant No. A-6 to purchase 150,500 shares of Common Stock
           issued to the Alexander M. Milley Irrevocable Trust I U/A dated May
           9, 1994. (Incorporated herein by reference to Exhibit 4.2 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 1994 (File No. 000-11877)).

4.5        Form of Third Allonge and Amendment to Series A Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant. (Incorporated
           herein by reference to Exhibit 4.6 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2000 (File No.
           000-11877)).

4.6        Form of Fourth Allonge and Amendment to Series A Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant (Filed herewith).

4.7        Series C Warrant No. C-3 to purchase 68,762 shares of Common Stock
           issued to EKLLC. (Incorporated herein by reference to Exhibit 4.6 to
           the Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 1996 (File No. 000-11877)).

4.8        Form of Third Allonge and Amendment to Series C Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant. (Incorporated
           herein by reference to Exhibit 4.9 of the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 2000 (File No.
           000-11877)).

4.9        Form of Fourth Allonge and Amendment to Series C Warrants of ELXSI
           Corporation, with respect to the foregoing Warrant. (Filed herewith).

4.10       Amended and Restated Registration Rights Agreement dated as of
           January 23, 1990 among the Company, Milley & Company ("M&C") and
           Continental Illinois Equity Corporation. (Incorporated herein by
           reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K
           for the fiscal year ended December 31, 1989 (File No. 000-11877)).

4.11       Exercise of Option and Assignment of Registration Rights executed by
           ELX Limited Partnership ("ELX") and The Airlie Group, L.P. ("Airlie")
           dated November 30, 1994. (Incorporated herein by reference to Exhibit
           4.6 to the Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1994 (File No. 000-11877)).

4.12       Amended and Restated Loan and Security Agreement, dated as of April
           22, 2002 between ELXSI, Bickford's Holding Company, Inc., Bickford's
           Family Restaurants, Inc. and Bank of America, N.A. (Incorporated
           herein by reference to Exhibit 4.14 to the Company's Annual Report on
           Form 10-K for the year ended December 31, 2001 (File No. 000-11877)).

                                       32
<PAGE>

4.13       First Amendment to Amended and Restated Loan And Security Agreement
           dated as of August 5, 2002 between ELXSI, Bickford's Holding Company,
           Inc., Bickford's Family Restaurants, Inc. and Bank of America, N.A.
           (Filed herewith).

4.14       Second Amendment to Amended and Restated Loan And Security Agreement
           dated as of December 30, 2002 between ELXSI, Bickford's Holding
           Company, Inc., Bickford's Family Restaurants, Inc. and Bank of
           America, N.A. (Filed herewith).

4.15       Third Amendment to Amended and Restated Loan And Security Agreement
           dated as of January 31, 2003 between ELXSI, Bickford's Holding
           Company, Inc., Bickford's Family Restaurants, Inc. and Bank of
           America, N.A. (Filed herewith).

4.16       Trust Indenture, dated as of September 24, 1997, between the Orange
           County Industrial Development Authority and Sun Trust Bank, Central
           Florida, National Association, as Trustee. (Incorporated herein by
           reference to Exhibit 4.19 to the Company's Quarterly Report on Form
           10-Q for the quarter ended September 30, 1997 (File No. 000-11877)).

4.17       Loan Agreement, dated as of September 24, 1997, between ELXSI and the
           Orange County Industrial Development Authority. (Incorporated herein
           by reference to Exhibit 4.20 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 1997 (File No.
           000-11877)).

4.18       Mortgage and Security Agreement, dated as of September 24, 1997
           between ELXSI and the Orange County Industrial Development Authority.
           (Incorporated herein by reference to Exhibit 4.21 to the Company's
           Quarterly Report on Form 10-Q for quarter ended September 30, 1997
           (File No. 000-11877)).

4.19       Bond Purchase Agreement, dated as of September 24, 1997, by and among
           the Orange County Industrial Development Authority, ELXSI and Bank of
           America National Trust and Savings Association. (Incorporated herein
           by reference to Exhibit 4.22 to the Company's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 1997 (File No.
           000-11877)).

4.20       Guaranty Agreement, dated as of September 24, 1997, by and between
           ELXSI Corporation and Bank of America National Trust and Savings
           Association. (Incorporated herein by reference to Exhibit 4.23 to the
           Company's Quarterly Report on Form 10-Q for the quarter ended
           September 30, 1997 (File No. 000-11877)).

4.21       Security Agreement, dated as of September 24, 1997, between ELXSI and
           the Orange County Industrial Development Authority. (Incorporated
           herein by reference to Exhibit 4.24 to the Company's Quarterly Report
           on Form 10-Q for the quarter ended September 30, 1997 (File No.
           000-11877)).

4.22       Rights Agreement, dated as of June 4, 1997, between the Company and
           Continental Stock Transfer & Trust Company, as Rights Agent.
           (Incorporated herein by reference to Exhibit 4.17 to the Company's
           Form 8-A Registration Statement, dated June 10, 1997 (File No.
           000-11877)).

4.23       Rights Agreement Amendment, dated as of March 16, 1999, between the
           Company and Continental Stock Transfer & Trust Company, as Rights
           Agent. (Incorporated herein by reference to Exhibit 2 to the
           Registrant's Form 8-A/A Registration Statement (Post-Effective
           Amendment No. 1) dated March 19, 1999 (File No. 000-11877)).

4.24       Standstill Agreement, dated as of March 16, 1999, among the Company,
           Alexander M. Milley and the "Kellogg Person" party thereto.
           (Incorporated herein by reference to Exhibit 3 of the Registrant's
           Form 8-A/A Registration Statement (Post-effective Amendment No. 1)
           dated March 19, 1999 (File No. 000-11877)).

                                       33
<PAGE>

10.1       The Company's 1987 Incentive Stock Option Plan as amended.
           (Incorporated by reference to Exhibit 10.1 to the Company's Annual
           Report on Form 10-K for the fiscal year ended December 31, 1987 (File
           No. 000-11877)).

10.2       The Company's 1987 Supplemental Stock Option Plan as amended.
           (Incorporated by reference to Exhibit 10.2 to the Company's Annual
           Report on Form 10-K for the fiscal year ended December 31, 1987 (File
           No. 000-11877)).

10.3       The Company's 1993 Incentive Stock Option Plan. (Incorporated herein
           by reference to Exhibit 10.3 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 1994 (File No.
           000-11877)).

10.4       The Company's 1995 Incentive Stock Option Plan. (Incorporated herein
           by reference to Exhibit 4.1 to the Company's Form S-8 Registration
           Statement filed November 14, 1995 (Registration No. 333-64205)).

10.5       The Company's 1996 Incentive Stock Option Plan. (Incorporated herein
           by reference to Exhibit 4.1 to the Company's Form S-8 Registration
           Statement filed December 2, 1996 (Registration No. 333-17131)).

10.6       The Company's 1997 Incentive Stock Option Plan. (Incorporated herein
           by reference to Exhibit 4.1 to the Company's Form S-8 Registration
           Statements filed January 30, 1998 (Registration No. 333-45381)).

10.7       The Company's 1998 Incentive Stock Option Plan. (Incorporated herein
           by reference to the Annex A to the Company's Proxy Statement included
           in its Schedule 14A filed on April 17, 1998 (File No. 000-11877)).

10.8       The Company's 1999 Incentive Stock Option Plan. (Incorporated herein
           by reference to the Annex A to the Company's Proxy Statement included
           in its Schedule 14A filed on April 23, 1999 (File No. 000-11877)).

10.9       The Company's 2000 Incentive Stock Option Plan. (Incorporated herein
           by reference to the Company's Form S-8 Registration Statement filed
           March 27, 2000 (Registration No. 333-33300)).

10.10      The Company's 2001 Incentive Stock Option Plan. (Incorporated herein
           by reference to the Annex B to the Company's Proxy Statement included
           in its Schedule 14A filed with the Commission on April 17, 2001 (File
           No. 000-11877)).

10.11      The Company's 2002 Incentive Stock Option Plan. (Incorporated herein
           by reference to the Annex A to the Company's Proxy Statement included
           in its Schedule 14A filed with the Commission on October 21, 2002
           (File No. 000-11877)).

10.12      The ELXSI 1991 Phantom Stock Option Plan for the management of the
           Bickford's Division. (Incorporated herein by reference to Exhibit
           10.4 to the Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1994 (File No. 000-11877)).

10.13      Amendment No. 1 to the ELXSI 1991 Phantom Stock Option Plan for the
           management of the Bickford's Division. (Incorporated herein by
           reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K
           for the fiscal year ended December 31, 1994 (File No. 000-11877)).

10.14      Letter agreement dated December 11, 2001 between ELXSI and the
           management of the Bickford's Division holding rights under the ELXSI
           1991 Phantom Stock Option Plan setting forth the amounts and timing
           of payments thereunder as a result of the exercise of rights
           thereunder. (Incorporated

                                       34
<PAGE>

           herein by reference to Exhibit 10.13 of the Company's Annual Report
           on Form 10-K to the fiscal year ended December 31, 2001 (File No.
           000-11877)).

10.15      Letter Agreement by and between ELXSI and Robert Germaine dated March
           28, 2003.

10.16      Letter Agreement by and between ELXSI and Lawrence Pszenny dated
           March 28, 2003.

10.17      Letter Agreement by and between ELXSI and Daniel Bloodwell dated
           March 28, 2003.

10.18      Management Agreement between Winchester National, Inc. (d/b/a M&C)
           and the Company dated September 25, 1989. (Incorporated herein by
           reference to Exhibit 10.21 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 1991 (File No.
           000-11877)).

10.19      Assignment of Management Agreement dated June 28, 1991 among the
           Company, Winchester National, Inc., ELXSI and Milley Management
           Incorporated ("MMI"). (Incorporated herein by reference to Exhibit
           10.16 to the Company's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1994 (File No. 000-11877)).

10.20      Management Agreement Extension dated September 25, 1992 between ELXSI
           and MMI. (Incorporated herein by reference to Exhibit 10.17 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 1994 (File No. 000-11877)).

10.21      Assignment to Cadmus ("Cadmus"), dated January 1, 1994, of MMI's
           rights under the extended Management Agreement dated September 25,
           1992, as amended, between ELXSI and MMI. (Incorporated herein by
           reference to Exhibit 10.18 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 1994 (File No.
           000-11877)).

10.22      Form of Extension No. 2 to Management Agreement, dated as of June 30,
           1997, between ELXSI and Cadmus. (Incorporated herein by reference to
           Exhibit 10.33 to the Company's Current Report on Form 8-K dated and
           filed July 9, 1997 (File No. 000-11877)).

10.23      Promissory Note of ELX payable to the Company dated December 8, 1994
           in the amount of $1,155,625.00 due December 8, 1997. (Incorporated
           herein by reference to Exhibit 10.6 to the Company's Annual Report on
           Form 10-K for the fiscal year ended December 31, 1994 (File No.
           000-11877)).

10.24      Letter Agreement dated December 8, 1997, from the Company to ELX
           extending the term of the foregoing. (Incorporated herein by
           reference to Exhibit 10.24 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 1998 (File No.
           000-11877)).

10.25      Letter Agreement dated December 8, 2000, from the Company to ELX
           further extending the term of the foregoing to December 8, 2003 and
           increasing the amount to $1,472,074 (Incorporated herein by reference
           to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2000 (File No. 000-11877)).

10.26      Amended and Restated Promissory Note of ELX payable to the Company
           dated as of December 31, 2001 in the amount of $1,606,278, amending
           and restating the foregoing Promissory Note (as so amended) of ELX.
           (Incorporated herein by reference to Exhibit 10.26 to the Company's
           Annual Report on Form 10-K to the fiscal year ended December 31, 2001
           (File No. 000-11877)).

10.27      Promissory Note of ELX payable to the Company, dated December 30,
           1996, in the amount of $909,150 due on December 30, 1999.
           (Incorporated herein by reference to Exhibit E to the Amendment No.
           10 to the Schedule 13D of Alexander M. Milley, MMI, ELX, Cadmus and
           EKLLC, dated January 7, 1997, filed in respect to the Company's
           Common Stock).

                                       35
<PAGE>

10.28      Letter Agreement dated December 30, 1999, from the Company to ELX
           extending the term of the foregoing to December 31, 2002 and
           increasing the amount to $1,150,959. (Incorporated herein by
           reference to Exhibit 10.26 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 1999 (File No.
           0000-11877)).

10.29      Amended and Restated Promissory Note of ELX payable to the Company
           dated as of December 31, 2001 in the amount of $1,362,489, amending
           and restating the foregoing Promissory Note (as so amended) of ELX.
           (Incorporated herein by reference to Exhibit 10.29 of the Company's
           Annual Report on Form 10-K to the fiscal year ended December 31, 2001
           (File No. 000-11877)).

10.30      Form of Employment Agreement, dated as of June 30, 1997, between
           ELXSI and Alexander M. Milley. (Incorporated herein by reference to
           Exhibit 10.34 to the Company's Form 8-K Current Report dated July 9,
           1997 filed on July 9, 1997 (File No. 000-11877)).

10.31      Amendment No. 1 to the above Employment Agreement, dated as of May
           27, 1999. (Incorporated herein by reference to Exhibit 10.28 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2000 (File No. 000-11877)).

10.32      Form of Employment Agreement, dated as of June 30, 1997, between
           ELXSI and David M. Doolittle. (Incorporated herein by reference to
           Exhibit 10.39 of the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 1999 (File No. 000-11877)).

10.33      Amendment No. 1 to the above Employment Agreement, dated as of May
           27, 1999. (Incorporated herein by reference to Exhibit 10.30 to the
           Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2000 (File No. 000-11877)).

10.34      Form of $2,000,000 Secured Promissory Note of Cadmus payable to
           ELXSI, dated June 27, 1997. (Incorporated herein by reference to
           Exhibit 10.31 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2000 (File No. 000-11877)).

10.35      Letter agreement dated June 25, 1999 from ELXSI to Cadmus extending
           the term of the foregoing Secured Promissory Note. (Incorporated
           herein by reference to Exhibit 10.32 to the Company's Annual Report
           on Form 10-K for the fiscal year ended December 31, 2000 (File No.
           000-11877)).

10.36      Amended and Restated Secured Promissory Note of Cadmus payable to
           ELXSI dated as of December 31, 2001 in the amount of $2,000,000,
           amending and restating the foregoing Secured Promissory Note (as so
           amended) of Cadmus. (Incorporated herein by reference to Exhibit
           10.36 to the Company's Annual Report on Form 10-K to the fiscal year
           ended December 31, 2001 (File No. 000-11877)).

10.37      Form of Promissory Note of Cadmus payable to ELXSI, dated December
           28, 2000, in a maximum amount of $10,000,000 Note. (Incorporated
           herein by reference to Exhibit 10.33 to the Company's Annual Report
           on Form 10-K for the fiscal year ended December 31, 2000 (File No.
           000-11877)).

10.38      Amended and Restated Promissory Note of Cadmus payable to ELXSI dated
           as of December 31, 2001 in the amount of $7,003,364, amending and
           restating the foregoing Promissory Note of Cadmus (as so amended).
           (Incorporated herein by reference to Exhibit 10.38 to the Company's
           Annual Report on Form 10-K to the fiscal year ended December 31, 2001
           (File No. 000-11877)).

10.39      From of guaranty instrument executed by Alexander M. Milley in
           relation to the above two notes. (Incorporated herein by reference to
           Exhibit 10.34 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2000 (file No. 000-11877)).

                                       36
<PAGE>

10.40      Form of Pledge and Security Agreement, dated as of December 31, 2001,
           executed by ELX to secure the above-referenced amended and restated
           promissory notes of ELX and Cadmus. (Incorporated herein by reference
           to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2001 (File No. 000-11877)).

10.41      Form of Pledge and Security Agreement, dated as of December 31, 2001,
           executed by Cadmus to secure the above-referenced amended and
           restated promissory notes of ELX and Cadmus. (Incorporated herein by
           reference to Exhibit 10.41 to the Company's Annual Report on Form
           10-K for the fiscal year ended December 31, 2001 (File No.
           000-11877)).

10.42      Form of Pledge and Security Agreement, dated as of December 31, 2001,
           executed by Alexander M. Milley, MMI and Winchester National, Inc. to
           secure the above-referenced amended and restated promissory notes of
           ELX and Cadmus. (Incorporated herein by reference to Exhibit 10.42 of
           the Company's Annual Report on Form 10-K for the fiscal year ended
           December 31, 2001 (File No. 000-11877)).

16.1       Letter from PricewaterhouseCoopers LLP to the Commission dated July
           24, 2002. (Incorporated herein by reference to Exhibit 16.1 to the
           Company's Current Report on Form 8-K dated July 24, 2002 and filed
           with the Commission on July 30, 2002 (File No. 000-11877)).

21.1       Subsidiaries of the Company. (Incorporated herein by reference to
           Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
           fiscal year ended December 31, 2000 (File No. 000-11877)).

23.1       Consent of Tedder, James, Worden and Associates, P.A.

23.2       Consent of PricewaterhoouseCoopers LLP

4.         Reports on Form 8-K. No current reports on Form 8-K have been filed
           during the last quarter for the period covered by this report

99.1       Certifications pursuant to Sections 906 of the Sarbanes-Oxley Act of
           2002.

                                       37
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                       ELXSI CORPORATION

                                       BY: /s/ ALEXANDER M. MILLEY
                                           -------------------------------------
                                           Alexander M. Milley
                                           Chairman of the Board, President and
                                           Chief Executive Officer

Dated:   March 15, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

       Signature                        Title                          Date
---------------------------    -----------------------------      --------------

/s/ ALEXANDER M. MILLEY        Chairman of the Board,             March 15, 2003
---------------------------     President and Chief Executive
     Alexander M. Milley        Officer (Principal Executive Officer)


/s/ ROBERT C. SHAW             Director and Vice President        March 15, 2003
---------------------------
     Robert C. Shaw

/s/ DAVID M. DOOLITTLE         Vice President, Treasurer          March 15, 2003
---------------------------     and Secretary (Chief
     David M. Doolittle         Accounting Officer and
                                Principal Financial Officer)

/s/ KEVIN P. LYNCH             Director and Vice President        March 15, 2003
---------------------------
     Kevin P. Lynch

/s/ FARROKH K. KAVARANA        Director                           March 15, 2003
---------------------------
     Farrokh K. Kavarana

/s/ DENIS M. O'DONNELL         Director                           March 15, 2003
---------------------------
     Denis M. O'Donnell

                                       38
<PAGE>

                                 CERTIFICATIONS


     I, Alexander M. Milley, certify that:


1.   I have reviewed this annual report on Form 10-K of ELXSI Corporation;

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

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

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

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

     b)  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

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

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

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

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

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

Date:  March 15, 2003

By: /s/ ALEXANDER M. MILLEY
    ----------------------------
    Alexander M. Milley
    Chairman of the Board, President and Chief Executive Officer

                                       39
<PAGE>

     I, David M. Doolittle, certify that:

1.   I have reviewed this annual report on Form 10-K of ELXSI Corporation;

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

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

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

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

     b)  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

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

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

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

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

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

Date:  March 15, 2003

By: /s/ DAVID M. DOOLITTLE
    --------------------------
    David M. Doolittle
    Treasurer, Secretary and Chief Financial Officer

                                       40
<PAGE>
                          Independent Auditors' Report

To the Board of Directors and Stockholders of
   ELXSI Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheet of ELXSI Corporation
and Subsidiaries (the "Company") as of December 31, 2002, and the related
consolidated statements of income (loss) and comprehensive income (loss),
stockholders' equity, and cash flows for the year then ended. 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 the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 ELXSI Corporation
and Subsidiaries as of December 31, 2002, and the results of their operations
and their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 to the
consolidated financial statements, the Company's primary bank credit facility
includes certain default provisions that allow the bank, based on its subjective
determination, to consider the bank credit facility to be in default and
accelerate the maturity date. In the event of acceleration, the Company would be
required to fund substantially all of its debt, which would raise substantial
doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustment that might result from the
outcome of such acceleration.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets as of
January 1, 2002 as required by the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets.

/s/ TEDDER, JAMES, WORDEN & ASSOCIATES, P.A.

Orlando, Florida
March 6, 2003, except as to Notes 8 and 12,
which are as of March 31, 2003

                                      F-1
<PAGE>

               Report of Independent Certified Public Accountants

To the Board of Directors and Stockholders of
ELXSI Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, of stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of ELXSI Corporation and its subsidiaries ("the Company") at December
31, 2001 and 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7, the
Company's primary bank credit facility includes certain default provisions that
allow the bank, based on its subjective determination, to consider the facility
to be in default and accelerate the maturity date. In the event of acceleration,
the Company would be required to fund substantially all of its debt, which would
raise substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustment that might
result from the outcome of such acceleration.

/s/  PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
April 23, 2002
Tampa, Florida

                                      F-2
<PAGE>

                                ELXSI CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

                                   A S S E T S

                                                    December 31,    December 31,
                                                        2002          2001
                                                    ------------   ------------
Current assets:

   Cash and cash equivalents                        $        777   $      1,194

   Accounts receivable, less allowance for
     doubtful accounts of $374 and $193 in 2002
     and 2001, respectively                                4,699          6,116

   Income taxes receivable                                   252          1,630

   Inventories                                            14,616         14,734

   Prepaid expenses and other current assets                 842            450

   Deferred tax asset                                      4,104          3,879
                                                    ------------   ------------

      Total current assets                                25,290         28,003

Property, buildings and equipment, net                    32,294         34,588

Intangible assets, net                                     1,785          4,986

Deferred tax asset - noncurrent                           10,799         10,140

Deferred charge (Note 6)                                   8,074          9,913

Other                                                        457            824
                                                    ------------   ------------

      Total assets                                  $     78,699   $     88,454
                                                    ============   ============


The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3
<PAGE>

                                ELXSI CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                    December 31,   December 31,
                                                        2002           2001
                                                    ------------   ------------
Current liabilities:
   Accounts payable                                 $      2,734   $      2,585
   Accrued expenses                                        6,492          6,399
   Capital lease obligations - current                        54            105
   Current portion of long-term debt                      13,202         18,953
   Other current liabilities                                  --          2,728
                                                    ------------   ------------

        Total current liabilities                         22,482         30,770

Capital lease obligations - non current                      578          1,011
Long-term debt                                                43            404
Other non current liabilities                              3,638            910
                                                    ------------   ------------

      Total liabilities                                   26,741         33,095
                                                    ------------   ------------
Commitments and contingencies (Note 10)

Stockholders' equity:
 Preferred Stock, Series A Non-voting

   Convertible, par value $0.002 per share
    Authorized--5,000,000 shares
    Issued and outstanding--none                              --             --
   Common Stock, par value $0.001 per share
    Authorized--60,000,000 shares
    Issued and outstanding--4,012,197
    at December 31, 2002 and 4,027,997
    at December 31, 2001                                       4              4
   Additional paid-in-capital                            221,194        221,246
   Notes receivable - related parties                    (11,972)       (11,972)
   Accumulated deficit                                  (156,982)      (153,414)
   Accumulated other comprehensive income                   (286)          (505)
                                                    ------------   ------------

        Total stockholders' equity                        51,958         55,359
                                                    ------------   ------------

      Total liabilities and stockholders' equity    $     78,699   $     88,454
                                                    ============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-4
<PAGE>

                                ELXSI CORPORATION

    CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
                  (Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>

                                                        Year Ended December 31,
                                                 -----------------------------------
                                                    2002         2001         2000
                                                 ---------    ---------    ---------
<S>                                              <C>          <C>          <C>
Net sales                                        $  98,828    $ 105,398    $ 103,710
Costs and expenses:
  Cost of sales                                     82,099       87,437       83,594
  Selling, general and administrative               10,125       11,874        9,544
  Depreciation and amortization                      4,235        4,579        4,318
                                                 ---------    ---------    ---------

Operating income                                     2,369        1,508        6,254

Other income (expense):

  Interest income                                       22        1,272        1,500
  Interest expense                                  (1,550)      (1,844)      (1,303)
  Other income (expense)                               (88)          81         (272)
                                                 ---------    ---------    ---------

Income before income taxes                             753        1,017        6,179
(Provision) benefit for income taxes                (1,149)      (7,507)       6,890
                                                 ---------    ---------    ---------

Net (loss) income before cumulative
  effect of accounting change                         (396)      (6,490)      13,069

Cumulative effect of accounting change
  for SFAS No. 142                                  (3,172)          --           --
                                                 ---------    ---------    ---------

Net (loss) income                                   (3,568)      (6,490)      13,069

Other comprehensive income (loss), net of tax:

  Foreign currency translation adjustment              124         (102)         (56)
  Adjustment for cash flow hedge                        95          (95)          --
                                                 ---------    ---------    ---------

Comprehensive (loss) income                      $  (3,349)   $  (6,687)   $  13,013
                                                 =========    =========    =========

Net (loss) income per common share:

  Basic                                          $    (.89)   $   (1.61)   $    3.08
                                                 =========    =========    =========
  Diluted                                        $    (.89)   $   (1.61)   $    2.75
                                                 =========    =========    =========
Weighted average number of common
  and common equivalent shares:

  Basic                                              4,027        4,043        4,246
                                                 =========    =========    =========
  Diluted (Note 12)                                  4,027        4,043        4,758
                                                 =========    =========    =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-5
<PAGE>

                                ELXSI CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                                                                          Accumulated
                                           Common Stock         Additional     Related        Accum-         Other
                                     ------------------------     Paid-In-      Party         ulated     Comprehensive
                                       Shares        Dollars      Capital       Notes         Deficit    Income (Loss)
                                     ----------    ----------   ----------    ----------    ----------   -----------
<S>                                   <C>          <C>          <C>           <C>           <C>           <C>
Balance at December 31, 1999          4,275,477    $        4   $  224,118    $       --    $ (159,993)   $     (252)

Foreign currency translation
  adjustment, net of tax                     --            --           --            --            --           (56)
Purchase and retirement of
  Common Stock                         (162,900)           --       (1,849)           --            --            --
Exercise of Common Stock options
  to purchase Common Stock               21,798            --          138            --            --            --
Net income                                   --            --           --            --        13,069            --
                                     ----------    ----------   ----------    ----------    ----------    ----------
Balance at December 31, 2000          4,134,375             4      222,407            --      (146,924)         (308)

Foreign currency translation
  adjustment, net of tax                     --            --           --            --            --          (102)
Adjustment to recognize fair value
  of cash flow hedge, net of tax             --            --           --            --            --           (95)
Purchase and retirement of
  Common Stock                         (108,712)           --       (1,183)           --            --            --
Exercise of Common Stock options
  to purchase Common Stock                2,487            --           22            --            --            --
Reclassification of related party
  notes receivable                           --            --           --       (11,478)           --            --
Increase in related party notes
  receivable                                 --            --           --          (494)           --            --
Adjustment for fractional shares           (153)           --           --            --            --            --
Net loss                                     --            --           --            --        (6,490)           --
                                     ----------    ----------   ----------    ----------    ----------    ----------
Balance at December 31, 2001          4,027,997             4      221,246       (11,972)     (153,414)         (505)

Foreign currency translation
  adjustment, net of tax                     --            --           --            --            --           124
Adjustment to recognize fair value
  of cash flow hedge, net of tax             --            --           --            --            --            95
Purchase and retirement of
  Common Stock                          (15,800)           --          (52)           --            --            --
Net loss                                     --            --           --            --        (3,568)           --
                                     ----------    ----------   ----------    ----------    ----------    ----------
Balance at December 31, 2002          4,012,197    $        4   $  221,194    $  (11,972)   $ (156,982)   $     (286)
                                     ==========    ==========   ==========    ==========    ==========    ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>

                                ELXSI CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                Year Ended December 31,
                                                      ----------------------------------------
                                                         2002           2001           2000
                                                      ----------     ----------     ----------
<S>                                                   <C>            <C>            <C>
Cash flows provided by operating activities:
Net (loss) income                                     $   (3,568)    $   (6,490)    $   13,069
Adjustments to reconcile net (loss) income to
 net cash provided by operating activities:
  Depreciation and amortization                            4,235          4,579          4,318
  Cumulative effect of accounting change                   3,172             --             --
  Amortization of deferred debt costs                        292            297             25
  Loss on disposal of equipment                              270             86             32
  Gain on sale of intangible                                  --             --            (60)
  Net realized loss on sale of trading securities             --             --            165

(Increase) decrease in assets:

  Accounts receivable                                      1,417         (1,272)          (735)
  Income tax receivable                                    1,378         (1,630)            --
  Inventories                                                118         (1,790)          (342)
  Prepaid expenses and other current assets                 (392)          (121)           (49)
  Deferred tax asset                                        (884)         5,440          1,711
  Deferred charge                                          1,839          2,504        (12,417)
  Other                                                      250           (227)            50
Increase (decrease) in liabilities:
  Accounts payable                                           149           (876)           194
  Accrued expenses                                            93           (414)           825
  Other current and non current liabilities                   --            (62)            --
                                                      ----------     ----------     ----------
  Net cash provided by operating activities                8,369             24          6,786
                                                      ----------     ----------     ----------

Cash flows used in investing activities:

  Purchase of property, buildings and equipment           (3,634)        (4,500)        (6,461)
  Net repayments from (loans to) related party                --           (494)         2,620
  Proceeds from sale of property, building
     & equipment                                           1,452            175            100
  Net purchase of trading securities                          --             --         (2,346)
  Proceeds from sale of intangible asset                      --             --            105
  Collection of notes receivable - related party              --             --            135
  Collection of notes receivable                              70             --             --
  Purchase of equity investment                               --             --           (210)
                                                      ----------     ----------     ----------
  Net cash used in investing activities                   (2,112)        (4,819)        (6,057)
                                                      ----------     ----------     ----------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-7
<PAGE>

                                ELXSI CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                                ----------------------------------------
                                                                   2002           2001           2000
                                                                ----------     ----------     ----------
<S>                                                                 <C>             <C>              <C>
Cash flows (used in) provided by financing activities:
  Net (payments) borrowings on line of credit                       (5,873)         7,361            648
  Payments of long-term debt                                          (239)          (244)          (246)
  Purchase of Common Stock                                             (52)        (1,183)        (1,849)
  Proceeds from exercise of Common Stock
    options                                                             --             22            138
  Payment of deferred fees                                             (26)          (449)          (355)
  (Decrease) Increase in capital lease obligations                    (484)           103            (52)
                                                                ----------     ----------     ----------
  Net cash (used in) provided by financing activities               (6,674)         5,610         (1,716)
                                                                ----------     ----------     ----------

Increase (decrease) in cash and cash equivalents                      (417)           815           (987)

Cash and cash equivalents, beginning of period                       1,194            379          1,366
                                                                ----------     ----------     ----------

Cash and cash equivalents, end of period                        $      777     $    1,194     $      379
                                                                ==========     ==========     ==========
Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

     Interest                                                   $    1,333     $    1,502     $    1,356
     Taxes                                                             561          2,151          2,317
</TABLE>


Non Cash Investing Activities:

During 2001, the Company converted approximately $494,000 of interest due from
related parties to a note receivable.

During 2000, the Company converted approximately $316,000 of interest due from
related parties to a note receivable.


The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-8
<PAGE>

                                ELXSI CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2002 and 2001

Note 1.  The Company

General. ELXSI Corporation (together with its subsidiaries, the "Company")
operates principally through its two wholly-owned subsidiaries, ELXSI, a
California corporation ("ELXSI"), and Bickford's Family Restaurants, Inc., a
Delaware corporation ("BFRI"). Operations consist of the following business
segments: a restaurant chain in New England and an equipment manufacturer
headquartered in Orlando, Florida.

Restaurant Operations. On July 1, 1991, ELXSI acquired 30 Bickford's Restaurants
and 12 Howard Johnson's restaurants from Marriott Family Restaurants, Inc. These
Restaurants were located in Massachusetts, Vermont, New Hampshire, Rhode Island
and Connecticut.

On December 30, 2000, ELXSI contributed and transferred to a newly-formed,
wholly owned subsidiary, Bickford's Holdings Company, Inc. ("BHC"), all of the
restaurants and substantially all of the related operations, assets and
liabilities. Immediately thereafter, these Restaurants, operations, assets and
liabilities were contributed and transferred by BHC to another newly-formed,
wholly-owned subsidiary, BFRI.

During 2002, we reopened one Bickford's Restaurant in Worcester, MA, we closed
three Bickford's Restaurants and we subleased one Bickford's Restaurant to
another restaurant chain. As of December 31, 2002, the Company had 63 Bickford's
Restaurants owned and operated by BFRI (the "Restaurants" or "Restaurant
Operations").

Equipment Manufacturer. On October 30, 1992, ELXSI acquired Cues, Inc. of
Orlando, Florida and its two wholly-owned subsidiaries Knopafex, Ltd., a
Canadian company, and Cues B.V., a Dutch company, collectively referred to
herein as "Cues" or "Cues Division".

Cues is engaged in the manufacturing and servicing of video inspection and
repair equipment for wastewater and drainage systems primarily for
municipalities, service contractors and industrial users.

Note 2.  Summary of Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the
accounts of ELXSI Corporation and its subsidiaries, all of which are
wholly-owned. All material intercompany accounts and transactions have been
eliminated in consolidation.

Both the Company's corporate functions and Cues Division have fiscal years
consisting of four calendar quarters ending on December 31. The Restaurant's
fiscal year consists of four 13-week quarters (one 52-week period) ending on the
last Monday in December; this requires that every six or seven years the
Restaurants add an extra week at the end of the fourth quarter and fiscal year.
The Restaurant's 2000 fiscal year included a 53rd week.

                                      F-9
<PAGE>

Revenue Recognition. Revenues for the restaurant operations are recognized when
services are provided to customers. Revenues for the equipment manufacturer are
recognized when products are shipped and the risk of loss transfers to an
unrelated third party or when services are provided to customers.

Cash and Cash Equivalents. The Company has a cash management system whereby
substantially all cash generated by operations is used to reduce debt. Cash and
cash equivalents include cash on hand and bank deposits.

Fair Value of Financial Instruments. The carrying amount of cash and cash
equivalents, accounts and notes receivable, accounts payable, accrued expenses
and long-term debt approximates fair value primarily due to the short-term
maturity of those instruments and the variable, market-rate based nature of the
interest rates associated with the long-term debt.

Allowance for Doubtful Accounts. The Company evaluates the collectibility of
accounts receivable based on numerous factors including past transaction history
with the customers and their creditworthiness. Initially, the Company estimates
an allowance for doubtful accounts as a percentage of net sales based on
historical bad debt experience. This estimate is adjusted when the Company
becomes aware of a specific customer's inability to meet its financial
obligations, or periodically as a result of changes in the overall aging of
accounts receivable. While the Company has a large customer base that is
geographically dispersed, a slowdown in the markets in which the Company
operates may result in a higher than expected uncollectible accounts, and
therefore, the need to revise the estimate for bad debts. Generally, the Company
has experienced relatively low bad debt expense partially because customers
depend on the Company to provide parts and labor to repair and service
equipment, which gives them a strong incentive to pay past due balances. During
2002, the Company increased the allowance for doubtful accounts as a result of a
bankruptcy filing by a contractor-customer of Cues. As of December 31, 2002 and
2001, the allowance for doubtful accounts totaled $374,000 and $193,000,
respectively.

Inventories. Inventories are stated at the lower of cost or market determined by
the first-in, first-out method. The Company evaluates its inventory balances at
the end of each quarter to ensure that they are carried at the lower of cost or
market. This evaluation includes the analysis of regular cycle counts, a review
for obsolete inventory and an analysis of potential slow moving and excess
inventory items. Events which could effect the amount of reserves for obsolete
or slow moving inventory include a decrease in demand for the Company's products
due to economic conditions, innovations or technology introduced by Cues or a
competitor, price decreases by competitors on specific products or systems, or
the discontinuance by a vendor of a component part required in production
requiring a re-design of a Cues product. At December 31, 2002 and 2001, the
reserve for obsolete and slow moving inventory was $1,893,000 and $1,886,000,
respectively.

Property, Buildings and Equipment. Property, buildings and equipment, including
buildings under capital leases, are stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over the
estimated useful lives of individual assets or classes of assets. Buildings held
pursuant to capital leases and improvements to leased properties or fixtures are
amortized over the shorter of the remaining term of the applicable lease or the
estimated useful life. Estimated useful lives are:

                                      F-10
<PAGE>

         Buildings                                30 years
         Building improvements                    20 years
         Equipment, furniture and fixtures       3-7 years

Depreciation expense for 2002, 2001 and 2000 was $4,206,000, $4,340,000 and
$4,079,000, respectively.

Normal repairs and maintenance are expensed as incurred. Expenditures that
materially increase values, change capacities or extend useful lives are
capitalized. The property, building and equipment accounts are relieved of the
cost of the items being replaced and the accumulated depreciation of disposed
assets is eliminated, with any resulting gain or loss on disposal being recorded
in other income or expense.

Restaurant Opening Costs. Non-capital expenditures incurred in opening new
restaurants are expensed as incurred.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. The
Company's long-lived assets and certain identifiable intangibles are reviewed
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 net cash flows (undiscounted and without interest charges) expected to
be generated by the asset. If such assets are considered to be impaired, the
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.

Goodwill and Trademarks. Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("FAS 142"). The adoption of FAS 142 required an initial
impairment assessment involving a comparison of the fair value of goodwill and
trademarks to current carrying value. Upon adoption, the Company recorded a loss
as a cumulative effect of an accounting change of $3,172,000 related to goodwill
in the Cues division. Prior periods have not been restated for the adoption of
FAS 142. Goodwill represents the excess of cost over the fair value of net
assets acquired and is not amortized. The Company will perform tests for
impairment of goodwill annually or more frequently if events or circumstances
indicate it may be impaired. Such tests include comparing the fair value of a
reporting unit with its carrying value, including goodwill. Goodwill and other
intangible assets are allocated to various reporting units, which are either the
operating segment or one reporting level below the operating segment. The
Company's reporting units for purposes of applying the provisions of FAS 142 are
Restaurants and Equipment. Impairment assessments are performed using a variety
a methodologies, including cash flow analysis, estimates of sales proceeds and
independent appraisals. Where applicable, an appropriate discount rate is used,
based on the Company's cost of capital rate or location-specific economic
factors (see Note 4). Trademarks are being amortized over their useful lives of
35 years. The Company reviews such trademarks for impairment to ensure they are
appropriately valued if conditions exist that may indicate the carrying value
may not be recoverable. Such conditions may include an economic downturn in a
geographic market or a change in the assessment of future operations.

Deferred Debt Costs. Deferred debt costs are amortized over the term of the loan
and charged to interest expense using the effective interest method. As of
December 31, 2002 and 2001, $295,000 and $564,000, respectively, remained to be
amortized over future periods.

                                      F-11
<PAGE>

Amortization expense in 2002, 2001 and 2000 was $292,000, $297,000 and $25,000,
respectively.

Related Party Notes Receivable. The Company is owed substantial amounts under
related party promissory notes receivable as discussed in Note 7 to the
consolidated financial statements. These notes receivable have been reflected in
the equity section of the balance sheet as a contra-equity account at December
31, 2002 and 2001. Alexander M. Milley, the Company's Chairman, President and
Chief Executive Officer and principal stockholder, and certain companies he
controls guaranteed payment of the notes receivable. In addition, Mr. Milley and
these companies have pledged assets, including Company Common Stock along with
other assets, under a pledge and security agreement. A permanent decline in the
value of the Company's Common Stock or other assets pledged as collateral or a
default in the payment of the principal and interest by these related parties
would have a negative effect on the Company's operating results and potentially
its ability to repay outstanding debt.

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

Concentration of Credit Risk. Financial instruments that potentially subject the
Company to concentrations of credit risk are primarily accounts receivable and
notes receivable. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. The allowance for non-collection of accounts receivable is based upon
the expected collection of all accounts receivable.

The Company does not rely on any one vendor or supplier for its raw materials,
and management believes that alternative suppliers are available that could
provide for the Company's needs on comparable terms.

Foreign Currency Translation. The assets and liabilities of the Canadian and
Dutch subsidiaries of Cues are translated into U.S. dollars at year-end exchange
rates, and revenue and expense items are translated at average rates of exchange
prevailing during the year. Resulting translation adjustments are accumulated as
a separate component of stockholders' equity.

Income Taxes. The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of "other" assets and liabilities. Temporary
differences giving rise to deferred tax assets and liabilities include certain
accrued liabilities and net operating loss carryforwards. The provision for
income taxes includes the amount of income taxes for the year that would be paid
by the Company without its net operating loss carryforwards, as determined by
applying the provisions of the current tax law to taxable income for the year;
and the net change during the year in the Company's deferred tax assets and
liabilities. In determining the amount of any valuation allowance required to
offset deferred tax assets, an assessment is made that includes anticipating
future income and determining the likelihood of realizing deferred tax assets
(see Note 6).

The Company's net deferred tax assets include substantial amounts of net
operating loss and credit carryforwards, totaling $12,634,000 and $11,394,000 at
December 31, 2002 and 2001,

                                      F-12
<PAGE>

respectively. The carrying value of the Company's net deferred tax assets
assumes that the Company will be able to generate sufficient future taxable
income, which is based on estimates and assumptions. If these estimates and
assumptions change in the future, the Company may be required to record
additional valuation allowances against its deferred tax assets, resulting in
increased income tax expense. The Company continually reviews the adequacy of
the valuation allowance and recognizes deferred tax asset benefits only as
reassessment indicates that it is more likely than not that the benefits will be
realized. Failure to achieve forecasted taxable income would affect the ultimate
realization of the net deferred tax assets.

The utilization of the Company's net operating loss and tax credit carryforwards
may be impaired or reduced under certain circumstances. Events which may affect
the Company's ability to utilize these carryforwards include, but are not
limited to, future profitability, cumulative stock ownership changes of 50% or
more over a three-year period, as defined by Section 382 of the Internal Revenue
Code (IRC), and the timing of the utilization of the tax benefit carryforwards.
Such changes in ownership would significantly restrict the Company's ability to
utilize loss and credit carryforwards in accordance with Sections 382 and 383 of
the IRC.

Warranty. The Company's warranty reserve is established based on our best
estimate of the amounts necessary to settle future and existing claims on
products sold as of the balance sheet date. While the Company believes that the
warranty reserve is adequate and that the judgment applied is appropriate, such
amounts estimated to be due and payable could differ materially from what will
actually transpire in the future.

Advertising. Advertising costs are expensed as incurred and totaled $1,022,000,
$1,038,000 and $981,000 in 2002, 2001 and 2000, respectively.

Accounting for Stock-Based Compensation. The Company measures compensation
expense for employee and director stock options as the aggregate difference
between the market and exercise prices of the particular options on the date
that both the number of shares the optionee is entitled to receive and the
exercise price thereunder are known. Compensation expense associated with option
grants is equal to the market value of the underlying shares on the date of
grant and is recorded pro rata over the required holding period. Pro forma
information relating to the fair value of stock-based compensation is presented
in Note 12 below.

Reclassifications. The Company has recorded certain reclassifications in prior
years to be consistent with the current year's presentation. These
reclassifications have no effect on reported net income or stockholders' equity.

Earnings Per Share. The Company presents "basic" earnings per share, which is
net income (loss) divided by weighted average shares outstanding during the
period, and "diluted" earnings per share, which considers the impact of common
stock equivalents. The Company's Common Stock equivalents consist of employee
and director stock options and warrants to purchase Common Stock.

Options and warrants to purchase 854,282 and 269,262 shares, respectively of
Common Stock at average exercise prices of approximately $7.20 and $5.95 per
share, respectively, were not included in the computation of diluted earning per
share for 2002 and 2001 because the effect of their exercise would have been
anti-dilutive.

                                      F-13
<PAGE>

Recent Accounting Pronouncements

Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"), as amended by FAS 137 and FAS 138. FAS 133 established
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
FAS 133 requires that an entity recognize all derivative instruments in its
balance sheet at fair value. Changes in the fair value of derivatives that are
not designated as hedges must be adjusted to fair value through income. If the
derivative is designated as a hedge, depending on the nature of the underlying
exposure, changes in the fair value are either offset against the change in fair
value of the hedged item or recognized in "Other comprehensive income (expense)"
until the hedged item is recognized in earnings. The ineffective portion of the
derivative's change in fair value is immediately recognized in earnings. The
adoption of FAS 133 did not have a material impact on the Company's operating
results.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141")
and FAS 142, "Goodwill and Other Intangible Assets". FAS 141 requires all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method of accounting. FAS 141 also specifies the types of acquired
intangible assets that are required to be recognized and reported separately
from goodwill and those acquired intangible assets that are required to be
included in goodwill.

As previously mentioned, effective January 1, 2002, the Company adopted FAS 142
(see Notes 2 and 4).

The FASB issued FAS No. 143, "Accounting for Asset Retirement Obligations" in
August 2001. FAS 143, which will become effective for the Company beginning in
2003, establishes accounting standards for the recognition and measurement of
asset retirement obligations and their associated asset retirement costs. The
Company does not expect the adoption of FAS 143 to have a material impact on its
consolidated results of operations and financial position.

The FASB issued FAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. FAS 144, which became effective for the
Company beginning with the first quarter of fiscal 2002, establishes a single
accounting model for long-lived assets to be disposed of by sales and also
broadens the presentation of discontinued operations to include more disposal
transactions. The adoption of FAS 144 had no impact on the consolidated results
of operations and financial position.

In April 2002, the FASB issued FAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
FAS 145 eliminates the requirement that gains and losses from the extinguishment
of debt be aggregated and, if material, classified as an extraordinary item, net
of the related income tax effect, and also eliminates an inconsistency between
the accounting for sale-leaseback transactions and certain lease modifications
that have economic effects that are similar to sale-leaseback transactions.
Generally, FAS 145 is effective for transactions occurring after May 15, 2002.
The adoption of FAS 145 is expected to have no impact to the Company.

In June 2002, the FASB issued FAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities". FAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. FAS 146 requires that the initial

                                      F-14
<PAGE>

measurement of a liability be at fair value. FAS 146 will become effective for
the Company beginning in 2003 and the Company does not expect the adoption to
have a material impact on its consolidated results of operations and financial
position.

Note 3.  Composition of Certain Financial Statement Components

                                                            December 31,
                                                    ---------------------------
                                                        2002           2001
                                                    ------------   ------------
Assets:
 Inventories:
    Raw materials and finished goods                $  9,479,000   $  8,506,000
    Work in process                                    5,137,000      6,228,000
                                                    ------------   ------------
                                                    $ 14,616,000   $ 14,734,000
                                                    ============   ============
 Property, buildings and equipment:
       Land                                         $  8,777,000   $  8,777,000
       Buildings and improvements                     21,328,000     22,555,000
       Buildings held pursuant to capital leases       1,234,000      1,234,000
       Equipment, furniture and fixtures              27,508,000     26,366,000
                                                      58,847,000     58,932,000
                                                    ------------   ------------

       Accumulated depreciation                      (26,553,000)   (24,344,000)
                                                    ------------   ------------
                                                    $ 32,294,000   $ 34,588,000
                                                    ============   ============
Liabilities:
 Accrued expenses:
       Salaries, benefits and vacation              $  2,309,000   $  1,972,000
       Common Stock reverse split payable                560,000        560,000
       Insurance                                         587,000        462,000
       Utilities                                         388,000        397,000
       State and federal income taxes                    324,000        382,000
       Other taxes                                       279,000        299,000
       Warranty                                          302,000        282,000
       Professional fees                                 156,000        225,000
       Rents                                             190,000        195,000
       Interest and bank fees                            117,000        132,000
       Interest rate swap                                     --        155,000
       Other accruals                                  1,280,000      1,338,000
                                                    ------------   ------------
                                                    $  6,492,000   $  6,399,000
                                                    ============   ============

Note 4.  Goodwill and Trademarks

In accordance with FAS 142, goodwill is no longer amortized but is reviewed
annually for impairment. Intangible assets that are deemed to have definite
lives are amortized over their useful lives. The amortization provisions of FAS
142 apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, the
Company began applying the new accounting rules effective January 1, 2002.

The adoption of FAS 142 required the Company to perform an initial assessment of
all goodwill and indefinite lived intangible assets for each business segment as
of January 1, 2002. The Company compared the fair value of trademarks and to the
carrying value. Fair values were derived using discounted cash flow analyses.
The assumptions used in these discounted cash flow analyses were consistent with
our internal planning. Valuations were completed for the

                                      F-15
<PAGE>

intangible assets of the Company. As a result of a decline in 2002 of operating
profits of the Cues segment, goodwill was estimated to be impaired due to the
carrying value of the net assets exceeded their estimated fair value. As a
result, the Company recorded a loss for the cumulative effect of a change in
accounting principle related to the goodwill impairment in the amount of
$3,172,000. The Restaurant segment had no impairment in connection with its
goodwill of $1,559,000 as of December 31, 2002. Future impairment tests will be
performed on the Restaurant operations' goodwill and the Company's earnings may
be subject to volatility if additional goodwill impairment occurs in the future.

The following table sets forth the information for intangible assets subject to
amortization and for intangible assets not subject to amortization at December
31:

                                                     2002           2001
                                                 -----------    -----------
Amortized intangibles assets (trademarks)
 Gross carrying amount                           $ 1,030,000    $ 1,030,000
 Accumulated amortization                           (804,000)      (775,000)
                                                 -----------    -----------
                                                     226,000        255,000
 Unamortized intangible assets:

    Goodwill                                       1,559,000      4,731,000
                                                 -----------    -----------
        Total goodwill and intangible assets     $ 1,785,000    $ 4,986,000
                                                 ===========    ===========

Amortization expense totaled $29,000 during each of 2002, 2001 and 2000. The
estimated amortization expense for each of the next five years is $29,000 per
year.

The following table summarizes and reconciles Net Income (Loss) Before
Cumulative Effect of Accounting Change for the three years ended December 31,
2002, 2001 and 2000, adjusted to exclude amortization expense recognized in such
periods related to goodwill that is no longer being amortized:
<TABLE>
<CAPTION>

                                                2002            2001             2000
                                            -------------    -------------    --------------
<S>                                         <C>              <C>              <C>
Reported net income (loss) before
   cumulative effect of accounting change   $    (396,000)   $  (6,490,000)   $   13,069,000

Add back after-tax amounts:

   Goodwill amortization                               --          210,000           210,000
                                            -------------    -------------    --------------
Adjusted net income (loss) before
   cumulative effect of accounting change   $    (396,000)   $  (6,280,000)   $   13,279,000
                                            =============    =============    ==============
Basic net income (loss) per share
   before cumulative effect of
   accounting change:

      Reported net income (loss)            $        (.89)   $       (1.61)   $         3.08
      Goodwill amortization                            --              .06               .05
                                            -------------    -------------    --------------
Adjusted basic net income (loss)
   per share before accounting
   change                                   $        (.89)   $       (1.55)   $         3.13
                                            =============    =============    ==============
</TABLE>

                                      F-16
<PAGE>
<TABLE>
<CAPTION>

                                                 2002             2001              2000
                                            -------------    -------------    --------------
<S>                                         <C>              <C>              <C>
Diluted net income (loss) per share
   before cumulative effect of
   accounting change:

      Reported net income (loss)            $        (.89)   $       (1.61)   $         2.75
      Goodwill amortization                            --             . 06               .04
                                            -------------    -------------    --------------
Adjusted diluted net income (loss)
   per share before accounting
   change                                   $        (.89)   $       (1.55)   $         2.79
                                            =============    =============    ==============
</TABLE>

A summary of changes in the Company's carrying amount of goodwill during the
year ended December 31, 2002 is as follows:
<TABLE>
<CAPTION>

<S>                                                                      <C>
Balance at December 31, 2001                                              $ 4,731,000
Impairments of excess cost over fair value of net assets acquired:
   Cues Division goodwill                                                  (3,172,000)
                                                                          -----------
Balance at December 31, 2002                                              $ 1,559,000
                                                                          ===========
</TABLE>

Note 5.  Closing of Russian Operations

During 2001, Cues opened an office in Moscow, Russia to market and demonstrate
its equipment. In connection with this effort, the Company recorded selling,
general and administrative expenses of approximately $665,000 for the year ended
December 31, 2001. In December 2001, the Company decided to close its Russian
operation and recorded approximately $870,000 in closing-related charges. Of
these charges, approximately $514,000 has been recorded in cost of sales and is
attributable to the reduction in inventory carrying value to estimated market
values. The remaining $356,000 has been recorded in selling, general and
administrative expenses and relate to severance and other closing related costs.
Of the $514,000 inventory charge, approximately $316,000 relates to inventory
originally purchased from a related party in which the Company holds an equity
investment (see Note 7 below).

Note 6.  Income Taxes

Pre-tax income (loss) for the years ended December 31, 2002, 2001 and 2000 are
as follows:

                                 2002           2001           2000
                             ------------   ------------   ------------
              Domestic       $    817,000   $  1,125,000   $  6,159,000
              Foreign             (64,000)      (108,000)        20,000
                             ------------   ------------   ------------
                 Total       $    753,000   $  1,017,000   $  6,179,000
                             ============   ============   ============

The components of income tax (expense) benefit related to earnings for the years
ended December 31, 2002, 2001 and 2000 are as follows:

                                 2002           2001           2000
                             ------------   ------------   ------------
    Current:
       Federal               $     54,000   $     22,000   $   (790,000)
       State and local           (311,000)       471,000     (3,028,000)
       Foreign                      4,000          4,000          3,000
                             ------------   ------------   ------------
                                 (253,000)       497,000     (3,815,000)
                             ------------   ------------   ------------

                                      F-17
<PAGE>

                                 2002           2001           2000
                             ------------   ------------   ------------
    Deferred:

       Federal                 (1,026,000)    (5,887,000)     8,345,000
       State and local            130,000     (2,117,000)     2,360,000
                             ------------   ------------   ------------
                                 (896,000)    (8,004,000)    10,705,000
                             ------------   ------------   ------------

    Total                    $ (1,149,000)  $ (7,507,000)  $  6,890,000
                             ============   ============   ============

Deferred income taxes are provided for temporary differences between income tax
and financial statement recognition of revenues and expenses. Significant
components of the deferred tax assets (liabilities) are comprised of the
following at December 31, 2002 and 2001:

                                                      2002           2001
                                                 ------------   ------------
    Fixed asset and other                        $   (621,000)  $   (214,000)
                                                 ------------   ------------
      Gross deferred tax liabilities                 (621,000)      (214,000)
                                                 ------------   ------------

    Accrued expenses and other                      2,890,000      2,839,000
    Loss carryforwards                             16,825,000     15,499,000
    Credit carryforwards                            4,107,000      3,861,000
                                                 ------------   ------------
      Gross deferred tax assets                    23,822,000     22,199,000
                                                 ------------   ------------

    Deferred tax asset valuation allowance         (8,298,000)    (7,966,000)
                                                 ------------   ------------
      Net deferred taxes                         $ 14,903,000   $ 14,019,000
                                                 ============   ============

At December 31, 2002 and 2001, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $47 million and $41 million,
respectively. The increase in the net operating loss carryforwards primarily
resulted from the creation of new net operating loss carryforwards. As of
December 31, 2002, the Company had tax credit carryforwards of approximately
$4,107,000. Included in the tax credit carryforwards are alternative minimum tax
credit carryforwards of approximately $1,638,000, which have an unlimited
carryforward period. These net operating loss and tax credit carryforwards
expire as follows:
                                                     Net
                                                Operating Loss  Tax Credit
                                                 Carryforwards  Carryforwards
                                                 ------------   -----------
                      2003                         14,118,000            --
                      2004                         18,941,000            --
                      2005                            260,000            --
                      2006                                 --            --
                      2007                            167,000            --
                      2008 through 2022            13,771,000     4,107,000
                                                 ------------   -----------
                                                 $ 47,257,000   $ 4,107,000
                                                 ============   ===========

The Company continually reviews the adequacy of its carryforward valuation
allowances and recognizes deferred tax asset benefits only as reassessment
indicates that it is more likely than not that the benefits will be realized.

During 2000, the Company recorded a consolidated tax benefit of $6,890,000,
consisting of a current tax provision on pre-tax earnings, offset by a net tax
benefit generated by the intercompany transfer of assets and utilization of net
operating loss carryforwards described in the following paragraph.

                                      F-18
<PAGE>

In December 2000, ELXSI transferred the Restaurants's assets, liabilities and
operations, in a taxable transaction, to a newly formed, wholly owned
subsidiary. This transfer was effected in order to put in place a more efficient
corporate structure. Because the newly formed subsidiary has an ultimate
ownership structure identical to that of the Restaurant Operations prior to the
transfer and the transfer occurred between entities under common control, there
is no impact on the consolidated financial statements other than the tax-related
impacts discussed herein. For tax purposes, the gain on the transfer of these
assets created a current state tax liability of $2,360,000 and a federal
alternative minimum tax liability of $592,000, which were reflected in the
current tax provision at December 31, 2000. For federal income tax purposes, the
gain was offset with net operating loss carryforwards, creating a deferred tax
benefit of $10,057,000. In accordance with FAS 109, $12,417,000 was recorded at
December 31, 2000 as a deferred charge to reflect the federal and state tax
impacts of inter-company profits related to this transaction. As a result, the
tax bases of the Restaurants assets were increased and the Company has been
recognizing higher depreciation deductions for income tax purposes since 2001.

During 2001, as a result of a decrease in taxable income, the Company did not
utilize net operating loss carryforwards to the extent anticipated. In addition,
the Company reduced its projection of future taxable income during the remaining
life of the net operating loss carryforwards. As a result, the associated
valuation allowance was increased during the year and deferred tax expense was
recorded on the income statement. Also during 2001, a valuation of the
Restaurants was completed for purposes of calculating the final taxable gain
resulting from the above-described intercompany transfer of the Restaurant
Operations. Due to the reduction in the taxable gain from the prior years
estimate, the deferred charge was reduced $1,301,000 by recording a deferred tax
expense. In addition, $1,203,000 of the deferred charge was amortized to
deferred tax expense, which was offset by a decrease in current tax expense. As
a result of establishing the taxable basis of the Restaurants' assets
transferred during 2000, the remaining "Corporate" deferred charge was
$9,913,000 at December 31, 2001.

During 2002, as a result of an increase in taxable income, the Company utilized
additional net operating loss carryforwards over the prior year anticipated
amount. In addition, the Company reduced its projection of future taxable income
during the remaining life of the net operating loss carryforwards. As a net
result, the associated valuation allowance was increased during the year and
deferred tax expense was recorded on the income statement. In addition,
$1,839,000 of the deferred charge was amortized to deferred tax expense. As a
result of establishing the taxable basis of the Restaurants' assets transferred
during 2000, the remaining "Corporate" deferred charge was $8,074,000 at
December 31, 2002.

The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards. Failure to achieve forecasted
taxable income would affect the ultimate realization of these net deferred tax
assets. The Company's ability to utilize its net operating loss and tax credit
carryforwards may be reduced for other reasons. Events which may affect the
Company's ability to utilize these carryforwards include, but are not limited
to, cumulative stock ownership changes of 50% or more over any three-year
period, as defined by Section 382 of the Internal Revenue Code (IRC).

A reconciliation of the statutory federal tax rate and the Company's effective
income tax rates for the years ended December 31, 2002, 2001 and 2000 is as
follows:

                                      F-19
<PAGE>
<TABLE>
<CAPTION>

                                                        2002       2001        2000
                                                      --------   --------   --------
<S>                                                       <C>        <C>        <C>
    Federal income tax rate                               34.0%      34.0%      34.0%
    State income taxes, net of federal benefit            15.9       21.5        7.1
    Permanent differences                                (27.8)        --         --
    Changes in valuation allowance for deferred
          tax assets                                      48.5      663.2     (150.2)
    Other                                                 81.9       19.4       (2.4)
                                                      --------   --------   --------
             Effective income tax rate                   152.5%     738.1%    (111.5)%
                                                      ========   ========   ========
</TABLE>

Note 7.  Related Party Transactions

Revisions to Notes Receivable with Related Parties

As of December 31, 2001, the Company restructured the promissory notes
receivable from two related parties, ELX Limited Partnership ("ELX") and Cadmus
Corporation ("Cadmus"). The due dates of the notes were extended to April 1,
2005 in exchange for collateralization of the notes under pledge and security
agreements. In addition, Alexander M. Milley, the Company's Chairman, President
and Chief Executive Officer and principal stockholder, and certain other
entities that he controls, personally guaranteed the Cadmus and ELX notes. Under
the new, restructured notes, 821,705 of issued and outstanding shares of Common
Stock of the Company, held by these companies under Mr. Milley's control serve
as the primary collateral. The collateral also includes shares of another
publicly traded company and other assets held by Mr. Milley and these related
companies, which support the guarantees of these notes. All interest and
principal payable under these notes is due on the maturity date at rates
previously in existence, as described below. As a result of these extensions and
revisions in the underlying collateral, the aggregate balance of these notes
receivable of $11,972,000 at December 31, 2002 and 2001 has been reflected in
the equity section of the balance sheet as a contra-equity.

Transactions with ELX Limited Partnership. On December 8, 1994, the Company
loaned ELX, of which Mr. Milley is the sole general partner and other officers
of the Company are limited partners, approximately $1,156,000 under an unsecured
note. ELX used the proceeds to exercise its option to purchase 369,800 shares of
the Company's Common Stock held by The Airlie Group L.P. ("Airlie") under an
option granted to ELX at $3.125 per share on September 25, 1989. On December 8,
1997, the due date of the note was extended for an additional three years.
Interest from December 8, 1994 to December 8, 1997 was paid in December 1997. On
December 8, 2000, the note principal and the accrued interest from December 8,
1997 to December 8, 2000, in the amount of $316,000, were consolidated and the
due date was further extended to December 8, 2003. Interest accrues at 1/2%
above the Company's senior debt borrowing rate (8% at December 31, 2001). At
December 31, 2001, the then outstanding current principal balance of $1,472,000
and accrued interest of $134,000 were consolidated and the note was extended as
described above. During 2001 and 2000, the Company recorded interest income of
$125,000 and $116,000, respectively, in respect of this note. During 2002, the
Company did not record the approximately $121,000 of interest accrued during
that period.

On December 30, 1996, the Company loaned ELX approximately $909,000 under an
unsecured note. The proceeds of this note were used by ELX to exercise an option
to purchase 110,200 shares of the Company's Common Stock held by Bank America
Capital Corporation ("BACC") and to purchase the remaining 110,200 shares of the
Company's Common Stock held by BACC for $5.125 per share. On December 30, 1999,
the due date of the note, the note principal and the accrued interest from
December 30, 1996 to December 30, 1999, in the amount of $242,000,

                                      F-20
<PAGE>

were consolidated and the due date was extended for an additional three years.
Interest accrues at 1/2% above the Company's senior debt borrowing rate (8% at
December 31, 2001). At December 31, 2001, the then current principal balance of
$1,151,000 and accrued interest of $212,000 were consolidated and the note was
extended as described above. During 2001 and 2000, the Company recorded interest
income of $97,000 and $114,000, respectively, in respect of this note. During
2002, the Company did not record the approximately $103,000 of interest accrued
during that period.

Transactions with Cadmus Corporation. On June 30, 1997, ELXSI loaned $2,000,000
to Cadmus under a two-year note. Mr. Milley is the controlling shareholder of
Cadmus, and certain other officers, directors and/or shareholders of Cadmus are
officers and/or directors of the Company. On June 30, 1999, the note was
extended for an additional two years. On June 30, 2001 the note was further
extended for an additional two years, to June 30, 2003. The note bears interest
at 15%. ELXSI earned a 5%, or $100,000, closing fee, which was amortized to
interest income utilizing the effective interest method over the original life
of the loan. Cadmus reimbursed ELXSI for the costs incurred by ELXSI in making
the loan. At December 31, 2001, this note was extended as described above.
During each of 2001 and 2000, the Company recorded interest income of $300,000
in respect of this note. During 2002, the Company did not record approximately
$300,000 of interest accrued during that period.

In addition, as of December 31, 2001 the Company had advanced Cadmus an
additional total of approximately $6,732,000. During 2001 and 2000, the advances
were partially collateralized by a portfolio of private and public company
equities purchased with the proceeds of the advances. During 2000 Mr. Milley
formalized this receivable in the form of a note, bearing interest at ELXSI's
cost of funds plus 2% (9.5% at December 31, 2001), due in December 2001. This
note receivable was reclassified from a short-term asset at December 31, 1999 to
a long-term asset at December 31, 2000. At December 31, 2001 the then current
principal balance of $6,732,000 and accrued interest of $271,000 were
consolidated and the note was extended as described above. During 2001 and 2000,
the Company recorded interest income of $671,000 and $947,000, respectively, in
respect of this note. During 2002, the Company did not record the approximately
$634,000 of interest accrued during that period.

ELXSI is party to a management agreement dated September 25, 1989 with Cadmus.
Effective June 30, 1997, the management agreement was extended to at least June
30, 2005, and during 1998 the Board of Directors extended the agreement for an
additional two years ending on June 30, 2007. Effective April 1, 1997, the
management fee was increased from $500,000 to $600,000 annually, with a
provision that the fee shall increase 5% on each anniversary date thereof. The
management fee may be discontinued following a year in which the Company's
operating income is less than $4,000,000, but will be reinstated following the
first fiscal quarter in which the Company again attains quarterly operating
income of at least $1,250,000. As a result of the Company's consolidated 2001
operating income falling below $4,000,000, the management fee was discontinued
until such time as quarterly or annual earnings attain the level stated above.
During 2002, 2001 and 2000, the Company was charged management fees of $0,
$721,000 and $690,000, respectively. At December 31, 2002 and 2001, ELXSI did
not owe any amount to Cadmus under such management agreement.

Transactions with Azimuth Corporation and Subsidiaries. On March 24, 1998, ELXSI
borrowed $135,000 under its supplemental line of credit from Bank of America
("BofA") and loaned the proceeds at 15% per annum to Azimuth Corporation
("Azimuth"), which used those funds to purchase 10,000 shares of Common Stock
from a third party. Certain officers, directors

                                      F-21
<PAGE>

and stockholders of Azimuth are officers and directors of the Company. The loan
matured on March 24, 2000 and was repaid with accrued interest on that date.

Transactions with Corporate Care Providers, Inc. In November 1994, Corporate
Care Providers, Inc. ("CCP"), a Delaware corporation and wholly-owned subsidiary
of Cadmus, was incorporated for the purpose of providing employee benefits,
including health, dental, disability and life insurance, to Bickford's and Cues
employees. The benefits are administered under a self-funded plan by UNICARE
Life and Health Insurance Company of Massachusetts. During 2002, 2001 and 2000,
the Company paid CCP $2,495,000, $3,388,000 and $2,109,000, respectively, for
premiums and claims. The employees through, payroll deductions, reimburse
portions of these costs.

Note 8.  Long-Term Debt

Under the terms of its line of credit and term loan agreement with Bank of
America, N.A. ("BofA"), the Company is required to meet certain financial and
other qualitative covenants, including financial covenants relating to the ratio
of funded debt to earnings before interest, taxes, depreciation and amortization
("EBITDA"), a fixed charge coverage ratio and restrictions on capital
expenditures. On April 22, 2002, the Company entered into an Amended and
Restated Loan and Security Agreement ("the New Credit Agreement") with BofA. On
December 30, 2002 and January 31, 2003, under amendments to the New Credit
Agreement, the Company converted its outstanding Orange County Industrial
Development Authority, Industrial Development Revenue Bonds (ELXSI Project),
Series 1997 (the "IDB Bonds") into a second term loan with BofA under the New
Credit Agreement due June 30, 2003. At December 31, 2002, the Company was in
violation of the funded debt to EBITDA covenant and other non-financial
covenants under the New Credit Agreement, and therefore, was in default under
the provisions of the New Credit Agreement. On January 31, 2003, the Company
entered into an amendment to the New Credit Agreement, which provided a waiver
from BofA of all 2002 covenant violations. This amendment also included the
following terms, which represent changes from the New Credit Agreement: (1) an
extension of the maturity date of all BofA debt to June 30, 2003 with the
payment of a $50,000 extension fee (2) at the Company's option, a further
extension of the maturity date of all BofA debt until January 31, 2004 with the
payment of and additional fee of $50,000 in June 2003; (2) interest on all
BofA's debt at BofA's prime rate plus 3.5% (which interest rate will increase to
BofA's prime rate plus 5% if the Company exercises it option to extend the
maturity date of all BofA debt until January 31, 2004); (3) an increase in the
interest rate on April 30, 2003 to BofA's prime rate plus 5% and the requirement
to pay a non-refundable $250,000 fee unless the Company has obtained by that
date an acceptable loan commitment letter from another lender or has hired an
investment banker to sell either operating segment; and (4) the establishment of
revised covenants for 2003, including EBITDA, net worth and capital expenditure
covenants.

As a result, in part, of a waiver received from BofA, in March 2003, the Company
expects to be in compliance with the terms and covenants of the New Credit
Agreement, however, the New Credit Agreement contains provisions which allow
BofA to accelerate payment of the amounts due thereunder if they determine that
a material adverse change has occurred with respect to the Company. The
consolidated financial statements include an independent auditors' report which
indicates that these provisions raise substantial doubt as to the Company's
ability to continue as a going concern. Management believes it will be
successful in obtaining financing to replace the amounts due under the New
Credit Agreement prior to its maturity date. In the event that sufficient
additional financing cannot be obtained prior to the maturity date to repay the
amounts

                                      F-22
<PAGE>

due under the New Credit Agreement, the Company believes several options are
available to generate additional liquidity.

The following table summarizes the terms and balances of the Company's
borrowings at December 31, 2002 and 2001.

                                                         December 31,
                                                 --------------------------
                                                    2002            2001
                                                 -----------    -----------
    Bank Line of Credit with BofA, as
    amended, $15,000,000, interest due
    monthly at prime plus 3.5% (7.75%
    at December 31, 2002). The line of
    credit does not require minimum
    reductions in available credit. As
    of December 31, 2002, the Company
    had $3,025,000 available under this
    line of credit. The line is
    collateralized by assets of ELXSI,
    BHC and BFRI, including real
    estate, and the outstanding stock
    of ELXSI, BHC and BFRI. The
    agreement provides for commitment
    fees of 0.25% on the unused portion
    of the line of credit. In addition,
    the agreement restricts the payment
    of cash dividends by ELXSI to an
    amount not to exceed 50% of the
    excess cash flow (as defined).               $ 9,349,000    $12,485,000

    Term loan with BofA, $1,513,000
    available at December 31, 2002,
    interest due monthly at prime plus
    3.5% (7.75% at December 31, 2002)
    The term loan requires quarterly
    principal reductions of $250,000
    The term loan is collateralized by
    assets of ELXSI, BHC and BFRI
    including real estate, and the
    outstanding stock of ELXSI, BHC and
    BFRI.                                          1,513,000      4,250,000

    Term loan with BofA, $1,638,000
    available at December 31, 2002,
    interest due monthly at prime plus
    3.5% (7.75% at December 31, 2002)
    The term loan requires monthly
    principal reductions of $14,000
    The term loan is collateralized by
    assets of ELXSI, BHC and BFRI
    including real estate, and the
    outstanding stock of ELXSI, BHC and
    BFRI.                                           1,638,000             --

    5 year mortgage payable on land and
    building located in Marlboro,
    Massachusetts with monthly
    installments of approximately
    $3,000 plus interest at 8.01% per
    annum. The balance of $356,000 is
    due on April 15, 2003.                            356,000        373,000

    5 year mortgage payable on land and
    building located in Kingston,
    Massachusetts with monthly
    installments of approximately
    $2,800 plus interest at 8.25% per
    annum. The balance of $338,000 is
    due on August 25, 2003.                           338,000        386,000

                                      F-23
<PAGE>
                                                         December 31,
                                                 --------------------------
                                                    2002            2001
                                                 -----------    -----------
    Orange County Industrial
    Development Authority bonds ("IDB
    Bonds") with monthly principal
    payments of approximately $14,000
    plus interest at the tax exempt
    equivalent of the Eurodollar rate
    plus 1.5% payable monthly in
    arrears (3.1% at December 31,
    2001). BofA converted the IDB Bonds
    into a term loan on December 30,
    2002.                                                  --      1,806,000

    Mortgage payable at 8.25% on the
    land and building owned by Cues
    B.V                                                51,000         57,000
                                                 ------------   ------------
                                                   13,245,000     19,357,000
    Less current portion                          (13,202,000)   (18,953,000)
                                                 ------------   ------------
    Long-term debt                               $     43,000   $    404,000
                                                 ============   ============

Aggregate maturities of long-term debt for each of the years in the five-year
period ending December 31, 2007, and thereafter are as follows:

                      2003                       $ 13,202,000
                      2004                              7,000
                      2005                              7,000
                      2006                              7,000
                      2007                              7,000
                      Thereafter                       15,000
                                                 ------------
                                                 $ 13,245,000
                                                 ============

Note 9. Derivative Instrument. Until April 2002, the Company used a derivative
instrument to manage a portion of its exposure to variable interest rates on
outstanding bank debt. This interest rate swap agreement provided for a fixed
rate of interest of approximately 7.5% on $7 million of variable interest rate
loans under ELXSI's bank line of credit through March 2002 and $4.0 million for
the subsequent 12 months. This interest rate swap agreement was utilized to
provide an exchange of interest payments computed on notional principal amounts
to offset any undesirable changes in cash flows or fair values resulting from
market rate changes on designated hedged bank borrowings. The credit risk of the
interest rate swap agreement had been limited by the fact that ELXSI's
counterparty thereunder is a major financial institution; BofA. During 2001, the
Company recorded a net loss of $95,000, net of tax of $60,000, in "Other
comprehensive income (expense)" related to this cash flow hedge. The Company
terminated the interest rate Swap agreement in April 2002 in conjunction with
the execution of the New Credit Agreement, resulting in a termination payment of
approximately $112,000. The impact of the termination has been included in the
2002 consolidated financial statements.

Note 10.  Commitments and Contingencies

The Company conducts a substantial portion of its operations utilizing leased
facilities. The Company leases land and/or buildings at 47 of its 63 Restaurants
under lease agreements with terms expiring at various dates (including extension
options) through 2036. The majority of the leases require that the Company pay
all taxes, maintenance, insurance, and other occupancy expenses related to the
leased premises. The rental payments for a majority of the Restaurant

                                      F-24
<PAGE>

locations are based on a minimum annual rental plus a percentage of sales, as
defined in the relevant lease agreements. Generally, the leases provide for
renewal options, and in most cases management expects that in the normal course
of business lease agreements will be renewed or replaced by other leases.

Additionally, the Company has several non-cancelable operating leases, primarily
for certain office and transportation equipment, that expire over the next three
years and generally provide for purchases or renewal options.

The following is a schedule of future minimum lease commitments for each of the
years in the five-year period ending December 31, 2007, and thereafter:
<TABLE>
<CAPTION>

                                                             Capital         Operating
                                                              Leases          Leases
                                                           ------------    ------------
<S>                                                        <C>             <C>
    2003                                                   $     94,000    $  3,221,000
    2004                                                         90,000       3,086,000
    2005                                                         76,000       2,952,000
    2006                                                         68,000       2,897,000
    2007                                                         50,000       2,688,000
    Thereafter                                                  645,000      11,071,000
                                                           ------------    ------------
    Total minimum lease payments                              1,023,000    $ 25,915,000
                                                                           ============
    Less - Amount representing interest                        (391,000)
                                                           ------------
    Present value of net minimum capital lease payments         632,000
    Less - current portion                                      (54,000)
                                                           ------------
    Capital lease obligation - non current                 $    578,000
                                                           ============
</TABLE>

Rent expense charged to operations amounted to $3,686,000, $3,801,000 and
$3,686,000 during 2002, 2001, and 2000, respectively.

Cues has arrangements with truck dealers to deliver truck bodies that are used
in the manufacturing of certain of its products. Under these arrangements, Cues
reimburses the dealers' floor-plan financing costs for those vehicles held by
the dealers until delivery to Cues. The amount of this reimbursement for 2002,
2001 and 2000 was $28,000, $42,000 and $70,000, respectively. At December 31,
2002 and 2001, truck bodies held by the dealers under these arrangements were
valued at $504,000 and $660,000, respectively.

The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, the resolution of these matters will not
have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

Note 11.   Thrift and Profit Sharing Plan

In 1986, Cues established a contributory trustee administered thrift and profit
sharing plan covering all of its employees who have completed one year of
eligible service. The plan's enrollment dates are January 1, April 1, July 1,
and October 1 of each year. Participants can make deferred cash contributions,
not to exceed 16% of their annual compensation, which are supplemented by
employer matching contributions in the amount of 50% of the participant's
contribution up to a maximum employer contribution of 3%. Participants partially
vest in the employer's contributions after the second year of service and are
fully vested after the sixth year of service. Thrift and profit sharing expense
for 2002, 2001 and 2000 was $123,000, $121,000 and $89,000, respectively.

                                      F-25
<PAGE>

During 1995, the Restaurants established a non-contributory trustee administered
thrift and profit sharing plan covering all of its employees who are over the
age of 21 and have completed one year of eligible service and work at least
1,000 hours per year.

Note 12.   Stockholders' Equity

Common Stock. Effective June 28, 1999, the Company completed a 1-for-100 reverse
stock split voted on and approved by the Company's stockholders during its
annual meeting on May 27, 1999. As a result, those stockholders who held less
than 100 shares immediately prior to the reverse split were effectively
cashed-out at the average trading price of the Company's Common Stock during the
immediately preceding 20 trading days; all other stockholders were then restored
to their prior positions as a result of a 100-for-1 "forward" stock split that
became effective immediately after the reverse split. The reverse stock split
resulted in the retirement of approximately 157,000 shares at $10.83 per share,
or a total expense of approximately $1,704,000. As of December 31, 2002 and
2001, approximately $560,000, which is reflected in accrued expenses on the
accompanying balance sheet, remained to be paid to stockholders in connection
with the reverse stock split.

Common Stock Options. At December 31, 2002 and 2001, the Company had a total of
1,007,460 shares of common stock reserved for issuance under its stock option
plans. Options under the Company's plans are granted at exercise prices
determined by the Board of Directors, at generally not less than the fair market
value of the Common Stock on the date of grant. Options generally vest over four
years and become exercisable six months after the date of the grant (assuming
they are vested) and expire ten years after the date of the grant.

During 2002, stockholders approved the ELXSI Corporation 2002 Incentive Stock
Option Plan (the "2002 Plan"), under which up to 100,000 shares may be issued.
No options have been granted under the 2002 Plan as of December 31, 2002.

During 2001, stockholders approved the ELXSI Corporation 2001 Incentive Stock
Option Plan (the "2001 Plan"), under which up to 35,000 shares may be issued. No
options have been granted under the 2001 Plan as of December 31, 2002.

During 2000, stockholders approved the ELXSI Corporation 2000 Incentive Stock
Option Plan (the "2000 Plan"), under which up to 35,000 shares may be issued.
Under the 2000 Plan currently outstanding options to purchase an aggregate
26,000 shares of Common Stock have been granted at an exercise price of $11.063
per share. A portion of these options became exercisable on December 30, 2000.

                                                                      Weighted-
                                                                      Average
                                                       Number         Exercise
                                                     of Shares         Price
                                                    ------------   -------------
    Granted during 2000                                   26,000   $     11.063
    Exercised during 2000                                (21,798)          6.40
    Canceled during 2000                                  (1,500)        10.188
                                                    ------------
    Outstanding at December 31, 2000                     931,482          7.060

    Exercisable at December 31, 2000                     827,082          6.791
    Available for grant at December 31, 2000              43,465

                                      F-26
<PAGE>


                                                                      Weighted-
                                                                      Average
                                                       Number         Exercise
                                                     of Shares         Price
                                                    ------------   -------------
    Granted during 2001                                       --   $         --
    Exercised during 2001                                 (2,487)          8.91
    Canceled during 2001                                  (2,213)          9.29
                                                    ------------
    Outstanding at December 31, 2001                     926,782           7.07


    Exercisable at December 31, 2001                     866,770
    Available for grant at December 31, 2001              80,678

    Granted during 2002                                   17,500   $       3.61
    Exercised during 2002                                     --             --
    Canceled during 2002                                 (90,000)          5.00
                                                    ------------
    Outstanding at December 31, 2002                     854,282           7.20

    Exercisable at December 31, 2002                     824,059
    Available for grant at December 31, 2002             153,178

The following table summarizes the stock options outstanding and exercisable at
December 31, 2002:

                             Outstanding                    Exercisable
                  ---------------------------------  -----------------------
                              Weighted-
                               Average    Weighted-                 Weighted-
                              Remaining    Average                  Average
   Range of       Number of  Contractual   Exercise   Number of     Exercise
Exercise Prices    Options      Life        Price     Options        Price
---------------   --------    ---------   ---------  ----------     --------

     $3.61          17,500          9.8   $   3.63       12,500     $   3.63
$5.00 - $6.50      512,400          2.6       5.86      512,400         5.86
$8.125 - $9.00     138,388          5.2       8.58      138,388         8.58
$9.75-$10.188      159,994          6.3      10.02      141,523        10.04
   $11.063          26,000          7.5      11.06       19,248        11.06

Had compensation costs for the stock option plans been determined based on the
fair value at the date of grant for awards, the Company's net income and
earnings per share would approximate the following pro forma amounts:
<TABLE>
<CAPTION>

                                      2002              2001              2000
                                  -------------    -------------    --------------
<S>                               <C>              <C>              <C>
Net (loss) income - as reported   $  (3,568,000)   $  (6,490,000)   $   13,069,000
Net (loss) income - pro forma        (3,590,000)      (6,578,000)       12,934,000

Basic EPS - as reported           $        (.89)   $       (1.61)   $         3.08
Basic EPS - pro forma                      (.89)           (1.63)             3.05

Diluted EPS - as reported         $        (.89)   $       (1.61)   $         2.75
Diluted EPS - pro forma                    (.89)           (1.63)             2.72

</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model. The fair value of options granted during
2000 were calculated utilizing the following weighted-average assumptions: no
dividend yield; expected volatility of 11.8% and

                                      F-27
<PAGE>

11.7%, respectively; risk free interest rate of 5.91% and 5.89%, respectively;
and expected lives of 7 years. The weighted-average fair value of options
granted during fiscal 2002 and 2000 are as follows:
<TABLE>
<CAPTION>

                                                             Weighted-     Weighted-
                                                              Average       Average
                                                  Number      Exercise       Fair
                                                of Options    Prices        Values
                                                ----------------------------------
<S>                                                <C>       <C>          <C>
Fiscal 2002:
Exercise price = market price at date of grant     17,500    $   3.61     $   1.26

Fiscal 2000:
Exercise price = market price at date of grant     26,000    $  11.06     $   3.87

</TABLE>

Warrants. At December 31, 2002 and 2001, the Company had a total of 269,262
shares of Common Stock reserved for issuance pursuant to warrants as follows:

In September 1989, the Company issued warrants to acquire an aggregate of
1,204,000 shares of the Company's Common Stock. On December 8, 1994, the Company
repurchased 761,638 of these warrants for $1,635,000, or $2.125 per warrant. On
December 30, 1996, the Company repurchased all of these warrants that were
exercisable for convertible preferred stock (convertible into 241,862 shares of
Common Stock) from BACC for $478,000, or $1.975 per underlying common share. Of
the remaining, 200,500 Series A warrants to purchase shares of the Company's
Common Stock, warrants to acquire 50,000 share are held by Eliot Kirkland L.L.C.
("Eliot"), of which Alexander M. Milley, is the sole manager and significant
equity holder, and warrants to acquire 150,500 shares of the Company's Common
Stock are held by the Alexander M. Milley Irrevocable Trust, a trust for the
benefit of members of Mr. Milley's immediate family of which Mr. Milley's wife
is a trustee. These 200,500 Series A warrants, which were outstanding and
unexercised at December 31, 2002 originally had an exercise price of $3.125 and
expiration date of September 25, 1996. During 1996, these warrants' expiration
date was extended until September 30, 1998 and the exercise price was increased
to $3.75 per share. During 1998 their expiration date was further extended until
September 30, 2000 and their exercise price was further increased to $4.50 per
share. During 2000 their expiration date was further extended until September
30, 2002 and their exercise price was further increased to $5.40 per share.
During 2002 their expiration date was further extended until September 30, 2004
and their exercise price was further increased to $6.48 per share. The estimated
fair value of the modified Series A warrants at September 30, 2000 and September
30, 1998 was $6.73 and $5.39 per share, respectively, using the Black-Scholes
option pricing model and assumptions similar to those used for valuing the
Company's stock options as described above.

In connection with its 1992 acquisition of Cues, the Company issued Series C
warrants to purchase 68,762 shares of the Company's Common Stock. These
warrants, currently held by Eliot, remained unexercised at December 31, 2002 and
originally had an exercise price of $4.36 and expiration date of January 31,
1997. During 1997, the warrants' expiration date was extended until January 31,
1999 and the exercise price was increased to $5.23 per share. During 1998, their
expiration date was further extended until January 31, 2001 and their exercise
price was further increased to $6.278 per share. During 2000, their expiration
date was further extended until January 31, 2003 and their exercise price was
further increased to $7.534 per share. During 2002, their expiration date was
further extended until January 30, 2005 and their exercise price was further
increased to $9.041 per share. The estimated fair value of the modified Series C
warrants at January 31, 2001 and December 17, 1998 was $4.85 and $4.55 per

                                      F-28
<PAGE>

share, respectively, using the Black-Scholes option pricing model and
assumptions similar to those used for valuing the Company's stock options as
described above.

Phantom Stock Option Plan. The ELXSI phantom stock option plan was implemented
in 1992 as a long-term incentive plan for four key executives of the Restaurants
(the "Group"). At the inception of the plan, the Group paid an initial
investment totaling approximately $116,000. In October 1997, the Company
returned the Group's initial investment and simultaneously received notes for
the same amount from each Group member. These notes bore interest at 9% per
annum and were due June 30, 2001. Each Group member was entitled under this plan
to receive, upon exercise, a cash payment equal to his individual vested
percentage of the appraised value of the Restaurants, as defined, less the
balance of his exercise price payable upon exercise. Full vesting occurred on
July 1, 1996, at which time the Group, as a whole, was entitled to 13.9% of such
appraised value. Each Group member's phantom stock options could be exercised at
the earliest of July 1, 2001, termination of employment, death or the sale of
the Restaurants.

The assumptions used in calculating the annual expense attributable to this plan
for 2000 and 1999 included the use of a multiple of the Restaurants' operating
income, less certain Bickford's-related liabilities, a non-liquidity discount,
estimated taxes related to a gain on divestiture of the Restaurants, sale
transaction costs and the exercise price.

On July 2, 2001, the Group exercised in full their rights to receive payment
under this plan. In November 2001, management and the Group reached an agreement
that provides for the Group to receive $3,638,000 in the aggregate in principal
payments. A deferred payment schedule was negotiated to provide for
approximately three-quarters of the balance due to be paid by October 2002. The
remaining principal balance is to be paid on October 1, 2003. As a result of a
decrease in earnings and lack of borrowing availability, the Company did not
make any principal payments during 2002 under the deferred payment schedule.
Unpaid principal bears interest at 7% per annum.

During 2002, 2001 and 2000, the Company recorded no compensation expense related
to the phantom stock option plan. As of December 31, 2002, $3,638,000 was
recorded in "Other non-current liabilities". At December 31, 2001, $2,728,000
and $910,000 was recorded in "Other current liabilities" and "Other non-current
liabilities", respectively. At December 31, 2000, $3,700,000 was recorded in
"Other non-current liabilities". During 2002 and 2001, the Company recorded
interest expense related to the plan of $258,000 and $66,000, respectively.

In March 2003, the Company reached an agreement-in-principal with one of the
phantom stock option holders, who had sued the Company for non-payment. This
holder is owed approximately $785,000 of which $589,000 was due on or before
October 1, 2002. The agreement provides for the option holder to receive a
second position lien on the Kingston, MA restaurant and restructures the
principal payments to be due in 2007. In addition, in March 2003, the Company
reached an agreement-in principal with the other three phantom stock option
holders under which they will receive monthly principal payments over four years
totaling approximately $2,853,000 with such payment beginning with the earlier
of February 2004 or upon refinancing BofA debt with a new lender. These payments
will be subject to the Board's discretion and will be based upon the ability of
the Company to pay.

                                      F-29
<PAGE>

Stock Purchase Rights. On June 4, 1997, the Board of Directors declared a
dividend distribution of one Common Stock purchase right (a "Right") for each
share of the Company's Common Stock outstanding on June 16, 1997 issued under a
rights agreement (the "Rights Agreement") with Continental Stock Transfer &
Trust Company. Each Right would entitle stockholders to purchase the Company's
Common Stock at an exercise price of $25.00 per common share, subject to
adjustment. The Rights are not currently exercisable, but would become
exercisable if a person or group, together with his affiliates and associates,
becomes an "Acquiring Person" (as defined in the Rights Agreement) by becoming a
beneficial holder of 15% or more of the outstanding shares of Common Stock (35%
or more for The Milley Group Members (as defined in the Rights Agreement). Upon
such an event (or certain other events described in the Rights Agreement), each
Right will entitle the holder thereof (other than the Acquiring Person and his
affiliates) to receive, upon exercise and payment of the exercise price, shares
of Common Stock having a market value equal to two times that exercise price.

In the event that the Company is acquired in a merger or other business
combination, under various circumstances the holders of the Rights will be
entitled to receive, upon exercise, Common Stock of the Company or the acquiring
company, and/or cash and other property, equal to two times the exercise price
of the Rights.

The Company may redeem the Rights at a price of $0.001 per Right, subject to
certain limitations. The Rights will expire at the close of business on June 15,
2007, unless extended through provisions in the Rights Agreement or early
redemption or exchange by the Company.

In March 1999, in connection with and under the terms of a Standstill Agreement
entered into by the Company with Peter R. Kellogg and certain persons and
entities controlled by or related to him who had purchased Common Stock
("Kellogg Persons"), the Company and Rights Agent entered into an amendment to
the Rights Agreement which provided that under certain circumstances such
Kellogg Persons could acquire in excess of 15% of the outstanding Common Stock
without becoming "Acquiring Persons" under the Rights Agreement. Under the
Standstill Agreement, Mr. Milley was granted irrevocable proxies to vote the
Kellogg Persons' shares and obtained certain rights of first refusal over such
shares.

Reconciliation of (Loss) Earnings Per Share. The following is a reconciliation
of the numerators and denominators of the basic and diluted (loss) earnings per
share computations for the years ended December 31, 2002, 2001 and 2000,
respectively:
<TABLE>
<CAPTION>

                                              2002          2001            2000
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
Basic (loss) earnings per share
   Numerator                              $(3,568,000)   $(6,490,000)   $13,069,000
                                          -----------    -----------    -----------
   Denominator:

      Weighted average Common shares
         outstanding                        4,027,000      4,043,000      4,246,000
                                          -----------    -----------    -----------
      Basic (loss) earnings per share     $      (.89)   $     (1.61)   $      3.08
                                          ===========    ===========    ===========
</TABLE>

                                      F-30
<PAGE>
<TABLE>
<CAPTION>

                                              2002          2001            2000
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
   Numerator                              $(3,568,000)   $(6,490,000)   $13,069,000
                                          -----------    -----------    -----------
   Denominator:

      Weighted average Common shares
         outstanding                        4,027,000      4,043,000      4,246,000
      Assumed conversion of options and
        warrants                                   --             --        512,000
                                          -----------    -----------    -----------
      Total shares                          4,027,000      4,043,000      4,758,000
                                          -----------    -----------    -----------
      Diluted (loss) earnings per share   $      (.89)   $     (1.61)   $      2.75
                                          ===========    ===========    ===========
</TABLE>

Note 13.   Segment Reporting

The Company has two reportable segments, restaurant operations and equipment
manufacturing. The Company is primarily organized into two strategic business
units, which have separate management teams and infrastructures and that offer
different products and services. Each business requires different employee
skills, technology and marketing strategies. The restaurant operations segment
includes 63 Restaurants located in the New England states operating under the
Bickford's brand name. The equipment manufacturing segment produces sewer
inspection equipment for sale to municipalities, contractors, and foreign
governments.

Accounting policies of the segments are the same as those described in Note 2,
"Summary of Significant Accounting Policies" above. The Company evaluates the
performance of each segment based upon profit or loss from operations "before"
income taxes, non-recurring gains and losses and foreign exchange gains and
losses.

Summarized financial information by business segment for the years ended
December 31, 2002, 2001 and 2000 is summarized in the following table. The
"Other" lines include "Corporate" related items; results of insignificant
operations; and, as they relate to profit and losses, income and expense not
allocated to reportable segments:

<TABLE>
<CAPTION>
                                               2002             2001             2000
                                           -------------    -------------    -------------
<S>                                        <C>              <C>              <C>
Revenues From External Customers:
   Restaurants                             $  68,928,000    $  73,159,000    $  76,284,000
   Equipment                                  29,900,000       32,239,000       27,426,000
                                           -------------    -------------    -------------
                                           $  98,828,000    $ 105,398,000    $ 103,710,000
                                           =============    =============    =============
Depreciation and Amortization:
   Restaurants                             $   3,723,000    $   3,920,000    $   3,550,000
   Equipment                                     512,000          659,000          768,000
                                           -------------    -------------    -------------
                                           $   4,235,000    $   4,579,000    $   4,318,000
                                           =============    =============    =============
Segment Operating Profit (Loss):
   Restaurants                             $   2,437,000    $   2,922,000    $   6,257,000
   Equipment                                     880,000          (95,000)       1,049,000
   Other                                        (948,000)      (1,319,000)      (1,052,000)
                                           -------------    -------------    -------------
                                           $   2,369,000    $   1,508,000    $   6,254,000
                                           =============    =============    =============
Interest Income:
   Restaurants                             $          --    $          --    $          --
   Equipment                                      12,000           71,000            9,000
   Other                                          10,000        1,201,000        1,491,000
                                           -------------    -------------    -------------
                                           $      22,000    $   1,272,000    $   1,500,000
                                           =============    =============    =============
</TABLE>

                                      F-31
<PAGE>
<TABLE>
<CAPTION>

                                               2002             2001             2000
                                           -------------    -------------    -------------
<S>                                        <C>              <C>              <C>
Interest Expense:
   Restaurants                             $     139,000    $     177,000    $     158,000
   Equipment                                      79,000          121,000          164,000
   Other                                       1,332,000        1,546,000          981,000
                                           -------------    -------------    -------------
                                           $   1,550,000    $   1,844,000    $   1,303,000
                                           =============    =============    =============
Segment Assets:
   Restaurants                             $  37,915,000    $  34,421,000    $  33,668,000
   Equipment                                  22,841,000       27,715,000       24,751,000
   Other                                      17,943,000       26,318,000       44,103,000
                                           -------------    -------------    -------------
                                           $  78,699,000    $  88,454,000    $ 102,522,000
                                           =============    =============    =============
Capital Expenditures for Segment Assets:
   Restaurants                             $   3,447,000    $   3,860,000    $   6,182,000
   Equipment                                     187,000          640,000          279,000
                                           -------------    -------------    -------------
                                           $   3,634,000    $   4,500,000    $   6,461,000
                                           =============    =============    =============
</TABLE>

Capital expenditures exclude amounts expended in connection with acquisitions
and divestitures.

There were no inter-segment sales or transfers during 2002, 2001, and 2000.
Operating income by business segment excludes interest income, interest expense,
and other income and expenses. "Other assets" consists principally of the
accounts and notes receivable from related parties, interest receivable, and the
deferred tax asset.

Foreign assets, revenues, and export sales each represent less than 10% of the
Company's totals. No material amounts of the Company's sales are dependent upon
a single customer.

Note 14.  Quarterly Financial Data - (Unaudited)

The following summarizes quarterly financial data for 2002 and 2001 (in
thousands, except per share data):
<TABLE>
<CAPTION>

                                                                       2002
                                               ----------------------------------------------------
                                                Mar. 31,      June 30,      Sep. 30,       Dec. 31,
                                               ----------    ----------    ----------    ----------
<S>                                            <C>           <C>           <C>           <C>
      Net sales                                $   25,282    $   25,132    $   24,660    $   23,754
Gross profit                                        3,967         4,518         4,598         3,646
Income (loss) before income taxes                    (160)          291           807          (185)
Net income (loss)                              $   (3,182)   $      265    $      816    $   (1,467)
Earnings (loss) per common share:
      Basic                                    $     (.79)   $      .07    $      .20    $     (.37)
      Diluted                                  $     (.79)   $      .07    $      .20    $     (.37)

Reconciliation of earnings (loss) per share:
  Basic earnings (loss) per share:

   Numerator                                   $   (3,182)   $      265    $      816    $   (1,467)
                                               ==========    ==========    ==========    ==========
   Denominator:

      Common shares outstanding                     4,028         4,028         4,028         4,024
                                               ==========    ==========    ==========    ==========
   Basic earnings per share reported           $     (.79)   $      .07    $      .20    $     (.37)
                                               ==========    ==========    ==========    ==========
</TABLE>

                                      F-32
<PAGE>
<TABLE>
<CAPTION>

                                                                       2002
                                               ----------------------------------------------------
                                                Mar. 31,      June 30,      Sep. 30,       Dec. 31,
                                               ----------    ----------    ----------    ----------
<S>                                            <C>           <C>           <C>           <C>
 Diluted earnings (loss) per share:

   Numerator                                   $   (3,182)   $      265    $      816    $   (1,467)
                                               ==========    ==========    ==========    ==========
   Denominator:

     Common shares outstanding                      4,028         4,028         4,028         4,024
     Assumed conversion of options
         and warrants                                  --            --            --            --
                                               ----------    ----------    ----------    ----------
     Common shares reported                         4,028         4,028         4,028         4,024
                                               ==========    ==========    ==========    ==========
   Diluted earnings (loss) per share
    reported                                   $     (.79)   $      .07    $      .20    $     (.37)
                                               ==========    ==========    ==========    ==========
</TABLE>

<TABLE>
<CAPTION>

                                                                       2001
                                               ----------------------------------------------------
                                                Mar. 31,      June 30,      Sep. 30,       Dec. 31,
                                               ----------    ----------    ----------    ----------
<S>                                            <C>           <C>           <C>           <C>
Net sales                                      $   24,101    $   26,969    $   28,031    $   26,297
Gross profit                                        3,515         4,714         5,199         4,533
Income (loss) before income taxes                    (418)          508         1,058          (131)
Net income (loss)                              $     (260)   $      315    $   (1,652)   $   (4,893)
Earnings (loss) per common share:
      Basic                                    $     (.06)   $      .07    $     (.40)   $    (1.22)
      Diluted                                  $     (.06)   $      .07    $     (.40)   $    (1.22)

Reconciliation of earnings (loss) per share:
  Basic earnings (loss) per share:

   Numerator                                   $     (260)   $      315    $   (1,652)   $   (4,893)
                                               ==========    ==========    ==========    ==========
   Denominator:

      Common shares outstanding                     4,089         4,028         4,028         4,028
                                               ==========    ==========    ==========    ==========
   Basic earnings per share reported           $     (.06)   $      .07    $     (.40)   $    (1.22)
                                               ==========    ==========    ==========    ==========
Diluted earnings (loss) per share:

   Numerator                                   $     (260)   $      315    $   (1,652)   $   (4,893)
                                               ==========    ==========    ==========    ==========
   Denominator:

     Common shares outstanding                      4,089         4,028         4,028         4,028
     Assumed conversion of options
         and warrants                                  --            --            --            --
                                               ----------    ----------    ----------    ----------
      Common shares reported                        4,089         4,028         4,028         4,028
                                               ==========    ==========    ==========    ==========
   Diluted earnings (loss) per share
    reported                                   $     (.06)   $      .07    $     (.40)   $    (1.22)
                                               ==========    ==========    ==========    ==========

</TABLE>

During the fourth quarter of 2001, the Company recorded an income tax charge of
approximately $3,500,000 to adjust the tax gain on the transfer of assets and
liabilities from ELXSI to BHC (see Notes 1 and 6 above) and to provide an
additional valuation allowance for net operating losses which the Company
estimates will not be utilized prior to their expiration.

In addition, during the fourth quarter of 2001, the Company decided to close its
operation in Moscow, Russia and recorded charges of $870,000 to adjust the
carrying value of the inventory to estimated realizable value and to accrue
other closure costs (see Note 5 above).

                                      F-33
<PAGE>

              Report of Independent Certified Public Accountants on
                          Financial Statement Schedules

To the Board of Directors and Stockholders
of ELXSI Corporation


Our audit of the consolidated financial statements referred to in our report
dated March 6, 2003 (except as to Notes 8 and 12, which are as of March 31,
2003) appearing under Item 15(a)(1) in this Annual Report on Form 10-K, also
included an audit of the financial statement schedules listed in Item 15(a)(2)
of this Form 10-K. In our opinion, these financial statement schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

/s/ Tedder, James, Worden & Associates, P.A.
(except as to Notes 8 and 12, which are as of March 31, 2003)
Orlando, Florida
March  6, 2003

                                      S-1
<PAGE>

              Report of Independent Certified Public Accountants on
                          Financial Statement Schedules

To the Board of Directors and Stockholders
of ELXSI Corporation


Our audits of the consolidated financial statements referred to in our report
dated April 23, 2002 appearing under Item 15(a)(1) in this Annual Report on Form
10-K, also included an audit of the financial statement schedules listed in Item
15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.


/s/ PricewaterhouseCoopers LLP
Tampa, Florida
April 23, 2002


                                       S-2
<PAGE>

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                       ELXSI CORPORATION AND SUBSIDIARIES
                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                                           Additions/(Deductions)
                                                                         ------------------------
                                                                                       Charged to
                                                         Balance at         Charged       Other                           Balance
                                                         Beginning         Costs and    Accounts-        Deductions-      at End
                                                         of Period         Expenses     describe          describe       of Period
                                                        -----------      -----------    ----------      -----------     -----------

<S>                                                     <C>              <C>            <C>             <C>             <C>
Year ended December 31, 2002
  Account deducted from assets:

    Reserve for doubtful accounts
      receivable                                        $       193      $       277    $       --      $        96(A)  $       374
                                                        ===========      ===========    ==========      ===========     ===========
    Inventory reserve                                   $     1,886      $       525    $       --      $       518(B)  $     1,893
                                                        ===========      ===========    ==========      ===========     ===========
    Deferred tax asset valuation allowance              $     7,966      $        --    $       --      $       332(C)  $     8,298
                                                        ===========      ===========    ==========      ===========     ===========

Year ended December 31, 2001
  Account deducted from assets:

    Reserve for doubtful accounts
      receivable                                        $       170      $        30    $       --      $         7(A)  $       193
                                                        ===========      ===========    ==========      ===========     ===========
Inventory reserve                                       $     1,190      $       839    $       --      $       143(B)  $     1,886
                                                        ===========      ===========    ==========      ===========     ===========
    Deferred tax asset valuation allowance              $    11,585      $        --    $       --      $     3,619(C)  $     7,966
                                                        ===========      ===========    ==========      ===========     ===========

Year ended December 31, 2000
  Account deducted from assets:

    Reserve for doubtful accounts
      receivable                                        $       214      $       28     $       --      $        72(A)  $       170
                                                        ===========      ===========    ==========      ===========     ===========
Inventory reserve                                       $       581      $       475    $      134(D)   $        --     $     1,190
                                                        ===========      ===========    ==========      ===========     ===========
Deferred tax asset valuation allowance                  $    30,451      $        --    $       --      $    18,866(C)  $    11,585
                                                        ===========      ===========    ==========      ===========     ===========
</TABLE>


(A)  Uncollectible accounts written off during 2002, 2001 and 2000.
(B)  Obsolete inventory written off during 2002, 2001 and 2000.
(C)  Change in estimate related to future net operating loss and tax credit
     usage and various changes in timing differences associated with tax to book
     benefits.
(D)  Adjustment for system over-allocation of burden on inventory.



                                      S-3