<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934

                    For the fiscal year ended April 30, 1997
                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 For the transition period from _____ to _____

Commission File No. 0-12226

                       CALIFORNIA BEACH RESTAURANTS, INC.
             (Exact name of registrant as specified in its charter)

              California                                 95-2693503
    (state or other jurisdiction of           (IRS Employer Identification No.)
    Incorporation or organization)

   17383 Sunset Boulevard, Suite 140
     Pacific Palisades, California                          90272
(Address of principal executive office)                  (Zip Code)

                  Registrant's telephone number: (310) 459-9676

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                 Yes [X] No [ ]
                                     ---    ---

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

The aggregate market value of voting and non-voting common stock held by
non-affiliates of the Registrant based upon the average bid price in the
over-the-counter market on August 11, 1995 (the date of the last posted quote)
was approximately $12,144.

The number of outstanding shares of the Registrant's Common Stock as of July 15,
1997 was 3,400,975.

Documents incorporated by reference; the definitive Proxy Statement of the
Registrant for the 1997 annual meeting of shareholders (Part III to the extent
described herein), or if such Proxy Statement is not filed within 120 days of
the Registrant's fiscal year end, such information will be included in an
amendment to this Form 10-K filed within such timeframe.



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PART I

ITEM 1 BUSINESS

GENERAL

        California Beach Restaurants, Inc., ("Registrant"), formerly I.H.V.
Corp., was organized under the laws of the State of California in April 1971.
The Registrant is currently engaged in one line of business, the ownership and
operation of restaurants, including Gladstone's 4 Fish ("Gladstone's") in
Pacific Palisades, California and RJ's - Beverly Hills ("RJ's") in Beverly
Hills, California.


RESTAURANT OPERATIONS - CONCEPT AND MENU

        The Registrant owns and operates the following restaurants through its
wholly-owned subsidiary, Sea View Restaurants, Inc. ("Sea View"):

        GLADSTONE'S 4 FISH. Gladstone's is one of Southern California's best
known fresh seafood restaurants. In 1972, the original Gladstone's was opened as
a small, 80-seat establishment in Santa Monica Canyon near the Pacific ocean in
Santa Monica, California. In 1981, Gladstone's was moved to its present location
on the beach at the intersection of Sunset Boulevard and Pacific Coast Highway
in Pacific Palisades, California. Based on restaurant industry surveys,
Gladstone's is one of the top grossing restaurants in America, with annual sales
in excess of $13,000,000. The 10,000 square foot interior of Gladstone's seats
approximately 400, while the outside deck has a seating capacity of
approximately 300 in a 6,000 square foot area. Gladstone's is open 365 days a
year for breakfast, lunch and dinner.

        Gladstone's offers an extensive menu specializing in fresh fish and
shellfish. Gladstone's strives to purchase only the finest seafood products
including, live Maine lobster, premium Alaskan red king crab, western Australian
lobster tails and Mexican shrimp as well as the freshest fish available. Typical
fresh fish on the menu include salmon, swordfish, catfish, ahi tuna, petrale
sole, pacific red snapper, halibut and mahi-mahi. Gladstone's menu also includes
a large number of salads, pasta dishes and sandwiches in addition to its
extensive fresh fish and shellfish items.

        Sandwich and salad prices begin at $8.95, with dinner entrees beginning
at $16.75. A typical dinner entree includes soup or salad, a loaf of hot
sourdough bread, fresh vegetable and rice or potato. Gladstone's average check,
including beverages and desserts, is approximately $21.75. Gladstone's portion
sizes are very large and food that cannot be finished is wrapped in a gold foil
animal "sculpture." The gold foil, which is manufactured specially for
Gladstone's, is a signature element of the restaurant. Gladstone's is also well
known for the full barrels of peanuts that are always available free of charge
to guests and free "mile-high" cake for all birthday and anniversary
celebrations.

        RJ'S - BEVERLY HILLS. RJ's is located at 252 N. Beverly Drive, Beverly
Hills, California. RJ's was opened in 1979 and emphasizes its extensive salad
bar, barbecued ribs and chicken, library bar and antique ceiling fans to create
an attractive, casual dining atmosphere in the heart of Beverly Hills. RJ's is
open for lunch and dinner from Monday through Saturday and dinner only on
Sunday. The restaurant occupies approximately 7,500 square feet with seating
capacity of approximately 260.

        RJ's menu specializes in classic American food. RJ's signature items
include barbequed beef and baby back pork ribs and a very extensive salad bar.
RJ's menu also includes a wide selection of sandwiches and salads. Sandwich and
salad pricing begins at $6.95 with dinner entrees starting at $12.50. RJ's
average check is approximately $16.50. As with Gladstone's, 



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portion sizes are very generous and waitstaff are trained to wrap all leftovers
in signature gold foil animal sculptures.


RESTAURANT OPERATIONS - GLADSTONE'S CONCESSION AGREEMENT

        Sea View operates Gladstone's pursuant to a concession agreement with
the County of Los Angeles ("County") which expires October 31, 1997. The
County's standard operating procedure for contracts in excess of a certain
minimum length or dollar value is to distribute a request for proposal seeking
bids prior to entering into new agreements. In March 1997 the County completed
the bid process and announced their intention to enter into formal negotiations
with Gladstone's for a twenty year concession agreement, subject to approval by
the County Board of Supervisors. On April 15, 1997 the Board of Supervisors
unanimously approved the recommendation to enter into formal negotiations with
Gladstone's.

        Sea View and the County are currently negotiating a new twenty year
concession agreement which will commence on November 1, 1997. Based on Sea
View's bid, it is anticipated that the new agreement will include minimum annual
rental payments of $1,750,000, an increase of approximately $600,000 over rents
paid in fiscal 1997. Percentage rents based on 10% of food sales and 12% of the
sales of alcoholic beverages, merchandise and parking lot revenue will be
payable to the extent the percent rents exceed the minimum annual rents. Sea
View also expects that the agreement will require significant renovation to the
restaurant but will provide for reduced minimum rents during the period when
renovations are undertaken. This reduced rental period will not exceed six
months. The new agreement will also require Sea View to post a $2,000,000 letter
of credit in favor of the County, as a security deposit. The County may draw
upon the letter of credit if Gladstone's fails to pay rent as it comes due. The
letter of credit obligation will be reduced, or eliminated, as Sea View reaches
certain net worth levels.


RESTAURANT OPERATIONS - MARKETING

        Both of the Registrant's restaurants focus on the casual segment of the
upper-end dinner house market. Management believes that its restaurants'
reputation, developed over many years, of providing guests with a unique dining
experience has been the most effective approach to attracting and retaining
business. By focusing its resources on providing superior service and value,
Gladstone's and RJ's have primarily relied on word of mouth to attract new
business.

        The restaurants have also developed unique promotions that are repeated
on an annual basis. For example, both Gladstone's and RJ's have a special
Christmas day promotion whereby each guest that dines in the restaurant on that
day receives a gift certificate for the amount of their Christmas day food
purchase. Additionally, Gladstone's has developed promotions tied to specific
products such as Crabfest during the month of February, Sockeye Salmonfest
during July and Lobsterfest in October. During these promotions, which have run
for several years, Gladstone's reduces menu prices and adds numerous daily menu
specials related to the featured product. On a weekly basis, Gladstone's
features special lobster prices each Thursday and special crab prices each
Friday. The Registrant uses print and radio advertising from time to time to
support its promotions.

        Gladstone's also has developed other unique programs that are a key
element of its marketing plan. Placemats used at each table are printed daily
which allows guests that have made a reservation to print a unique message such
as welcoming a special friend, announcing the celebration of a birthday,
anniversary or other special occasion. Guests are encouraged to take a placemat
home as a reminder of their special experience at Gladstone's. An electronic
message board is located in the front of the restaurant that is also used to
welcome guests with special messages. All special occasions are also celebrated
with a free picture that is placed in a customized photo sleeve to serve as a
reminder of the special experience at Gladstone's.



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RESTAURANT OPERATIONS - PURCHASING

        The Registrant's senior management establishes general purchasing
guidelines. The executive chef, who is responsible for all quality control,
develops product and quality specifications. The Registrant continuously seeks
to obtain quality menu ingredients and other supplies from reliable sources at
competitive prices. From time to time the Registrant will negotiate contract
purchases to insure product availability and to reduce short-term exposure to
price fluctuations. Management believes that all essential food and beverage
products are available from several qualified suppliers.


GOVERNMENT REGULATIONS

        The Registrant is subject to various federal, state and local laws
affecting its business. Each restaurant is subject to licensing and regulation
by a number of governmental authorities, including alcoholic beverage control,
coastal development, health, safety and fire agencies. The Registrant has not
experienced problems in obtaining or renewing required permits or licenses. The
failure to receive or retain, or a delay in obtaining any significant license or
permit could adversely impact the Registant's operations.

        Alcoholic beverage control regulations require that each restaurant
apply to a state authority for a license or permit to sell alcoholic beverages
on the premises. Licenses 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 operation of each restaurant, including minimum
age of patrons and employees, hours of operation, advertising, wholesale
purchasing and storage and dispensing of alcoholic beverages. The Registrant has
not encountered any problems relating to alcoholic beverage licenses to date.
The failure to receive or retain a liquor license could adversely impact the
Registrant's operations. The Registrant is also subject to "dram-shop" statutes
in the state of California, which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment which
wrongfully served alcoholic beverages to such person. The Registrant carries
liquor liability coverage as part of its existing comprehensive general
liability insurance. A judgment against the Registrant under a "dram-shop"
statute in excess of the Registrant's liability coverage could have a material
adverse impact on the Registrant. The Registrant has not been the subject of a
"dram-shop" claim to date.

        Various federal and state labor laws govern the Registrant's
relationship with its employees, including such matters as minimum wage
requirements, overtime and other working conditions. Significant additional
increases in minimum wage, mandated paid leaves of absence or mandated universal
health benefits could adversely impact the Registrant. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations - Cost
of Goods Sold).


LICENSE AGREEMENT

        GLADSTONE'S/UNIVERSAL CITY - In 1992 the Registrant entered into a
license agreement with MCA Development Venture Two ("MCADVT"), an affiliate of
MCA Inc., which permits MCADVT to use the Gladstone's 4 Fish name and trademarks
at a restaurant in their CityWalk development located in Universal City,
California in exchange for a royalty fee of .8% of the restaurant's gross
receipts during such use. The Gladstone's 4 Fish restaurant at CityWalk opened
in May 1993. Fees received pursuant to this agreement during fiscal 1997 were
approximately $78,000.



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<PAGE>   5

TRADEMARKS

        The Registrant has registered several of its marks relating to the
operation of Gladstone's and R.J.'s as trademarks and service marks and regards
such marks as having significant value and as being an important factor in the
marketing of its restaurants.


COMPETITION

        The Registrant's restaurants compete with a wide variety of restaurants,
ranging from national and regional restaurant chains to locally owned
restaurants. Restaurants historically have represented a high risk investment in
a very competitive industry. Many of the Registrant's competitors have
significantly greater financial resources than the Registrant. The restaurant
business is often affected by changes in consumer tastes and discretionary
spending patterns, national and regional economic conditions, demographic
trends, consumer confidence in the economy, traffic patterns and the type,
number and location of competing restaurants. Any change in these factors could
adversely impact the Registrant. Management believes that the Registrant's
restaurants are comparable in quality, and in many cases superior, to competing
restaurants. There is no assurance that the Registrant's restaurants will be
able to compete successfully with other restaurants in their respective areas.


EMPLOYEES

        The Registrant has approximately 319 employees in restaurant operations.
None of the employees are represented by a union. The Registrant believes that
its working conditions and compensation packages are competitive with those
offered by its competitors and considers relations with its employees to be
good.


SEASONALITY

        The Registrant's restaurant business is seasonal due to Gladstone's
location on the beach in Pacific Palisades, California. As a result, sales and
operating profits are higher during the summer months.


ITEM 2  PROPERTIES

        GLADSTONE'S LEASES. The current concession agreements with the County of
Los Angeles ("County") for the operation of Gladstone's and the adjacent parking
lot expire on October 31, 1997. (See Item 1 - "Restaurant Operations -
Gladstone's Concession Agreement" for additional information regarding the new
concession agreement). The current concession agreement for the restaurant
provides for rent based on 8% of sales of food, non-alcoholic beverages and
other merchandise and 10% of the sales of alcoholic beverages, with an annual
minimum rent of $480,000. Rent paid under the restaurant lease for the 1997
fiscal year was approximately $1,116,000, representing approximately 8.4% of the
restaurant's sales. The current monthly rental payment for the adjacent parking
lot is $2,948, subject to annual cost-of-living adjustments of up to 5.5%. Rent
paid during fiscal 1997 for the parking lot was $35,400.

        R.J.'S LEASE. In December 1994, the Registrant negotiated an amended and
restated lease for RJ's. The amended lease expires in December 2004 subject to a
non-guaranteed extension period of five years. The amended lease further
provides for monthly rental payments of $12,500 through December 1997. In
January 1998, 2001 and 2004 the monthly lease payments are subject to adjustment
based on Consumer Price Index changes. Rent paid in fiscal 1997 was $150,000.



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<PAGE>   6

        EXECUTIVE OFFICE. The Registrant occupies approximately 2,000 square
feet of office space in Pacific Palisades, pursuant to a lease which expires in
September 1997 and provides for current monthly rental payments of approximately
$2,900. The Registrant is currently negotiating an extension to its lease.


ITEM 3  LEGAL PROCEEDINGS

        In July 1996, a former restaurant employee filed a complaint in the
Superior Court for the state of California, County of Los Angeles (BC 153053),
against the Registrant's wholly owned subsidiary, Sea View Restaurants, Inc.,
and three of its current and former employees. The complaint arises out of the
plaintiff's former employment and alleges sexual harassment, wrongful
termination and various related causes of action. The Registrant believes that
this case is without merit and is vigorously contesting it.

        Additionally, the Registrant is involved in litigation and threatened
litigation arising in the ordinary course of business. Management of the
Registrant does not believe that resolution of any such matters will have a
material adverse effect on its business.


ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of the Registrant's stockholders
during the fourth quarter of the fiscal year ended April 30, 1997.


PART II

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

        The shares of Registrant's common stock are listed on the OTC Bulletin
Board under the symbol "CBHR".

        Market price information for the Registrant's common stock listed below
is taken from the OTC Bulletin Board. 

<TABLE>
<CAPTION>
                                                            BID PRICE
                                                       -------------------
                                                       HIGH           LOW
                                                       ----           ----
<S>                                                     <C>           <C>
          FISCAL 1996 

          First Quarter                                 .02           .01
          Second Quarter                                (A)           (A)
          Third Quarter                                 (A)           (A)
          Fourth Quarter                                (A)           (A)

          FISCAL 1997

          First Quarter                                 (A)           (A)
          Second Quarter                                (A)           (A)
          Third Quarter                                 (A)           (A)
          Fourth Quarter                                (A)           (A)

          FISCAL 1998

          First Quarter (through 7/11/97)               (A)           (A)
</TABLE>



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<PAGE>   7

        Bid prices prior to May 1, 1995, the effective date of the Registrant's
one for 33.286962 reverse stock split, have been adjusted on a pro-forma basis
to reflect such stock split. At July 11, 1997, the Registrant had approximately
570 shareholders of record.

        (A)     - Since August 14, 1995 there have been no posted bid prices for
                the Registrant's common stock.

        DIVIDENDS The Registrant has not paid a dividend on its common stock
since fiscal 1985. The Registrant presently intends to retain any earnings to
repay indebtedness and finance its operations and does not anticipate declaring
cash dividends in the foreseeable future. Sea View's loan agreement prohibits
the payment of dividends to the Registrant or the repurchase of Sea View's
common stock by Sea View.


ITEM 6  SELECTED FINANCIAL DATA

        The following table sets forth the selected financial data and operating
data for the five years ended April 30, 1997 and is derived from the audited
consolidated financial statements of the Registrant. The consolidated financial
data in the following table is qualified in its entirety by, and should be read
in conjunction with, the consolidated financial statements and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and other financial and statistical information included elsewhere
in this Form 10-K.

<TABLE>
<CAPTION>
                                                                       YEARS ENDED APRIL 30,
                                                   ----------------------------------------------------------
                                                     1997        1996        1995         1994         1993
                                                   --------    --------    --------     --------     --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>         <C>         <C>          <C>          <C>     
Income Statement Data:
      Sales                                        $ 15,164    $ 15,257    $ 14,160     $ 13,924     $ 15,144
      Income (loss) from operations
       before extraordinary items                       327         577      (3,419)      (1,372)        (665)
      Income (loss) per common share
       from operations before
       extraordinary items                              .10         .20      (12.21)       (4.93)       (2.35)
      Extraordinary item (a)                             --          --       2,540           --           --
      Income per common share from
        extraordinary item                               --          --        9.07           --           --
      Net Income (loss)                                 327         577        (879)      (1,372)        (649)
     Net Income (loss) per common share                 .10         .20       (3.14)       (4.93)       (2.35)

Balance Sheet Data:

     Total assets                                     5,078       6,060       6,709       10,369       11,649
     Convertible subordinated notes                      --          --         783           --           --
     Long-term debt, net of current portion (b)          --       1,500       2,776        8,166        8,166
</TABLE>


     (a)  Extraordinary Gain recognized in connection with the December 1994
          restructuring - See Note B to the Financial Statements.

     (b)  See Note B to the Financial Statements regarding the December 1994
          restructuring.



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


INTRODUCTION

        The Registrant currently has operations in one business segment, the
ownership and operation of restaurants.


RESTAURANT OPERATIONS

        Restaurant operations include the results of Gladstone's 4 Fish in
Pacific Palisades, California, and RJ's - Beverly Hills in Beverly Hills,
California. See Item 1 - "Restaurant Operations - Gladstone's 4 Fish" for
additional information regarding the concession agreement pursuant to which
Gladstone's 4 Fish is operated.

        Total sales for the year ended April 30, 1997 decreased $93,000 or .6%
compared with the year ended April 30, 1996. All restaurant operations are
currently conducted through the Registrant's wholly-owned subsidiary, Sea View.
Sea View's fiscal year included 52 weeks during the most recent fiscal year
compared with 53 weeks in the prior year. On a sales per week basis, Sea View's
weekly sales were $291,600 for the 52 weeks ended May 1, 1997 compared with
$287,900 for the 53 weeks ended May 2, 1996, an increase of 1.3%.

        The Registrant's Gladstone's 4 Fish restaurant is located on the beach
in Pacific Palisades, California and is dependent, to a certain extent, on
favorable weather and tourism. Gladstone's has a large outside deck overlooking
the Pacific ocean which is a very popular destination but is only open as
weather permits. Sales at Gladstone's for the fourth quarter ended May 1, 1997
benefitted significantly from unseasonably warm weather and lower rainfall as
compared with the same period last year.

        Total sales for the year ended April 30, 1996 increased $1,097,000 or
7.7% compared with the year ended April 30, 1995. Sea View's fiscal year
included 53 weeks during the year ended May 2, 1996 compared with 52 weeks in
the prior year. On a sales per week basis Sea View's weekly sales were $287,900
for the 53 weeks ended May 2, 1996 compared with $272,300 for the 52 weeks ended
April 27, 1995, an increase of 5.7%. Sales at Gladstone's for the third and
fourth quarters of fiscal 1996 benefitted significantly from several successful
promotional events as well as favorable weather and lower rainfall as compared
with the same periods in fiscal year 1995.

        In May 1993, MCA Development, Inc.("MCAD") opened a Gladstone's 4 Fish
at its Citywalk project in Universal City, California pursuant to a license
agreement between the Registrant and a subsidiary of MCAD. License fees for the
fiscal years ended April 30, 1997, 1996 and 1995 were $78,000, $76,000 and
$77,000, respectively.


COST OF GOODS SOLD

        Cost of goods sold includes all food, beverages, liquor, direct labor
and other operating expenses, including rent, of the Registrant's restaurant
operations. Cost of goods sold, as a percentage of sales, for the fiscal year
ended April 30, 1997 was 82.0% compared to 80.9% for fiscal 1996 and 82.9% for
fiscal 1995.

        The increase in cost of goods sold for fiscal 1997, is primarily due to
significantly higher prices paid for certain key food products, including live
Maine lobster, dungeness crab, fresh 



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poultry and most dairy products. Prices on these items, except for dungeness
crab, began to moderate in the second half of the fiscal year.

        The Registrant has also been impacted by the implementation of a higher
minimum wage. On October 1, 1996, federal legislation was signed mandating a
$.50 per hour increase in the minimum wage, with a second increase of $.40 per
hour scheduled for September 1, 1997. In addition, the state of California is
separately increasing the minimum wage in two steps resulting in a state minimum
wage of $5.75 per hour as of March 1998. This state minimum wage will be $.60
per hour above the new federal standard. At present, the state of California,
unlike most states, does not allow any adjustment of minimum wage for employees
that receive tips. These wage increases, unless offset by an adjustment for
tipped employees, have and will continue to have an adverse impact on the
Registrant's labor costs. The Registrant also believes that these mandated
increases in minimum wage will result in higher prices paid for most major food
products. To partially offset the higher food and labor costs, the Registrant
has implemented certain menu price increases at both of its restaurants.

        The Registrant expects that its cost of goods sold will increase
significantly based on the expected terms of Gladstone's new twenty year
concession agreement. Annual minimum rent will increase to $1,750,000, which is
approximately $600,000 higher than total rent expense in fiscal 1997.
Additionally, Gladstone's will assume certain maintenance obligations which are
currently the responsibility of the County as landlord.

        The decrease in cost of goods sold as a percentage of sales in fiscal
1996 compared with fiscal 1995 is primarily due to lower insurance costs,
particularly in the area of workers compensation insurance. Legislative reform
of the California workers compensation insurance system enabled the Registrant
to renew its workers compensation insurance for the year commencing April 1,
1995 at significantly reduced rates. The Registrant's advertising expenditures
for the year ended April 30, 1996 were also slightly lower than the prior year.
This reduction was primarily due to marketing and advertising expenses related
to a July 4th fireworks show held in fiscal 1995 which was not held in fiscal
1996.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

        Selling, general and administrative expense for the year ended April 30,
1997, increased $99,000 or 9.8% as compared with the year ended April 30, 1996.
The Registrant incurred approximately $147,000 of expenses related to the
Registrant's response to the County's "Request for Proposal" for a twenty year
concession agreement to remain as the operator of the restaurant site where
Gladstone's currently operates. These expenses included legal fees,
architectural design, proposal preparation, economic analysis and a
nonrefundable fee of $25,000 paid to the County for the right to negotiate
exclusively.

        Selling, general and administrative expenses for the year ended April
30, 1996, increased $68,000 or 7.2% as compared with the year ended April 30,
1995. This increase is primarily due to expenses incurred in connection with the
Registrant's reverse stock split which became effective May 1, 1995 as well as
an increase in certain incentive compensation expenses. As a percentage of
sales, selling, general and administrative expenses declined slightly from 6.7%
of sales for the year ended April 30, 1995 to 6.6% of sales for the year ended
April 30, 1996.



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<PAGE>   10

LEGAL AND LITIGATION SETTLEMENT

        For the year ended April 30, 1997, legal and litigation settlement
expenses decreased $27,000 or 17.2% as compared with the year ended April 30,
1996. This decrease is primarily due to the elimination of certain litigation
that was active during the prior year.

        Legal and litigation settlement expenses for the year ended April 30,
1996, decreased $64,000 or 29.0% as compared with the year ended April 30, 1995.
Expenses incurred during the 1996 fiscal year included costs to register
3,004,282 shares of common stock owned by certain stockholders, pursuant to an
existing contractual obligation. The selling stockholders did not sell any of
their shares. The Registrant is obligated to file amendments to the registration
statement in order to update it at any time until December 8, 1997 when
requested in writing by Bank of America (one of the selling stockholders) with
the Registrant bearing all the expenses of such registration and updates up to
certain limits.

        On December 22, 1994 the Registrant completed a restructuring of Sea
View's bank loan and settlement of a contingent note. The Registrant
concurrently closed a private placement of securities to finance such
restructuring and settlement. Legal expenses related to the debt restructuring
of $100,000 reduced the extraordinary gain that was recorded upon consummation
of the transaction. Legal expenses of $98,000 related to the private placement
were offset against the proceeds of such offering.

INTEREST EXPENSE

        For the year ended April 30, 1996, the Registrant incurred interest
expense of $43,000 related primarily to the 9.75% Convertible Subordinated Notes
("Convertible Notes"). The Convertible Notes were partially redeemed by the
Registrant in October 1995 and the unredeemed portion of the notes converted
into common stock as of October 30, 1995. The balance of the interest expense in
fiscal year 1996 as well as the interest expense recorded in fiscal year 1997 is
related to a capital lease for certain restaurant equipment.

AMORTIZATION OF INTANGIBLE ASSETS

        Amortization expense relates primarily to the goodwill and covenant not
to compete which were recorded in April 1990 upon the completion of the
acquisition of the Registrant's restaurant operations. The five year covenant
not to compete was fully amortized at April 30, 1995.

        The Registrant considered the restructuring transactions consummated on
December 22, 1994 to represent an event which established the existence of
impairment indicators. The issuance of equity securities to the bank and the
private financing reflects potentially 78% of the Registrant's fully diluted
voting equity. These transactions served as the basis for determining fair value
in order to measure the extent of impairment. This valuation was further
adjusted to reflect the uncertainty, at that time, concerning continuation of
business at the Registrant's principal restaurant location beyond the current
term of the concession agreement. Accordingly, during fiscal year 1995 goodwill
was written down by $2,500,000 and concurrently, the amortization period was
reduced from fifteen years to ten years. The combination of the write-down and
reduction in amortization period will result in future annual goodwill
amortization expense of approximately $714,000.

INCOME TAX EXPENSE

        For the year ended April 30, 1997 and 1996, the Registrant recorded
income tax expense of $21,000 and $16,000, respectively, representing federal
and state taxes due based on Alternative Minimum Tax calculations.

        For the year ended April 30, 1995 the Registrant recorded income tax
expense of $4,000 which represents minimum state taxes. 



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<PAGE>   11

LIQUIDITY AND CAPITAL RESOURCES

        Sea View is currently negotiating with the County on the terms of a new
twenty year concession agreement. Based on Gladstone's bid, it is expected that
the terms of the new concession agreement, which will commence on November 1,
1997, will require Sea View to post a $2,000,000 letter of credit as a security
deposit for rental payments due to the County. In the event that rents are not
paid when due, the County may draw upon the letter of credit. It is further
expected that the terms of the new concession agreement will provide for the
reduction in the face amount of the letter of credit when Sea View's net worth
exceeds certain amounts. The Registrant also intends to complete extensive
renovations to Gladstone's, including certain improvements which will likely be
required by the terms of the concession agreement. The timing of these
renovations will ultimately be determined by the final terms of the new
concession agreement. The Registrant is currently in discussions with equity and
debt financing sources to raise the necessary funds or receive appropriate
commitments to meet the letter of credit requirement as well as to complete the
proposed renovations to Gladstone's.

        Reference is made to Note D of the financial statements, included under
item 8 hereof, for a description of the Registrant's outstanding indebtedness to
Bank of America. The Registrant believes that its existing cash and cash flow
from operations over the next year will allow it to meet its payment obligations
under its bank loan agreement and its normal operating expenses.

        The Registrant currently has no outside sources of short-term or
long-term financing; however in November 1996, the Registrant signed a three
year, $3,000,000 commitment letter with Finova Capital Corporation. The
commitment is contingent upon the Registrant executing an agreement to remain
the operator of Gladstone's at its current location for not less than twenty
years. Additionally, the commitment letter is subject to numerous other
conditions including executing a definitive loan agreement. The commitment also
includes a $1,500,000 subline of credit for the sole purpose of financing
renovations to the Gladstone's location. There can be no assurance that the
Registrant will be able to conclude an agreement on acceptable terms.

        The Registrant is also exploring various opportunities to expand its
operations. The Registrant's ability to expand is subject to the availability of
debt or equity financing on terms that are acceptable to the Registrant. There
can be no assurance that such financing will be available.

        Capital expenditures for the year ended April 30, 1997 totaled
approximately $110,000. The Registrant expects that renovation costs for
Gladstone's will exceed $2,500,000. The timing of such renovations is subject to
the terms of a final concession agreement with the County and the receipt of all
necessary permits. The Registrant expects that a portion of the renovation costs
will be incurred in fiscal 1998 with the balance incurred in fiscal 1999.

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Except for the historical information contained herein, certain
statements in this Form 10-K, including statements in this Item and in
"Business" are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievement of the Registrant, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: whether the Registrant is able to
conclude a new concession agreement with the County of Los Angeles with respect
to the operation of Gladstone's at its current location or, failing that, is
able to secure a suitable alternate location; the Registrant's ability to secure
adequate debt or equity financing in order to comply with the terms of a new
concession agreement, including the payment of significantly higher rental
payments and completion of required renovations; the Registrant's ability to
generate an operating profit based on the terms of the new concession agreement;
the Registrant's ability to service its current indebtedness to the bank and to
comply with certain restrictive covenants;



                                       11

<PAGE>   12

            SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS (CONT.)

that its principal source of cash is funds generated from operations; that
restaurants historically have represented a high risk investment in a very
competitive industry; general and local economic conditions, which can, among
other things, impact tourism, consumer spending and restaurant revenues; weather
and natural disasters, such as earthquakes and fires, which can impact sales at
the Registrant's restaurants; quality of management; changes in, or the failure
to comply with, governmental regulations; unexpected increases in the cost of
key food products, labor and other operating expenses in connection with the
Registrant's business; and other factors referenced in this Form 10-K and the
Registrant's other filings with the SEC.


ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                                 Not Applicable


ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                        CALIFORNIA BEACH RESTAURANTS, INC.

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                 Page
                                                                 ----
<S>                                                               <C>

Report of Independent Auditors                                    15

Consolidated Balance Sheets - April 30, 1997 and 1996             16

Consolidated Statements of Operations for each of the three
  years in the period ended April 30, 1997                        18

Consolidated Statements of Stockholders' Equity (Deficit)  for
  each of the three years in the period ended April 30, 1997      19

Consolidated Statements of Cash Flows for each of the
  three years in the period ended April 30, 1997                  20

Notes to Consolidated Financial Statements                        22

Schedule No. Description

I            Condensed Financial Information of Registrant
             California Beach Restaurants, Inc.                   33
</TABLE>


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



                                       12
<PAGE>   13


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

                                      None


PART III


ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information concerning directors and executive officers is incorporated
herein by reference from the sections entitled "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's
1997 Proxy Statement, or if such Proxy Statement is not filed within 120 days of
the Registrant's fiscal year end, such information will be included in an
amendment to this Form 10-K filed within such timeframe.


ITEM 11  EXECUTIVE COMPENSATION

        Information concerning executive compensation is incorporated herein by
reference from the section entitled "Executive Compensation" in the Registrant's
1997 Proxy Statement, or if such Proxy Statement is not filed within 120 days of
the Registrant's fiscal year end, such information will be included in an
amendment to this Form 10-K filed within such timeframe.


ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


        Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the section entitled
"Security Ownership of Certain Beneficial Owners and Management" in the
Registrant's 1997 Proxy Statement, or if such Proxy Statement is not filed
within 120 days of the Registrant's fiscal year end, such information will be
included in an amendment to this Form 10-K filed within such timeframe.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information concerning certain relationships and related transactions is
incorporated herein by reference from the section entitled "Certain
Relationships and Related Transactions" in the Registrant's 1997 Proxy
Statement, or if such Proxy Statement is not filed within 120 days of the
Registrant's fiscal year end, such information will be included in an amendment
to this Form 10-K filed within such timeframe.



                                       13

<PAGE>   14

PART IV


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

(a)(1)  Financial Statements

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>                                                                        <C>
        Report  of Independent Auditors                                    15

        Consolidated Balance Sheets - April 30, 1997 and 1996              16

        Consolidated Statements of Operations for each of the three
        years in the period ended April 30, 1997                           18

        Consolidated Statements of Stockholders' Equity (Deficit) for
        each of the three years in the period ended April 30, 1997         19

        Consolidated Statements of Cash Flows for each of the three
        years in the period ended April 30, 1997                           20

        Notes to Consolidated Financial Statements                         22

   (2)  Financial Statement Schedule

        Schedule No.    Description

             I          Condensed Financial Information of 
                        Registrant, California Beach 
                        Restaurants, Inc.                                  33
</TABLE>

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

   (3)  Exhibits

                The exhibits listed on the accompanying Index to Exhibits are
        filed as part of this Annual Report on Form 10-K.

(b)     Reports on Form 8-K 
        None

        (c) Exhibits 

        All exhibits required by Item 601 are listed on the accompanying Index
to Exhibits described in (a) (3) above.

(d)     Financial Statement Schedules 

        All of the financial statement schedules which are required by the
regulations of the Securities and Exchange Commission are either inapplicable or
are included as part of Item 8 herein.



                                       14

<PAGE>   15

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
California Beach Restaurants, Inc.


We have audited the accompanying consolidated balance sheets of California Beach
Restaurants, Inc. and subsidiaries as of April 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended April 30, 1997. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 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
California Beach Restaurants, Inc. and subsidiaries at April 30, 1997 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended April 30, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.




                                        ERNST & YOUNG LLP



Los Angeles, California
June 6, 1997



                                       15

<PAGE>   16


               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                      APRIL 30,
                                                             ----------------------------
                                                                1997              1996
                                                             ----------        ----------

Current Assets:
<S>                                                          <C>                <C>
         Cash                                                $  626,000        $  624,000
         Restricted cash                                        475,000           500,000
         Trade and other receivables                             51,000            27,000
         Inventories                                            286,000           261,000
         Prepaid expenses                                       234,000           203,000
                                                             ----------        ----------
              Total current assets                            1,672,000         1,615,000
                                                             ----------        ----------

Fixed Assets - net of accumulated
         depreciation and amortization (Note C)               1,075,000         1,410,000

Other Assets:

             Goodwill, net of accumulated
                amortization of $4,584,000 (1997) and
             $3,870,000 (1996)                                2,141,000         2,855,000

          Other                                                 190,000           180,000
                                                             ----------        ----------

                              Total Assets                   $5,078,000        $6,060,000
                                                             ==========        ==========
</TABLE>







The accompanying notes to consolidated financial statements are an integral part
of this statement.



                                       16

<PAGE>   17

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY




<TABLE>
<CAPTION>
                                                                            APRIL 30,
                                                               ---------------------------------
                                                                   1997                 1996
                                                               ------------         ------------
<S>                                                            <C>                  <C>
Current Liabilities:

         Accounts payable                                      $    673,000         $    697,000
         Accrued liabilities                                        713,000              770,000
         Current portion of long-term debt (Note D)               1,488,000            1,216,000
                                                               ------------         ------------
               Total current liabilities                          2,874,000            2,683,000

Long-term debt, less current portion (Note D)                            --            1,500,000

Commitments and Contingencies (Notes G and H)

Stockholders' Equity (Notes B and F):

         Common stock, $.01 par value, authorized
           25,000,000 shares, issued and
           outstanding 3,401,000 shares at
           April 30, 1997 and 1996                                   34,000               34,000

         Series A Convertible Preferred Stock,
           no par value, authorized
           5,000,000 shares, none issued and
           outstanding at April 30, 1997 and
           1996 (Note F)                                                 --                   --

         Additional paid-in capital                              13,175,000           13,175,000
           Deficit in retained earnings                         (11,005,000)         (11,332,000)
                                                               ------------         ------------
         Total stockholders' equity                               2,204,000            1,877,000
                                                               ------------         ------------
             Total Liabilities and Stockholders' Equity        $  5,078,000         $  6,060,000
                                                               ============         ============
</TABLE>








 The accompanying notes to consolidated financial statements are an integral
                            part of this statement.



                                       17

<PAGE>   18

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         YEAR ENDED APRIL 30,
                                                      ------------------------------------------------------
                                                           1997                1996                 1995
                                                      ------------         ------------         ------------
<S>                                                   <C>                  <C>                  <C>         
Sales                                                 $ 15,164,000         $ 15,257,000         $ 14,160,000

Costs and expenses:

       Cost of goods sold                               12,438,000           12,335,000           11,741,000
       Selling, general and administrative               1,113,000            1,014,000              946,000
       Legal  and litigation settlement                    130,000              157,000              221,000
       Depreciation                                        445,000              431,000              452,000
                                                      ------------         ------------         ------------
                                                         1,038,000            1,320,000              800,000
Other income (expenses):

       Interest expense                                     (2,000)             (43,000)            (657,000)
       Amortization of intangible assets                  (718,000)            (714,000)          (1,104,000)
       Write-down of goodwill (Note A)                          --                   --           (2,500,000)
       Other, net                                           30,000               30,000               46,000
                                                      ------------         ------------         ------------

Income (loss) before income taxes                          348,000              593,000           (3,415,000)

Income tax provision (Note E)                               21,000               16,000                4,000
                                                      ------------         ------------         ------------

Income (loss) before extraordinary item                    327,000              577,000           (3,419,000)

Extraordinary item:

      Gain from debt
       restructuring (Note B)                                   --                   --            2,540,000
                                                      ------------         ------------         ------------

Net Income (loss)                                     $    327,000         $    577,000         ($   879,000)
                                                      ============         ============         ============


Net Income (loss) per common share:

   Primary:
     Before extraordinary items                       $        .10         $        .20         ($     12.21)
     Extraordinary items                                        --                   --                 9.07
                                                      ------------         ------------         ------------


                                                      $        .10         $        .20         ($      3.14)
                                                      ============         ============         ============


  Fully-diluted                                       $        .10         $        .18         ($      3.14)
                                                      ============         ============         ============

Weighted average number of shares outstanding:

   Primary                                               3,401,000            2,931,000              280,000

   Fully-diluted                                         3,401,000            3,401,000              280,000
</TABLE>

   The accompanying notes to consolidated financial statements are an integral
                            part of this statement.



                                       18

<PAGE>   19

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                      SERIES A CONVERTIBLE
                                  COMMON STOCK           PREFERRED STOCK         ADDITIONAL     DEFICIT IN
                              -------------------   -------------------------     PAID-IN        RETAINED
                                SHARES    AMOUNT      SHARES          AMOUNT      CAPITAL         EARNINGS        TOTAL
                              ---------   -------   ----------     ----------    -----------   ------------     ----------
<S>                             <C>        <C>       <C>          <C>            <C>           <C>             <C>   
Balance at April 30, 1994       280,000   $ 3,000         --      $      --      $10,853,000   $(11,030,000)   $  (174,000)

Series A Convertible
Preferred Stock issued
pursuant to private
placement                          --        --      1,000,000        714,000           --             --          714,000

Series A Convertible
Preferred Stock issued
pursuant to restructuring          --        --      1,223,556        980,000           --             --          980,000

Net loss                           --        --           --             --             --         (879,000)      (879,000)
                              ---------   -------   ----------    -----------    -----------   ------------    -----------
Balance at April 30, 1995       280,000     3,000    2,223,556      1,694,000     10,853,000    (11,909,000)       641,000

Conversion of Series A
Convertible Preferred Stock
into common stock             2,181,000    22,000   (2,223,556)    (1,694,000)     1,672,000           --             --   

Common stock issued
pursuant to Rights Offering     244,000     2,000         --             --           77,000           --           79,000

Conversion of 9.75%
Convertible Subordinated
Notes                           696,000     7,000         --             --          573,000           --          580,000

Net Income                         --        --           --             --             --          577,000        577,000
                              ---------   -------   ----------    -----------    -----------   ------------    -----------
Balance at April 30, 1996     3,401,000    34,000         --             --       13,175,000    (11,332,000)     1,877,000

Net Income                         --        --           --             --             --          327,000        327,000
                              ---------   -------   ----------    -----------    -----------   ------------    -----------
Balance at April 30, 1997     3,401,000   $34,000         --             --      $13,175,000   $(11,005,000)   $ 2,204,000
                              =========   =======   ==========    ===========    ===========   ============    ===========
</TABLE>









 The accompanying notes to consolidated financial statements are an integral
part of this statement.



                                       19

<PAGE>   20

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                YEAR ENDED APRIL 30,
                                                    -------------------------------------------
                                                        1997           1996            1995
                                                    -----------     -----------     -----------
<S>                                                 <C>             <C>             <C>         
 Cash flows from operating activities:
     Net Income (loss)                              $   327,000     $   577,000     $  (879,000)

     Adjustments to reconcile net income (loss)
         to cash provided by operations:
         Depreciation and amortization                1,163,000       1,145,000       1,613,000
         Write-down of goodwill                            --              --         2,500,000
         Gain from debt restructuring                      --              --        (2,540,000)

Changes in operating assets and liabilities:
        Restricted cash                                  25,000            --          (425,000)
        Accounts receivable, trade                      (24,000)         (5,000)        (13,000)
        Inventories                                     (25,000)          1,000         (11,000)
        Prepaid expenses                                (31,000)        (48,000)          2,000
        Accounts payable                                (24,000)         32,000         125,000
        Accrued interest                                   --           (27,000)           --
        Accrued liabilities                             (57,000)        114,000        (146,000)
                                                    -----------     -----------     -----------
Cash provided by operations                           1,354,000       1,789,000         226,000
                                                    -----------     -----------     -----------

Cash flows used in investing activities:

Increase in other assets                                (14,000)        (33,000)         (7,000)
 Additions to fixed assets                             (110,000)       (259,000)       (280,000)
                                                    -----------     -----------     -----------
Net cash used in investing activities                  (124,000)       (292,000)       (287,000)
                                                    -----------     -----------     -----------
Cash flows from financing activities:
     Principal payments on borrowing                 (1,228,000)     (1,242,000)     (1,595,000)
     Payment of contingent note and
       restructuring expenses                              --              --          (692,000)
     Borrowings representing accrued interest
       prior to restructuring                              --              --           570,000
     Proceeds from the sale of Series A
       Convertible Preferred Stock                         --              --           714,000
     Proceeds from issuance of 9.75% Convertible
       Subordinated Notes                                  --              --           783,000
    Redemption of 9.75% Convertible
       Subordinated Notes                                  --          (203,000)           --
    Net proceeds from Rights Offering                      --            79,000            --
                                                    -----------     -----------     -----------

  Net cash used in financing
    activities                                       (1,228,000)     (1,366,000)       (220,000)
                                                    ===========     ===========     ===========
</TABLE>



 The accompanying notes to consolidated financial statements are an integral
part of this statement.



                                       20
<PAGE>   21

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
                                           YEAR ENDED APRIL 30,
                                   ---------------------------------
                                     1997        1996        1995
                                   --------    --------    ---------
<S>                                <C>         <C>         <C>       
Net increase (decrease) in cash    $  2,000    $131,000    ($281,000)
Cash at beginning of period         624,000     493,000      774,000
                                   --------    --------    ---------
Cash at end of period              $626,000    $624,000    $ 493,000
                                   ========    ========    =========
</TABLE>

        Supplemental disclosures of cash flow information:

        The Company incurred a capital lease obligation of $21,000 in connection
with a lease agreement to acquire equipment during the year ended April 30,
1996.

        In connection with settlement of a contingent note payable, the Company
recorded a $500,000 liability during the year ended April 30, 1995.



<TABLE>
<CAPTION>
Cash paid during the year for:
<S>                                   <C>            <C>            <C>   
    Interest                          $ 2,000        $70,000          --  
                                      =======        =======        ======
    Income taxes                      $30,000        $ 2,000        $4,000
                                      =======        =======        ======
</TABLE>














   The accompanying notes to consolidated financial statements are an integral
                            part of this statement.



                                       21

<PAGE>   22

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


BUSINESS

        The Company has operations in a single business segment, the ownership
and management of two restaurants, Gladstone's 4 Fish and RJ's - Beverly Hills.

FISCAL YEAR 

        The Company's fiscal year ends on April 30. The Company's restaurant
operations are conducted through its wholly-owned subsidiary, Sea View
Restaurants, Inc. ("Sea View"). Sea View's fiscal year is the 52 or 53 week
period ending on the Thursday closest to April 30. Fiscal year 1997 ended on May
1, 1997 and contained 52 weeks. Fiscal year 1996 ended on May 2, 1996 and
contained 53 weeks while fiscal year 1995 ended on April 27, 1995 and contained
52 weeks.

CONSOLIDATION

        The consolidated financial statements of California Beach Restaurants,
Inc. and subsidiaries include the accounts of the parent company and its
wholly-owned subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation.

RESTRICTED CASH

        At April 30, 1997 and 1996, the Company had $475,000 and $500,000,
respectively, in restricted cash, primarily pursuant to a financial covenant of
the Company's restructured bank loan (see Note B).

INVENTORIES

        Inventories are stated at the lower of cost or market. Cost is
determined principally by the first-in, first-out method. Inventories consist
primarily of food, beverages and other restaurant supplies.

FIXED ASSETS

        Fixed assets are stated at cost. Depreciation on furniture and equipment
is computed by the straight-line method using lives ranging from 3 to 8 years.
Leasehold improvements are amortized over the remaining terms of the leases
(including options expected to be exercised) or the estimated lives of the
improvements, principally 7 years, whichever is less.

INCOME TAXES

        The Company uses the liability method of accounting for income taxes
pursuant to the adoption of Statement of Financial Accounting Standards No. 109
("SFAS 109") Accounting for Income Taxes on May 1, 1993.

REVERSE STOCK SPLIT

        On April 28, 1995, the Company's shareholders approved a one for
33.286962 reverse stock split with respect to the outstanding shares of common
stock which became effective May 1, 1995, upon the filing of a Certificate of
Amendment to the Company's Articles of Incorporation. All references to share
and per share amounts of common stock have been adjusted to give effect to the
reverse stock split.



                                       22

<PAGE>   23

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

PER SHARE DATA 

        Primary earnings per common share are calculated by dividing net
earnings applicable to common stock by the weighted average of common stock
outstanding and common stock equivalents. On a fully diluted basis, where
applicable, shares outstanding have been adjusted to assume the conversion of
the 9.75% Convertible Subordinated Notes ("Convertible Notes") as of the
beginning of the year and net income has been adjusted to reflect the addition
of $38,000 in interest expense recorded during 1996.

        In 1995 common stock equivalents and other potentially dilutive
securities have been excluded from per share calculations as their effect would
be antidilutive.

INTANGIBLE ASSETS

        Intangible assets are stated at cost and are being amortized as follows:

<TABLE>
<CAPTION>
                                   TERM                        METHOD
                                 --------                 ---------------
<S>                              <C>                      <C>            
Goodwill                          10 years                Straight Line
Covenant not to compete           5 years                 Straight Line
Deferred loan costs               7 years                 Interest method
</TABLE>

        The covenant not to compete and all deferred loan costs have been fully
amortized as of April 30, 1995. The Company's only remaining separately
identifiable intangible asset is goodwill. It is the Company's policy to
separately value all purchased intangible assets other than goodwill and to
assign such identifiable intangible assets separate amortization lives.

        The Company considered the transactions described in Note B to represent
an event which established the existence of impairment indicators. The issuance
of equity securities to the bank and the private financing reflects potentially
78% of the Company's fully diluted voting equity. These transactions served as
the basis for determining fair value in order to measure the extent of the
impairment. This valuation was further adjusted to reflect the uncertainty
concerning continuation of business at the Company's principal restaurant
location beyond the current term of the concession agreement. Accordingly,
during the year ended April 30, 1995 goodwill was written down by $2,500,000 and
concurrently, the amortization period was reduced from fifteen years to ten
years. The combination of the write-down and reduction in amortization period
will result in future annual amortization expense of approximately $714,000.

FINANCIAL INSTRUMENTS

        Based on the restructuring transactions described in Note B, the fair
value of the long-term debt is estimated to be the same as amounts reported in
the Company's balance sheet.

STOCK-BASED COMPENSATION

        The Company has elected to continue to account for its stock-based
compensation arrangements using the intrinsic value-based method prescribed by
Accounting Principles Board (APB) No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations. Management has determined that the
effect of applying Financial Accounting Standards Board No. 123's fair value
method to the Company's stock-based compensation plans results in net income
that is not materially different from amounts reported under APB No. 25, since
the exercise price of the Company's employee stock options equals or exceeds the
market price of the underlying stock on the date of grant and therefore no
compensation expense is recognized.



                                       23

<PAGE>   24

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

RECENT ACCOUNTING PRONOUNCEMENTS

        The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" effective with its fiscal year
ending April 30, 1997. SFAS No. 121 requires an entity to review long-lived
assets and certain identifiable intangibles whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Impairment losses are recognized when the carrying amount of the asset exceeds
the estimated fair value of the asset. There was no impact on the Company as a
result of implementing SFAS No. 121.

        In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Accounting for Earnings Per Share", which will be effective for the
Company in fiscal 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share and restate all prior
periods. The impact of SFAS No. 128 is not expected to be material.

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 consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.


NOTE B - RESTRUCTURING OF SENIOR AND SUBORDINATED CONTINGENT 
         DEBT AND PRIVATE PLACEMENT

        On December 22, 1994, the Company completed a restructuring of Sea
View's bank loan and settlement of a contingent note, and concurrently completed
a private placement of securities to finance such restructuring and settlement.

        In April 1992, Sea View received notification from its bank that all
amounts outstanding under the loan were due and payable. In late August 1994,
Sea View's bank commenced formal foreclosure proceedings against the loan's
collateral which included all of Sea View's assets. Additionally, Sea View was
potentially liable under a Subordinated Contingent Promissory Note ("Contingent
Note") to a third party issued in connection with the Company's acquisition of
Sea View's operating assets in 1990. This Contingent Note could have resulted in
a maximum amount due of $5,000,000, assuming a fifteen year extension of the
Gladstone's 4 Fish restaurant concession agreement, plus interest at 12.5% from
April 2, 1990. The bank required as a condition to the bank debt restructuring
that the Contingent Note be settled or otherwise restructured to the bank's
satisfaction. Accordingly, as part of the bank debt restructuring, the Company
paid $500,000 in full satisfaction of the Contingent Note. The gain from the
debt restructuring has been reduced by this payment.

        At the date of the bank debt restructuring, the Company owed the bank
$8,166,000 in principal and $1,514,000 in accrued and unpaid interest. The
restructured bank loan provided for the payment by Sea View of an aggregate of
$4,700,000, of which $1,300,000 was paid on or before December 22, 1994, and a
balance of $3,400,000 which was represented by two notes;



                                       24

<PAGE>   25

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - RESTRUCTURING OF SENIOR AND SUBORDINATED 
         CONTINGENT DEBT AND PRIVATE PLACEMENT - CONTINUED

a senior secured note in the amount of $3,000,000, bearing interest at 12% per
annum, and payable at varying monthly amounts through October 31, 1997, and a
junior secured note in the amount of $400,000 accruing interest at 12% per annum
with both interest and principal payable in a single lump sum on October 31,
1997. Interest to maturity on the senior secured and junior secured notes of
$563,000 and $157,000, respectively has been included in the carrying value of
such notes, in accordance with Financial Accounting Standards Board Statement
No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring",
and will not be recognized as interest expense in current and future years. Such
notes are guaranteed by the Company. As additional consideration for the debt
restructuring, the Company issued to the bank,1,223,556 shares of a new issue
Series A Convertible Preferred Stock ("Convertible Preferred Stock") that
converted into 1,200,000 shares of common stock on May 1, 1995 upon the filing
of a Certificate of Amendment to the Articles of Incorporation of the Company
effecting a one for 33.286962 reverse stock split (constituting 30% of the
combined voting power of all outstanding shares on a fully diluted basis). The
bank is also entitled to two representatives on the Board of Directors of the
Company until the restructured debt has been repaid or the bank has sold at
least 25% of its stock holdings. Also, the bank will be entitled to participate
in certain future equity offerings by the Company in order to maintain its
percentage equity ownership and will be entitled to a prepayment of its
restructured loan equal to 35% of the net proceeds of any such future equity
offering by the Company. For the year ended April 30, 1995, the Company
recognized an extraordinary gain of $2,540,000 on the bank debt restructuring
and settlement of the Contingent Note. No tax expense or benefit was recognized
from this transaction, as the resulting gain was not taxable.

        The private financing which raised the funds necessary to effect the
bank debt restructuring and Contingent Note settlement, involved a total
investment of $1,600,000, excluding expenses, consisting of $817,290 of
Convertible Preferred Stock and $782,710 of Convertible Notes. 1,000,000 shares
of the Convertible Preferred Stock were issued at $.81729 per share. These
shares automatically converted into common stock on May 1, 1995 upon the filing
of a Certificate of Amendment to the Articles of Incorporation of the Company
effecting a one for 33.286962 reverse stock split.

        On October 18, 1995 the Company completed a Rights Offering to certain
shareholders that did not participate in the December 22, 1994 private
placement. Eligible shareholders as of September 11, 1995 received 4.7215 rights
for each share of common stock that they owned. Each right entitled the holder
to purchase one share of common stock at $.83 per share. The proceeds of the
offering were used to partially redeem the Company's Convertible Notes, which,
if not redeemed, were scheduled to convert into common stock as of October 30,
1995.

        The Company raised $203,000 from the exercise of 244,020 rights. The
proceeds from the offering were distributed to the holders of the Convertible
Notes on a pro-rata basis. The unredeemed portion of the Convertible Notes
converted into 696,000 shares of common stock.



                                       25

<PAGE>   26

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - FIXED ASSETS

Detail of the Company's fixed assets are listed below:

<TABLE>
<CAPTION>
                                               APRIL 30,
                                     -------------------------------
                                         1997                1996
                                     -----------         -----------
<S>                                  <C>                 <C>        
Leasehold improvements               $ 2,754,000         $ 2,727,000
Furniture and equipment                  925,000             842,000
                                     -----------         -----------

                                       3,679,000           3,569,000
Less accumulated depreciation
  and amortization                    (2,604,000)         (2,159,000)
                                     -----------         -----------

                                     $ 1,075,000         $ 1,410,000
                                     ===========         ===========
</TABLE>

NOTE D - LONG-TERM DEBT

Long-term debt consists of the following: 

<TABLE>
<CAPTION>
                                                        APRIL 30,
                                             -------------------------------
                                                 1997                1996
                                             -----------         -----------

<S>                                          <C>                <C> 
 Notes payable to bank, payable monthly
  in varying amounts through October
  1997, including accrued
  interest through the term of the debt      $ 1,488,000         $ 2,704,000

Capitalized lease obligation, payable 
  monthly through March 1998 
  with interest at 10.5%                            --                12,000

Less current portion                          (1,488,000)         (1,216,000)
                                             -----------         -----------
                                             $      --           $ 1,500,000
                                             ===========         ===========
</TABLE>

        During 1990 Sea View entered into a loan agreement with a bank in
connection with the acquisition of its restaurant operations. On December 22,
1994 Sea View completed a restructuring of its bank debt and entered into an
Amended and Restated Loan Agreement ("Amended Loan") (See Note B). The Amended
Loan included a senior secured note in the principal amount of $3,000,000,
bearing interest at 12% per annum, and payable at varying monthly amounts
through October 31, 1997, ($176,000 in fiscal 1995, $874,000 in fiscal 1996,
$1,050,000 in fiscal 1997 and $900,000 in fiscal 1998), and a junior secured
note in the amount of $400,000 accruing interest at 12% per annum with both
interest and principal payable in a single lump sum on October 31, 1997.
Interest to maturity on the senior secured and junior secured notes of $563,000
and $157,000, respectively was included in the carrying value of such notes, in
accordance with Financial Accounting Standards Board Statement No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructuring," and will
not be recognized as interest expense in current and future years. At April 30,
1997, the balance of the senior secured note was $931,000, including $31,000 of
future interest costs and the balance on the junior secured note was $557,000,
including $30,000 of future interest costs. At April 30, 1996, the balance of
the senior secured note was $2,147,000, including $199,000 of future interest
costs and the balance on the junior secured note was $557,000, including $87,000
of future interest costs. 



                                       26

<PAGE>   27

              CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE D - LONG-TERM DEBT - CONTINUED

        The Amended Loan requires that Sea View must meet certain financial
covenants and restricts capital expenditures, payment of dividends, repurchases
of common stock, acquisitions or mergers, disposition of property and the
ability to incur or assume additional indebtedness.



NOTE E - INCOME TAXES

        The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                              YEAR ENDED APRIL 30,
                 --------------------------------------------
                      1997            1996             1995
                 ------------        -------        ----------
<S>              <C>                 <C>            <C>     
Current:
  Federal        $      2,000        $12,000        $     --
  State                19,000          4,000             4,000
                 ------------        -------        ----------
                 $     21,000        $16,000        $    4,000
                 ============        =======        ==========

Deferred:
  Federal        $       --          $  --          $     --
  State                  --             --                --
                 ------------        -------        ----------
                 $       --          $  --          $     --  
                 ============        =======        ==========
</TABLE>


        As of April 30, 1997, the Company has available for federal income tax
purposes net operating loss carryovers available to offset certain future
taxable income of approximately $5,588,000 and state net operating loss
carryovers of approximately $1,145,000 which expire from 1998 through 2010.

        During the year ended April 30, 1990, two changes in control of the
Company occurred. As a result, $2,025,000 of net operating losses which expire
through 2001 are subject to certain restrictions which limit their future use to
approximately $181,000 per year. As a result of the limitation, approximately
$514,000 of the net operating loss carryforward may expire without any
utilization. The restructuring transactions described in Note B also resulted in
a change of control as of December 22, 1994. As a result of changes in control
in prior years, net operating losses of $3,875,000 which expire from 2006
through 2010 are subject to certain restrictions which limit their future use to
approximately $277,000 per year. As a result of this limitation, approximately
$997,000 of these net operating loss carryforwards may expire without any
utilization.

        The restructuring transactions described in Note B qualified for the
Stock-for-Debt exception in Internal Revenue Code Section 108. Accordingly, the
cancellation of debt income amount was not taxable for income tax purposes.



                                       27

<PAGE>   28

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE E - INCOME TAXES - CONTINUED

        The effective income tax rate on income (loss) varied from the statutory
federal income tax rate as follows:

<TABLE>
<CAPTION>
                                              1997         1996           1995
                                             ------       ------        -------
<S>                                            <C>          <C>         <C>    
Statutory federal rate                         35.0%        35.0%       (35.0%)
Increase (decrease):
  State income taxes, net of
    federal tax benefit                         5.5           .7           .5
  Reduction in valuation reserve as a
    result of the utilization of net
    operating loss carryforwards              (35.0)       (35.0)         --
  Alternative Minimum Tax                        .5          2.0          --
  Operating losses which resulted in
    no current Federal tax benefit              --           --          35.0
                                             ------       ------       ------
Effective income tax rate                       6.0%         2.7%          .5%
                                             ======       ======       ======
</TABLE>

        As of April 30, 1997 and 1996, the tax effect of the net operating loss
carryforwards and net deferred tax assets, for which a 100% valuation allowance
has been provided and which have not been recognized in the Company's financial
statements, are as follows:

<TABLE>
<CAPTION>
                                                1997                1996
                                            -----------         -----------

<S>                                         <C>                 <C>        
    Depreciation and amortization           $ 1,568,000         $ 1,518,000

    Nondeductible accruals                       49,000              27,000
    Net operating loss carryforwards          2,025,000           2,100,000
                                            -----------         -----------
      Total deferred assets                   3,642,000           3,645,000
                                            -----------         -----------
    Valuation allowance                      (3,642,000)         (3,645,000)
                                            -----------         -----------
      Net deferred assets                   $      --           $      --
                                            ===========         ===========
</TABLE>

NOTE F - STOCKHOLDERS' EQUITY

Convertible Preferred Stock:

        On December 22, 1994, the Company issued 1,223,556 shares of Convertible
Preferred Stock to its bank pursuant to an agreement whereby the bank
restructured certain outstanding senior secured debt (See Note B). These shares
were valued at $980,000 net of issuance expenses of $20,000. The Company also
sold 1,000,000 shares of Convertible Preferred Stock at $.81729 per share in a
private placement on December 22, 1994. Funds received from this private
placement were used to effect the restructuring of the senior secured debt.

        On May 1, 1995, the bank's Convertible Preferred Stock and the private
placement Convertible Preferred Stock automatically converted into 1,200,000 and
980,748 shares of common stock, respectively, upon the filing of a Certificate
of Amendment to the Articles of Incorporation of the Company effecting a one for
33.286962 reverse stock split. Upon such conversion, no shares of Convertible
Preferred Stock remain outstanding.



                                       28

 
<PAGE>   29

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE F - STOCKHOLDERS' EQUITY - CONTINUED

Rights Offering:

        On October 18, 1995, the Company completed a Rights Offering to certain
shareholders that did not participate in the December 22, 1994 private
placement. Eligible shareholders as of September 11, 1995 received 4.7215 rights
for each share of stock that they owned. Each right entitled the holder to
purchase one share of common stock at $.83 per share. The Company raised
approximately $203,000 from the exercise of 244,020 rights.

Stock Options:

        During 1984, the Company adopted the non-statutory stock option plan
which provided for the grant of options to purchase up to approximately 27,000
shares of the Company's common stock to eligible employees and non-employees of
the Company. Options granted pursuant to this plan were approved by the
Company's Board of Directors. The Board of Directors also determined the option
price which could not be less than 85% of the fair market value at the date of
grant. In March 1995, the Board of Directors terminated this plan except as to
450 options which remain outstanding.

        In July 1992, the Company's Board of Directors approved the 1992
incentive stock option plan and the 1992 non-statutory stock option plan,
subject to shareholder approval of the plans. These plans provided for the grant
of options to purchase up to approximately 60,000 shares of the Company's common
stock at prices not less than 100 percent of market price at the date of grant.
Options under the plan were subject to vesting provisions of up to five years.
In March 1995, the Board of Directors terminated this plan, the outstanding
options thereunder were cancelled with the optionholder's consent and the Board
adopted the Omnibus Stock Plan.

        The Omnibus Stock Plan, which received shareholder approval in April
1995, provides for the issuance of a maximum of 1,000,000 shares of common stock
giving effect to the one for 33.286962 reverse stock split approved by
shareholders in April 1995. The plan provides for the issuance of stock options,
stock appreciation rights, restricted stock and other awards to participants as
selected by the Stock Plan Committee of the Board of Directors which administers
the plan.

        Options granted pursuant to all of these plans have expiration dates
which do not exceed ten years from the date of grant.



                                       29

<PAGE>   30

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE F - STOCKHOLDERS' EQUITY - CONTINUED


        The following schedule summarizes the changes in stock options for the
three years ended April 30, 1997 under the plans:


<TABLE>
<CAPTION>
                                                                      WEIGHTED
                                                                      AVERAGE
                                       NUMBER OF     EXERCISE         EXERCISE
                                        OPTIONS        PRICE           PRICE
                                       --------     ------------       -----
<S>                                     <C>        <C>                <C>  
Outstanding at April 30, 1994            39,600     $4.99-$33.29       $5.35

          Granted                       590,000              .83         .83
          Cancelled                     (39,100)            4.99        4.99
          Exercised                        --               --           --
                                       --------     ------------       -----
Outstanding at April 30, 1995           590,500     $ .83-$33.29       $ .86

        Granted                          30,000              .83         .83
        Cancelled                       (41,000)             .83         .83
        Exercised                          --                            --
                                       --------     ------------       -----
Outstanding at April 30, 1996           579,500      $.83-$33.29       $ .86

        Granted                            --               --          --
        Cancelled                       (40,500)       .83-33.29        1.23
        Exercised                          --               --          --
                                       --------     ------------       -----
 Outstanding at April 30, 1997          539,000     $        .83       $ .83
                                       ========     ============       =====
  Exercisable at April 30, 1997         446,700     $        .83       $ .83
                                       ========     ============       =====
</TABLE>

        The weighted average remaining contractual life of these options is
eight years.

        Pursuant to an existing Registration Rights Agreement, if the Company
registers any class of equity security under the Securities Act of 1933, certain
investors with a certain minimum number of shares of the Company's common stock,
individually or in aggregate, can request that their shares be included in such
registration.

        Pursuant to the terms of certain stock purchase agreements relating to
the Company's December 1994 private placement, investors together with the bank,
holding at least 20% of the common stock into which the Convertible Preferred
Stock was converted have two demand registration rights to require the Company
to register such shares for resale under the Securities Act of 1933 for resale
to the public. Such investors, together with the bank, will also be entitled to
certain incidental registration rights. The Company will pay the expenses in
connection with any such incidental registrations and two such demand
registrations. In December 1995, the Company effected a registation for resale
of 3,004,282 shares on behalf of certain shareholders. No shares were sold
pursuant to such registration statement.



                                       30

<PAGE>   31

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE G - LEASES

        The Company leases restaurant and office facilities under various
non-cancelable operating leases with remaining terms ranging from one to nine
years. The terms of certain of the leases require additional rental payments
based on a percentage of the restaurants' sales in excess of a minimum amount.
Total amounts charged to rent expense under the Company's operating leases for
the three years ended April 30, 1997 are summarized below:

<TABLE>
<CAPTION>
                                   1997         1996          1995
                               ----------    ----------    ----------
<S>                            <C>           <C>           <C>       
Restaurants:
Fixed minimum rentals          $  630,000    $  630,000    $  630,000
Percentage rentals                636,000       606,000       521,000

Other fixed minimum rentals        70,000        70,000        70,000
                               ----------    ----------    ----------
Total                          $1,336,000    $1,306,000    $1,221,000
                               ==========    ==========    ==========
</TABLE>


        The parking lot for the Company's Gladstone's 4 Fish restaurant is
operated by a parking operator pursuant to a management agreement whereby the
Company pays a monthly fee for the operation of the parking facility. The
Company receives all revenues and pays all operating expenses under this
arrangement. During fiscal 1997, 1996 and 1995 the Company received $151,000,
$163,000 and $150,000, respectively pursuant to this arrangement, net of all
expenses (except rent). These amounts have been recorded as a reduction to cost
of goods sold.


Aggregate minimum annual rental commitments at April 30, 1997 were as follows:

<TABLE>
<CAPTION>
                Year Ending April 30,
                ---------------------
<S>                                            <C>       
                      1998                     $  422,000
                      1999                        150,000
                      2000                        150,000
                      2001                        150,000
                      2002                        150,000
                      Thereafter                  400,000
                                               ----------
                                               $1,422,000
                                               ==========
</TABLE>


        Sea View operates Gladstone's pursuant to a concession agreement with
the County of Los Angeles ("County") which expires October 31, 1997. The
County's standard operating procedure for contracts in excess of a certain
minimum length or dollar value is to distribute a request for proposal seeking
bids prior to entering into new agreements. In March 1997 the County completed
the bid process and announced their intention to enter into formal negotiations
with Gladstone's for a twenty year concession agreement, subject to approval by
the County Board of Supervisors. On April 15, 1997 the Board of Supervisors
unanimously approved the recommendation to enter into formal negotiations with
Gladstone's.



                                       31

<PAGE>   32

               CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE G - LEASES - CONTINUED

        Sea View and the County are currently negotiating a new twenty year
concession agreement which will commence on November 1, 1997. Based on Sea
View's bid, it is anticipated that the new agreement will include minimum annual
rental payments of $1,750,000, an increase of approximately $600,000 over rents
paid in fiscal 1997. Percentage rents based on 10% of food sales and 12% of the
sales of alcoholic beverages, merchandise and parking lot revenue will be
payable to the extent the percent rents exceed the minimum annual rents. Sea
View also expects that the agreement will require significant renovation to the
restaurant but will provide for reduced minimum rents during the period when
renovations are undertaken. This reduced rental period will not exceed six
months. The new agreement will also require Sea View to post a $2,000,000 letter
of credit in favor of the County, as a security deposit. The County may draw
upon the letter of credit if Gladstone's fails to pay rent as it comes due. The
letter of credit will be reduced as Sea View reaches certain net worth levels.


NOTE H - COMMITMENTS AND CONTINGENCIES

Employment Agreements:

        Effective May 21, 1993, the Company entered into employment agreements
with Messrs. Redhead and Segal, the Company's Chief Executive Officer and Vice
President - Finance, respectively at that time. These employment agreements set
forth certain of the terms of employment for each of these individuals,
including the right to receive nine months of salary as severance pay upon (i)
termination of employment without cause (as defined in the agreements) or (ii)
resignation for good reason (as defined in the agreements). The term of Mr.
Redhead's agreement is four years and provides for a current base salary of
$210,000 subject to annual cost of living adjustments. Mr. Segal's agreement is
for three years and provides for a current base salary of $108,000 subject to
annual cost of living adjustments. In April 1996, Mr. Segal's agreement was
extended for an additional year.

        The Company's Board of Directors has approved a bonus arrangement for
Messrs. Redhead and Segal that is contingent upon (i) execution of a new
concession agreement for Gladstone's for a minimum of ten years, on terms
acceptable to the Board of Directors, and (ii) the repayment in full of the
Company's current debt obligations to Bank of America. Mr. Redhead's bonus will
be 1.25 times his annual salary and Mr. Segal's bonus will be 1.0 times his
annual salary. The payment of such bonuses, if earned, is subject to the Board's
determination that adequate cash resources exist for such payment. The Company
has not recorded any expense related to these bonuses as of April 30, 1997, due
to the contingent nature of such obligation.

Litigation:

        The Company is involved in litigation and threatened litigation arising
in the ordinary course of business. However, it is the opinion of management
that these actions, when finally concluded, will not have a material adverse
effect upon the financial position of the Company.



                                       32

<PAGE>   33

SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES


CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                         APRIL 30,
                                               ----------------------------
                                                  1997              1996
                                               ----------        ----------
<S>                                            <C>               <C>       
ASSETS

CURRENT ASSETS

      Cash                                     $  298,000        $  300,000
      Due from affiliates                         845,000           833,000
                                               ----------        ----------
        Total current assets                    1,143,000         1,133,000

INVESTMENT IN WHOLLY-OWNED SUBSIDIARIES         1,904,000         1,566,000
                                               ----------        ----------
                                               $3,047,000        $2,699,000
                                               ==========        ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES                            $  843,000        $  822,000

STOCKHOLDERS' EQUITY                            2,204,000         1,877,000
                                               ----------        ----------
                                               $3,047,000        $2,699,000
                                               ==========        ==========
</TABLE>






                  See notes to condensed financial statements.



                                       33

<PAGE>   34

      SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONT.

CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES


CONDENSED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                               YEAR ENDED APRIL 30,
                                       -----------------------------------------
                                          1997           1996           1995
                                       ---------      ---------       ---------
<S>                                    <C>            <C>             <C>    
Sales                                  $    --        $    --         $    --

Costs and Expenses:

  Selling, general and
    administrative (Note B)                 --             --              --
                                       ---------      ---------       ---------
                                            --             --              --

  Interest expense                          --          (38,000)        (27,000)
  Other Income                            10,000         10,000           7,000
                                       ---------      ---------       ---------
Income (loss) before income taxes
  and equity in net loss of
  subsidiaries                            10,000        (28,000)        (20,000)

Income tax provision(Note C)              21,000         16,000           4,000
Equity in net income (loss)
  of subsidiaries                        338,000        621,000        (855,000)
                                       ---------      ---------       ---------
Net income (loss)                      $ 327,000      $ 577,000       ($879,000)
                                       =========      =========       =========
</TABLE>



                  See notes to condensed financial statements.



                                       34

<PAGE>   35

      SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONT.

CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES


CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                     YEAR ENDED APRIL 30,
                                                     ---------------------------------------------------
                                                         1997                1996                1995
                                                     -----------         -----------         -----------
<S>                                                  <C>                 <C>                 <C>         
CASH FLOWS FROM OPERATING
  ACTIVITIES:

  Net Income (loss)                                  $   327,000         $   577,000         ($  879,000)

  Adjustments to reconcile net Income
   (loss) to cash provided by (used in)
   operations:


  Equity in (income) loss of subsidiaries               (338,000)           (621,000)            855,000

Changes in assets and liabilities:

  Accrued liabilities                                     21,000             (11,000)             27,000
  Due to (from) affiliates                               (12,000)            189,000          (1,467,000)
                                                     -----------         -----------         -----------

  Cash provided by (used in) operations                   (2,000)            134,000          (1,464,000)

FINANCING ACTIVITIES:

  Proceeds from the sale of Convertible
     Preferred Stock                                        --                  --               714,000
  Proceeds from issuance of Convertible Notes               --                  --               783,000
 Net proceeds from Rights Offering                          --                79,000                --
 Redemption of Convertible Notes                            --              (203,000)               --
                                                     -----------         -----------         -----------
  Cash provided by financing activities                     --              (124,000)          1,497,000
                                                     -----------         -----------         -----------
Increase (Decrease) in cash                               (2,000)             10,000              33,000

Cash at beginning of period                              300,000             290,000             257,000
                                                     -----------         -----------         -----------
Cash at end of period                                $   298,000         $   300,000         $   290,000
                                                     ===========         ===========         ===========
</TABLE>








                  See notes to condensed financial statements.



                                       35

<PAGE>   36

SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - CONT.

CALIFORNIA BEACH RESTAURANTS, INC. AND SUBSIDIARIES



NOTES TO CONDENSED FINANCIAL STATEMENTS



NOTE A -- ACCOUNTING POLICIES


In the parent company - only financial statements, the Company's investment in
its wholly-owned subsidiaries is stated at cost adjusted for equity in
undistributed income and losses of the subsidiaries since date of acquisition.
Net undistributed losses aggregated $3,909,000 at April 30, 1997. Parent company
- only financial statements should be read in conjunction with the Company's
consolidated financial statements.


NOTE B -- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The Company allocates indirect corporate selling, general and administrative
expenses to each subsidiary based on the revenues generated by that subsidiary.
All revenues were generated by Sea View Restaurants, Inc. for the three years
ended April 30, 1997 thus no indirect selling, general and administrative
expenses were allocated to the parent company.


NOTE C -- INCOME TAXES

The Company files its federal and state income tax returns on a consolidated
basis. Under a tax sharing agreement California Beach Restaurants, Inc. has with
its subsidiaries, the subsidiaries provide for income taxes on a separate basis
as if they filed their own income tax returns. Any tax benefit which results
from filing consolidated tax returns are recognized by the parent company.



                                       36

<PAGE>   37

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Los Angeles, in the
State of California, on July 24, 1997.

                                 CALIFORNIA BEACH RESTAURANTS, INC.

                                 By:Alan Redhead
                                    -----------------------------------------
                                    Alan Redhead, Chief Executive Officer

                                    Mark E. Segal
                                    -----------------------------------------
                                    Mark E. Segal, Chief Financial Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                         DATE
---------                                   -----                                         ----

<S>                                         <C>                                            <C> 
Alan Redhead                                Chairman of the Board,Chief                   July 24, 1997
------------------------------------         Executive Officer and Director
Alan Redhead                                 (Principal Executive Officer) 


Mark E. Segal                               Vice President-Finance                        July  24, 1997
------------------------------------          Chief Financial Officer and
Mark E. Segal                                 Secretary (Principal Financial and                                                
                                              Accounting Officer)


J. Christopher Lewis                        Director                                      July 24, 1997
------------------------------------ 
J. Christopher Lewis


Jefferson W. Asher, Jr.                     Director                                      July  24, 1997
------------------------------------
Jefferson W. Asher, Jr.


Scott C. Dew                                Director                                      July 24, 1997
------------------------------------ 
Scott C. Dew


Faisal Shah                                 Director                                      July 24, 1997
------------------------------------ 
Faisal Shah


George Nicolais                             Director                                      July 24, 1997
------------------------------------ 
George Nicolais


Barry A. Chase                              Director                                      July 24, 1997
------------------------------------ 
Barry A. Chase
</TABLE>



                                       37

<PAGE>   38
INDEX TO EXHIBITS

                                Item 14(a) 3


<TABLE>
<CAPTION>
ITEM                                                                                              SEQUENTIALLY
NUMBER   DESCRIPTION                                                                              NUMBERED PAGE
------   -----------                                                                              -------------
<S>      <C>                                                                                      <C>
 3.1     Restated Articles of Incorporation of California Beach Restaurants,
         Inc., as amended to date, including Certificate of Determination of
         Rights and Preferences of Series A Convertible Preferred Stock (15)

 3.2     By-Laws, as amended to-date(15)

10.10    Registration Rights Agreement dated as of March 30, 1990 between I.H.V.
         Corp., Robert J. Morris, Richard S. Stevens, California Beach Capital,
         Inc. and certain investors. (4)

10.13    Amended and Restated Concession Agreement No. 31923 for Will Rogers
         State Beach Park Restaurant dated April 2, 1981, as amended
         (Gladstone's restaurant lease). (5)

10.14    Concession Agreement No. 45334 for the Operation and Maintenance of
         Parking Lot 4 at Will Rogers State Beach Park dated August 23, 1983, as
         amended (Gladstone's parking lot lease). (5)

10.18    Amendment to Registration Rights Agreement dated as of February 25,
         1991 among Registrant, California Beach Capital, Inc., Robert J.
         Morris, Richard S. Stevens, Sand and Sea Partners, Sea Fair Partners,
         W.R. Grace & Co., Eli Broad, Cushman/Sea View Partners and Cushman
         K/Sea View Partners. (A)

10.24    License Agreement, dated April 21, 1992, between Sea View Restaurants,
         Inc. and MCA Development Venture Two. (9)

10.26    Indemnification agreement dated as of October 7, 1992 between the
         Registrant and Alan Redhead(10)

10.27    Indemnification agreement dated as of October 7, 1992 between the
         Registrant and Mark E. Segal(10)

10.28    Indemnification agreement dated as of October 7, 1992 between the
         Registrant and J. Christopher Lewis(10)

10.30    Indemnification agreement dated November 23, 1992 between the
         Registrant and Jefferson W. Asher, Jr.(10)

10.31    Amendment number 6 to concession agreement number 31923 for Will Rogers
         State Beach Park Restaurant(10)

10.32    Executive employment agreement dated as of May 21, 1993 between the
         Registrant and Alan Redhead(10)*

10.33    Executive employment agreement dated as of May 21, 1993 between the
         Registrant and Mark E. Segal(10)*

10.40    Amended and Restated Loan Agreement dated as of December 22,1994
         between Sea View Restaurants, Inc. and Bank of America NT &SA(13)

</TABLE>



                                       38

<PAGE>   39

<TABLE>
<CAPTION>
ITEM                                                                                              SEQUENTIALLY
NUMBER   DESCRIPTION                                                                              NUMBERED PAGE
------   -----------                                                                              -------------
<S>      <C>                                                                                      <C>

10.41    Guarantor Confirmation and Amendment dated December 22, 1994 between 
         California Beach Restaurants, Inc. and Bank of America NT & SA(13)

10.42    Stock Purchase Agreement dated December 22, 1994 between California
         Beach Restaurants, Inc. and Bank of America NT & SA(13)

10.43    Shareholders and Noteholders Agreement dated as of December 22, 1994
         among Sand and Sea Partners, Sea Fair Partners and Bank of America NT &
         SA(13)

10.45    Securities Purchase Agreement dated December 22, 1994 between
         California Beach Restaurants, Inc. and the purchasers named therein(13)

10.47    California Beach Restaurants, Inc. Omnibus Stock Plan(A)*

10.49    Amended and Restated lease for RJ's dated January 1, 1995 (15)

10.50    Stock Option Agreement between the Registrant and Alan Redhead dated
         March 13, 1995 (15)* 

10.51    Stock Option Agreement between the Registrant and Mark E. Segal dated
         March 13, 1995 (15)*

10.52    Stock Option Agreement between the Registrant and Jefferson W. Asher,
         Jr. dated March 13, 1995 (15)*

10.53    First Amendment to Amended and Restated Loan Agreement dated as of
         August 1, 1995, between Sea View Restaurants, Inc. and Bank of America
         NT & SA (16)

10.54    Amendment to Stock Purchase Agreement dated as of August 1, 1995
         between the Registrant and Bank of America NT & SA (16)

10.55    Amendment No. 1 to executive employment agreement of Mark E. Segal,
         dated April 30, 1996 (17) *

10.56    Commitment Letter - Finova Capital Corporation re: $3,000,000 Secured
         Credit Facility (18)

21.1     Subsidiaries of the Registrant (15)

23.1     Consent of Ernst & Young LLP             (A) 

27.0     Financial Data Schedule                  (A)
</TABLE>

------------------

(A)      FILED HEREWITH ELECTRONICALLY

 (4)     Previously filed with Form 8-K filed April 27, 1990.**

 (5)     Previously filed with Form 10-K for the fiscal year ended April 30,
         1990.**

 (7)     Previously filed with Form 10-Q for the quarter ended January 31, 
         1991.**

 (9)     Previously filed with Form 8-K filed April 28, 1992.**

(10)     Previously filed with Form 10-K for the fiscal year ended April 30,
         1993.**

(13)     Previously filed with Form 8-K filed January 18, 1995.**

(15)     Previously filed with Form 10-K for the fiscal year ended April 30,
         1995.**

(16)     Previously filed with Form S-1 on August 4, 1995, Registration No.
         33-95240.**

(17)     Previously filed with Form 10-K for the fiscal year ended April 30,
         1996.**

(18)     Previously filed with Form 10-Q for the quarter ended January 31,
         1997.**

         *This is a management contract or compensatory plan or arrangement.

         **All filings were made at the Commission's office in Washington D.C.;
           The Registrant's SEC file number is 0-12226.



                                       39