<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 30, 2001

                                File No. 0-14968

                                 EATERIES, INC.
             (Exact name of registrant as specified in its charter)


<Table>
<S>                                                <C>
                   Oklahoma                                   73-1230348
(State or other jurisdiction of incorporation or   (I.R.S. Employer Identification No.)
                organization)

          1220 South Santa Fe Avenue
              Edmond, Oklahoma                                   73003
   (Address of principal executive offices)                    (Zip code)
</Table>

                                 (405) 705-5000
              (Registrant's telephone number, including area code)

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

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

                    Common Stock, par value, $.002 per share

         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, 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
amendments to this Form 10-K. ( )

         The aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 25, 2002, was $4,939,870. The
registrant has assumed that its directors and officers are the only affiliates,
for purposes of this calculation. As of March 25, 2002, the registrant had
3,000,317 shares of common stock outstanding.

<PAGE>

                                 EATERIES, INC.
                                    FORM 10-K
                   For the Fiscal Year Ended December 30, 2001

                                TABLE OF CONTENTS

<Table>
<Caption>
PART I                                                                     Page
                                                                           ----

<S>        <C>                                                             <C>
Item 1.     Business.......................................................   1

Item 2.     Properties.....................................................   9

Item 3.     Legal Proceedings..............................................   9

Item 4.     Submission of Matters to a Vote of Security Holders............   9

PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder
            Matters........................................................  10

Item 6.     Selected Financial Data........................................  11

Item 7.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations......................................  12

Item 8.     Financial Statements and Supplementary Data....................  22

Item 9.     Changes in and Disagreements With Accountants on Accounting
            and Financial Disclosure.......................................  22

PART III

Item 10.    Directors and Executive Officers of the Registrant.............  22

Item 11.    Executive Compensation.........................................  22

Item 12.    Security Ownership of Certain Beneficial Owners and Management.  22

Item 13.    Certain Relationships and Related Transactions.................  22

PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form
            8-K............................................................  23

INDEX TO EXHIBITS..........................................................  23

SIGNATURES ................................................................  25

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................................  26
</Table>



<PAGE>


ITEM 1. BUSINESS

IN GENERAL

         Eateries, Inc. (the "Company") and its subsidiaries own, operate and
franchise restaurants under the names: Garfield's Restaurant & Pub
("Garfield's"), Garcia's Mexican Restaurants ("Garcia's") and Pepperoni Grill.
As of December 30, 2001, the Company owned 67 (48 Garfield's, 17 Garcia's and 2
Pepperoni Grills) and franchised or licensed 7 (6 Garfield's and 1 Garcia's)
restaurants in 25 states.

         The Company opened its first restaurant, a Garfield's, in 1984 in
Oklahoma City, Oklahoma. In 1986, the Company completed an initial public
offering of its common stock. Prior to 1997, Garfield's was the Company's
primary restaurant concept. Garfield's is a family-oriented concept, providing
an upscale alternative to traditional fast food. Garfield's are designed to
appeal to a divergent customer base that grew up on fast food, but now prefers a
more sophisticated menu, the availability of alcoholic beverages, a comfortable
ambiance, speed, value and convenience. The concept features a varied selection
of moderately priced, high quality food and beverage items with table service
dining.

         In January 1995, the Company acquired substantially all the assets of
the "Pepperoni Grill" restaurant located in Oklahoma City, Oklahoma, along with
all rights to the use of the trademarks associated with the concept. Pepperoni
Grill features a variety of Northern Italian entrees with special emphasis on
brick-oven baked pizza.

         In November 1997, the Company, through its wholly owned subsidiary,
Fiesta Restaurants, Inc., acquired 17 Mexican restaurants under the names:
Garcia's (10), Casa Lupita (5) and Carlos Murphy's (2), along with the
trademarks associated with these concepts. In February 1998, the Company sold
three of the Casa Lupita locations to Chevy's, Inc. ("Chevy's"). In connection
with this transaction, the Company entered into an agreement to sell another
Casa Lupita location to Chevy's. This second transaction closed in May 1998. The
decision to sell these restaurants was the result of a plan to consolidate
operations and focus on the expansion of Garcia's. During 1998, the Company
closed its one remaining Casa Lupita and converted one of its Carlos Murphy's to
a Garcia's. The other Carlos Murphy's was converted to a Garcia's in 1999.
Currently, the Company has no locations open utilizing the names "Casa Lupita"
or "Carlos Murphy's".

         In 1999, the Company acquired three formerly franchised Garfield's in
Oklahoma. In 1999 the Company constructed and opened four Garfield's, one
Garcia's and acquired two Bellini's Ristorante and Grill and one Tommy's
Italian-American Restaurant. In 2000 the Company constructed and opened one
Garfield's and three Garcia's, converted one Carlos Murphy's to a Garcia's and
sold the two Bellini's and one Tommy's it acquired in 1999. Additionally, the
Company opened two Garfield's and two Garcia's, all in major regional malls in
2001. The Company's future expansion of its existing concepts will be primarily
focused on the construction and franchising of Garfield's. The Company may also
pursue other acquisitions to further enhance shareholder value.

         The Company's principal offices are located at 1220 South Santa Fe
Avenue, Edmond, Oklahoma 73003. Its telephone number is (405) 705-5000 and
website is www.eats-inc.com.

GARFIELD'S RESTAURANT & Pub

Menu

         Each Garfield's restaurant offers a diverse menu of freshly prepared
traditional and innovative entrees, including steaks, seafood, chicken,
hamburgers, Mexican, Italian, and sandwiches along with a variety of appetizers,
salads and desserts. The Company revises menu offerings semi-annually to improve
sales. The Company's senior management actively participates in the search for
new menu items. Garfield's also offers a separate lower-priced children's menu.

RESTAURANT LAYOUT

         Historically the majority of Garfield's restaurants have been
constructed in regional malls in accordance with uniform design specifications
and are generally similar in appearance and interior decor. Over the last two
years the Company has begun to develop freestanding locations as well. Both the
freestanding and mall restaurants are furnished and styled in a colorful motif,
highlighting the travels of the Company's namesake, "Casey Garfield", including
exhibits, photographs, souvenirs and other travel-related furnishings. Tables
are covered with paper and


                                       1
<PAGE>

customers are encouraged to doodle with crayons provided at each table. During
2000 the Company and a Franchisee each opened one new freestanding Garfield's.
There were no freestanding units opened in 2001 or 1999.

         The size and shape of Garfield's restaurants vary depending upon the
location but typically average 4,500 to 5,500 square feet, and seat
approximately 200 guests.

HOURS OF OPERATION

         Depending on location, most restaurants are open from 11:00 a.m. until
11:00 p.m. on weekdays and Sunday, and later on Friday and Saturday.

UNIT ECONOMICS

         Historically, the cost of opening a new Garfield's restaurant has
varied widely due to the different restaurant configuration and sizes, regional
construction cost levels, and certain other factors. The Company currently
leases restaurant premises in existing freestanding facilities as well as in
major regional malls and builds-out the leased space to meet the Garfield's
concept specifications of style and decor. Gross construction costs for a
typical Garfield's opened in 2001 and 2000 were approximately $1,005,000 and
$920,000, respectively. However, landlord's typically provide substantial tenant
construction allowances (approximately $459,000 in 2001 and $450,000 in 2000).
After tenant allowances the Company's net investment was approximately $546,000
and $470,000 per unit for 2001 and 2000, respectively.

SITE SELECTION

         All Garfield's restaurants are located in regional shopping malls and
freestanding buildings, primarily in the eastern half of the United States. The
Company considers the location of a restaurant to be critical to its long-term
success and has devoted significant effort to the investigation and evaluation
of potential mall sites. The mall site selection process focuses on historical
sales per foot by mall tenants and proximity to entertainment centers within and
near the mall as well as accessibility to major traffic arteries. The Company
also reviews potential competition in the area and utilizes site selection
models to evaluate each potential location based upon a multitude of different
criteria. Senior management inspects and approves each restaurant site. It takes
approximately 18 weeks to complete construction and open a Garfield's.

MARKET CONCENTRATION

         Although Garfield's are spread primarily throughout the eastern half of
the United States there are areas of concentration. These areas allow the
Company to use advertising dollars in an effective way. In the future as
franchises build out market areas this will assist the marketing and advertising
effectiveness by further targeting areas of concentration.


                                       2
<PAGE>

RESTAURANT LOCATIONS

         The following table sets forth the locations of the existing Garfield's
as of December 30, 2001.

<Table>
<Caption>
                     COMPANY-OWNED RESTAURANTS
                                                   NO. OF
         STATE                                      UNITS
         -----                                     -------
<S>                                                <C>
         Alabama...............................       3
         Arkansas..............................       1
         Florida...............................       3
         Georgia...............................       1
         Illinois..............................       4
         Indiana...............................       4
         Maryland..............................       1
         Michigan..............................       2
         Mississippi...........................       4
         Missouri..............................       4
         New York..............................       2
         North Carolina........................       2
         Ohio..................................       3
         Oklahoma..............................       5
         Pennsylvania..........................       2
         South Carolina........................       1
         Tennessee.............................       1
         West Virginia.........................       3
         Wisconsin.............................       2
                                                   ----
              Total............................      48
                                                   ====
</Table>

                     FRANCHISED RESTAURANTS

<Table>
<Caption>
                                                   NO. OF
         STATE                                      UNITS
                                                   ------
<S>                                                <C>
         Indiana...............................       3
         Iowa..................................       2
         Oklahoma..............................       1
                                                    ---
     Total.....................................       6
                                                    ===
</Table>

GARCIA'S MEXICAN RESTAURANTS

MENU

         Each Garcia's restaurant offers a traditional menu of high quality
Mexican food. Alcoholic beverages are also offered in each location. Menus are
generally standardized, although there are slight variations to accommodate
regional taste preferences.

RESTAURANT LAYOUT

         Garcia's restaurants have a distinctive southwestern design and decor.
The existing freestanding restaurants generally measure 5,000 to 10,000 square
feet and seat approximately 200 to 250 guests in the main dining area with an
additional 75 to 125 seats in the bar area. However in 2001 and 2000, the
Company built four new Garcia's in malls and has one other under construction.
These mall-based locations are between 4,800 and 6,200 square feet.


                                       3
<PAGE>

RESTAURANT LOCATIONS

         The following table sets forth the locations of the existing Garcia's
as of December 30, 2001.

<Table>
<Caption>
                     COMPANY-OWNED RESTAURANTS
                                                  NO. OF
         STATE                                     UNITS
         -----                                    -------
<S>                                               <C>
         Arizona(1)............................       9
         California............................       1
         Colorado..............................       1
         Idaho.................................       1
         Missouri..............................       1
         Oklahoma..............................       3
         Utah..................................       1
                                                   ----
              Total............................      17
                                                   ====
</Table>

         (1) Includes Bank One Ball Park Concession

                      FRANCHISED RESTAURANTS

<Table>
<Caption>
                                                  NO. OF
         STATE                                     UNITS
                                                  ------
<S>                                               <C>
         Iowa...................................     1
                                                   ---
              Total.............................     1
                                                   ===
</Table>

PEPPERONI GRILL

MENU

         Each Pepperoni Grill offers a menu that features a variety of Northern
Italian entrees with special emphasis on brick-oven baked pizza. The warm
European bistro atmosphere is accented with an exhibition kitchen, light foods
and booths covered in tapestry. All menu items are prepared on the premises with
the entire entree presentation being performed within view of the guest, making
the kitchen part of the restaurant's atmosphere. An in-store bakery makes all
the breads and daily desserts. Pepperoni Grill's signature bakery item is Tuscan
Parmesan black pepper bread that is served with all entrees along with
traditional olive oil and balsamic vinegar. Over 60 different wine selections
are offered along with 25 wines available by the glass.

RESTAURANT LOCATIONS

         Both Pepperoni Grill locations are in Oklahoma.

RESTAURANT OPERATIONS

MANAGEMENT AND EMPLOYEES

         Responsibility for the Company's restaurant operations is organized
geographically with restaurant general managers reporting to area directors of
operations who, in turn, report to the respective Regional Vice-Presidents of
Operations for Garfield's, Garcia's and Pepperoni Grill. A typical restaurant
has a general manager, two to four assistant managers and average 53 employees,
approximately 72% of who are part-time.

         Regional VP's of Operations, Area Directors of Operations as well as
restaurant general managers and associate managers are eligible for cash and
stock bonuses, travel incentives, professional training and attendance at
industry conferences. Receipt of these incentives is based on reaching
restaurant performance objectives. The Company's hourly employees are eligible
for performance-based awards for superior service to the Company and its guests.
Employee awards can include travel incentives, gift certificates, plaques and
Company memorabilia. Most employees other than restaurant management and
corporate management are compensated on an hourly basis.

QUALITY CONTROL

         The Company has uniform operating standards and specifications relating
to the quality, preparation and selection of menu items, maintenance and
cleanliness of the premises, and employee conduct. Managers are responsible for
assuring compliance with Company operating procedures. Executive and supervisory
personnel routinely visit each restaurant to evaluate adherence to quality
standards and employee performance.


                                       4
<PAGE>

TRAINING

         The Company has instituted "The Best in Town" program which places a
great deal of emphasis on the proper training of its hourly employees and
general and associate managers. To insure our restaurants are "The Best in
Town", all training is tailored to ensure our guests receive the best experience
we can offer in our restaurants. This commitment to quality food and service
demands both traditional and creative training techniques. The Company employs a
full time corporate training staff to oversee all areas of employee education.
The outline for the training programs is based on the individual expertise of
the trainee and typically lasts about two weeks for hourly employees and up to
eight weeks for managers. Managers are certified in a number of skills in
restaurant management, including technical proficiency and job functions,
management techniques and profit and loss responsibilities. The Company sponsors
further management training and certification in food safety using the ServeSafe
program as developed by the National Restaurant Association Educational
Foundation. Skills are taught primarily in the restaurant along with classroom
training and assigned projects. Management training is performed in several
geographically dispersed restaurants and includes further training at our
corporate offices. The Company provides standard manuals regarding training and
operations, products and equipment and local marketing programs.

EMPLOYEE CONDUCT

         The Company maintains a no tolerance policy on harassment or
discrimination of any kind. The managers and employees of the Company are
required to acknowledge and obey these policies at all times. The Company
maintains the right to terminate any employee for violation of its harassment or
discrimination policies as well as any conduct that is inappropriate, at any
time.

PURCHASING

         The Company employs a purchasing director to oversee the relations and
negotiations with manufacturers and regional distributors for most food and
beverage products and to ensure uniform quality, competitive costs and adequate
supplies of proprietary products. The Company and its franchisees purchase
substantially all food and beverage products from several national and regional
suppliers. The Company has not experienced any significant delays in receiving
food and beverage inventories or restaurant supplies.

ADVERTISING AND MARKETING

         Marketing at Eateries Inc. is focused on enhancing the guest experience
in all of our concepts. The Company develops marketing plans to improve guest
satisfaction in the areas of food, value and service. We offer a broad range of
products our guests' desire while striving to deliver the food in a fast,
friendly manner. Utilizing multiple mediums such as television, local cable
television, radio, outdoor and print advertising, we are able to deliver our
messages to the guests in the most efficient way. Our restaurant managers are
also encouraged to be involved in the community and to use proven local store
marketing programs to drive their individual business. In markets where the
Company shares a trade area with a franchisee, advertising cooperatives are
utilized to maximize the Company's restaurant's visibility. Franchisees of
Garfield's units are generally required to expend up to 4% of sales on
restaurant related marketing efforts. In addition, all Company and franchise
restaurants contribute 1/2% of their sales to a marketing fund used to produce
advertising, menu development and point-of-sale material to promote increased
sales. The Company engages in a variety of local market promotional activities
such as contributing goods, time and money to charitable, civic and educational
programs, in order to increase public awareness of the Company's restaurants.

RESTAURANT REPORTING

         Financial controls are implemented through the use of computerized
point of sales and management information systems. Sales reports and food,
beverage and labor cost data are prepared and reviewed weekly for operational
control. The Company has implemented new systems to streamline the flow of
sales, payroll and accounts payable information and has continued to enhance
these systems in 2001 and will continue in 2002.


                                       5
<PAGE>

MANAGEMENT INFORMATION SYSTEM

         The Company in a concerted effort to enhance its accounting and
information systems hired Jaroslav Lajos as Director of Management Information
Systems in 1999. Mr. Lajos has completed his class work at Oklahoma State
University related to a PhD. in computer science, and is in the process of
writing his thesis. Currently Mr. Lajos is designing, writing and implementing
several new computer software programs designed to advance the Company with MIS
technology in the future.

EXPANSION STRATEGY

         The Company's primary expansion emphasis is gradually shifting from
constructing new Company-owned restaurants to franchise development.

         The Company has customarily opened Garfield's restaurants in regional
malls principally throughout the eastern half of the United States. This
mall-based expansion strategy for Garfield's reduced the risks associated with
locating restaurants in new markets because of the availability of historical
trends regarding mall sales and customer traffic. Restaurant construction within
a mall typically required a lower investment than construction of a freestanding
restaurant.

         The Company has developed a new prototype freestanding building for
future franchise and Company owned freestanding locations. Management believes
there are sufficient additional freestanding locations for its Garfield's
concept, particularly with the large number of existing closed or failing
competitor's buildings. It is Management's intention to continue the expansion
of Garfield's through the development and construction of higher volumed
freestanding locations. The Company maintains relationships with several leading
real estate developers who provide the Company with an ongoing supply of
potential locations for evaluation.

         The Company customarily opens Garcia's in freestanding and regional
mall sites primarily in its core operating area in and around Phoenix, Arizona
and Oklahoma City, Oklahoma. This strategy capitalizes on the strong reputation
of the Garcia's concept in the Phoenix area and allowed the Company to expand
closer to its Oklahoma base of operation.

         In 2001 Company also opened two new Garfield's in Pennsylvania and
Alabama and two new Garcia's in Oklahoma and Missouri. In 2000, the Company
opened one new Garfield's in Maryland and converted one Oklahoma mall-based
Garfield's to a freestanding location. The Company also opened two mall-based
Garcia's in Oklahoma. Additionally, one franchised location opened in 2000 in
Indiana.

         Because of its commitment to supporting franchise openings, the Company
doesn't expect to develop or open any other company owned restaurants in 2002.
The Company expects approximately 4 franchised Garfield's will be opened in
2002.

FRANCHISE OPERATIONS

GENERAL TERMS

         As of December 30, 2001, seven franchised Garfield's were operating
pursuant to agreements granted by the Company. The typical Garfield's franchise
agreement provides for (i) the payment of an initial franchise fee of $30,000
and a monthly continuing royalty fee of 4.0% of gross sales with a minimum fee
of $3,000 per month; (ii) the payment of 1/2% of gross sales to the Garfield's
Creative Marketing Fund; (iii) quality control and operational standards; (iv)
development obligations for the opening of new restaurants under the franchise;
and (v) the creation and use of advertising. The franchise term is for ten years
with five-year renewals. The grant of a franchise does not ensure that a
restaurant will be opened. Under the Company's typical franchise agreement, the
failure to open restaurants can cause a termination of the franchise. Although
the Company largely relies upon standardized agreements for its franchises, it
will continue to adjust its agreements as circumstances warrant.

         As of December 30, 2001, there was one licensed Garcia's restaurants.
The license agreement provides for the monthly payment of continuing royalties
of 1.5% of gross sales.


                                       6
<PAGE>

FUTURE FRANCHISE DEVELOPMENT

         In 1999, the Company hired Laurence Bader as Vice President of
Franchising. Mr. Bader formerly held a similar position at KFC and more recently
at Applebee's International, Inc. The Company finalized a new franchise program
and updated franchise and development agreements for Garfield's Restaurant and
Pubs. The uniform franchise offering circular (called the UFOC that contains the
franchise and development agreement) was registered nationally in 2000, and
since registration the Company has aggressively pursued franchise development.

         In 2000 the Company began its aggressive marketing of franchises under
the UFOC registered during the year. The Company signed commitments for
forty-six and twenty-five franchise restaurants in 2001 and 2000, respectively.
One new freestanding franchise restaurant was opened in October 2000. The
forty-six franchise restaurants committed to in 2001 included thirty-five in
Indiana, ten in Nevada and one in Florida. The twenty-five franchise restaurants
committed to during 2000 include twelve in Florida, ten in Nebraska and three in
Indiana.

         During 2001, the Company developed plans for two prototypes for
Garfield's freestanding units.

FRANCHISE REVENUE DATA

The following table sets forth fees and royalties earned by the Company from
franchisees for the years indicated:

<Table>
<Caption>
                                                 2001             2000             1999
                                               --------         --------         --------
<S>                                            <C>              <C>              <C>
Initial franchise fees                         $218,000         $161,000         $ 35,000
Continuing royalties                            323,000          274,000          282,000
                                               --------         --------         --------
   Total                                       $541,000         $435,000         $317,000
                                               ========         ========         ========
</Table>

COMPLIANCE WITH FRANCHISE STANDARDS

         All franchisees are required to operate their restaurants in compliance
with the Company's methods, standards and specifications regarding such matters
as menu items, ingredients, materials, supplies, services, fixtures,
furnishings, decor and signs, although the franchisee has the discretion to
determine the menu prices to be charged. However, as a practical matter, all
franchisees utilize the Company's standardized menu. In addition, all
franchisees are required to purchase all food, ingredients, supplies and
materials from suppliers approved by the Company. These standards are addressed
in the UFOC agreement and the Company enforces the standards required of
franchisees. Such enforcement may result in the closure or non-renewal of
certain franchise units, but any such closings or non-renewals are not expected
to have a material adverse effect upon the Company's results of operations or
financial position.

COMPETITION

         The restaurant industry is intensely competitive with respect to price,
service, location, food type and quality. There are many well-established
competitors with substantially greater financial and other resources than the
Company. Some of the Company's competitors have been in existence for
substantially longer periods than the Company and may be better established in
the market area than the Company's restaurants. The restaurant business is often
affected by changes in consumer taste, national, regional or local economic
conditions, demographic trends, traffic patterns and type, number and location
of competing restaurants. In addition, factors such as inflation, increased
food, labor and benefit costs, and the lack of experienced management and hourly
employees may adversely affect the restaurant industry in general and the
Company's restaurants in particular.

SERVICE MARKS

         "GARFIELD'S", "CASEY GARFIELD'S", "PEPPERONI GRILL", "GARCIA'S", "CASA
LUPITA" and "CARLOS MURPHY'S", AND "BELLINI'S RISTORANTE" are Company service
marks registered with the United States Patent and Trademark Office. The Company
pursues any infringement of its marks within the United States and considers its
marks to be crucial to the success of its operations. The "Bellini's Ristorante"
pertains to the use of the name and mark outside of Texas and Oklahoma. The
Company has no locations open at this time using "Casa Lupita", "Carlos
Murphy's" or "Bellini's Ristorante" trade names.


                                    7
<PAGE>

EMPLOYEES

         As of December 30, 2001, the Company employed 3,977 individuals, of
whom 271 were management or administrative personnel (including 222 who were
restaurant managers or trainees) and 3,706 were employed in non-management
restaurant positions. As of this date, the Company employed 260 persons on a
salaried basis and 3,717 persons on an hourly basis. Each restaurant employs an
average of 53 people.

         Most employees, other than restaurant management and corporate
management personnel, are paid on an hourly basis. The Company believes that it
provides working conditions and wages that compare favorably with those of its
competition. As the Company expands, it will need to hire additional management
and its continued success will depend in large part on its ability to attract
and retain good management employees. The Company's employees are not covered by
a collective bargaining agreement.

SEASONALITY

         With 52 of the 67 Company-owned restaurants located in regional malls
as of December 30, 2001, the resulting higher pedestrian traffic during the
Thanksgiving to New Year holiday season has caused the Company to experience a
substantial increase in food and beverage sales and profits in the Company's
fourth and first fiscal quarters. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Impact of Seasonality."

GOVERNMENT REGULATIONS

         The Company's restaurants are subject to licensing and regulation by
alcoholic beverage control, health, sanitation, safety and fire agencies in each
state and/or municipality in which restaurants are located. The Company has not
experienced material difficulties in these areas, however, regulatory
difficulties or failures in obtaining the required licenses or approvals could
delay or prevent the opening of a new restaurant and affect profitability.

         Approximately 13% of the Company's food and beverage revenues in 2001
were attributable to the sale of alcoholic beverages. Alcoholic beverage control
regulations require each of the Company's restaurants to apply to a state
authority and, in certain locations, county or municipal authorities, for a
license or permit to sell alcoholic beverages on the premises and to provide
service for extended hours and on Sundays. Typically, such licenses or permits
must be renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous aspects of the daily
operations of the Company's restaurants, including minimum age of patron and
employees, hours of operation, advertising, wholesale purchasing, inventory
control and handling, storage and dispensing of alcoholic beverages.

         In certain states the Company may be subject to "dram-shop" statutes,
which generally provide a person injured by an intoxicated patron the right to
recover damages from an establishment that wrongfully served alcoholic beverages
to the intoxicated person. The Company carries liquor liability coverage as part
of its existing comprehensive general liability insurance.

         The Company's restaurant operations are also subject to federal and
state laws governing such matters as minimum wages, working conditions, overtime
and tip credits. Significant numbers of the Company's food service and
preparation personnel are paid at rates equal to or based upon the federal
minimum wage and, accordingly, further increases in the minimum wage could
increase the Company's labor costs. The enactment of future legislation
increasing employee benefits, such as mandated health insurance, could also
significantly adversely affect the industry and the Company, as could future
increases in workers' compensation rates.

         The Company is subject to Federal Trade Commission ("FTC") regulation
and state laws that regulate the offer and sale of franchises. The Company may
also become subject to state laws that regulate substantive aspects of the
franchisers/franchisee relationship. The FTC requires the Company to furnish
prospective franchisees a franchise offering circular containing prescribed
information. A number of states in which the Company might consider franchising
also regulate the offer and sale of franchises and require registration of the
franchise offering with state authorities. The Company believes that it is in
material compliance with such laws.

         The Americans with Disabilities Act ("ADA") prohibits discrimination in
employment and public accommodations on the basis of disability. While the
Company believes it is in substantial compliance with the ADA regulations, the
Company could be required to expend funds to modify its restaurants to provide
service to, or make reasonable accommodations for the employment of disabled
persons.


                                    8
<PAGE>

ITEM 2.  PROPERTIES

         All of the Company's facilities are occupied under leases. The majority
of the Company's restaurant leases provide for the payment of base rents plus
real estate taxes, insurance and other expenses and for the payment of a
percentage of the Company's sales in excess of certain sales levels. These
leases typically provide for escalating rentals in future years and have initial
terms expiring as follows:

<Table>
<Caption>
                                                                           NO. OF
             YEAR LEASE TERM EXPIRES                                     FACILITIES
             -----------------------                                     ----------
<S>                                                                      <C>
             2003-2004........................................               7
             2005-2006........................................               17
             2007-2008........................................               13
             2009-2010........................................               15
             2011-2012........................................               11
             2012-2013........................................               2
             2014 and beyond..................................               2
</Table>

ITEM 3. LEGAL PROCEEDINGS

         In 1999 the Company filed suit against one of its food purveyors, J.R.
Simplot Co. in federal court. This suit stems from the receipt of contaminated
food product that caused a food borne illness outbreak at the Company's Garcia's
Mexican restaurants in the Phoenix, Arizona area in July 1998. In 2001, Simplot
admitted that it did in fact ship contaminated product to Company-owned Garcia's
in July 1998. The suit was litigated in August 2001 in order to determine the
amount of damages to be awarded the Company. Initially, the Company was awarded
approximately $6,551,000 in damages plus attorney's fees and costs. The Company
filed a motion to reconsider, based on a technical error in the calculation of
damages and was awarded an additional amount, bringing the total to
approximately $8,405,000 plus attorneys fees and costs. As of December 30, 2001,
approximately $516,000 was included in accounts receivable for reimbursement of
legal fees and was subsequently paid to the Company related to the suit. No
amounts related to actual damages have been included in Consolidated Statements
of Income. As of the date of this report, the case is currently in appeal by
both parties.

         The Company has other lawsuits pending but does not believe the outcome
of the lawsuits, individually or collectively will materially impair the
Company's financial and operational condition.

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

         No matter was submitted to a vote of the Company's security holders
during its fourth fiscal quarter of 2001.


                                        9
<PAGE>


                                     PART II

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

         The Company's common stock has been quoted on the NASDAQ National
Market System under the symbol "EATS" since May 1994. Prior to that date, the
Company's common stock was quoted on the NASDAQ Small-Cap Market. The following
table sets forth, for the quarterly periods indicated, the high and low sales
price for the common stock, as reported by the NASDAQ Markets.

<Table>
<Caption>
                                                        Low         High
                                                        ---         ----
<S>                                                    <C>          <C>
1999
First Quarter..................................        $3.75        $6.31
Second Quarter.................................         3.13         4.16
Third Quarter..................................         2.75         4.00
Fourth Quarter.................................         2.03         3.13

2000
First Quarter..................................        $2.25        $3.63
Second Quarter.................................         2.50         4.44
Third Quarter..................................         3.88         4.79
Fourth Quarter.................................         2.00         4.16

2001
First Quarter..................................        $1.93        $3.88
Second Quarter.................................         2.48         3.45
Third Quarter..................................         2.30         4.05
Fourth Quarter.................................         1.57         2.70

2002
First Quarter (March 25) ......................        $2.25        $3.55
</Table>

         On February 27, 2002, the Company's stock transfer agent reported that
the Company's common stock was held by 181 holders of record. However,
management believes there are in excess of 1,000 beneficial owners of the
Company's common stock.

         The Company has paid no cash dividends on its common stock. The Board
of Directors intends to retain earnings of the Company to support operations and
to finance expansion and does not intend to pay cash dividends on the common
stock for the foreseeable future. The payment of cash dividends in the future
will depend upon such factors as earnings levels, capital requirements, level of
debt, the Company's financial condition and other factors deemed relevant by the
Board of Directors.


                                       10
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth selected financial data of the Company.
The selected financial data in the table are derived from the consolidated
financial statements of the Company. The following data should be read in
conjunction with, and is qualified in its entirety by, the Company's
consolidated financial statements and related notes and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. All amounts are reported in thousands except for per
share amounts.

<Table>
<Caption>
                                                                2001        2000(3)      1999        1998       1997
<S>                                                           <C>         <C>         <C>         <C>         <C>
Income Statement Data:
Revenues:
     Food and beverage sales ...............................  $  98,324   $ 103,480   $  93,846   $  88,190   $  62,851
     Franchise fees and royalties ..........................        541         435         319         358         268
     Other income ..........................................        618         690         413         637         423
          Total revenues ...................................     99,483     104,605      94,578      89,185      63,542
Costs and Expenses:
     Costs of sales ........................................     26,846      28,319      25,841      24,261      17,840
     Operating expenses ....................................     61,727      63,473      57,779      53,824      36,795
     Pre-opening costs .....................................        592         790         691         535         279
     General and administrative expenses ...................      5,835       5,806       5,968       5,548       4,049
      Provision for impairment of long-lived assets ........        339         340         300          41          85
      Depreciation and amortization ........................      4,245       3,889       3,377       2,964       2,216
      Interest expense .....................................        986         974         776         410         310
           Total costs and expenses ........................    100,570     103,591      94,732      87,583      61,574
Income(loss) before provision (benefit) for
  income taxes .............................................     (1,087)      1,014        (154)      1,602       1,968

Provision for (benefit from) income taxes ..................       (407)        103        (116)        419         569
Net income (loss) ..........................................  $    (679)  $     911   $     (38)  $   1,183   $   1,399

Net income (loss) per common share .........................  $   (0.23)  $    0.30   $   (0.01)  $    0.30   $    0.36

Net income (loss) per common share assuming
dilution ...................................................  $   (0.23)  $    0.29   $   (0.01)  $    0.28   $    0.35

Weighted average common shares .............................      2,961       3,044       3,151       3,942       3,869
Weighted average common shares
      assuming dilution ....................................      2,961       3,145       3,151       4,177       3,988

Balance Sheet Data (at end of period):
      Working capital (deficit) ............................  $  (8,480)  $ (11,039)  $  (8,320)  $  (3,360)  $  (4,844)
      Total assets .........................................  $  30,256   $  33,102   $  31,090   $  25,820   $  29,775
      Long-term debt obligations ...........................  $   8,682   $   8,440   $   9,092   $   3,409   $   7,637
      Stockholders' equity .................................  $   7,216   $   8,099   $   7,319   $  12,451   $  10,993

Other Data:
     Cash provided by operating activities .................  $   1,365   $   5,354   $   7,497   $   2,945   $   4,977
     Cash (used in) provided by investing activities .......  $  (1,323)  $  (6,338)  $  (7,516)  $   1,566   $ (11,182)
     Cash (used in) provided by financing activities .......  $      81   $    (383)  $     964   $  (4,545)  $   6,841
     Earnings before interest, taxes, depreciation and
        amortization (EBITDA)(1) ...........................  $   4,144   $   5,877   $   4,000   $   4,977   $   4,493
     System-wide sales(2) ..................................  $ 106,843   $ 112,217   $ 102,665   $  98,923   $  71,133
</Table>

(1)  EBITDA is calculated by adding the following to GAAP net income: interest
     expense, provision/benefit for income taxes and depreciation and
     amortization. EBITDA is not a calculation provided by GAAP and similarly is
     not an alternative to operating income or net income and is not a measure
     of liquidity. Additionally, EBITDA may be calculated differently by other
     companies sharing the same industry as Eateries, Inc.

(2)  System-wide sales include annual Company sales and annual sales as reported
     to the Company by its franchisees and licensees. Franchisee and licensee
     gross sales are not included in revenues in the consolidated financial
     statements and are not GAAP revenue for Eateries, Inc.

(3)  Included 53rd week of operations for the fiscal year ended December 31,
     2000.


                                       11
<PAGE>

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

         From time to time, the Company may publish "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Some examples of
forward-looking statements are statements related to anticipated financial
performance, business prospects, the future opening of Company-owned and
franchised restaurants, anticipated capital expenditures, future liquidity and
capital resource needs, and other matters. In addition, forward-looking
statements often (though not always) may be identified by the use of such terms
as "may", "will", "expect", "intend", "project", "estimate", "anticipate",
"believe", "think", "continue" or variations of such terms and similar
terminology. All statements other than statements of historical fact contained
in this Form 10-K or in any other report of the Company are forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of that
safe harbor, the Company notes that a variety of factors, individually or in the
aggregate, could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements including, without limitation, the
following: consumer spending trends and habits; competition in the casual dining
restaurant segment; weather conditions in the Company's operating regions; laws
and government regulations; general business and economic conditions;
availability of capital; success of operating initiatives and marketing and
promotional efforts; and changes in accounting policies. In addition, the
Company disclaims any intent or obligation to update those forward-looking
statements. However, the Company may be required to amend its filings if
information becomes materially misleading.

INTRODUCTION

         As of December 30, 2001, the Company owned and operated 67 (48
Garfield's, 17 Garcia's, 2 Pepperoni Grills) and franchised or licensed 7 (6
Garfield's and 1 Garcia's) restaurants. The Company currently has no Garfield's
or Garcia's in development. As of the date of this report, the entire system
includes 67 (48 Garfield's, 17 Garcia's, 2 Pepperoni Grills) Company-owned
restaurants and 7 (6 Garfield's and 1 Garcia's) franchised or licensed
restaurants.


                                       12
<PAGE>

PERCENTAGE RESULTS OF OPERATIONS AND RESTAURANT DATA

         The following table sets forth, for the periods indicated, (i) the
percentages that certain items of income and expense bear to total revenues,
unless otherwise indicated, and (ii) selected operating data:

<Table>
<Caption>
                                                                                    Fiscal Year
                                                                   ----------------------------------------
                                                                      2001            2000          1999
                                                                   -----------    -----------   -----------
<S>                                                                <C>            <C>           <C>
INCOME STATEMENT DATA:
Revenues:
    Food and beverage sales .....................................         98.9%          98.9%         99.2%
    Franchise fees and royalties ................................          0.5            0.4           0.3
    Other income ................................................          0.6            0.7           0.5
                                                                   -----------    -----------   -----------
                                                                         100.0          100.0         100.0
                                                                   -----------    -----------   -----------
Costs and Expenses:
    Costs of sales(1) ...........................................         27.3           27.4          27.5
    Operating expenses(1) .......................................         62.8           61.3          61.6
    Pre-opening costs(1) ........................................          0.6            0.8           0.7
    General and administrative expenses .........................          5.9            5.6           6.3
    Provision for impairment of long-lived assets ...............          0.3            0.3           0.3
    Depreciation and amortization(1) ............................          4.3            3.8           3.6
    Interest expense ............................................          1.0            0.9           0.8
                                                                   -----------    -----------   -----------

Income before provision for (benefit from) income taxes .........         (1.1)           1.0         (0.02)

Provision for (benefit from) income taxes .......................         (0.4)           0.1         (0.01)
                                                                   -----------    -----------   -----------
Net income (loss) ...............................................         (0.7)%          0.9%        (0.01)%
                                                                   ===========    ===========   ===========

Selected Operating Data:
(Dollars in thousands)
System-wide sales:
   Company restaurants ..........................................  $    98,324    $   103,480   $    93,846
   Franchise restaurants ........................................        8,515          8,737         8,819
                                                                   -----------    -----------   -----------
      Total .....................................................  $   106,843    $   112,217   $   102,665
                                                                   ===========    ===========   ===========
Number of restaurants (at end of period):
   Company restaurants ..........................................           67             69            69
   Franchise restaurants ........................................            7              8             9
                                                                   -----------    -----------   -----------
          Total .................................................           74             77            78
                                                                   ===========    ===========   ===========

(1) As a percentage of food and beverage sales.
</Table>


                                       13
<PAGE>


IMPACT OF SEASONALITY

         The concentration of restaurants in regional malls, where customer
traffic increases substantially during the Thanksgiving to New Year holiday
season, has resulted in the Company experiencing a substantial increase in
restaurant sales and profits during the fourth quarter of each year. However, as
a result of the acquisition of 17 freestanding Mexican restaurants from Famous,
Company revenues and profits have been slightly less affected by seasonality.
The following table presents the Company's revenues, net income (loss) and
certain other financial and operational data for each fiscal quarter of 2001,
2000 and 1999.

<Table>
<Caption>
                                                                            FISCAL QUARTERS
                                                         -------------------------------------------------------
                                                            1ST        2ND         3RD         4TH      ANNUAL
                                                         ---------  ---------   ---------   ---------  ---------
                                                                (In thousands except per share amounts)
<S>                                                      <C>        <C>         <C>         <C>        <C>
2001:
           Revenues ...................................  $  25,867  $  23,655   $  23,559   $  26,403  $  99,483
           Net income (loss) ..........................         22       (661)       (468)        428       (679)
           Net income (loss) per common share .........       0.01      (0.22)      (0.16)       0.14      (0.23)
           Net income (loss) per common share
                assuming dilution .....................       0.01      (0.22)      (0.16)       0.14      (0.23)
           Weighted average common shares .............      3,092      2,958       2,959       2,959      2,961
           Weighted average common
                shares assuming dilution ..............      3,412      2,958       2,959       2,960      2,961
           Pre-opening costs ..........................  $     261  $      69   $      99   $     163  $     592
           Number of Company units at
                end of period .........................         66         65          67          67         67
           Company restaurant operating
                weeks .................................        866        857         852         867      3,442
           Sales per Company restaurant
                operating week ........................  $      30  $      28   $      28   $      30  $      29

2000:
           Revenues ...................................  $  25,108  $  24,797   $  25,069   $  29,631  $ 104,605
           Net income (loss) ..........................        324       (181)       (249)      1,017        911
           Net income (loss) per common share .........       0.11      (0.06)      (0.08)       0.33       0.30
           Net income (loss) per common share
                assuming dilution .....................       0.10      (0.06)      (0.08)       0.32       0.29
           Weighted average common shares .............      2,997      3,004       3,011       3,055      3,044
           Weighted average common
                shares assuming dilution ..............      3,094      3,004       3,011       3,156      3,145
           Pre-opening costs ..........................  $     209  $     311   $     127   $     143  $     790
           Number of Company units at
                end of period .........................         69         71          71          69         69
           Company restaurant operating
                weeks .................................        884        907         923       1,004      3,718
           Sales per Company restaurant
                operating week ........................  $      28  $      27   $      26   $      29  $      28

1999:
           Revenues ...................................  $  23,074  $  22,887   $  23,216   $  25,401  $  94,578
           Net income (loss) ..........................        247       (336)       (518)        569        (38)
           Net income (loss) per common share .........       0.07      (0.11)      (0.18)       0.19      (0.01)
           Net income (loss) per common share
                assuming dilution .....................       0.07      (0.11)      (0.18)       0.19      (0.01)
           Weighted average common shares .............      3,519      2,938       2,997       2,996      3,151
           Weighted average common
                shares assuming dilution ..............      3,725      2,938       2,997       3,008      3,151
           Pre-opening costs ..........................  $      99  $     183   $     342   $      67  $     691
           Number of Company units at
                end of period .........................         64         66          68          69         69
           Company restaurant operating
                weeks .................................        828        854         872         893      3,447
           Sales per Company restaurant
                operating week ........................  $      28  $      26   $      26   $      28  $      27
</Table>


                                       14
<PAGE>


FISCAL YEARS 2001, 2000, AND 1999

         The Company's fiscal year 2001 was highlighted by the judgment received
against J.R. Simplot Co., which awarded $6,551,000 in damages plus legal fees
and expenses. Subsequent to year-end, the Company's motion to reconsider the
calculation of the judgment was granted and the Company was awarded an
additional $1,854,000, bringing the total award to $8,405,000. Additionally,
subsequent to year-end, the Company was awarded and received $516,000 for legal
fees and costs. The Company's diligent and aggressive handling of this matter
resulted in a favorable result and outlook for the Company's future. Although,
the matter is currently in appeal by both parties, the Company intends to
aggressively pursue its legal options until a judgment award is collected.

RESULTS OF OPERATIONS

         The Company's results of operations for the year ended December 30,
2001 decreased over prior year. The Company had increases in same store sales
over prior year, however the sales, closing and disposition of ten restaurants
since December 2000 and the opening of only four additional units, has resulted
in a decrease in food and beverage sales. During 2001, the Company focused on
improving its restaurant inventory, by selling, closing or disposing of
locations that were either not profitable, not in favorably concentrated market
locations or did not provide enough cash flow to substantiate the renewal of the
lease term. The Company continued to its focus on training, continuing to
improve the quality of food preparation and customer service in all locations.
This focus resulted in greater repeat business in 2001 and management
anticipates this trend to continue in 2002. Additionally, the Company is
maintaining the focus it began in 1999 to grow its franchise business. As a
result, the Company experienced growth through its campaign to recruit
additional franchisees, opening one new franchise location in 2000 and signing
agreements for additional 46 units in 2001 and 25 units in 2000. The Company
also experienced slightly better food and labor costs, despite increasing wages
and liquor costs throughout its territories. This is primarily due to increased
same store sales and higher check averages. The Company successfully opened one
freestanding Garfield's location in 2001, which experienced higher sales as
opposed to its normal mall based volumes. During the third and fourth quarters
of 2000, the Company began to experience substantial increases in utility
expenses. In some markets the increase was as much as 40% and has continued in
2001, which negatively impacted the Company's results of operations.
Additionally, increasing property and health insurance costs as well as legal
fees, also negatively impacted operational results. However, management believes
that its current restaurant inventory as of December 30, 2001 is stronger than
in prior years and will provide a base for overall financial improvement.

REVENUES

         Revenues for the year ended December 30, 2001, decreased 4.9% over the
revenues reported for the year ended December 31, 2000. Revenues for the year
ended December 31, 2000, increased 10.6% over the revenues reported for the year
ended December 26, 1999. These fluctuations are mainly due to restaurant
openings, acquisitions, sales, closings and dispositions throughout the three
fiscal years.


                                       15
<PAGE>

         The number of restaurants operating at the end of each year, the number
of operating months during that year and average sales per operating week were
as follows:

<Table>
<Caption>
                                                                      2001               2000               1999
                                                                     -------            -------            -------
<S>                                                                  <C>                <C>                <C>
Garfield's:
Number of Company restaurants at year end................                 48                 50                 49
Number of Company restaurant operating weeks.............              2,516              2,629              2,475
Average sales per Company restaurant operating
     Week................................................             27,917             26,649             25,528

Garcia's:(1)
Number of Company restaurants at year end................                 16                 17                 14
Number of Company restaurant operating weeks.............                822                825                763
Average sales per Company restaurant operating
     Week................................................             28,988             29,910             30,637

ROMA Foods:(2)
Number of Company restaurants at year end................                  2                  2                  5
Number of Company restaurant operating weeks.............                104                265                209
Average sales per Company restaurant operating
     Week................................................             35,132             30,893             32,107

All Concepts(3):
Number of Company restaurants at year end................                 67                 69                 68
Number of Company restaurant operating weeks.............              3,442              3,719              3,447
Average sales per Company restaurant operating
     Week................................................             28,390             27,675             27,058
</Table>

(1) Includes Casa Lupita (for 1999 only) and Carlos Murphy's; excludes the
Garcia's concession operation at the BankOne Ball Park in Phoenix, Arizona.

(2) Includes Pepperoni Grill, Bellini's and Tommy's; the two Bellini's and
Tommy's were acquired in May 2000 and sold December 2001.

(3) Includes Garfield's, Pepperoni Grill, Bellini's, Tommy's, Garcia's, Carlos
Murphy's and Casa Lupita; excludes the Garcia's concession operation at the
BankOne Ball Park in Phoenix, Arizona.

      A summary of sales and costs of sales expressed as a percentage of sales
are listed below for the fiscal years:

<Table>
<Caption>
                                      2001             2000              1999
                                     -------          -------           -------
<S>                                  <C>              <C>               <C>
Sales:
   Food .................             87.0%             86.5%             86.0%
   Beverage .............             13.0%             13.5%             14.0%
                                     -----             -----             -----
      Total .............            100.0%            100.0%            100.0%
                                     =====             =====             =====
Costs of Sales:
   Food .................             27.8%             27.6%             28.1%
   Beverage .............             24.1%             25.8%             23.8%
                                     -----             -----             -----
      Total .............             27.3%             27.4%             27.5%
                                     =====             =====             =====
</Table>

         Average weekly sales per unit for Garfield's were $27,917 during 2001
compared to $26,649 during 2000. The 2001 per unit weekly sales increased by
$1,268 or 4.8% from 2000 levels. Garfield's units continue to have strong
performance and increased same store sales over prior years due to concentrated
marketing strategies and new menu items. Average weekly sales per unit for
Garcia's were $28,988 during 2001 versus $29,910 in 2000. Garcia's 2001 average
weekly sales per unit decreased $922 or 3.1%. This decrease is mainly
attributable to the opening of two mall-based restaurants each in 2001 and
2000, which have lower sales volumes than freestanding locations.

         Average weekly sales per unit for Garfield's were $26,649 during 2000
compared to $25,528 during 1999. The 2000 per unit weekly sales increased by
$1,121 or 4.4% from 1999 levels. The increase was primarily due to the
introduction of a new menu design, a successful television advertising campaign,
the success of continued radio and newspaper advertising and the implementation
of a mall employee rewards program in selected locations. Average weekly sales
per unit for Garcia's were $29,910 during 2000 versus $30,637 in 1999. The
Company's Garcia's units were negatively impacted by negative publicity related
to a vendor contaminated product problem in the Phoenix,


                                       16
<PAGE>
Arizona market during the third quarter of 1998. Aggressive advertising was
unable to bring the average unit volumes to historical levels. In addition,
aggressive discounting to assist in attempting to bring back sales resulted in
lower unit profitability.

         Continuing royalties were $323,000 in 2001, $274,000 in 2000 and
$282,000 in 1999. The increase in 2001 from 2000 is a result of the higher
volumed franchised locations and the opening of one additional unit in October
2000.

         Other income during 2001 was $618,000 compared to $690,000 in 2000 and
$413,000 in 1999. The increase in 2000 as compared to 1999 is primarily due to
banquet and audio/video rental income in the Tempe, Arizona Garcia's in an
Embassy Suites Hotel.

During 2001, 2000 and 1999 Other Income consisted of the following:

<Table>
<Caption>
                                           2001             2000               1999
                                         ---------        ---------          ---------
<S>                                      <C>              <C>                <C>
Vending                                  $159,000         $125,000           $169,000
Audio/Video Rental                         66,000          112,000                ---
Banquet Rental                             46,000           55,000                ---
Other Rental                               50,000           60,000             63,000
Marketing Fund Revenues                    43,000           39,000             33,000
Interest                                   31,000           38,000             28,000
Merchandise Sales                          15,000           31,000             20,000
Miscellaneous                             208,000          230,000            100,000
                                         --------         --------           --------
Total                                    $618,000         $690,000           $413,000
                                         ========         ========           ========
</Table>

COSTS AND EXPENSES

         The following is a comparison of costs of sales and labor costs
(excluding payroll taxes and fringe benefits) as a percentage of food and
beverage sales at Company-owned restaurants:

<Table>
<Caption>
                               2001     2000     1999
                               ----     ----     ----
<S>                            <C>      <C>      <C>
Garfield's:
   Costs of sales ...........  27.6%    27.5%    27.9%
   Labor costs ..............  28.6%    28.3%    28.8%
                               ----     ----     ----
       Total ................  56.2%    55.8%    56.7%
                               ====     ====     ====

Garcia's (1):
   Costs of sales ...........  26.6%    26.3%    25.6%
   Labor costs ..............  30.0%    31.5%    29.7%
                               ----     ----     ----
       Total ................  56.6%    57.8%    55.3%
                               ====     ====     ====

Pepperoni Grill (2)
   Costs of sales ...........  26.7%    29.7%    30.6%
   Labor costs ..............  28.8%    30.4%    30.5%
                               ----     ----     ----
       Total ................  55.5%    60.1%    61.1%
                               ====     ====     ====

All Concepts (3):
   Costs of sales ...........  27.3%    27.4%    27.5%
   Labor costs ..............  29.0%    29.3%    29.1%
                               ----     ----     ----
       Total ................  56.3%    56.7%    56.6%
                               ====     ====     ====
</Table>

(1) Includes Casa Lupita (for 1999 only) and Carlos Murphy's.

(2) Includes Bellini's and Tommy's, which were purchased in May 2000 and sold in
December 2001.

(3) Includes Garfield's, Garcia's, Pepperoni Grill, Bellini's, Tommy's, Carlos
Murphy's and Casa Lupita (for 1999 only).


                                       17
<PAGE>

         Garfield's costs of sales as a percentage of food and beverage sales
increased in 2001 to 27.6% from 27.5% in 2000 and decreased from 27.9% in 1999
from 2000. Garcia's costs of sales as a percentage of food and beverage sales
increased to 26.6% in 2001 from 26.3% in 2000 and 25.6% in 1999. This increase
is primarily due to high liquor costs and lower vendor rebates. Pepperoni Grill
cost of sales as a percentage of sales decreased in 2001 to 26.7% from 29.7% in
2000. This decrease was due to the sale of Bellini's and Tommy's in December
2000 which had higher cost of sales due to its product mix.

         Garfield's labor costs as a percentage of food and beverage sales
increased in 2001 to 28.6% from 28.3% in 2000, which decreased from 28.8% in
1999. The increase in 2001 was primarily due to increased kitchen labor and
restaurant level management salaries and incentive compensation. This decrease
in 2000 is primarily due to lower turnover in most markets. Labor costs for
Garcia's as a percentage of food and beverage sales decreased to 30.0% in 2001
from 31.5% in 2000, which increased from 29.7% in 1999. Labor costs for
Pepperoni Grill decreased in 2001 to 28.8% of food and beverage sales compared
to 30.4%% in 2000. This again was mainly due to the sale of Bellini's and
Tommy's in December 2000, which carried higher labor costs.

         Operating expenses (which include labor costs) as a percentage of food
and beverage sales were 62.8% in 2001, 61.3% in 2000, and 61.6% in 1999. The
increase in operating expenses as a percentage of food and beverage sales in
2001 compared to 2000 due primarily to increased utility and health and property
insurance costs.

PRE-OPENING COSTS

         The Company expenses pre-opening costs as incurred. During each of the
three years in the period ended December 30, 2001, the Company incurred and
recognized as expense the following amounts for restaurant pre-opening costs
relative to the corresponding number of restaurants opened:

<Table>
<Caption>
                                                            2001        2000       1999
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Total pre-opening costs .................................  $592,000   $790,000   $691,000
Restaurants opened ......................................         4          6          5
Average pre-opening costs per restaurant opened .........  $148,000   $131,667   $138,200
Total pre-opening costs as a percentage of food
      and beverage sales ................................       0.6%       0.8%       0.7%
</Table>

              The increase in average pre-opening costs between 2001 and 2000 is
due to a delay in the opening of one Garcia's unit in the first quarter of 2000.
The decrease in average pre-opening cost between 2000 and 1999 is primarily due
to better coordinated training programs for new store openings, which lower
initial per-opening labor costs.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses increased as a percentage of total
revenues to 5.9% in 2001 from 5.6% in 2000 as compared to 6.3% in 1999. The
lower absolute levels of general and administrative expenses from 1999 to 2001
and 2000 are related primarily to the Company's ability to increase revenues
without incurring large corresponding addition to personnel costs. The Company
anticipates that its costs of supervision and administration of Company and
franchise stores will increase at a slower rate than revenue increases during
the next few years. The slight increase in 2001 from 2000 is due to an increase
in one-time legal fees during the year.

PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS

         In the regular course of business the Company's restaurants are
reviewed on an individual restaurant basis for indicators of impairment,
whenever events or circumstances indicate that the carrying value of its
restaurants may not be recoverable. The Company's primary test for an indicator
of potential impairment is operating losses. In order to determine whether
impairment has occurred, the Company estimates the future net cash flows
expected to be generated from the use of its restaurants, and compares such
estimated future cash flows to the respective carrying amounts. Those
restaurants, which have carrying amounts in excess of estimated future cash
flows, are deemed impaired. The carrying value of these restaurants is adjusted
to an estimated fair value by discounting the estimated future cash flows
attributable to such restaurants using a discount rate equivalent to the rate of
return the Company expects to achieve from its investment in newly-constructed
restaurants. The excess is charged to expense and cannot be reinstated.


                                       18
<PAGE>


         Considerable management judgment and certain significant assumptions
are necessary to estimate future cash flows. Significant judgments and
assumptions used by the Company in evaluating its assets for impairment include,
but may not be limited to: estimations of future sales levels, costs of sales,
direct and indirect costs of operating the assets, the length of time the assets
will be utilized and the Company's ability to utilize equipment, fixtures and
other moveable long-lived assets in other existing or future locations. In
addition, such estimates and assumptions include anticipated operating results
related to certain profit improvement programs implemented by the Company during
1999, 2000 and 2001, as well as the possible rent reductions, deferrals, and
other negotiated concessions from landlords. Actual results could vary
materially from management's estimates and assumptions and such variance could
result in a change in the estimated recoverability of the Company's long-lived
assets. Accordingly, the results of the changes in those estimates could have a
material impact on the Company's future results of operations and financial
position.

         During 2001, the Company recorded a $339,000 provision for impairment
of long-lived assets related to five locations. During 2000, the Company
recorded a $340,000 provision for impairment of long-lived assets related to
three locations, and during 1999 the Company recorded a $300,000 provision for
impairment of long-lived assets related to four locations.

         In the normal course of business, management performs a regular review
of the strength of its operating assets. It is management's plan to continue to
make such decisions to close under-performing restaurants and/or dispose of
other assets it considers in the best long-term interest of the Company's
shareholders.

DEPRECIATION AND AMORTIZATION EXPENSE

         Depreciation and amortization expense increased in 2001 to $4,245,000
(4.3% of food and beverage sales) compared to $3,889,000 (3.8% of food and
beverage sales) in 2000 and $3,378,000 (3.6% of food and beverage sales) in
1999. The increase in 2001 compared to 2000 is primarily attributable to the
increase in net assets subject to depreciation and amortization in 2001 versus
2000 as the result of the opening of additional restaurants in 2001 and 2000.
The increase in 2000 versus 1999 also relates principally to the increase in net
assets subject to depreciation and amortization because of the opening of
additional restaurants and the remodeling of existing restaurants. Additionally,
unit economics of recent store developments are higher than those of many of the
aging locations whose leases were not renewed.

INTEREST EXPENSE

         Interest expense during each of the three years in the period ended
December 30, 2001, was $986,000 in 2001, $974,000 in 2000, and $776,000 in 1999.
Additionally, the Company has capitalized approximately $44,000, $71,000, and
$47,000 of interest costs during 2001, 2000 and 1999, respectively. The increase
in interest expense in 2000 compared to 1999 is attributable to an increase in
the 2001 average borrowing balances under the Company's revolving credit
agreements caused by the Company's aggressive program of building new Company
owned units during 2000 and most of 2001.

INCOME TAXES

         The benefit for income taxes was $407,000 and $116,000 in 2001 and
1999, respectively. The provision for income tax was $103,000 for 2000.

         At December 30, 2001, the Company has recorded a benefit for its
deferred tax assets of approximately $3,527,000. Management believes that
$1,371,000 of the assets will be recognized through the reversal of existing
taxable temporary differences with the remainder to be recognized through
realization of future income. It is management's opinion, based on the
historical trend of normal and recurring operating results, present store
development and forecasted operating results, that it is more likely than not
that the Company will realize the approximately $5,673,000 in the future taxable
income necessary to recognize the net deferred tax assets not otherwise offset
by reversing taxable temporary differences; net operating loss carry forwards do
not begin to expire until 2003 and general business tax credits until 2009.
Although management of the Company is not presently aware of any adverse
matters, result of loss of market share, increased competition or other adverse
general economic conditions, it intends to evaluate the realizability of the net
deferred tax asset at least quarterly by assessing the need for a valuation
allowance.


                                       19
<PAGE>

NET INCOME PER SHARE AMOUNTS

         Basic Earnings Per Share ("EPS") includes no dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. The weighted-average common
shares outstanding for the basic EPS calculation were 2,960,999, 3,044,195 and
3,151,279 in 2001, 2000 and 1999, respectively. EPS for 2001 and 1999 was
anti-dilutive. Diluted EPS is computed by dividing net income available to
common stockholders by the sum of the weighted-average number of common shares
outstanding for the period plus dilutive common stock equivalents to the extent
such Common Stock equivalents are not anti-dilutive. The sum of the
weighted-average common shares and common share equivalents for the diluted EPS
calculation were 2,960,999, 3,144,515 and 3,151,279 in 2001, 2000 and 1999,
respectively.

IMPACT OF INFLATION

         The impact of inflation on the cost of food and beverage products,
labor and real estate can affect the Company's operations. Over the past few
years, inflation has had a lesser impact on the Company's operations due to the
lower rates of inflation in the nation's economy and the economic conditions in
the Company's market area.

         Management believes the Company has historically been able to pass on
increased costs through certain selected menu price increases and increased
productivity and purchasing efficiencies, but there can be no assurance that the
Company will be able to do so in the future. Management anticipates that the
average cost of restaurant real estate leases and construction costs could
increase in the future which could affect the Company's ability to expand.

LIQUIDITY AND CAPITAL RESOURCES

         At December 30, 2001, the Company's working capital ratio was .34 to 1
compared to .34 to 1 at December 31, 2000. As is customary in the restaurant
industry, the Company has consistently operated with negative working capital
and has not historically required large amounts of working capital.
Historically, the Company has leased the vast majority of its restaurant
locations. For fiscal years 2001, 2000 and 1999, the Company's expenditures for
capital improvements were $3,509,000, $8,876,000 and $7,918,000, respectively,
which were funded out of cash flows from operating activities of approximately
$1,368,000, $5,354,000 and $7,497,000, respectively, landlord finish-out
allowances of approximately $1,302,000, $2,023,000 and $814,000 respectively,
and borrowings under the Company's credit agreements.

         During 2001, the Company expects to continue to make expenditures for
capital improvements to its existing and future locations. The Company believes
the cash generated from its operations and borrowing availability under its
credit facility (described below), will be sufficient to satisfy the Company's
net capital expenditures and working capital requirements through 2001.

         In November 1997, the Company entered into an interest rate swap
agreement with a bank to hedge its risk exposure to potential increases in
LIBOR. This agreement has a term of five years and an initial notional amount of
$9,500,000. The notional amount declines quarterly over the life of the
agreement on a seven-year amortization schedule assuming a fixed interest rate
of 7.68%. Under the terms of the interest rate swap agreement, the Company pays
interest quarterly on the notional amount at a fixed rate of 7.68%, and receives
interest quarterly on the notional amount at a floating rate of three-month
LIBOR plus 1.25%.

         In April 1997, the Company's Board of Directors authorized the
repurchase of up to 200,000 shares of the Company's common stock. In July 1997,
an additional 200,000 shares were authorized for repurchase. As of December 30,
2001, 197,762 shares had been repurchased under this plan for a total purchase
price of approximately $695,000.

         In February 2000, the Company's Board of Directors authorized the
repurchase of 1,056,200 shares of its common stock from Astoria Capital
Partners, L.P., Montavilla Partners, L.P., and MicroCap Partners L.P.
("Sellers") for a purchase price of $5.125 per share or an aggregate purchase
price of $5,413,025. The shares purchased from the Sellers represented 26.7% of
the outstanding common stock of the Company, prior to the transaction. In
connection with this transaction, the Company entered into a new credit facility
with a bank in the aggregate amount of $14,600,000, of which a maximum of
$6,000,000 is available to the Company under a revolving line of credit and
$8,600,000 was available to the Company under a term loan. Certain proceeds of
the term loan (approximately $5.4 million) were used for the stock purchase from
the Sellers. The balance of the proceeds under the term loan (approximately $3.2
million) and the proceeds under the revolving line of credit were used to retire
indebtedness under the Company's existing loan agreement. The revolving line of
credit expires in March 2003 and initially bears interest at a floating rate of
three month LIBOR plus 1.50% (initially 6.5%), which is reset quarterly. The
term loan also provides for an initial floating rate of interest equal to three
month LIBOR plus 1.50% and requires quarterly


                                       20
<PAGE>

installments of principal and interest in the amount necessary to fully amortize
the outstanding principal balance over a seven-year period, with a final
maturity on the fifth anniversary of the note. The term loan converts to a
five-year amortization schedule if the Company's debt coverage ratio, as defined
in the loan agreement, exceeds a certain level. Additionally, the floating
interest rate on both facilities is subject to changes in the Company's ratio of
total loans and capital leases to net worth. Under the terms of these notes, the
Company's minimum floating rate is LIBOR plus 1.25% and the maximum floating
rate is LIBOR plus 2.50%. Borrowings under this loan agreement are unsecured.
The loan agreement does contain certain financial covenants and restrictions. As
of the date of this report, the Company is in compliance with operating
covenants and restrictions.

      Effective March 15, 2001, the Company entered into an overline of credit
with a maximum draw amount of $1,000,000. This overline had a term of six
months, which was extended to March 31, 2002 and initially bears interest at a
rate equal to the greater of the national prime rate or 5.0%, payable monthly.
No amounts were outstanding at December 30, 2001.

      In June 2001, the Company entered into a letter of credit with a financial
institution in the amount of $250,000. The amount available under the Company's
revolving credit facility is lowered by this amount at December 30, 2001.

LEASE COMMITMENTS

      The Company leases the majority of its restaurant facilities and its
corporate office under operating leases with initial terms expiring at various
dates through the year 2015. Certain leases contain renewal options ranging from
five to ten years. Most, but not all, leases require the Company to be
responsible for the payment of taxes, insurance and/or maintenance and include
percentage rent and fixed rent escalation clauses. In the normal course of
business, the Company may grant a landlord lien on certain personal property
upon an event of default by the Company. At December 30, 2001, the remaining
minimum rental commitments under long-term noncancellable leases, excluding
amounts related to taxes, insurance, maintenance and percentage rent, are as
follows:

<Table>
<S>                                                          <C>
2002..............................................           $ 5,938,000
2003..............................................             5,824,000
2004..............................................             5,080,000
2005..............................................             4,465,000
2006..............................................             3,949,000
Thereafter........................................            13,080,000
                                                             -----------
Total minimum rental commitments..................           $38,336,000
                                                             ===========
</Table>

STOCK PUT AGREEMENTS

         In April 1997, the Company entered into stock put agreements with two
of its executive officers (who also serve on the Company's Board of Directors).
Under the agreements, in the event of the officer's death while an employee of
the Company, their respective estate or legal representative has the right (but
not the obligation) to compel the Company to purchase all or part of the common
stock owned by or under stock option agreements with the decreased officers or
members of their immediate families (i.e. spouse or children) or controlled by
any of them through trusts, partnership corporations or other entities on the
date of their death. The agreement calls for a calculation of the per share
price payable by the company. The purchase price cannot exceed the proceeds
payable to the Company from the key man life insurance policy maintained on the
life of the respective officer. The Company expects the source of funding for
this commitment to come from the proceeds of the key man life insurance policy
for the respective officer.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         As of the date of this report, the Company has an available revolving
line of credit in the amount of $7,000,000, as well as outstanding borrowings
under a term loan of approximately $4,935,000. Both loans bear interest at
floating rate of three-month LIBOR plus 2.5%. Thus, the Company is exposed to
the risk of earnings losses due to increases in three-month LIBOR. To hedge its
risk exposure to potential increases in three-month LIBOR, the Company has
entered into an interest rate swap agreement with a bank. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" for a discussion of the terms of the Company's
credit facilities and interest rate swap agreement.


                                       21
<PAGE>


ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements of the Company are included in a separate
section of this report.

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

         None.

                                    PART III

         In accordance with General Instruction G(3), a presentation of
information required in response to Items 10, 11, 12, and 13 will appear in the
Company's Proxy Statement to be filed pursuant to Regulation 14A within 120 days
of the year end covered hereby, and shall be incorporated herein by reference
when filed.


                                       22
<PAGE>


                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
             AND REPORTS ON FORM 8-K

         (a)      The following documents are filed as part of the report:

1.  Consolidated Financial Statements:

    Management's Responsibility for Financial Reporting
    Report of Independent Auditors
    Consolidated Balance Sheets as of December 30, 2001 and  December 31, 2000
    Consolidated Statements of Income for each of the three years in
      the period ended December 30, 2001
    Consolidated Statements of Stockholders' Equity for each of the three years
      in the period ended December 30, 2001
    Consolidated Statements of Cash Flows for each of the three years in the
      period ended December 30, 2001 Notes to Consolidated Financial Statements

2.  Consolidated Financial Statement Schedules:

    All schedules for which provision is made in the applicable accounting
    regulation of the Securities and Exchange Commission are not required under
    the related instructions or are inapplicable, and therefore have been
    omitted.

3.  Exhibits.

    The following exhibits are filed as part of Form 10-K and are identified by
    the numbers indicated:

EXHIBIT
NUMBER                DESCRIPTION OF DOCUMENT
------                -----------------------

  3.1   Amended and Restated Articles of Incorporation.(1)

  3.2   Amendment to the Amended and Restated Articles of Incorporation.(2)

  3.3   Second Amendment to the Amended and Restated Articles of
        Incorporation.(11)

  3.4   Bylaws as amended.(1)

  3.5   Amendment to Bylaws.(11)

  4.1   Specimen Stock Certificate.(3)

 10.1   Employment Agreement between the Company and Vincent F. Orza, Jr., dated
        January 22, 2001.(12)

 10.2   Employment Agreement between the Company and James M. Burke, dated
        January 22, 2001.(12)

 10.3   Employment Agreement between the Company and Bradley L. Grow, dated
        January 1, 2001.(12)

 10.4   Lease Amendment dated May 1, 1999 between the Company and Great Places,
        L.L.C. for the lease of the Company's corporate office facilities in
        Edmond, Oklahoma.(12)

 10.5   Franchise Agreement and Amendment dated August 31, 1993 between the
        Company and Wolsey Dublin Company for the Garfield's franchise in Sioux
        City, Iowa and non-exclusive development rights to two additional
        locations in seven cities in four states over the next two years.(3)

 10.6   Form of Franchise Agreement for Garfield's and Garcia's dated March 20,
        2000.(12)

 10.7   Collateral Assignment Agreement dated January 20, 1991, between the
        Company and Vincent F. Orza, Jr.(5)

 10.8   Collateral Assignment Agreement dated January 20, 1991, between the
        Company and James M. Burke.(5)

 10.9   Employee Stock Purchase Plan dated June 15, 1994(6).

10.10   Amended and restated Eateries, Inc. Omnibus Equity Compensation Plan
        dated as of June 15, 1994.(7)

10.11   Amendment to Amended and Restated Eateries, Inc. omnibus equity
        compensation plan.(11)

10.12   Asset Purchase Agreement dated November 14, 1997, by and between the
        Company, through its wholly-owned subsidiary, Fiesta Restaurants, Inc.,
        and Famous Restaurants, Inc. and its subsidiaries.(8)

10.13   Agreement for Purchase and Sale of Assets and Licenses dated February
        26, 1998, among the Company and Chevy's, Inc.(9)

10.14   Agreement for purchase and Sale of Assets dated February 26, 1998,
        between the Company and Chevy's, Inc.(9)

10.15   Stock Put Agreement dated April 2, 1997, by and among Vincent F. Orza,
        Jr. and the Company.(4)

10.16   Stock Put Agreement dated April 2, 1997, by and among James M. Burke and
        the Company.(4)

10.17   Stock Purchase Agreement dated as of February 17, 1999, between
        Eateries, Inc. and Astoria Capital Partners, L.P., Montavilla Partners,
        L.P. and Microcap Partners L.P.(10)

10.18   Loan Agreement dated effective February 19, 1999, among Eateries, Inc.,
        Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's Management,
        Inc. and Local Federal Bank, F.S.B.(10)

10.19   Revolving Promissory Note in the principal amount of $6,000,000 dated
        February 19, 1999, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc. and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(10)

10.20   Term Promissory Note in the principal amount of $8,600,000 dated
        February 19, 1999, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc., and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(10)

10.21   Lease Amendment dated August 1, 1999 between the Company and Great
        Places of Shawnee L.L.C. for the lease of the Company's Garfield's
        Restaurant in Shawnee, Oklahoma.(12)

10.22   Loan Agreement Amendment dated September 30, 2000 between Eateries,
        Inc., Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's
        Management, Inc. and Local Federal Bank, F.S.B.(13)


                                       23
<PAGE>

10.23   Amended Term Promissory Note dated September 30, 2000 between Eateries,
        Inc., Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's
        Management, Inc. and Local Federal Bank, F.S.B.(13)

10.24   Amended Revolving Promissory Note in the principal amount of $6,000,000
        dated September 30, 2000, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc. and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(13)

 21.1   Subsidiaries of Eateries, Inc.(12)

 23.1   Consent of Arthur Andersen LLP.

 99.0   Availability Opinion Confirmation.

 (1)    Filed as exhibit to Registrant's Registration Statement on Form S-18
        (File No. 33-6818-FW) and incorporated herein by reference.

 (2)    Filed as exhibit to Registrant's Quarterly Report on Form 10-Q for the
        six months ended June 30, 1988 (File No. 0-14968) and incorporated
        herein by reference.

 (3)    Filed as exhibit to Registrant's Registration Statement on Form S-2
        (File No. 33-69896) and incorporated herein by reference.

 (4)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 28, 1997 (File No. 0-14968) and incorporated
        herein by reference.

 (5)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1990 (File No. 0-14968) and incorporated
        herein by reference.

 (6)    Filed as Appendix A to the Company's Notice of Annual Meeting of
        Shareholders dated April 29, 1994 and incorporated herein by reference.

 (7)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1994 (File No. 0-14968) and incorporated
        herein by reference.

 (8)    Filed as exhibit to Registrant's Current Report on Form 8-K dated
        December 8, 1997 (File No. 0-14968) and incorporated herein by
        reference.

 (9)    Filed as exhibit to Registrant's Current Report on Form 8-K dated March
        16, 1998 (File No. 0-14968) and incorporated herein by reference.

(10)    Filed as exhibit to Registrant's Current Report on Form 8-K dated March
        3, 1999 (File No. 0-14968) and incorporated herein by reference.

(11)    Filed as exhibit to registrant's proxy statement filed with the
        Commission on June 6, 2000 and incorporated herein by reference.

(12)    Filed as exhibit to registrant's Annual Report of Form 10-K for fiscal
        year ended December 31, 2000 dated March 21, 2001 (File No. 0-14968) and
        incorporated herein by reference.

(13)    Filed as exhibit to registrant's Annual Report of Form 10-K Amendment
        No. 1 for fiscal year ended December 31, 2000 dated May 16, 2001 (File
        No. 0-14968) and incorporated herein by reference.

                                       24
<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.

                                                  REGISTRANT:
                                                  EATERIES, INC.

         Date: March 29, 2002                     By: /s/ Vincent F. Orza, Jr.
              ---------------                         -------------------------
                                                      Vincent F. Orza, Jr.
                                                      Chief Executive Officer

         Date: March 29, 2002                     By: /s/ Bradley L. Grow
              ---------------                         -------------------------

                                                      Bradley L. Grow
                                                      Vice President
                                                      Chief Financial Officer

         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.

         Date: March 29, 2002                     By: /s/ Vincent F. Orza, Jr.
              ---------------                         -------------------------
                                                      Vincent F. Orza, Jr.
                                                      Chairman of the Board
                                                      and Director

         Date: March 29, 2002                     By: /s/ James M. Burke
              ---------------                         -------------------------
                                                      James M. Burke
                                                      Assistant Secretary and
                                                        Director

         Date: March 29, 2002                     By: /s/ Edward D. Orza
              ---------------                         -------------------------
                                                      Edward D. Orza,
                                                      Director

         Date: March 29, 2002                     By: /s/ Patricia L. Orza
              ---------------                         -------------------------
                                                      Patricia L. Orza,
                                                      Secretary and Director

         Date: March 29, 2002                     By: /s/ Thomas F. Golden
              ---------------                         -------------------------
                                                      Thomas F. Golden,
                                                      Director

         Date: March 29, 2002                     By: /s/ Philip Friedman
              ---------------                         -------------------------
                                                      Philip Friedman,
                                                      Director

         Date: March 29, 2002                     By: /s/ Larry Kordisch
              ---------------                         -------------------------
                                                      Larry Kordisch,
                                                      Director


                                       25
<PAGE>

                         EATERIES, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>

                                                                              Page
                                                                              ----
<S>                                                                           <C>
Management's Responsibility for Financial Reporting.........................   F-1

Report of Independent Auditors..............................................   F-2

Consolidated Balance Sheets as of December 30, 2001 and December 31, 2000...   F-3

Consolidated Statements of Income for each of the three years in the
      period ended December 30, 2001........................................   F-4

Consolidated Statements of Stockholders' Equity for each of the three years
      in the period ended December 30, 2001.................................   F-5

Consolidated Statements of Cash Flows for each of the three years in the
      period ended December 30, 2001........................................   F-6

Notes to Consolidated Financial Statements..................................   F-7
</Table>


                                       26
<PAGE>
               MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

         The management of Eateries, Inc. has the responsibility for preparing
the accompanying consolidated financial statements and for their integrity and
objectivity. The statements were prepared in accordance with generally accepted
accounting principles and include amounts that are based on management's best
estimates and judgment where necessary. Management believes that all
representations made to our external auditors during their examination of the
financial statements were valid and appropriate.

         To meet its responsibility, management has established and maintains a
comprehensive system of internal control that provides reasonable assurance as
to the integrity and reliability of the consolidated financial statements, that
assets are safeguarded, and that transactions are properly executed and
reported. This system can provide only reasonable, not absolute, assurance that
errors and irregularities can be prevented or detected. The concept of
reasonable assurance is based on the recognition that the cost of a system of
internal control is subject to close scrutiny by management and is revised as
considered necessary.

         The Board of Directors of Eateries, Inc. have engaged Arthur Andersen
LLP, independent auditors, to conduct an audit of and express an opinion as to
the fairness of the presentation of the 2001 consolidated financial statements.
Their report is included on the following page.



/s/ Vincent F. Orza, Jr.
------------------------
Vincent F. Orza, Jr.
Chairman and
Chief Executive Officer



/s/ Bradley L. Grow
-------------------
Bradley L. Grow
Vice President
Chief Financial Officer



February 27, 2002


                                      F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Eateries, Inc.
Oklahoma City, Oklahoma



         We have audited the accompanying consolidated balance sheets of
Eateries, Inc. and subsidiaries (an Oklahoma Corporation) as of December 30,
2001 and December 31, 2000 and the related consolidated statements of income,
stockholders' equity and other comprehensive income and cash flows for each of
the three years in the period ended December 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Eateries, Inc. and subsidiaries at December 30, 2001 and December 31, 2000, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 30, 2001, in conformity with accounting
principles generally accepted in the United States.



                               ARTHUR ANDERSEN LLP


Oklahoma City, Oklahoma
February 27, 2002


                                      F-2
<PAGE>


                         EATERIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                                  December 30,   December 31,
                                                                                     2001           2000
                                                                                 ------------   ------------
<S>                                                                              <C>            <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                   $    999,533   $    875,892
     Receivables:
            Franchisees                                                                37,956        156,538
            Insurance refunds                                                         191,463             --
            Vendor rebates                                                            253,616        537,250
            Other                                                                     894,983        562,735
     Deferred income taxes (Note 9)                                                   362,633        447,612
     Inventories                                                                      958,354      1,010,631
     Prepaid expenses and deposits                                                    706,306      1,585,384
                                                                                 ------------   ------------
                   Total current assets                                             4,404,874      5,176,042
Property and equipment, at cost:
     Land and buildings                                                               338,800        838,800
     Furniture and equipment                                                       18,170,963     19,775,204
     Leasehold improvements                                                        36,116,489     38,092,084
     Assets under capital leases                                                           --        123,430
                                                                                 ------------   ------------
                                                                                   54,626,252     58,829,518
     Less: Landlord finish-out allowances                                          17,459,166     18,327,050
                                                                                 ------------   ------------
                                                                                   37,167,086     40,502,468
     Less: Accumulated depreciation and amortization                               15,935,445     16,773,112
                                                                                 ------------   ------------
                   Net property and equipment                                      21,231,641     23,729,356
Deferred income taxes (Note 9)                                                      1,796,378        714,265
Goodwill, net                                                                       2,055,620      2,238,276
Other assets                                                                          767,956        819,842
                                                                                 ------------   ------------
                                                                                 $ 30,256,470   $ 32,677,781
                                                                                 ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                            $  7,736,379   $  8,540,398
     Accrued liabilities:
              Compensation                                                          1,542,262      2,771,953
              Taxes, other than income                                                831,125      1,081,659
              Other                                                                 1,717,707      1,600,741
     Current portion of long-term obligations (Note 6)                              1,228,571      1,348,571
                                                                                 ------------   ------------
                        Total current liabilities                                  13,056,043     15,343,322
Deferred credit                                                                       998,509        535,352
Other liabilities                                                                     303,625        260,325
Long-term obligations, net of current portion (Note 6)                              8,682,486      8,439,744
Commitments and contingencies (Note 5 and 12)
                                                                                 ------------   ------------
                        Total Liabilities                                          23,040,663     24,578,743
                                                                                 ------------   ------------

Stockholders' equity (Note 10):
     Preferred stock, $.002 par value, none outstanding                                    --             --
     Common stock, $.002 par value, 4,521,914 and 4,468,265 shares
            outstanding at December 30, 2001 and December 31, 2000,
            respectively                                                                9,044          8,937
     Additional paid-in capital                                                    10,370,359     10,264,218
     Accumulated other comprehensive income (loss), net of tax                       (171,000)            --
     Retained earnings                                                              4,330,646      5,009,906
                                                                                 ------------   ------------
                                                                                   14,539,049     15,283,061
     Treasury stock, at cost 1,521,597 and 1,454,097 shares at
            December 30, 2001 and December 31, 2000, respectively                  (7,323,242)    (7,184,023)
                                                                                 ------------   ------------
                        Total stockholders' equity                                  7,215,807      8,099,038
                                                                                 ------------   ------------
                                                                                 $ 30,256,470   $ 32,677,781
                                                                                 ============   ============
</Table>


See accompanying notes

                                      F-3
<PAGE>


                         EATERIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                   December 30,    December 31, December 26,
                                                                       2001           2000          1999
                                                                   ------------   ------------  ------------
<S>                                                                <C>            <C>           <C>
Revenues:
     Food and beverage sales ....................................  $ 98,324,145   $103,479,815  $ 93,846,076
     Franchise fees and royalties ...............................       541,196        435,381       319,422
     Other ......................................................       617,633        689,791       412,676
                                                                   ------------   ------------  ------------
               Total revenues ...................................    99,482,974    104,604,987    94,578,174

Costs of sales ..................................................    26,845,855     28,318,905    25,840,737
                                                                   ------------   ------------  ------------
                                                                     72,637,119     76,286,082    68,737,437
                                                                   ------------   ------------  ------------

Operating expenses (Note 7) .....................................    61,727,252     63,472,674    57,778,851
Pre-opening costs (Note 2) ......................................       592,000        790,000       691,000
General and administrative expenses .............................     5,835,170      5,805,974     5,968,157
Provision for impairment of long-lived assets (Note 8) ..........       338,695        340,000       300,000
Depreciation and amortization ...................................     4,245,198      3,889,419     3,377,569
Interest expense ................................................       985,759        974,190       776,171
                                                                   ------------   ------------  ------------
                                                                     73,724,074     75,272,257    68,891,748
                                                                   ------------   ------------  ------------

Income (loss) before income taxes ...............................    (1,086,955)     1,013,825      (154,311)

Provision for (benefit from) income taxes (Note 9) ..............      (407,695)       102,957      (116,171)
                                                                    ------------  ------------  ------------

Net income (loss) ...............................................  $   (679,260)  $    910,868  $    (38,140)
                                                                   ============   ============  ============


Net income (loss) per common share (Note 11) ....................  $      (0.23)  $       0.30  $      (0.01)
                                                                   ------------   ------------  ------------

Net income per common share assuming dilution (Note 11) .........  $      (0.23)  $       0.29  $      (0.01)
                                                                   ============   ============  ============
</Table>


See accompanying notes.


                                      F-4
<PAGE>
                         EATERIES, INC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME


<Table>
<Caption>
                                                    OTHER              COMMON STOCK                 TREASURY STOCK
                                                COMPREHENSIVE   ---------------------------   ----------------------------
                                                INCOME (LOSS)     ISSUED          AMOUNT         SHARES          AMOUNT
                                                -------------   ------------   ------------   ------------    ------------

<S>                                             <C>              <C>           <C>             <C>            <C>
Balance, December 27, 1998 ..................             --       4,347,020   $      8,694        384,015    $ (1,758,413)

Issuance of common stock:
     Exercise of stock options ..............             --          30,255             60             --              --
     Employee stock purchase plan ...........             --          30,790             62             --              --
Tax benefit from the exercise of
     non-qualified stock options ............             --              --             --             --              --
Treasury stock acquired (Note 10) ...........             --              --             --      1,095,662      (5,634,318)
Treasury stock issued for acquisition .......             --              --             --        (99,278)        496,010
Net loss ....................................             --              --             --             --              --
                                                ------------    ------------   ------------   ------------    ------------
Other Comprehensive Income ..................             --
Balance, December 26, 1999 ..................                      4,408,065   $      8,816      1,380,399    $ (6,896,721)

Issuance of common stock:
    Exercise of stock options ...............             --          37,030             74             --              --
    Employee stock purchase plan ............             --          23,170             47             --              --
Tax benefit from the exercise of
  non-qualified stock options ...............             --              --             --             --              --
Treasury stock acquired (Note 10) ...........             --              --             --         10,070         (56,650)
Treasury stock acquired from sale of
  assets ....................................             --              --             --         63,328        (230,652)
Net income ..................................             --              --             --             --              --
                                                ------------    ------------   ------------   ------------    ------------
Other Comprehensive Income ..................             --
Balance, December 31, 2000 ..................                      4,468,265   $      8,937      1,454,097    $ (7,184,023)

Issuance of common stock:
    Exercise of stock options ...............             --          14,397             29             --              --
    Employee stock purchase plan ............             --          39,252             78             --              --
Tax benefit from the exercise of
  non-qualified stock options ...............             --              --             --             --              --
Treasury stock acquired (Note 10) ...........             --              --             --         67,500        (139,219)
Derivatives marked to market, net of
  tax (Note 2) ..............................       (171,000)             --             --             --              --
Net loss ....................................       (679,260)             --             --             --              --
                                                ------------    ------------   ------------   ------------    ------------
Other comprehensive income (loss) ...........   $   (850,260)
Balance, December 30, 2001 ..................                      4,521,914   $      9,044      1,521,597    $ (7,323,242)
                                                ============    ============   ============   ============    ============

<Caption>

                                                                 ACCUMULATED
                                                 ADDITIONAL         OTHER
                                                  PAID-IN       COMPREHENSIVE     RETAINED
                                                  CAPITAL       INCOME (LOSS)     EARNINGS          TOTAL
                                                ------------    -------------   ------------    ------------

<S>                                             <C>             <C>             <C>             <C>
Balance, December 27, 1998 ..................   $  9,952,216              --    $  4,248,487    $ 12,450,984

     Issuance of common stock:
     Exercise of stock options ..............         58,319              --              --          58,379
     Employee stock purchase plan ...........         73,544              --              --          73,606
Tax benefit from the exercise of
  non-qualified stock options ...............         30,000              --              --          30,000
Treasury stock acquired (Note 10) ...........             --              --              --      (5,634,318)
Treasury stock issued for acquisition .......             --              --        (111,309)        384,701
Net loss ....................................             --              --         (38,140)        (38,140)
                                                ------------    ------------    ------------    ------------
Other Comprehensive Income
Balance, December 26, 1999 ..................   $ 10,114,079              --    $  4,099,038    $  7,325,212

Issuance of common stock:
    Exercise of stock options ...............         91,325              --              --          91,399
    Employee stock purchase plan ............         54,114              --              --          54,161
Tax benefit from the exercise of
  non-qualified stock options ...............          4,700              --              --           4,700
Treasury stock acquired (Note 10) ...........             --              --              --         (56,650)
Treasury stock acquired from sale of
  assets ....................................             --              --              --        (230,652)
Net income ..................................             --              --         910,868         910,868
                                                ------------    ------------    ------------    ------------
Other Comprehensive Income
Balance, December 31, 2000 ..................   $ 10,264,218              --    $  5,009,906    $  8,099,038

Issuance of common stock:
    Exercise of stock options ...............         19,978              --              --          20,007
    Employee stock purchase plan ............         79,667              --              --          79,745
Tax benefit from the exercise of
  non-qualified stock options ...............          6,496              --              --           6,496
Treasury stock acquired (Note 10) ...........             --              --              --        (139,219)
Derivatives marked to market, net of
  tax (Note 2) ..............................             --        (171,000)             --        (171,000)
Net loss ....................................             --              --        (679,260)       (679,260)
                                                ------------    ------------    ------------    ------------
Other comprehensive income (loss)
Balance, December 30, 2001 ..................   $ 10,370,359    $   (171,000)   $  4,330,646    $  7,215,807
                                                ============    ============    ============    ============
</Table>

See accompanying notes.



                                      F-5
<PAGE>

                         EATERIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                         Year Ended
                                                                          ------------------------------------------
                                                                          December 30,    December 31,  December 26,
                                                                              2001           2000           1999
                                                                          ------------   ------------   ------------
<S>                                                                       <C>            <C>            <C>
Cash flows from operating activities:
      Net income (loss) ................................................  $   (679,260)  $    910,868   $    (38,140)
      Adjustments to reconcile net income (loss) to
            net cash provided by operating activities:
           Depreciation and amortization ...............................     4,245,198      3,889,419      3,377,569
           Provision (benefit) for deferred income taxes ...............      (407,695)       102,957       (116,171)
           (Increase) decrease in operating assets:
                Receivables ............................................      (121,496)       271,392       (403,512)
                Deferred income taxes ..................................      (994,135)       207,294       (508,000)
                Inventories ............................................        52,277        (73,533)       (66,803)
                Prepaid expenses and deposits ..........................       879,078       (905,479)     1,600,670
                Other assets ...........................................        51,886       (495,470)            --
           Increase (decrease) in operating liabilities:
                Accounts payable .......................................      (804,019)     1,505,246      2,568,630
                Accrued liabilities ....................................    (1,363,259)      (218,113)     1,190,229
                Other liabilities ......................................       506,458         59,314       (107,182)
                                                                          ------------   ------------   ------------
           Total adjustments ...........................................     2,041,703      4,343,027      7,535,430
                                                                          ------------   ------------   ------------
           Net cash provided by operating activities ...................     1,365,033      5,253,895      7,497,290
                                                                          ------------   ------------   ------------

Cash flows from investing activities:
      Capital expenditures .............................................    (3,507,259)    (8,776,530)    (7,918,226)
      Landlord finish-out allowances ...................................     1,302,191      2,022,784        813,702
      Net cash payments for restaurant acquisitions ....................            --             --       (320,479)
      Proceeds from the sale of property and equipment .................       752,107        511,825             --
      Proceeds from the sale of notes receivable .......................       115,500             --             --
      Payments received for notes receivable ...........................        14,764          3,597          3,574
      Increase in other assets .........................................            --             --        (94,664)
                                                                          ------------   ------------   ------------
           Net cash used in investing activities .......................    (1,322,697)    (6,238,324)    (7,516,093)
                                                                          ------------   ------------   ------------

Cash flows from financing activities:
      Sales of common stock ............................................        79,745         54,161         73,606
      Payments on long-term obligations ................................    (1,353,398)    (1,228,571)    (1,046,503)
      Borrowings under revolving credit agreement ......................    28,814,170     34,405,000     14,810,829
      Payments under revolving credit agreement ........................   (27,340,000)   (33,705,000)   (12,760,829)
      Borrowings under note payable ....................................            --             --      5,463,333
      Proceeds from issuance of stock on exercise of
            stock options ..............................................        20,007         91,399         58,379
      Repurchase of treasury stock .....................................      (139,219)            --     (5,634,318)
                                                                          ------------   ------------   ------------
           Net cash (used in) provided by financing activities .........        81,305       (383,011)       964,497
                                                                          ------------   ------------   ------------

Net (decrease) increase in cash and cash equivalents ...................       123,641     (1,367,440)       945,694
Cash and cash equivalents at beginning period ..........................       875,892      2,243,332      1,297,638
                                                                          ------------   ------------   ------------
Cash and cash equivalents at end of period .............................  $    999,533   $    875,892   $  2,243,332
                                                                          ============   ============   ============
</Table>


See accompanying notes.


                                      F-6
<PAGE>

                         EATERIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      ORGANIZATION

         Eateries, Inc. (the "Company") was incorporated under the laws of the
State of Oklahoma on June 1, 1984. The Company is engaged in the creation,
design, management and operations of restaurants through Company-owned and
franchised restaurants. The Company's restaurants are located primarily in the
Southwest, Midwest and Southeast regions of the United States. The Company's
restaurants operate under the name Garfield's Restaurant & Pub ("Garfield's"),
Pepperoni Grill, Garcia's Mexican Restaurants ("Garcia's") and Carlos Murphy's.
An analysis of Company-owned and franchised restaurants for the three years in
the period ended December 30, 2001, is as follows:

<Table>
<Caption>
                                            Company         Franchised         Total
                                             Units            Units            Units
                                          ------------     -------------    ------------
<S>                                       <C>              <C>             <C>
At December 27, 1998.................              64                 8              72
     Units opened....................               5                 1               6
     Units closed....................              (3)               --              (3)
     Units acquired..................               3                --               3
                                          -----------      ------------     -----------
At December 26, 1999.................              69                 9              78
     Units opened....................               4                --               4
     Units closed....................              (1)               (1)             (2)
     Units sold......................              (3)               --              (3)
                                          -----------      ------------     -----------
At December 31, 2000.................              69                 8              77
     Units opened....................               4                --               4
     Units closed....................              (5)               (1)             (6)
     Units sold......................              (1)               --              (1)
                                          -----------      ------------     -----------
At December 30, 2001.................              67                 7              74
                                          ===========      ============     ===========
</Table>

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of Eateries,
Inc. and its wholly owned subsidiaries, Fiesta Restaurants, Inc. and Roma Foods,
Inc. All significant intercompany transactions and balances have been
eliminated.

RECLASSIFICATIONS

         Certain reclassifications have been made to prior year financial
statements to conform to current year presentation. These reclassifications have
no effect on previously reported net income or stockholders' equity.

FISCAL YEAR

         The Company's fiscal year is a 52/53-week year ending on the last
Sunday in December. The Company operated 52, 53 and 52-week fiscal years for the
years ended December 30, 2001, December 31, 2000 and December 26, 1999,
respectively.

CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include certain highly liquid debt
instruments with a maturity of three months or less when purchased.

OTHER RECEIVABLES

         Other receivables included on the consolidated balance sheets consist
primarily of banquet receivables which are recorded at the time the service is
provided and amounts due the Company for reimbursement of legal services
provided in conjunction with a legal suit filed by the Company against a food
purveyor (See Note 12).


                                      F-7
<PAGE>

INVENTORIES

         Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of food and beverages.

LANDLORD FINISH-OUT ALLOWANCES

         Amounts received or receivable from landlords for reimbursement of
improvements to leased facilities are recorded as a reduction of the costs
incurred by the Company for property and equipment.

DEPRECIATION AND AMORTIZATION

         Property and equipment (which includes assets under capital leases) and
landlord finish-out allowances are stated at cost (or amounts received with
respect to landlord finish-out allowances) and are depreciated and amortized
over the lesser of the estimated useful lives of the assets or the remaining
term of the leases using the straight-line method. Estimated useful lives are as
follows:

<Table>
<S>                                                 <C>
Buildings..................................         15-30 Years
Furniture and equipment....................          3-15 Years
Leasehold improvements.....................          3-15 Years
Landlord finish-out allowances.............          8-15 Years
</Table>

GOODWILL

         The Company records goodwill in connection with acquisitions. Goodwill
is recorded in the amount of the purchase price in excess of the fair value of
the assets acquired and amortized over twenty years. The amount of Goodwill
presented on the Consolidated Balance Sheets is net of accumulated amortization
of approximately $506,000 and $415,000 for 2001 and 2000.

REVENUE

         Revenue from food and beverage sales is recorded at the date services
are provided. Typically all customers pay at the time the service is provided,
however, due to the company opening a new banquet facility, the company allows
certain parties to pay in arrears. The revenue from banquets is also recorded
when the service is provided and any uncollected amounts are recorded to other
receivables included on the Consolidated Balance Sheets.

ADVERTISING COSTS

         Costs incurred in connection with advertising and marketing of the
Company's restaurants are expensed as incurred. Such costs amounted to
$3,311,000, $3,199,000 and $2,868,800 in 2001, 2000 and 1999 and are included in
Operating expenses on the Consolidated Statements of Income.

PRE-OPENING COSTS

         The costs related to the opening of restaurant locations are expensed
when incurred.

PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS

         The Company's restaurants are reviewed on an individual restaurant
basis for indicators of impairment whenever events or circumstance indicate that
the carrying value of its restaurants may not be recoverable. The Company's
primary test for an indicator of potential impairment is operating losses. In
order to determine whether an impairment has occurred, the Company estimates the
future net cash flows expected to be generated from the use of its restaurants
and the eventual disposition, as of the date of determination, and compares such
estimated future cash flows to the respective carrying amounts. Those
restaurants, which have carrying amounts in excess of estimated future cash
flows, are deemed impaired. The carrying value of these restaurants is adjusted
to an estimated fair value by discounting the estimated future cash flows
attributable to such restaurants using a discount rate equivalent to the rate of
return the Company expects to achieve from its investment in newly-constructed
restaurants. The excess is charged to expense and cannot be reinstated. (See
Note 8.)


                                      F-8
<PAGE>

INCOME TAXES

         The Company is subject to Federal, state and local income taxes.
Deferred income taxes are provided on the tax effect of presently existing
temporary differences, existing net operating loss and tax credit carryforwards.
The tax effect is measured using the enacted marginal tax rates and laws that
will be in effect when the differences and carryforwards are expected to be
reversed or utilized. Temporary differences consist principally of depreciation
caused by using different lives for financial and tax reporting, the expensing
of smallwares when incurred for tax purposes while such costs are capitalized
for financial purposes and the expensing of costs related to restaurant closures
and other disposals for financial purposes prior to being deducted for tax
purposes.

DEFERRED CREDIT

         Certain of the Company's long-term noncancellable operating leases for
restaurant and corporate facilities include scheduled base rental increases over
the term of the lease. The total amount of the base rental payments is charged
to expense on the straight-line method over the term of the lease. The Company
has recorded a deferred credit to reflect the net excess of rental expense over
cash payments since inception of the leases.

FRANCHISE ACTIVITIES

         The Company franchises and licenses the Garfield's and Garcia's
concepts to restaurant operators. As of December 30, 2001 and December 31, 2000,
seven and eight restaurant units, respectively, were operating under franchise
and license agreements. In July 1999, the Company acquired three of its
franchised Garfield's. As a result of this transaction, the system includes six
franchised Garfield's. The initial non-refundable franchise fee paid to the
Company is recognized as income in the year received. The franchisor provides
initial services to the franchisee in the selection of a site, approval of
architectural plans, assistance in the selection of equipment for the
restaurant, distribution of operations manuals and training of franchisee's
personnel prior to the opening of the restaurant. The Company recognized
$218,000, $161,000 and $35,000 of initial franchise fees for franchised
restaurants during 2001, 2000, and 1999, respectively.

         Continuing royalties are recognized as revenue based on the terms of
each franchise agreement, generally as a percentage of sales of the franchised
restaurants. During 2001, 2000 and 1999, the Company recognized $323,000,
$274,000 and $284,000, respectively, of fees from continuing royalties.

         Garfield's franchisees are required to remit an amount equal to 1/2% of
their sales to the Garfield's Creative Marketing Fund. The franchisees'
payments, which were $43,000, $39,000 and $44,000, during 2001, 2000 and 1999,
respectively, are combined with the franchisor's expenditures to purchase
services for creative advertising and design, market research and other items to
maintain and further enhance the Garfield's concept.

         Franchisee receivables at December 30, 2001 and December 31, 2000 are
comprised primarily of uncollected continuing royalties, which are generally
unsecured; however, the Company has not experienced significant credit losses in
prior years and is not aware of any significant uncollectible amounts at
December 30, 2001.

CAPITALIZATION OF INTEREST

      Interest attributed to funds used to finance restaurant construction
projects is capitalized as an additional cost of the related assets.
Capitalization of interest ceases when the related projects are substantially
complete. The Company has capitalized approximately $44,000, $71,000 and $47,000
of interest costs during 2001, 2000 and 1999, respectively. These costs are
included in leasehold improvements in the accompanying balance sheets.

STOCK-BASED COMPENSATION

         As permitted by SFAS 123, "Accounting for Stock-Based Compensation."
the Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under SFAS 123, requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.


                                      F-9
<PAGE>

NET INCOME PER COMMON SHARE

         Basic Earnings Per Share ("EPS") includes no dilution and is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS is computed by
dividing net income available to common stockholders by the sum of the weighted
average number of common shares outstanding for the period plus common stock
equivalents.

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

STATEMENTS OF CASH FLOWS

         Interest of $991,301, $978,000 and $775,000 was paid for 2001, 2000 and
1999, respectively.

         For 2001, 2000 and 1999, the Company had the following non-cash
investing and financing activities.

<Table>
<Caption>
                                                                                       Fiscal Year
                                                                             ---------------------------
                                                                             2001       2000        1999
                                                                             ----       ----        ----
<S>                                                                       <C>        <C>         <C>
Decrease in current receivables
      for landlord finish-out allowances ...............................  $  10,000  $      --   $      --
Cash paid for income taxes .............................................    203,141         --     149,866
Increase Stockholder Equity as a result of the  issuance of
      treasury stock related to restaurant acquisition .................         --         --     384,702
Decrease in stockholder's equity as a result of the receipt of
      treasury stock related to restaurant sale ........................         --   (230,652)         --
Acquisition of treasury stock upon exercise of
      stock options (Note 10) ..........................................         --     56,650          --
Increase in additional paid-in capital as a result
      of tax benefits from the exercise of non-qualified stock
      options ..........................................................      6,496      4,700      30,000
Asset write-offs related to restaurant
      closures and other disposals .....................................    338,695    222,988      90,822
Assumption of liabilities related to restaurant acquisition ............         --         --     263,883
Decrease in goodwill as a result of sale of restaurants ................         --    230,651          --
</Table>

FAIR VALUES OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
estimating the fair values of financial instruments:

         Cash and cash equivalents, accounts receivable, deposits, accounts
payable and accrued liabilities - The carrying amounts reported in the
consolidated balance sheets approximate fair values because of the short
maturity of these instruments.

         Long-term obligations - The revolving credit agreement and term loan,
which represent the material portion of long-term obligations in the
accompanying consolidated balance sheets, bear interest at a variable rate,
which is adjusted quarterly. Therefore, the carrying values for these borrowings
approximate their fair values.

ACCOUNTING PRONOUNCEMENTS

In June 1999, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and for Hedging Activities", with an effective date for periods
beginning after June 15, 2000. In July 2000, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB No. 133". As a result of SFAS No. 137, adoption of SFAS
No. 133 is now required for financial statements for periods beginning after
June 15, 2001. In June 2001, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities', which amends the
accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and hedging activities. SFAS No. 133 sweeps in a broad population of
transactions and


                                      F-10
<PAGE>
changes the previous accounting definition of a derivative instrument. Under
SFAS No. 133, every derivative instrument is recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedging accounting criteria are met. The Company has reviewed
various contracts, identifying those which meet the criteria as set forth in
SFAS No. 133 and SFAS No. 138. The Company adopted these new standards effective
January 1, 2001. The adoption of these new standards did not have a material
impact on the Company's financial position or results of operation.

      In July 2001, the Financial Accounting Standards Board issued SFAS No. 141
"Business Combinations," which establishes financial accounting and reporting
for business combinations and supersedes APB Opinion No. 16, Business
Combinations, and FASB Statement No. 38, Accounting for Preacquisition
Contingencies of Purchased Enterprises. It requires that all business
combinations within the scope of this Statement be accounted for using only the
purchase method. The provisions of this Statement apply to all business
combinations initiated after June 30, 2001, and also applies to all business
combinations accounted for using the purchase method for which the date of
acquisition is September 30, 2001, or later. The Company adopted SFAS No. 141
effective September 30, 2001. As of the date of this report, the Company has not
engaged in a business combination since implementing SFAS No. 142.

      In July 2001, the Financial Accounting Standards Board issued SFAS No. 142
"Goodwill and Other Intangible Assets," which establishes financial accounting
and reporting for acquired goodwill and other intangible assets and supersedes
APB Opinion No. 17, "Intangible Assets". It addresses how intangible assets that
are acquired individually or with a group of other assets (but not those
acquired in a business combination) should be accounted for in financial
statements upon their acquisition, and after they have been initially recognized
in the financial statements. The provisions of this Statement are effective
starting with fiscal years beginning after December 15, 2001. The Company
adopted SFAS No. 142 effective December 31, 2001. The adoption of this standard
did not have a material impact on the Company's financial position or results of
operation.

      In August 2001, the Financial Accounting Standards Board issued SFAS No.
144 "Accounting for the Impairment or Disposal of Long-Lived Assets". This
statement addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. This statement supersedes SFAS No. 121,
"Accounting for Impairment of Long-Lived Assets to be Disposed Of." This
statement requires (1) recognition of an impairment loss only if the carrying
amount of a long-lived asset is not recoverable from its undiscounted future
cash flows and (2) measurement of an impairment loss as the difference between
the carrying amount and the fair value of the asset. The Company adopted the
statement December 31, 2001 with no material impact on the Company's results of
operations or financial position.

(3)   RESTAURANT ACQUISITIONS

      In May 1999, the Company acquired all of the outstanding common stock of
K & L Restaurants, Inc. for 36,101 shares of the Company's common stock and
$125,000 in cash. K & L Restaurants, Inc. owns and operates Bellini's, a
restaurant located on Waterford Boulevard in Oklahoma City, Oklahoma. The
acquisition has been accounted for under the purchase method. Pro forma
operating results for the year ended December 26, 1999, assuming that the
acquisition had been made on the first day of the respective years, would not be
materially different than the results reported.

      In May 1999, the company acquired all of the outstanding common stock of
B & C Development Company for 36,101 shares of the Company's common stock and
$125,000 in cash. B & C Development Company owns and operates Tommy's
Italian-American Grill located at North Park Mall in Oklahoma City, Oklahoma.
The acquisition has been accounted for under the purchase method. Pro forma
operating results for the year ended December 26, 1999, assuming that the
acquisition had been made on the first day of the respective years, would not be
materially different than the results reported.

      In May 1999, the Company acquired certain assets of Bellini's Ristorante
and Grill of Edmond, LLC for 27,076 shares of the Company's common stock.
Bellini's Ristorante and Grill of Edmond, LLC owns and operates Bellini's, a
restaurant located in Edmond, Oklahoma. The acquisition has been accounted for
under the purchase method. Pro forma operating results for the year ended
December 26, 1999, assuming that the acquisition had been made on the first day
of the respective years, would not be materially different than the results
reported.


                                      F-11
<PAGE>

(4) RESTAURANT DISPOSITIONS

      In December 2000, the Company sold the two Bellini's Ristorante and
Grill's and one Tommy's Italian-American Grill, located in the Oklahoma City,
Oklahoma area, back to their founder, Tommy Byrd, for $500,000 and 63,628 shares
of the Company's Common Stock. No gain or loss was recognized in the sale. The
Company retained the rights to the name and trademark "Bellini's Ristorante and
Grill" outside of Oklahoma and Texas.

      In January 2001, the Company sold one Garcia's Mexican Restaurant located
in Davie, Florida. The amount unrecoverable of $79,000 was previously charged
off under SFAS 121 provisions in 2000. In April 2001, the Company sold one
Garcia's Mexican Restaurant located in Pleasant Hill, California. The amount
unrecoverable of $248,000 was previously charged off under SFAS 121 in 2000. In
July 2001, the Company terminated the lease on one under-performing Garfield's
Restaurant & Pub in Anderson, South Carolina resulting in a charge to restaurant
closure expense of approximately $36,000. Leases on four Company-owned
restaurants that expired in January (2), May and June 2001 were not renewed,
resulting in the closing of the locations. A charge of approximately $242,000
was recorded to restaurant closure expense. In November 2001, the Company sold a
building to its lessee in Newark, Ohio, the Golden Dragon Chinese Restaurant. A
charge of approximately $54,000 was recorded to restaurant closure expense.

(5) COMMITMENTS

      The Company leases the majority of its restaurant facilities and its
corporate office under operating leases with initial terms expiring at various
dates through the year 2015. Certain leases contain renewal options ranging from
five to ten years. Most, but not all, leases require the Company to be
responsible for the payment of taxes, insurance and/or maintenance and include
percentage rent and fixed rent escalation clauses. In the normal course of
business, the Company may grant a landlord lien on certain personal property
upon an event of default by the Company. At December 30, 2001, the remaining
minimum rental commitments under long-term noncancellable leases, excluding
amounts related to taxes, insurance, maintenance and percentage rent, are as
follows:

<Table>
<S>                                                          <C>
2002..............................................           $ 5,938,000
2003..............................................             5,824,000
2004..............................................             5,080,000
2005..............................................             4,465,000
2006..............................................             3,949,000
Thereafter........................................            13,080,000
                                                             -----------
Total minimum rental commitments..................           $38,336,000
                                                             ===========
</Table>

      The components of rent expense for noncancellable operating leases are
summarized as follows:

<Table>
<Caption>
                                                               Fiscal Year
                                            ---------------------------------------------------
                                                2001              2000               1999
                                            --------------    --------------    ---------------
<S>                                           <C>               <C>                <C>
Minimum rents..........................       $ 6,222,000       $ 6,133,000        $ 5,790,000
Percentage rents.......................           439,000           542,000            361,000
                                              -----------       -----------        -----------
                                              $ 6,661,000       $ 6,675,000        $ 6,151,000
                                              ===========       ===========        ===========
</Table>

(6) LONG-TERM OBLIGATIONS

      Long-term obligations consist of the following:

<Table>
<Caption>
                                                                          December 30,        December 31,
                                                                              2001                2000
                                                                        ---------------     ---------------
<S>                                                                     <C>                 <C>
Revolving line of credit with a bank, variable interest at the             $ 4,974,170         $ 3,500,000
greater of three month London Interbank Offered Rates ("LIBOR")
plus 2.50% or 5.00% (5.00% at December 30, 2001)..................
Term loan with a bank, variable interest at the three-month
    LIBOR plus 2.50% (4.63% at December 30, 2001) ................           4,934,917           6,286,345
Bank Loan , Interest fixed at  10% at December 30, 2001...........               1,970               1,970
                                                                           -----------         -----------
                                                                             9,911,057           9,788,315
Less current portion..............................................          (1,228,571)         (1,348,571)
                                                                           -----------         -----------
                                                                           $ 8,682,486         $ 8,439,744
                                                                           ===========         ===========
</Table>


                                      F-12
<PAGE>

      Maturities of long-term obligations at December 30, 2001 are:

<Table>
<S>                                        <C>
                        2002.........      1,228,571
                        2003.........      6,202,741
                        2004.........      2,479,745
                                          ----------
                                          $9,911,057
                                          ==========
</Table>

      In February 1999, the Company entered into a new credit facility with a
bank in the aggregate amount of $14,600,000, of which a maximum of $6,000,000 is
available to the Company under a revolving line of credit and $8,600,000 was
available to the Company under a term loan. Certain proceeds from the term loan
(approximately $5.4 million) were used to repurchase $1,056,200 shares of the
Company's common stock (see Note 10). The balance of the proceeds under the term
loan (approximately $3.2 million) and the proceeds under the revolving line of
credit were used to retire indebtedness under the Company's existing loan
agreement. The revolving line of credit expires in March 2003 and initially
bears interest at the greater of a floating rate of three month LIBOR plus 2.50%
or 5.00%, which is reset quarterly. The term loan also provides for an initial
floating rate of interest equal to three month LIBOR plus 2.50% and requires
quarterly installments of principal and interest in the amount necessary to
fully amortize the outstanding principal balance over a seven-year period, with
a final maturity on the fifth anniversary of the note. The term loan converts to
a five-year amortization schedule if the Company's debt coverage ratio, as
defined in the loan agreement, exceeds a certain level. Additionally, the
floating interest rate on both facilities is subject to changes in the Company's
ratio of total loans and capital leases to net worth. Under the terms of these
notes, the Company's minimum floating rate is LIBOR plus 1.25% and the maximum
floating rate is LIBOR plus 2.50%. Borrowings under this loan agreement are
unsecured. The loan agreement does contain certain financial covenants and
restrictions. For the year ended December 31, 2000, the Company violated a
certain financial commitment relating to a limit on capital expenditures. The
bank waived the violation of this covenant. As of the date of this report, the
Company is in compliance with these covenants and restrictions.

      In March 2001, the Company entered into an additional credit facility with
a bank in the amount of $1,000,000 which is available to the Company under a
revolving line of credit. The credit facility bears interest at the greater of
the prime rate of interest or 5.00% and is set monthly. There is a one-quarter
of a percent (0.25%) non-use fee related to this facility. As of December 30,
2001 the Company had no outstanding borrowings under this facility.

      In November 1997, the Company entered into an interest rate swap agreement
with a bank to hedge its risk exposure to potential increases in LIBOR. This
agreement has a term of five years and an initial notional amount of $9,500,000.
The notional amount declines quarterly over the life of the agreement on a
seven-year amortization schedule assuming a fixed interest rate of 7.68%. Under
the terms of the interest rate swap agreement, the Company pays interest
quarterly on the notional amount at a fixed rate of 7.68% and receives interest
quarterly on the notional amount at a floating rate of three-month LIBOR plus
1.25%. The notional amount as of December 30, 2001 was $4,695,102. The
unrealized gain as of December 31, 2000 and December 26, 1999 was immaterial.
The unrealized loss as of December 30, 2001 was $171,158 and is included in
Other Comprehensive Income according to the provisions of SFAS No. 133.

(7) RELATED PARTY TRANSACTIONS

      An affiliate of the Company is providing marketing and advertising
services. Total costs incurred for such services (primarily radio, television
and print media) were approximately $1,297,000, $1,056,000 and $1,333,000 in
2001, 2000 and 1999, respectively. A director of the Company is a partner in a
law firm that provides legal services to the Company. During 2001, 2000 and
1999, the Company incurred approximately $184,000, $208,000 and $224,778,
respectively, in legal services with the firm. The Company leases two buildings
from affiliates. During 2001, 2000 and 1999 the lease payments related to these
buildings were $214,000, $214,000 and $80,400, respectively.

(8) PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS

      The Company's restaurants are reviewed on an individual restaurant basis
for indicators of impairment whenever events or circumstance indicate that the
carrying value of its restaurants may not be recoverable. The Company's primary
test for an indicator of potential impairment is operating losses. In order to
determine whether an impairment has occurred, the Company estimates the future
net cash flows expected to be generated from the use of its restaurants and the
eventual disposition, as of the date of determination, and compares such
estimated future cash flows to the respective carrying amounts. Those
restaurants, which have carrying amounts in excess of estimated future cash
flows, are deemed impaired. The carrying value of these restaurants is adjusted
to an estimated fair value by discounting the estimated future cash flows
attributable to such restaurants using a discount


                                      F-13
<PAGE>
rate equivalent to the rate of return the Company expects to achieve from its
investment in newly-constructed restaurants. The excess is charged to expense
and cannot be reinstated.

      Considerable management judgment and certain significant assumptions are
necessary to estimate future cash flows. Significant judgments and assumptions
used by the Company in evaluating its assets for impairment include, but may not
be limited to: estimations of future sales levels, cost of sales, direct and
indirect costs of operating the assets, the length of time the assets will be
utilized and the Company's ability to utilize equipment, fixtures and other
moveable long-lived assets in other existing or future locations. In addition,
such estimates and assumptions include anticipated operating results related to
certain profit improvement programs implemented by the Company during 2001, 2000
and 1999 as well as the continuation of certain rent reductions, deferrals, and
other negotiated concessions from certain landlords. Actual results could vary
significantly from management's estimates and assumptions and such variance
could result in a change in the estimated recoverability of the Company's
long-lived assets. Accordingly, the results of the changes in those estimates
could have a material impact on the Company's future results of operations and
financial position.

      During 2001, 2000 and 1999, the Company recorded a $339,000, $340,000 and
$300,000, respectively as a provision for impairment of long-lived assets.

(9)  INCOME TAXES

      The provision (benefit) for income taxes consists approximately of the
following (see Note 2):

<Table>
<Caption>
                                               2001        2000       1999
                                            ---------   ---------   ---------
<S>                                         <C>         <C>         <C>
      Current:
          Federal ........................  $ 232,000   $ (15,000)  $      --
          State ..........................     43,000      91,000          --
                                            ---------   ---------   ---------
                                              275,000      76,000          --
                                            ---------   ---------   ---------

      Deferred:
          Federal ........................   (575,000)     23,000    (110,000)
          State ..........................   (108,000)      4,000      (6,000)
                                            ---------   ---------   ---------
                                             (683,000)     27,000    (116,000)
                                            ---------   ---------   ---------
      Provision for income taxes .........  $(408,000)  $ 103,000   $(116,000)
                                            =========   =========   =========
</Table>

      The components of deferred tax assets and liabilities consist
approximately of the following:

<Table>
<Caption>
                                                                   December 30, December 31,
                                                                      2001         2000
                                                                   -----------  ------------
<S>                                                                <C>         <C>
Deferred tax assets:
    Net operating loss carryforwards .............................  $  743,000  $  399,000
    General business tax credits .................................   1,860,000   1,860,000
    Alternative minimum tax credit ...............................     583,000     772,000
    Reserve for restaurant closing ...............................      48,000     166,000
    Accrued vacation .............................................      72,000      62,000
    Gift certificate liability ...................................      81,000      52,000
    Deferred rent credit .........................................      48,000      55,000
    Other ........................................................      95,000     107,000
                                                                    ----------  ----------
       Total deferred tax assets .................................   3,530,000   3,473,000

Deferred tax liabilities:
    Smallwares expensed for tax purposes .........................     738,000     872,000
    Tax depreciation in excess of financial depreciation .........     462,000   1,297,000
    Tax amortization in excess of financial amortization .........      83,000      72,000
    Other ........................................................      88,000      70,000
                                                                    ----------  ----------
       Total deferred tax liabilities ............................   1,371,000   2,311,000
                                                                    ----------  ----------
    Net deferred tax assets ......................................   2,159,000   1,162,000
                                                                    ==========  ==========
</Table>


                                      F-14
<PAGE>


      At December 30, 2001, the Company has recorded a benefit for its deferred
tax assets of $3,530,000. Management believes that $1,371,000 of these assets
will be recognized through the reversal of existing taxable temporary
differences with the remainder to be recognized through realization of future
income. It is management's opinion based on the historical trend of normal and
recurring operating results, present store development, and forecasted operating
results that it is more likely than not that the Company will realize the net
deferred tax assets. Net operating loss carryforwards do not begin to expire
until 2003 and general business tax credits until 2009. While management is not
presently aware of any adverse matters, it is possible that the Company's
ability to realize the deferred income tax assets could be impaired if there are
significant future exercises of non-qualified stock options or the Company were
to experience declines in sales and/or profit margins as a result of loss of
market share, increased competition or other adverse general economic
conditions.

      A reconciliation of the provision (benefit) for income taxes follows:

<Table>
<Caption>
                                                                         Fiscal Year
                                                              ---------------------------------
                                                                2001         2000       1999
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
      Expected tax provision at 34% ........................  $(369,000)  $ 345,000   $ (52,000)
      Permanent differences ................................      4,000      26,000      20,000
      State tax provisions, net of federal benefit .........    (43,000)     41,000      (6,000)
      Tax effect of general business tax credits ...........         --    (309,000)   (265,000)
      Other, net ...........................................         --          --     187,000
                                                              ---------   ---------   ---------
      Provision  (benefit) for income taxes ................  $(408,000)  $ 103,000   $(116,000)
                                                              =========   =========   =========
</Table>

      The Company estimates that at December 30, 2001, the federal tax net
operating loss carryforward was approximately $651,000 which is available for
utilization in various years through 2011.

(10)  STOCKHOLDERS' EQUITY

      The Company has authorized 10,000,000 shares of $.002 par value preferred
stock. None of the preferred stock has been issued. The rights, preferences and
dividend policy have not been established and are at the discretion of the
Company's Board of Directors.

      The Company has authorized 20,000,000 shares of common stock at a par
value of $.002 per share.

      In May 1989, the Company's shareholders approved the Eateries, Inc.
Omnibus Equity Compensation Plan ("the Plan"), which was amended in June 1994 by
approval of the shareholders. The Plan consolidated the Company's equity based
award programs, which are described as follows:

DIRECTOR OPTION PLAN

      Non-qualified stock options granted and outstanding include 460,000
director options. Under the Plan, each director receives options to purchase
50,000 shares of common stock upon initial election to the Board of Directors.
These options vest over a five-year period at 20% per year and expire five years
from the date vested (last expiring in 2007). Any director who has served as a
director of the Company for five years, upon election for any additional terms,
shall be granted an option to purchase 10,000 shares of common stock for each
additional year elected. These options fully vest after one year of additional
service by the director and expire five years from the date vested (last
expiring in 2006).


                                      F-15
<PAGE>
MANAGEMENT OPTIONS

      Non-qualified stock options granted and outstanding include 515,500
management options, which are vested over three- to five-year periods and expire
five years from the date vested (last expiring in 2009). A summary of stock
option activity under the Plan is as follows:

<Table>
<Caption>
                                                                                                Weighted
                                                                     Number    Exercise Price    Average
                                                                    of Shares    Per Share    Exercise Price
                                                                    --------   -------------- --------------
<S>                                                                  <C>       <C>    <C>     <C>
Outstanding at December 26, 1999 (of which approximately
    663,427 options are exercisable at weighted average
    prices of $3.43) .............................................   899,437   $1.00  $6.88       $3.38
                                                                    --------   -----  -----       -----
Granted ..........................................................   169,500   $2.34  $4.00       $2.81
Options exercised:
    Director .....................................................    (7,030)  $1.00  $1.00       $1.00
    Management ...................................................   (30,000)  $2.81  $2.81       $2.81
    Forfeited ....................................................   (81,000)  $3.25  $6.00       $4.46
                                                                    --------   -----  -----       -----
Outstanding at December 31, 2000 (of which approximately
    639,397 options are exercisable at weighted average
    prices of $3.36) .............................................   950,897   $1.00  $6.88       $3.22
                                                                    --------   -----  -----       -----
Granted ..........................................................   240,000   $2.13  $3.03       $2.57
Options exercised:
   Director ......................................................   (11,397)  $1.00  $1.00       $1.00
    Management ...................................................    (3,000)  $2.88  $2.88       $2.88
    Forfeited ....................................................  (201,500)  $2.63  $4.13       $3.26
                                                                    --------   -----  -----       -----
Outstanding at December 30, 2001 (of which approximately
839,500 options are exercisable at weighted average
prices of $2.39) .................................................   962,000   $2.13  $6.88       $3.08
                                                                    ========   =====  =====       =====
</Table>

      As of December 30, 2001, the Plan provides for issuance of options up to
2,760,032 shares and has 312,366 shares of common stock reserved for future
grant under the Plan.

RESTRICTED MANAGEMENT OPTIONS

      As of December 30, 2001 and December 31, 2000, there were 210,000
restricted stock options (not granted under the Plan) which had original vesting
dates from 1999 to 2004 and expire five to eight years from the date vested
(last expiring in 2009). Certain options include an acceleration feature, which
allowed for all or a portion of the options to vest in 2000, based on certain
performance criteria. Based on these performance criteria, 60,000 of these
options vested in 2000. A summary of restricted stock option activity is as
follows:

<Table>
<Caption>
                                                                                                                  Weighted
                                                                         Number            Exercise Price          Average
                                                                        of Shares            Per Share         Exercise Price
                                                                        ----------        ---------------      --------------
<S>                                                                     <C>               <C>       <C>        <C>
Outstanding at December 31, 2000 and December 26, 1999 (of
   which 20,000 options are exercisable at a price of $3.13 per
   option share and 60,000 are exercisable at a price of $6.00 per
   option share) .....................................................    170,000          $3.13     $6.00          $5.66
 Granted..............................................................    150,000          $2.50     $2.50          $2.50
 Forfeited............................................................   (110,000)        $3.13     $6.00          $5.48
                                                                         ========          =====     =====          =====
Outstanding at December 30, 2001 (of which 60,000 options are
   exercisable at a price of $2.50 per option share and 60,000 are
   exercisable at a price of $6.00 per option share) .................    210,000          $2.50     $6.00          $3.50
                                                                         ========          =====     =====          =====
</Table>


                                      F-16
<PAGE>

EMPLOYEE STOCK PURCHASE PLAN

      In June 1994, the Company's shareholders approved the Employee Stock
Purchase Plan under the Company's Omnibus Equity Compensation Plan. The Employee
Stock Purchase Plan enables substantially all employees to subscribe to shares
of common stock on an annual offering date at a purchase price of 85% of the
fair market value of the shares on the offering date or, if lower, 85% of the
fair market value of the shares on the exercise date, which is one year from the
annual offering date. A maximum of 200,000 shares are authorized for
subscription over the ten-year term of the plan (40,000 shares reserved for
issuance at December 30, 2001, for the offering period ending on November 30,
2001). During 2001, 2000 and 1999, 39,252, 23,170 and 30,790 shares,
respectively, were issued under the Plan.

STOCK BONUS PLAN

      The Plan provides for up to 200,000 shares of stock to be awarded to
non-executive employees at the Compensation Committee's discretion over
specified future periods of employment. A total of 179,039 shares have been
issued under the Plan leaving 20,961 shares available for issuance. No shares
were issued during 2001, 2000 or 1999.

TREASURY STOCK TRANSACTIONS

      As provided for in each stock option agreement, option holders can satisfy
amounts due for the exercise price and applicable required withholding taxes on
the exercise by delivery to the Company shares of common stock having a fair
market value equal to such amounts due to the Company. During 2000 the Company
acquired 10,070 common shares, respectively, in lieu of cash for such amounts
due to the Company related to the exercise of stock options.

PRO FORMA INFORMATION FOR STOCK OPTIONS

      Following are pro forma net income and earnings per share as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions for 2001, 2000 and 1999,
respectively: risk-free interest rates of 4.72%, 4.85% and 6.51% a dividend
yield of 0%; volatility factors of the expected market price of the Company's
common stock of .45%, .90 and .65 and a weighted average expected life of the
options of 7.5 years. The weighted average grant date fair value of options
issued in 2001, 2000 and 1999 was $1.49, $2.12 and $1.88, respectively.

      The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options and stock purchase plan
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options and stock purchase plan.

      For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<Table>
<Caption>
                                                                      2001               2000                1999
                                                                  --------------     -------------       ------------
<S>                                                               <C>                <C>                 <C>
Pro forma net income (loss)................................       $ (1,044,624)          $625,823          $(373,531)
Pro forma net income (loss) per common share...............       $      (0.35)          $   0.21          $   (0.12)
Pro forma net income (loss) per common share
    assuming dilution......................................       $      (0.35)          $   0.02          $   (0.12)
</Table>


                                      F-17
<PAGE>


STOCK REPURCHASES

      In April 1997, the Company's Board of Directors authorized the repurchase
of up to 200,000 shares of the Company's common stock. In July 1997, an
additional 200,000 shares were authorized for repurchase. In 1997, the Company
purchased 55,100 shares for an aggregate purchase price of approximately
$160,000. In 1999, an additional 35,700 shares were repurchased for an aggregate
purchase price of approximately $182,000. In 2000, an additional 39,462 shares
were repurchased for an aggregate purchase price of approximately $214,000. In
2001, an additional 67,500 shares were purchased for an aggregate purchase price
of approximately $139,000.

      In February 2000, the Company's Board of Directors authorized the
repurchase of 1,056,200 shares of its common stock from Astoria Capital
Partners, L.P., Montavilla Partners, L.P., and MicroCap Partners L.P.
("Sellers") for a purchase price of $5.125 per share or an aggregate purchase
price of $5,413,025. The shares purchased from the Sellers represented 26.7% of
the outstanding common stock of the Company, prior to the transaction. The
purchase price was financed by the Company through a term loan with a bank (See
Note 6).

STOCK PUT AGREEMENTS

      In April 1997, the Company entered into stock put agreements with two of
its executive officers (who also serve on the Company's Board of Directors).
Under the agreements, in the event of the officer's death while an employee of
the Company, their respective estate or other legal representative has the right
(but not the obligation) to compel the Company to purchase all or part of the
common stock owned by or under stock option agreements with the deceased officer
or the members of their immediate families (i.e. spouse or children) or
controlled by any of them through trusts, partnership corporations or other
entities on the date of their death. The per share purchase price payable by the
Company for common stock purchased under the agreements is the greater of the
highest closing stock price during the 60 days preceding the officer's death or
two times the net book value per share as of the last day of the calendar month
immediately preceding the officer's death. In any event, the total purchase
price cannot exceed the proceeds payable to the Company from the key man life
insurance policy maintained on the life of the respective officer. The maximum
commitment as of the date of this report is $5,518,000.

(11) EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share:

<Table>
<Caption>
                                               2001         2000        1999
                                           ----------   -----------  -----------
<S>                                        <C>          <C>          <C>
Numerator:
     Net income .........................  $ (679,260)  $   910,868  $   (38,140)
                                           ==========   ===========  ===========

Denominator:
    Denominator for basic
      earnings per share-
      weighted average shares
      outstanding .......................   2,960,999     3,044,195    3,151,279

Dilutive effect of nonqualified
      stock options .....................          --       100,320           --
                                           ----------   -----------  -----------

Denominator for diluted
     earnings per share .................   2,960,999     3,144,515    3,151,279
                                           ==========   ===========  ===========

Basic earnings per share ................  $    (0.23)  $      0.30  $     (0.01)
                                           ==========   ===========  ===========

Diluted earnings per share ..............  $    (0.23)  $      0.29  $     (0.01)
                                           ==========   ===========  ===========
</Table>

      As of December 30, 2001 and December 26, 1999, there were outstanding
options and warrants to purchase 130,000 and 227,500 shares of common stock,
respectively, at prices ranging from $6.00 per share to $6.88 per share, which
were not included in the computation of diluted earnings per share because their
effect would have been anti-dilutive. Dilutive earnings per share were
equivalent to basic earnings per share in 2001 and 1999 due to the net loss for
the year causing the impact of options and warrants to be anti-dilutive.


                                      F-18
<PAGE>

(12) CONTINGENCIES

       In the ordinary course of business, the Company is subject to legal
actions and complaints. In the opinion of management, based in part on the
advice of legal counsel, and based on available facts and proceedings to date,
the ultimate liability, if any, arising from such legal actions currently
pending will not have a material adverse effect on the Company's financial
position or future results of operations.

(13) LEGAL PROCEEDINGS

         In 1999 the Company filed suit against one of its food purveyors, J.R.
Simplot Co. in federal court. This suit stems from the receipt of contaminated
food product that caused a food borne illness outbreak at the Company's Garcia's
Mexican restaurants in the Phoenix, Arizona area in July 1998. In 2001, Simplot
admitted that it did in fact ship contaminated product to Company-owned Garcia's
in July 1998. The suit was litigated in August 2001 in order to determine the
amount of damages to be awarded the Company. Initially, the Company was awarded
approximately $6,551,000 in damages plus attorney's fees and costs. The Company
filed a motion to reconsider, based on a technical error in the calculation of
damages and was awarded an additional amount ($1,854,000), bringing the total to
approximately $8,405,000 plus attorneys fees and costs. As of December 30, 2001,
approximately $516,000 was included in accounts receivable for reimbursement of
legal fees and was subsequently paid to the Company related to the suit. No
amounts related to actual damages have been included in Consolidated Statements
of Income. As of the date of this report, the case is currently in appeal by
both parties.

(14)  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
      (In thousands except per share data)

<Table>
<Caption>
                                                         First          Second          Third           Fourth
                                                        Quarter         Quarter        Quarter         Quarter          Annual
                                                        -------         -------        -------         -------         -------
<S>                                                    <C>            <C>             <C>             <C>            <C>
2001:
            Total revenues .......................      $  25,867      $  23,655       $  23,559       $  26,403      $  99,483
            Gross profit .........................         18,936         17,188          17,097          19,416         72,637
            Net income (loss) ....................             22           (661)           (468)            428           (679)
            Net income (loss) per common
                 share ...........................           0.01          (0.22)          (0.16)           0.14          (0.23)
            Net income (loss) per common
                 share assuming dilution .........           0.01          (0.22)          (0.16)           0.14          (0.23)

2000:
            Total revenues .......................      $  25,108      $  24,797       $  25,069       $  29,631      $ 104,605
            Gross profit .........................         18,295         18,082          18,314          21,595         76,286
            Net income (loss) ....................            324           (181)           (361)          1,017            911
            Net income (loss) per common
                 share ...........................           0.11          (0.06)          (0.08)           0.33           0.30
            Net income (loss) per common
                share assuming dilution ..........           0.10          (0.06)          (0.08)           0.32           0.29

1999:
            Total revenues .......................      $  23,074      $  22,887       $  23,216       $  25,401      $  94,578
            Gross profit .........................         16,804         16,626          16,805          18,502         68,737
            Net income (loss) ....................            247           (336)           (518)            569            (38)
            Net income (loss) per common
                 share ...........................           0.07          (0.11)          (0.18)           0.19          (0.01)
            Net income (loss) per common
                 share assuming dilution .........           0.07          (0.11)          (0.18)           0.19          (0.01)
</Table>


                                     F-19
<PAGE>

                                INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                        DESCRIPTION
-------                       -----------
<S>     <C>
  3.1   Amended and Restated Articles of Incorporation.(1)

  3.2   Amendment to the Amended and Restated Articles of Incorporation.(2)

  3.3   Second Amendment to the Amended and Restated Articles of
        Incorporation.(11)

  3.4   Bylaws as amended.(1)

  3.5   Amendment to Bylaws.(11)

  4.1   Specimen Stock Certificate.(3)

 10.1   Employment Agreement between the Company and Vincent F. Orza, Jr., dated
        January 22, 2001.(12)

 10.2   Employment Agreement between the Company and James M. Burke, dated
        January 22, 2001.(12)

 10.3   Employment Agreement between the Company and Bradley L. Grow, dated
        January 1, 2001.(12)

 10.4   Lease Amendment dated May 1, 1999 between the Company and Great Places,
        L.L.C. for the lease of the Company's corporate office facilities in
        Edmond, Oklahoma.(12)

 10.5   Franchise Agreement and Amendment dated August 31, 1993 between the
        Company and Wolsey Dublin Company for the Garfield's franchise in Sioux
        City, Iowa and non-exclusive development rights to two additional
        locations in seven cities in four states over the next two years.(3)

 10.6   Form of Franchise Agreement for Garfield's and Garcia's dated March 20,
        2000.(12)

 10.7   Collateral Assignment Agreement dated January 20, 1991, between the
        Company and Vincent F. Orza, Jr.(5)

 10.8   Collateral Assignment Agreement dated January 20, 1991, between the
        Company and James M. Burke.(5)

 10.9   Employee Stock Purchase Plan dated June 15, 1994(6).

10.10   Amended and restated Eateries, Inc. Omnibus Equity Compensation Plan
        dated as of June 15, 1994.(7)

10.11   Amendment to Amended and Restated Eateries, Inc. omnibus equity
        compensation plan.(11)

10.12   Asset Purchase Agreement dated November 14, 1997, by and between the
        Company, through its wholly-owned subsidiary, Fiesta Restaurants, Inc.,
        and Famous Restaurants, Inc. and its subsidiaries.(8)

10.13   Agreement for Purchase and Sale of Assets and Licenses dated February
        26, 1998, among the Company and Chevy's, Inc.(9)

10.14   Agreement for purchase and Sale of Assets dated February 26, 1998,
        between the Company and Chevy's, Inc.(9)

10.15   Stock Put Agreement dated April 2, 1997, by and among Vincent F. Orza,
        Jr. and the Company.(4)

10.16   Stock Put Agreement dated April 2, 1997, by and among James M. Burke and
        the Company.(4)

10.17   Stock Purchase Agreement dated as of February 17, 1999, between
        Eateries, Inc. and Astoria Capital Partners, L.P., Montavilla Partners,
        L.P. and Microcap Partners L.P.(10)

10.18   Loan Agreement dated effective February 19, 1999, among Eateries, Inc.,
        Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's Management,
        Inc. and Local Federal Bank, F.S.B.(10)

10.19   Revolving Promissory Note in the principal amount of $6,000,000 dated
        February 19, 1999, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc. and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(10)

10.20   Term Promissory Note in the principal amount of $8,600,000 dated
        February 19, 1999, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc., and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(10)

10.21   Lease Amendment dated August 1, 1999 between the Company and Great
        Places of Shawnee L.L.C. for the lease of the Company's Garfield's
        Restaurant in Shawnee, Oklahoma.(12)

10.22   Loan Agreement Amendment dated September 30, 2000 between Eateries,
        Inc., Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's
        Management, Inc. and Local Federal Bank, F.S.B.(13)
</Table>

<PAGE>

<Table>
<S>     <C>
10.23   Amended Term Promissory Note dated September 30, 2000 between Eateries,
        Inc., Fiesta Restaurants, Inc., Pepperoni Grill, Inc., Garfield's
        Management, Inc. and Local Federal Bank, F.S.B.(13)

10.24   Amended Revolving Promissory Note in the principal amount of $6,000,000
        dated September 30, 2000, by Eateries, Inc., Fiesta Restaurants, Inc.,
        Pepperoni Grill, Inc. and Garfield's Management, Inc. in favor of Local
        Federal Bank, F.S.B.(13)

 21.1   Subsidiaries of Eateries, Inc.(12)

 23.1   Consent of Arthur Andersen LLP.

 99.0   Availability Opinion Confirmation.

 (1)    Filed as exhibit to Registrant's Registration Statement on Form S-18
        (File No. 33-6818-FW) and incorporated herein by reference.

 (2)    Filed as exhibit to Registrant's Quarterly Report on Form 10-Q for the
        six months ended June 30, 1988 (File No. 0-14968) and incorporated
        herein by reference.

 (3)    Filed as exhibit to Registrant's Registration Statement on Form S-2
        (File No. 33-69896) and incorporated herein by reference.

 (4)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 28, 1997 (File No. 0-14968) and incorporated
        herein by reference.

 (5)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1990 (File No. 0-14968) and incorporated
        herein by reference.

 (6)    Filed as Appendix A to the Company's Notice of Annual Meeting of
        Shareholders dated April 29, 1994 and incorporated herein by reference.

 (7)    Filed as exhibit to Registrant's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1994 (File No. 0-14968) and incorporated
        herein by reference.

 (8)    Filed as exhibit to Registrant's Current Report on Form 8-K dated
        December 8, 1997 (File No. 0-14968) and incorporated herein by
        reference.

 (9)    Filed as exhibit to Registrant's Current Report on Form 8-K dated March
        16, 1998 (File No. 0-14968) and incorporated herein by reference.

(10)    Filed as exhibit to Registrant's Current Report on Form 8-K dated March
        3, 1999 (File No. 0-14968) and incorporated herein by reference.

(11)    Filed as exhibit to registrant's proxy statement filed with the
        Commission on June 6, 2000 and incorporated herein by reference.

(12)    Filed as exhibit to registrant's Annual Report of Form 10-K for fiscal
        year ended December 30, 2000 dated March 21, 2001 (File No. 0-14968) and
        incorporated herein by reference.

(13)    Filed as exhibit to registrant's Annual Report of Form 10-K Amendment
        No. 1 for fiscal year ended December 31, 2000 dated May 16, 2001 (File
        No. 0-14968) and incorporated herein by reference.
</Table>