UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 29, 2002

File No. 0-14968****EATERIES,    INC.
(Exact    name of registrant as specified in its charter)**Oklahoma**73-1230348
(State    or other jurisdiction of incorporation or    organization)
(I.R.S.    Employer Identification No.)**1220    South Santa Fe Avenue    Edmond, Oklahoma**73003
(Address    of principal executive offices)
(Zip    code)**(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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months, and (2) has been subject to such filing requirements for the past90 days. **Yes X   No____**
Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendments to this Form 10-K. **( )
Indicate by check mark whether the registrant is an acceleratedfiler (as definted in Rule 12b-2 of the Act). Yes ___ No _X__

The aggregate market value of the voting common stock held bynon-affiliates of the registrant as of June 30, 2002, was $4,852,685. The registrant hasassumed that its directors and officers are the only affiliates, for purposes of thiscalculation. As of June 30, 2002, the registrant had 2,987,417 shares of common stockoutstanding.
**EATERIES,    INC.    FORM 10-K    For the Fiscal Year Ended December 29, 2002

TABLE OF CONTENTS**PART I****PageItem 1. Business 
1Item 2. Properties 
8Item 3. Legal Proceedings 
9Item 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 
10Item 6. Selected Financial    Data 
11Item 7.    Management’s Discussion and Analysis of Financial Condition and                 Results of    Operations 
12Item 8. Financial    Statements and Supplementary Data 
23Item 9. Changes    in and Disagreements With Accountants on Accounting and                 Financial    Disclosure 
23**PART III**Item 10. Directors and    Executive Officers of the Registrant 
23Item 11. Executive    Compensation 
23Item 12. Security    Ownership of Certain Beneficial Owners and Management 
23Item 13. Certain    Relationships and Related Transactions 
23Item 14.    Controls and Procedures 
23**PART IV**Item 15. Exhibits,    Financial Statement Schedules, and Reports on Form 8-K 
24INDEX TO EXHIBITS 
24SIGNATURES 
26INDEX TO CONSOLIDATED    FINANCIAL STATEMENTS 
27**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 29, 2002, the Companyowned 53 (47 Garfield’s, 4 Garcia’s and 2 Pepperoni Grills) and franchised orlicensed 11 Garfield’s restaurants in 20 states. The Company also provides managementservices for 12 Garcia’s.

The Company opened its firstrestaurant, a Garfield’s, in 1984 in Oklahoma City, Oklahoma. In 1986, the Companycompleted an initial public offering of its common stock. Prior to 1997, Garfield’swas the Company’s primary restaurant concept. Garfield’s is a family-orientedconcept, designed to appeal to a divergent customer base that grew up on fast food, butnow prefers a more sophisticated menu, the availability of alcoholic beverages, acomfortable ambiance, speed, value and convenience. The concept features a variedselection of moderately priced, high quality food and beverage items with table servicedining.
In January 1995, the Company acquired substantially all the assets ofthe "Pepperoni Grill" restaurant located in Oklahoma City, Oklahoma, along withall rights to the use of the trademarks associated with the concept. Pepperoni Grillfeatures a variety of Northern Italian entrees with special emphasis on brick-oven bakedpizza.

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 associatedwith these concepts. In February 1998, the Company sold three of the Casa Lupita locationsto Chevy’s, Inc. ("Chevy’s"). In connection with this transaction, theCompany 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 theresult 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 itsCarlos Murphy’s to a Garcia’s. The remaining Carlos Murphy’s was convertedto a Garcia’s in 1999. Currently, the Company has no locations open utilizing thenames "Casa Lupita" or "Carlos Murphy’s". 

In 2000 the Company constructed and opened one Garfield's and threeGarcia's, converted one Carlos Murphy's to a Garcia's and sold the two Bellini's ItalianRistorante’s and one Tommy's Italian American Grill it acquired in 1999.Additionally, the Company opened two Garfield’s and two Garcia’s, all in majorregional malls in 2001. 

In 2002, the Company sold thirteen Garcia’s located in Arizona,California, Colorado, Idaho and Utah, leaving the Company with four Garcia’s locatedin Oklahoma (3) and Missouri (1). In conjunction with this sale, the Company also sold thefranchise and trademark rights and retained a license agreement under which it operatesthe remaining Garcia’s. 

The Company’s future expansion of its existing concepts will beprimarily focused on the construction and franchising of Garfield’s. The Company mayalso pursue other acquisitions to further enhance shareholder value.

The Company’s principal offices are located at 1220 South Santa FeAvenue, Edmond, Oklahoma 73003. Its telephone number is (405) 705-5000 and website iswww.eats-inc.com .
**Garfield’s Restaurant & Pub

Menu**
Each Garfield’s restaurant offers a diverse menu of freshlyprepared traditional and innovative entrees, including steaks, seafood, chicken,hamburgers, Mexican, Italian, and sandwiches along with a variety of appetizers, saladsand desserts. The Company revises menu offerings semi-annually to improve sales. TheCompany’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 beenconstructed in regional malls in accordance with uniform design specifications and aregenerally similar in appearance and interior decor. Over the last two years the Companyhas begun to develop freestanding locations as well. Both the freestanding and mallrestaurants are furnished and styled in a colorful motif, highlighting the travels of theCompany’s namesake, "Casey Garfield", including exhibits, photographs,souvenirs and other travel-related furnishings. Tables are covered with paper andcustomers are encouraged to doodle with crayons provided at each table**.**During2002, five franchisees each opened one new freestanding Garfield’s.****During2000 the Company and a Franchisee each opened one new freestanding Garfield’s. Therewere no freestanding units opened in 2001 or 1999.

The size and shape of Garfield’s restaurants vary depending uponthe location but typically average 4,500 to 5,500 square feet, and seat approximately 200guests. 
**Hours of Operation**
Depending on location, most restaurants are open from 11:00 a.m. until11:00 p.m. on weekdays and Sunday, and later on Friday and Saturday.
**Unit Economics**
Historically, the cost of opening a new Garfield’s restaurant hasvaried widely due to the different restaurant configuration and sizes, regionalconstruction cost levels, and certain other factors. The Company currently leasesrestaurant premises in existing freestanding****facilities****as well****as inmajor regional malls and builds-out the leased space to meet the Garfield’s conceptspecifications of style and decor. Gross construction costs for a typical Garfield’sopened 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 netinvestment 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 andfreestanding buildings, primarily in the eastern half of the United States. The Companyconsiders the location of a restaurant to be critical to its long-term success and hasdevoted 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 andproximity to entertainment centers within and near the mall as well as accessibility tomajor traffic arteries. The Company also reviews potential competition in the area andutilizes site selection models to evaluate each potential location based upon a multitudeof criteria. Senior management inspects and approves each restaurant site. It takesapproximately 18 weeks to complete construction and open a Garfield’s.
**Market Concentration

Although Garfield's arespread primarily throughout the eastern half of the United States there are areas ofconcentration. These areas allow the Company to use advertising dollars in an effectiveway. In the future as franchises build out market areas this will assist the marketing andadvertising effectiveness by further targeting areas of concentration.**Restaurant Locations**
The following table setsforth the locations of the existing Garfield’s as of December 29, 2002.**Company-Owned Restaurants**Franchised Restaurants**State****No.    of Units**State****No.    of UnitsAlabama 
3Florida 
2Arkansas 
1Indiana 
5Florida 
3Iowa 
2Georgia 
1Nevada 
   1   Illinois 
3Oklahoma 
   1   Indiana 
4Total 
11Maryland 
1Michigan 
2Mississippi 
4Missouri 
4New York 
2North Carolina 
2Ohio 
3Oklahoma 
5Pennsylvania 
2South Carolina 
1Tennessee 
1West Virginia 
3Wisconsin 
   2   Total 
47**Garcia’s Mexican Restaurants

Menu**
Each Garcia’s restaurant offers a traditional menu of high qualityfresh Mexican food. Alcoholic beverages are also offered in each location. Menus aregenerally standardized, although there are slight variations to accommodate regional tastepreferences.
**Restaurant Layout**
Garcia’s restaurants have a distinctive southwestern design anddecor. In 2001 and 2000, the Company built four new Garcia's in malls. These mall-basedlocations are between 4,800 and 6,200 square feet and seat 175 to 200 people.
**Restaurant Locations**
The following table sets forth the locations of the existingGarcia’s as of December 29, 2002.
**Company-Owned    Restaurants**State****No.    of UnitsMissouri 
1Oklahoma 
3     Total    
4**Pepperoni Grill

Menu**
Each Pepperoni Grill offers a menu that features a variety of Italianand Mediterranean entrees with special emphasis on brick-oven baked pizza. The warmEuropean bistro atmosphere is accented with an exhibition kitchen, light foods and boothscovered in tapestry. All menu items are prepared on the premises with the entire entreepresentation being performed within view of the guest, making the kitchen part of therestaurant’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 isserved with all entrees along with traditional olive oil and balsamic vinegar. Over 60different 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 isorganized geographically with restaurant general managers reporting to area directors ofoperations who, in turn, report to the respective Regional Vice-Presidents of Operationsfor Garfield’s, Garcia’s and Pepperoni Grill. A typical restaurant has a generalmanager, two to four assistant managers and average 54 employees, approximately 72% of whoare part-time.

Regional VP’s of Operations, Area Directors of Operations as wellas restaurant general managers and associate managers are eligible for cash and stockbonuses, professional training and attendance at industry conferences. Receipt of theseincentives is based on reaching restaurant performance objectives. As of December 29, 2002approximately 50% of the general managers are a part of the Company’s Owner/OperatorProgram, which allows approved managers to purchase up to 10% of their locations netprofits. The Company’s hourly employees are eligible for performance-based awards forsuperior service to the Company and its guests. Employee awards can include travelincentives, gift certificates, plaques and Company memorabilia. Most employees other thanrestaurant management and corporate management are compensated on an hourly basis.
**Quality Control**
The Company has uniform operating standards and specifications relatingto the quality, preparation and selection of menu items, maintenance and cleanliness ofthe premises, and employee conduct. Managers are responsible for assuring compliance withCompany operating procedures. Executive and supervisory personnel routinely visit eachrestaurant to evaluate adherence to quality standards and employee performance.
**Training**
The Company has instituted"The Best in Town" program which places a great deal of emphasis on the propertraining of its hourly employees and general and associate managers. To insure ourrestaurants are "The Best in Town", all training is tailored to ensure ourguests receive the best experience we can offer in our restaurants. This commitment toquality food and service demands both traditional and creative training techniques. TheCompany employs a full time corporate training staff to oversee all areas of employeeeducation. The outline for the training programs is based on the individual expertise ofthe trainee and typically lasts about two weeks for hourly employees and up to eight weeksfor managers. Managers are certified in a number of skills in restaurant management,including technical proficiency and job functions, quality service, sales, costmanagement, team development and profit and loss responsibilities. The Companysponsors further management training and certification in food safety using the ServeSafeprogram as developed by the National Restaurant Association Educational Foundation. Skillsare taught primarily in the restaurant with a combination of hands-on experience,classroom training and assigned projects. Management training is performed in severalgeographically dispersed restaurants and includes further training at our corporateoffices. The Company provides standard manuals regarding training and operations, productsand equipment and local marketing programs.**Employee Conduct**
The Company maintains a no tolerance policy on harassment ordiscrimination of any kind. The managers and employees of the Company are required toacknowledge and obey these policies at all times. The Company maintains the right toterminate any employee for violation of its harassment or discrimination policies as wellas any conduct that is inappropriate, at any time.
**Purchasing**
The Company employs a purchasing director to oversee the relations andnegotiations with manufacturers and regional distributors for most food and beverageproducts and to ensure uniform quality, competitive costs and adequate supplies ofproprietary products. The Company and its franchisees purchase substantially all food andbeverage products from several national and regional suppliers. The Company has notexperienced any significant delays in receiving food and beverage inventories orrestaurant supplies.
**Advertising and Marketing**
Marketing at Eateries Inc. is focused on enhancing the guest experiencein all of our concepts. The Company develops marketing plans to improve guest satisfactionin the areas of food, value and service. We offer a broad range of products ourguests’ desire while striving to deliver the food in a fast, friendly manner.Utilizing multiple mediums such as television, local cable television, radio, outdoor andprint advertising, we are able to deliver our messages to the guests in the most efficientway. Our restaurant managers are also encouraged to be involved in the community and touse proven local store marketing programs to drive their individual business. In marketswhere the Company shares a trade area with a franchisee, advertising cooperatives areutilized to maximize the Company’s restaurant’s visibility. Franchisees ofGarfield’s units are generally required to expend up to 4% of sales on restaurantrelated marketing efforts. In addition, all Company and franchise restaurants contribute1/2% of their sales to a marketing fund used to produce advertising, menu development andpoint-of-sale material to promote increased sales. The Company engages in a variety oflocal market promotional activities such as contributing goods, time and money tocharitable, civic and educational programs, in order to increase public awareness of theCompany’s restaurants.
**Restaurant Reporting**
Financial controls are implemented through the use of computerizedpoint of sales and management information systems. Sales reports and food, beverage andlabor cost data are prepared and reviewed weekly for operational control. The Company hasimplemented new systems to streamline the flow of sales, payroll and accounts payableinformation and has continued to enhance these systems in 2002 and will continue in 2003.

 
**MANAGEMENT INFORMATION SYSTEM**
The Company in a concerted effort to enhance its accounting andinformation systems hired Jaroslav Lajos as Director of Management Information Systems in1999. Mr. Lajos has completed his class work at Oklahoma State University related to aPhD. in computer science, and is in the process of writing his thesis. Currently Mr. Lajosis designing, writing and implementing several new computer software programs designed toadvance the Company with MIS technology in the future. In 2001, Mr. Lajos was promoted toVice President of Management Information Systems. 
**EXPANSION STRATEGY**
The Company’s primary expansion emphasis is gradually shiftingfrom constructing new Company-owned restaurants to franchise development.

The Company has customarily opened Garfield’s restaurants inregional malls principally throughout the eastern half of the United States. Thismall-based expansion strategy for Garfield’s reduced the risks associated withlocating restaurants in new markets because of the availability of historical trendsregarding mall sales and customer traffic. Restaurant construction within a mall typicallyrequired a lower investment than construction of a freestanding restaurant. 

The Company****has developed a freestanding building and also hasutilized existing buildings as conversion vehicles for Garfield’s expansion. It isManagement’s intention to continue the expansion of Garfield’s through thedevelopment and construction of higher volumed freestanding locations as well as inregional malls. The Company maintains relationships with several leading real estatedevelopers who provide the Company with an ongoing supply of potential locations forevaluation.

In 2001 Company also opened two new Garfield's in Pennsylvania andAlabama and two new Garcia's in Oklahoma and Missouri. In 2000, the Company opened one newGarfield’s in Maryland and converted one Oklahoma mall-based Garfield’s to afreestanding location. The Company also opened two mall-based Garcia’s in Oklahoma.Additionally, five franchised locations opened in 2002 in Indiana, Nevada and Florida andone franchised location opened in Indiana in 2000.

Because of its commitment to supporting franchise openings, the Companydid not develop or open any company owned restaurants in 2002. However, the Companyexpects to open up to 3 Garfield’s locations in 2003. Additionally, the Companyexpects approximately 5 franchised Garfield's will be opened in 2003.
**FRANCHISE OPERATIONS

General Terms**
As of December 29, 2002, 11 franchised Garfield’s were operatingpursuant to agreements granted by the Company. The typical Garfield’s franchiseagreement provides for (i) the payment of an initial franchise fee of $30,000 and amonthly continuing royalty fee of 4.0% of gross sales with a minimum fee of $3,000 permonth; (ii) the payment of 1/2% of gross sales to the Garfield’s Creative MarketingFund; (iii) quality control and operational standards; (iv) development obligations forthe opening of new restaurants under the franchise; and (v) the creation and use ofadvertising. The franchise term is for ten years with five-year renewals. The grant of afranchise does not ensure that a restaurant will be opened. Under the Company’stypical franchise agreement, the failure to open restaurants can cause a termination ofthe franchise. Although the Company largely relies upon standardized agreements for itsfranchises, it will continue to adjust its agreements as circumstances warrant.
**Future Franchise Development**
In 1999, the Company hired Laurence Bader as Vice President ofFranchising. Mr. Bader formerly held a similar position at KFC and more recently atApplebee’s International, Inc. The Company finalized a new franchise program andupdated franchise and development agreements for Garfield’s Restaurant and Pubs. Theuniform franchise offering circular (called the UFOC that contains the franchise anddevelopment agreement) was registered nationally in 2000, and since registration theCompany has aggressively pursued franchise development.

In 2000 the Company began its aggressive marketing of franchises underthe UFOC registered during theyear. The Company signed commitments for forty-six andtwenty-five franchise restaurants in 2001 and 2000, respectively. One new freestandingfranchise restaurant was opened in 2000 and five new freestanding locations were opened in2002. The forty-six franchise restaurants committed to in 2001 included thirty-five inIndiana, ten in Nevada and one in Florida. The twenty-five franchise restaurants committedto during 2000 include twelve in Florida, ten in Nebraska and three in Indiana. In 2002,the franchisee in Nebraska defaulted under the Development Agreement and forfeited itsinvestment in Garfield’s. At December 29, 2002, sixty-five new franchise restaurantsremain under commitment.
During 2001, the Company developed plans for two prototypes forGarfield’s freestanding units.
**Franchise Revenue Data**
The following table sets forth fees and royalties earned by the Companyfrom franchisees for the years indicated:

2002
2001
2000
Initial    franchise fees
$      92,000
$  218,000
$  161,000 
Continuing    royalties
   527,000
   323,000
  274,000 
   Total
$  619,000
$  541,000
$  435,000 
**Compliance with FranchiseStandards**

All franchisees are required to operate their restaurants in compliancewith the Company’s methods, standards and specifications regarding such matters asmenu items, ingredients, materials, supplies, services, fixtures, furnishings, decor andsigns, although the franchisee has the discretion to determine the menu prices to becharged. However, as a practical matter, all franchisees utilize the Company’sstandardized menu. In addition, all franchisees are required to purchase all food,ingredients, supplies and materials from suppliers approved by the Company. Thesestandards are addressed in the UFOC agreement and the Company enforces the standardsrequired of franchisees. Such enforcement may result in the closure or non-renewal ofcertain franchise units, but any such closings or non-renewals are not expected to have amaterial adverse effect upon the Company’s results of operations or financialposition.
**COMPETITION**
The restaurant industry is intensely competitive with respect to price,service, location, food type and quality. There are many well-established competitors withsubstantially greater financial and other resources than the Company. Some of theCompany’s competitors have been in existence for substantially longer periods thanthe Company and may be better established in the market area than the Company’srestaurants. The restaurant business is often affected by changes in consumer taste,national, regional or local economic conditions, demographic trends, traffic patterns andtype, number and location of competing restaurants. In addition, factors such asinflation, increased food, labor and benefit costs, and the lack of experienced managementand hourly employees may adversely affect the restaurant industry in general and theCompany’s restaurants in particular.
**SERVICE MARKS

"GARFIELD’S", "CASEY GARFIELD’S",**"PEPPERONIGRILL", "CASA LUPITA"**and**"CARLOS MURPHY’S", AND"BELLINI’S RISTORANTE"**are Company service marks registered with theUnited States Patent and Trademark Office. The Company pursues any infringement of itsmarks within the United States and considers its marks to be crucial to the success of itsoperations. The Company has no locations open at this time using "Casa Lupita","Carlos Murphy's" or "Bellini's Ristorante" trade names.
**EMPLOYEES**
As of December 29, 2002, the Company employed 2,889 individuals, ofwhom 211 were management or administrative personnel (including 159 who were restaurantmanagers or trainees) and 2,678 of whom were employed in non-management restaurantpositions. As of this date, the Company employed 201 persons on a salaried basis and 2,688persons on an hourly basis. Each restaurant employs an average of 54 people.

Most employees, other than restaurant management and corporatemanagement personnel, are paid on an hourly basis. The Company believes that it providesworking conditions and wages that compare favorably with those of its competition. As theCompany expands, it will need to hire additional management and its continued success willdepend in large part on its ability to attract and retain good management employees. TheCompany’s employees are not covered by a collective bargaining agreement.
**SEASONALITY**
With 51 of the 53 Company-owned restaurants located in regional mallsas of December 29, 2002, the resulting higher pedestrian traffic during the Thanksgivingto New Year holiday season has caused the Company to experience a substantial increase infood and beverage sales and profits in the Company’s fourth and first fiscalquarters. See "Management’s Discussion and Analysis of Financial Condition andResults of Operations - Impact of Seasonality."
**GOVERNMENT REGULATIONS**
The Company’s restaurants are subject to licensing and regulationby alcoholic beverage control, health, sanitation, safety and fire agencies in each stateand/or municipality in which restaurants are located. The Company has not experiencedmaterial difficulties in these areas, however, regulatory difficulties or failures inobtaining the required licenses or approvals could delay or prevent the opening of a newrestaurant and affect profitability.

Approximately 13% of the Company’s food and beverage revenues in2002 were attributable to the sale of alcoholic beverages. Alcoholic beverage controlregulations require each of the Company’s restaurants to apply to a state authorityand, in certain locations, county or municipal authorities, for a license or permit tosell alcoholic beverages on the premises and to provide service for extended hours and onSundays. Typically, such licenses or permits must be renewed annually and may be revokedor suspended for cause at any time. Alcoholic beverage control regulations relate tonumerous aspects of the daily operations of the Company’s restaurants, includingminimum age of patron and employees, hours of operation, advertising, wholesalepurchasing, 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 torecover damages from an establishment that wrongfully served alcoholic beverages to theintoxicated person. The Company carries liquor liability coverage as part of its existingcomprehensive general liability insurance.

The Company’s restaurant operations are also subject to federaland state laws governing such matters as minimum wages, working conditions, overtime andtip credits. Significant numbers of the Company’s food service and preparationpersonnel 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 laborcosts. The enactment of future legislation increasing employee benefits, such as mandatedhealth 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 mayalso become subject to state laws that regulate substantive aspects of thefranchisers/franchisee relationship. The FTC requires the Company to furnish prospectivefranchisees a franchise offering circular containing prescribed information. A number ofstates in which the Company might consider franchising also regulate the offer and sale offranchises and require registration of the franchise offering with state authorities. TheCompany believes that it is in material compliance with such laws.

The Americans with Disabilities Act ("ADA") prohibitsdiscrimination in employment and public accommodations on the basis of disability. Whilethe Company believes it is in substantial compliance with the ADA regulations, the Companycould be required to expend funds to modify its restaurants to provide service to, or makereasonable accommodations for the employment of disabled persons.
**ITEM 2. PROPERTIES**
All of the Company’s facilities are occupied under leases. Themajority of the Company’s restaurant leases provide for the payment of base rentsplus real estate taxes, insurance and other expenses and for the payment of a percentageof the Company’s sales in excess of certain sales levels. These leases typicallyprovide for escalating rentals in future years and have initial terms expiring as follows:
**Year Lease Term    Expires****No.    ofFacilities2003-2004 
112005-2006 
112007-2008 
102009-2010 
132011-2012 
62012-2013 
12014 
1Total 
53**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 foodproduct that caused a food borne illness outbreak at the Company's Garcia's Mexicanrestaurants in the Phoenix, Arizona area in July 1998. In 2001, Simplot admitted that itdid in fact ship contaminated product to Company-owned Garcia’s in July 1998. Thesuit was litigated in August 2001 in order to determine the amount of damages to beawarded the Company. Initially, the Company was awarded approximately $6,551,000 indamages 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 additionalamount, bringing the total to approximately $8,405,000 plus attorney’s fees andcosts. In 2002, the Company was awarded an additional $516,000 for attorney’s feesand costs, bringing the total to approximately $8,921,000. As of December 30, 2001,approximately $516,000 was included in accounts receivable for reimbursement of legal feesand was subsequently paid to the Company related to the suit. Both the Company and Simplothave appealed the award. Oral arguments were heard in the Federal Court of Appeals inNovember 2002. No amounts related to actual damages have been included in ConsolidatedStataments of Income. As of the date of this report, the case is on appeal by bothparties.

The Company has other lawsuits pending but does not believe the outcomeof the lawsuits, individually or collectively will materially impair the Company'sfinancial 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 securityholders during its fourth fiscal quarter of 2002.
**PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY

               AND RELATED STOCKHOLDER MATTERS**
The Company’s common stock was quoted on the NASDAQ NationalMarket System under the symbol "EATS" from May 1994 to January 2003 when theCompany’s common stock was transferred and is now quoted on NASDAQ Small-Cap Market.The transfer in 2003 was a result of increased requirements for inclusion on NASDAQNational Market System. Prior to May 1994, the Company’s common stock was quoted onthe NASDAQ Small-Cap Market. The following table sets forth, for the quarterly periodsindicated, the high and low sales price for the common stock, as reported by the NASDAQMarkets.

Low
High2001First Quarter 
$1.93 
$3.88 Second Quarter 
2.48 
3.45 Third Quarter 
2.30 
4.05 Fourth Quarter 
1.57 
2.70 2002First Quarter 
$2.20 
$3.55Second Quarter 
$2.75
$3.45Third Quarter 
$2.35
$3.02Forth    Quarter 
$1.51       $2.352003First Quarter    (March 4) 
$1.40 
$2.70
On March 4, 2003, the Company’s stock transfer agent reported thatthe Company’s common stock was held by 181 holders of record. However, managementbelieves there are in excess of 500 beneficial owners of the Company’s common stock.

The Company has paid no cash dividends on its common stock. The Boardof Directors intends to retain earnings of the Company to support operations and tofinance expansion and does not intend to pay cash dividends on the common stock for theforeseeable future. The payment of cash dividends in the future will depend upon suchfactors as earnings levels, capital requirements, level of debt, the Company’sfinancial condition and other factors deemed relevant by the Board of Directors.
**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 financialstatements of the Company. The following data should be read in conjunction with, and isqualified in its entirety by, the Company’s consolidated financial statements andrelated notes and with "Management’s Discussion and Analysis of FinancialCondition and Results of Operations" included elsewhere herein. All amounts arereported in thousands except for per share amounts.

2002
2001
2000    (3)
1999
1998Income Statement Data:Revenues:     Food    and beverage sales 
$    95,167
$    98,324 
$103,480 
$      93,846 
$      88,190      Franchise    fees and royalties 
621
541 
435 
319 
358      Other    income 
465
     618 
     690 
      413 
      637                Total revenues 
96,253
 99,483 
 104,605 
  94,578 
  89,185 Costs and Expenses:     Costs    of sales 
25,784
26,846 
28,319 
25,841 
24,261      Operating    expenses 
59,778
61,727 
63,473 
57,779 
53,824      Pre-opening    costs 
---
592 
790 
691 
535      General    and administrative expenses 
5,814
5,835 
5,806 
5,968 
5,548       Provision    for impairment of long-lived assets 
2,135
339 
340 
300 
41          Loss on disposal of assets 
2,110
               ---
              ---
                  ---
                    ---      Depreciation    and amortization 
4,183
4,245 
3,889 
3,377 
2,964       Interest    expense 
706
     986 
     974 
      776 
      410                 Total costs and expenses 
100,510
 100,570 
 103,591 
  94,732 
  87,583 Income(loss) before    provision (benefit) for income        taxes 
(4,257)
(1,087)
1,014 
(154)
1,602 Provision for (benefit    from) income taxes 
2,070
      (407)
               103
    (116)
      419 Net income (loss) 
$    (6,327)
$         (679)
$       911 
$        (38)
$    1,183 Net income (loss) per    common share 
$    (2.12)
$     (0.23)
$      0.30 
$     (0.01)
$      0.30 Net income (loss) per    common share assuming dilution 
$    (2.12)
$     (0.23)
$      0.29 
$     (0.01)
$      0.28 Weighted average common    shares 
2,978
2,961 
3,044 
3,151 
3,942 Weighted average common    shares          assuming dilution 
2,978
2,961 
3,145 
3,151 
4,177 Balance Sheet Data (at    end of period):      Working    capital (deficit) 
$    (2,751)
$     (8,480)
$ (11,039)
$   (8,320)
$   (3,360)      Total    assets 
$    21,169
$      30,256
$  33,102 
$  31,090 
$  25,820       Long-term    debt obligations 
$    9,165
$        8,682
$    8,440 
$    9,092 
$    3,409       Stockholders’    equity 
$ 960
$        7,216
$    8,099 
$    7,319 
$  12,451 Other Data:     Cash    provided by operating activities
$    1,709
$        1,365
$    5,354 
$    7,497 
$    2,945      Cash    (used in) provided by investing activities
$    (1,069)
$      (1,323)
$   (6,338)
$   (7,516)
$    1,566      Cash    (used in) provided by financing                    activities
$    (846)
$          81 
$      (383)
$       964 
$   (4,545)     EBITDA    (1) 
$ 632
$    4,144 
$    5,877 
$    4,000 
$    4,977      System-wide    sales (2) 
$108,648
$106,843 
$112,217 
$102,665 
$  98,923 **(1)  Earnings before  interest, taxes, depreciation and amortization ("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.

 
****
**ITEM 7. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                 RESULTSOF OPERATIONS**
From time to time, the Company maypublish "forward-looking statements" within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended. Some examples of forward-looking statements are statements related toanticipated financial performance, business prospects, the future opening of Company-ownedand franchised restaurants, anticipated capital expenditures, future liquidity and capitalresource needs, and other matters. In addition, forward-looking statements often (thoughnot 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 statementsother than statements of historical fact contained in this Form 10-K or in any otherreport of the Company are forward-looking statements. The Private Securities LitigationReform Act of 1995 provides a safe harbor for forward-looking statements. In order tocomply 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 andexperience to differ materially from the anticipated results or other expectationsexpressed in the Company’s forward-looking statements including, without limitation,the following: consumer spending trends and habits; competition in the casual diningrestaurant segment; weather conditions in the Company’s operating regions; laws andgovernment regulations; general business and economic conditions; availability of capital;success of operating initiatives and marketing and promotional efforts; and changes inaccounting policies. In addition, the Company disclaims any intent or obligation to updatethose forward-looking statements. However, the Company may be required to amend itsfilings if information becomes materially misleading.
**INTRODUCTION**
As of December 29, 2002, the Company owned and operated 53 (47Garfield’s, 4 Garcia’s, 2 Pepperoni Grills), franchised or licensed 11Garfield’s restaurants and provided management and administrative services for 12Garcia’s**.**The Company currently has three Garfield’s in development. Asof the date of this report, the entire system includes 52 (46 Garfield’s, 4Garcia’s, 2 Pepperoni Grills) Company-owned restaurants and 11 Garfield’sfranchised or licensed restaurants.
**Percentage Results of Operations and Restaurant Data**
The following table sets forth, for the periods indicated, (i) thepercentages that certain items of income and expense bear to total revenues, unlessotherwise indicated, and (ii) selected operating data:

Fiscal Year
  2002
  2001
  2000**Income Statement    Data:**Revenues:    Food    and beverage sales 
98.9%     
98.9% 
98.9%    Franchise    fees and royalties 
0.6
0.5   
0.4       Other    income 
0.5
     0.6      
     0.7   
100.0
  100.0   
  100.0   Costs and    Expenses:    Costs    of sales (1) 
27.1
27.3   **************************************