SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the Fiscal Year Ended December 30, 2002      Commission File Number: 0-18668


                        MAIN STREET AND MAIN INCORPORATED
             (Exact name of registrant as specified in its charter)


            DELAWARE                                              11-2948370
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


        5050 NORTH 40TH STREET
      SUITE 200, PHOENIX, ARIZONA                                   85018
(Address of principal executive offices)                          (Zip Code)


                                 (602) 852-9000
               Registrant's telephone number, including area code

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

          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 par value

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. [ ]

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

At July 1, 2002,  there were outstanding  14,129,928  shares of the registrant's
common stock,  $.001 par value.  The aggregate market value of common stock held
by nonaffiliates of the registrant  (8,378,678 shares) based on the closing sale
price of the common stock as reported on the Nasdaq  National  Market on July 1,
2002, ($6.22 per share) was $52,115,377.  For purposes of this computation,  all
officers,  directors,  and 10% beneficial owners of the registrant are deemed to
be affiliates.  Such  determination  should not be deemed an admission that such
officers,  directors,  or 10% beneficial owners are, in fact,  affiliates of the
registrant.

Documents  incorporated  by  reference:   Portions  of  the  registrant's  Proxy
Statement  for the 2003  Annual  Meeting of  Stockholders  are  incorporated  by
reference into Part III.
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED

                           ANNUAL REPORT ON FORM 10-K

                       FISCAL YEAR ENDED DECEMBER 30, 2002

                                TABLE OF CONTENTS

                                                                            PAGE
PART I
  ITEM 1.  BUSINESS........................................................   1
  ITEM 2.  PROPERTIES......................................................  24
  ITEM 3.  LEGAL PROCEEDINGS...............................................  24
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............  24

PART II
  ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS...........................................  25
  ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA............................  25
  ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS.....................................  27
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......  37
  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................  37
  ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE...........................  37

PART III
  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............  38
  ITEM 11. EXECUTIVE COMPENSATION..........................................  38
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT AND RELATED STOCKHOLDER MATTERS....................  38
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................  38
  ITEM 14. CONTROLS AND PROCEDURES.........................................  38

PART IV
  ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
             ON FORM 8-K...................................................  39
SIGNATURES ................................................................  42

CERTIFICATIONS ............................................................  43

                 STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

THE  STATEMENTS  CONTAINED  IN THIS  REPORT  ON FORM  10-K  THAT ARE NOT  PURELY
HISTORICAL  ARE  FORWARD-LOOKING  STATEMENTS  WITHIN THE  MEANING OF  APPLICABLE
SECURITIES LAWS.  FORWARD-LOOKING  STATEMENTS INCLUDE  STATEMENTS  REGARDING OUR
"EXPECTATIONS,"   "ANTICIPATION,"   "INTENTIONS,"   "BELIEFS,"  OR  "STRATEGIES"
REGARDING  THE  FUTURE.   FORWARD-LOOKING  STATEMENTS  ALSO  INCLUDE  STATEMENTS
REGARDING REVENUE, MARGINS,  EXPENSES, AND EARNINGS ANALYSIS FOR FISCAL 2003 AND
THEREAFTER;  FUTURE  RESTAURANT  OPERATIONS AND NEW RESTAURANT  ACQUISITIONS  OR
DEVELOPMENT;  THE RESTAURANT INDUSTRY IN GENERAL;  AND LIQUIDITY AND ANTICIPATED
CASH NEEDS AND AVAILABILITY.  ALL  FORWARD-LOOKING  STATEMENTS  INCLUDED IN THIS
REPORT ARE BASED ON  INFORMATION  AVAILABLE  TO US AS OF THE FILING DATE OF THIS
REPORT,  AND  WE  ASSUME  NO  OBLIGATION  TO  UPDATE  ANY  SUCH  FORWARD-LOOKING
STATEMENTS.  OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE FORWARD-LOOKING
STATEMENTS IN THIS REPORT.  A VARIETY OF FACTORS COULD CAUSE OUR ACTUAL  RESULTS
TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS,  INCLUDING THE FACTORS
DISCUSSED IN ITEM 1, "BUSINESS - SPECIAL CONSIDERATIONS."
<PAGE>
                                     PART I

ITEM 1. BUSINESS

     We are the  world's  largest  franchisee  of T.G.I.  Friday's  restaurants,
currently owning 56 and managing four T.G.I. Friday's restaurants.  In addition,
at the end of 2002, we owned and operated eight Bamboo Club  restaurants  and we
opened a ninth in  January of 2003,  in  Aventura  (North  Miami),  Florida.  We
currently  have two Bamboo  Club  restaurants  under  construction,  one in Novi
(Detroit),  Michigan and one in Desert Ridge Mall (North Phoenix), Arizona; both
are scheduled to open in 2003. We will also open one T.G.I.  Friday's restaurant
in Desert Ridge Mall,  Arizona scheduled for the second quarter of 2003. We also
own five Redfish Seafood Grill and Bar restaurants.  On April 1, 2002, we opened
an Alice  Cooper'stown  restaurant  in  Cleveland,  Ohio,  pursuant to a license
agreement we entered into with Celebrity  Restaurants,  L.L.C., the owner of the
exclusive  rights to operate Alice  Cooper'stown  restaurants and which operates
one such restaurant in Phoenix, Arizona.

     T.G.I. Friday's restaurants are full-service,  casual dining establishments
featuring a wide  selection of freshly  prepared,  popular  foods and  beverages
served by  well-trained,  friendly  employees in relaxed  settings.  Bamboo Club
restaurants are full-service,  fine dining,  upscale restaurants that feature an
extensive and diverse menu of innovative  and  tantalizing  Pacific Rim cuisine.
Redfish  Seafood  Grill and Bar  restaurants  are  full-service,  casual  dining
restaurants  that feature a broad  selection of New Orleans style fresh seafood,
Creole and  seafood  cuisine,  and  traditional  southern  dishes,  as well as a
"Voodoo" style lounge,  all under one roof. Alice  Cooper'stown  restaurants are
rock and roll and sports themed restaurant and feature a connection to the music
celebrity Alice Cooper.

     We  own  the  exclusive  rights  to  develop  additional  T.G.I.   Friday's
restaurants  in  several  territories  in the  western  United  States.  We have
co-development   privileges  with  Carlson  Restaurants   Worldwide  to  develop
additional T.G.I. Friday's restaurants in California. We own the Bamboo Club and
Redfish brands. Our strategy is to

     *    capitalize on the brand-name  recognition and goodwill associated with
          T.G.I. Friday's restaurants;

     *    expand our restaurant operations through

          -    the development of additional T.G.I.  Friday's restaurants in our
               existing development territories,

          -    the development of additional Bamboo Club restaurants  throughout
               the United States, and

          -    the possible acquisition or development of restaurants  operating
               under other restaurant concepts; and

     *    improve  our   profitability  by  continuing  to  enhance  the  dining
          experience of our guests and improving operating  efficiency at all of
          our restaurant brands.

We may explore  opportunities  to franchise  Bamboo Club and Redfish concepts to
third parties in the future.

     We were incorporated in December 1988. We maintain our principal  executive
offices at 5050 North 40th Street,  Suite 200,  Phoenix,  Arizona 85018, and our
telephone  number is (602) 852-9000.  Our Web site,  which is not a part of this
Report,  is located at  www.mainandmain.com.  Our  current  periodic  and annual
reports  are  available  free of  charge  on our Web site as soon as  reasonably
practicable after such material is electronically  filed with the Securities and
Exchange  Commission.  As used in this Report,  the terms "we," "our," "us," the
"Company" or "Main Street" refers to Main Street and Main  Incorporated  and its
subsidiaries and operating divisions.

                                  OUR BUSINESS

OUR T.G.I. FRIDAY'S RESTAURANTS

THE T.G.I. FRIDAY'S CONCEPT

     The T.G.I. Friday's concept is franchised by Carlson Restaurants Worldwide,
Inc.  (formerly  TGI  Friday's  Inc.),  a wholly  owned  subsidiary  of  Carlson
Companies Inc.,  which is a diversified  company with business  interests in the
restaurant and hospitality industries.  The first T.G.I. Friday's restaurant was
opened in 1965 in New York City.  Carlson  Restaurants  Worldwide,  Inc. and its
predecessors,  has conducted a business since 1972 that is substantially similar

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to the business currently conducted by its franchisees. As of December 30, 2002,
Carlson  Restaurants  Worldwide had 245  franchisor-operated  and 277 franchised
T.G.I.   Friday's  restaurants   operating   worldwide.   During  2002,  Carlson
Restaurants  Worldwide  sold most of its  holdings  of our common  stock,  which
amounted to approximately 1.8% of our outstanding common stock, retaining 53,016
shares, or approximately  0.038% of our outstanding common stock. Holders of our
common  stock  do  not  have  any  financial  interest  in  Carlson  Restaurants
Worldwide,  and Carlson  Restaurants  Worldwide  has no  responsibility  for the
contents of this report.

     T.G.I. Friday's restaurants are full-service,  casual dining establishments
featuring a wide selection of high- quality,  freshly prepared popular foods and
beverages,  including a number of innovative and distinctive menu items, such as
menu items  featuring  "Jack Daniel's"  sauces.  The restaurants  feature quick,
efficient, and friendly table service designed to minimize customer-waiting time
and facilitate table turnover.  Our restaurants  generally are open seven days a
week between the hours of approximately  11:00 a.m. and 1:00 a.m. During 2002 we
started  experimenting with "curbside service".  The first location to have this
service  was in  Chandler,  Arizona  and we plan to use the same  concept in the
Desert Ridge location. We believe that the design and operational consistency of
all T.G.I. Friday's restaurants enable us to benefit significantly from the name
recognition and goodwill associated with T.G.I. Friday's restaurants.

MENU

     We attempt to capitalize on the innovative and distinctive  menu items that
have been an  important  attribute  of  T.G.I.  Friday's  restaurants.  The menu
consists of more than 85 food items, including

     *    appetizers,  such as buffalo wings, stuffed potato skins, quesadillas,
          spinach dip, cheese sticks, and pot stickers;

     *    a variety of soups, salads, sandwiches, burgers, and pasta;

     *    southwestern, oriental, and American specialty items;

     *    beef, seafood,  and chicken entrees,  including Jack  Daniels(TM)grill
          items;

     *    a children's menu; and

     *    desserts.

Beverages  include a full bar  featuring  wines,  beers,  classic and  specialty
cocktails,  after dinner drinks,  soft drinks,  milk,  milk shakes,  malts,  hot
chocolate, coffee, tea, frozen fruit drinks known as Friday's Smoothies(TM), and
sparkling fruit juice combinations known as Friday's Flings(R).

     Menu prices range from $9 to $20 for beef, chicken, and seafood entrees; $9
to $13 for pasta and oriental and  southwestern  specialty  items;  $4 to $9 for
salads,  sandwiches,  and burgers;  and $6 to $13 for appetizers and soups. Each
restaurant  offers a separate  children's menu with food entrees ranging from $2
to $3. Alcoholic beverage sales currently account for approximately 24% of total
revenue.

RESTAURANT LAYOUT

     Each of our T.G.I. Friday's restaurants is similar in terms of exterior and
interior  design.  Each  restaurant  features a  distinctive  decor  accented by
red-and-white  striped  awnings,  brass  railings,  stained glass,  and eclectic
memorabilia. Each restaurant has interior dining areas and bar seating.

     Most  of our  T.G.I.  Friday's  restaurants  are  located  in  freestanding
buildings.  These  restaurants  normally  contain between 5,500 and 9,000 square
feet of space and average  approximately 7,500 square feet. Most of our recently
developed restaurants, however, contain 5,800 to 6,500 square feet of space. Our
T.G.I.  Friday's restaurants contain an average of 60 dining tables,  seating an
average of 210 guests,  and a bar area  seating an average of  approximately  30
additional guests.

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<PAGE>
UNIT ECONOMICS

     We estimate that our total cost of opening a new T.G.I. Friday's restaurant
currently  ranges from $2,475,000 to $2,825,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include approximately (a) $1,650,000 to $2,000,000 for
building, improvements, and permits, including liquor licenses, (b) $600,000 for
furniture,  fixtures,  and  equipment,  (c)  $175,000 in  pre-opening  expenses,
including  hiring  expenses,  wages  for  managers  and  hourly  employees,  and
supplies,  and (d) $50,000 for the initial franchise fee. Actual costs, however,
may vary significantly  depending upon a variety of factors,  including the site
and  size  of the  restaurant  and  conditions  in the  local  real  estate  and
employment markets.  Our T.G.I.  Friday's  restaurants open during all of fiscal
2002 generated an average of approximately $3,383,000 in annual revenue.

OUR BAMBOO CLUB RESTAURANTS

THE BAMBOO CLUB CONCEPT

     Bamboo Club  restaurants are  full-service,  fine dining  restaurants  that
feature an extensive and diverse menu of innovative and tantalizing  Pacific Rim
cuisine.  Bamboo Club  restaurants  use fresh  ingredients and premium herbs and
spices in creative  combinations to serve  high-quality  food and beverages that
deliver a unique combination of delicious taste, eye-appealing color, appetizing
aroma, and delightful texture.  The entire Bamboo Club concept has been designed
to deliver a consistent  and  enjoyable  dining  experience  to each guest in an
elegant,  upscale  atmosphere.  The  restaurants  feature  a modern  decor  that
provides a dramatic yet comfortable impression, with food and beverages prepared
and served by a highly trained and skilled staff.

     Bamboo Club  restaurants are open for lunch and dinner,  with hours between
11:00 a.m.  to 11:00 p.m.  Monday  through  Thursday,  11:00 a.m. to midnight on
Friday and Saturday, and 11:00 a.m. to 10:00 p.m. on Sunday. The kitchen remains
open until 11:00 p.m.  Monday through  Thursday and until midnight on Friday and
Saturday to accommodate  guests who prefer to dine late. Bamboo Club restaurants
take reservations and can serve large parties or groups.

MENU

     Bamboo Club  restaurants  feature a menu of more than 80 items  inspired by
the diverse and exotic  cuisines  found in  locations  such as Bangkok,  Canton,
Singapore, Seoul, Hong Kong, Indonesia, Hawaii, and other Pacific Rim cities and
provinces.  Each Bamboo Club  restaurant  also features a full-service  bar that
serves a variety of popular  drinks and  liquors,  such as martinis and tropical
drinks, as well as traditional mixed beverages,  fine wines, a wide selection of
popular Asian and domestic beers, and fine cigars.

     Menu prices range from $6 to $10 for salads; $5 to $16 for appetizers;  and
$9 to $29 for  entrees.  The average  guest check is  approximately  $20-$22 per
person. Alcoholic beverage sales account for approximately 23% of total revenue.
Take-out  orders  represent  approximately  4-5% of total revenue.  In addition,
sales  through a third-party  delivery  service in Phoenix,  Arizona,  represent
approximately 3% of total Phoenix revenue.

RESTAURANT LAYOUT AND STAFFING

     Bamboo Club restaurants have been designed to create a dramatic  impression
in an  atmosphere  that is both spacious and intimate.  The  restaurants'  decor
features artful lighting,  dramatic murals, an eclectic mix of background music,
and a general color theme of black, copper, and bamboo to create a "hip," exotic
feeling of warmth and color.

     The  restaurants  also  feature an  "exhibition  kitchen"  adjacent  to the
seating area,  where diners can watch highly skilled wok chefs prepare and serve
the  restaurants'  appetizers  and entrees.  Most dishes are prepared and served
within five to ten minutes from the time when the order is placed.

     The eight  Bamboo  Club  restaurants  are  located in  high-traffic  retail
shopping environments.  Each restaurant contains approximately 6,500 square feet
of space in leased facilities,  excluding patio areas. Each of these restaurants

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feature  indoor  seating and bar area seating for a total of  approximately  200
guests, which does not include outdoor patio seating at some locations.

     Bamboo Club  restaurants  have developed an extensive  program to train and
motivate restaurant  employees.  The Bamboo Club serving staff are professional,
friendly,  highly skilled,  and knowledgeable about the restaurant's cuisine and
menu selections.  Servers are trained to make suggestions or recommendations for
new or different menu items or combinations  that patrons might try, which helps
each guest to enjoy a memorable dining experience. We have developed a prototype
for use in  developing  inline  Bamboo  Club  restaurants.  We plan to use  this
prototype whenever possible in order to standardize the construction process and
to  reduce  costs.  We  originally   acquired  the  two  operating  Bamboo  Club
restaurants in Phoenix and Scottsdale, Arizona, and since have opened a total of
seven more Bamboo Club restaurants, one each in Wellington, Tampa, and Aventura,
Florida; one each in Tempe and Tucson,  Arizona; one in Newport,  Kentucky;  and
one in King of Prussia,  Pennsylvania.  We plan to open a Bamboo Club restaurant
in Novi, Michigan,  and a freestanding Bamboo Club location in Phoenix,  Arizona
(Desert Ridge Mall), which is scheduled to open in the third quarter of 2003.

UNIT ECONOMICS

     After  opening seven Bamboo Club  restaurants,  our total cost of opening a
new location  ranges  between  $1,625,000  and  $1,800,000,  exclusive of annual
operating  expenses.   These  costs  included   approximately  (a)  $900,000  to
$1,000,000,  net  of a  reduction  for  landlord's  contribution,  for  building
improvements and permits,  including  liquor licenses,  (b) $550,000 to $600,000
for  furniture,  fixtures,  and  equipment,  and (c)  $175,000  to  $200,000  in
pre-opening expenses,  including hiring expenses,  wages for managers and hourly
employees,  and supplies. We are currently developing a freestanding Bamboo Club
restaurant (Desert Ridge Mall in Phoenix, Arizona) and anticipate that this cost
will be  substantially  in excess of the  preceding  averages.  Actual costs for
future openings may vary significantly, depending on a variety of factors.

     In the fourth  quarter  of 2002,  in  response  to the  difficult  and soft
national economy,  we decided (i) that we would begin  negotiations to terminate
several  existing  leases or delay openings for Bamboo Club  locations  where we
have not yet built a restaurant (these sites included San Antonio and Fort Worth
Texas; Columbus, Ohio; Raleigh-Durham,  North Carolina; and Fairfax,  Virginia),
(ii) we would not renew leases for two California  T.G. I. Friday's  restaurants
whose  lease terms  expire in 2003,  and (iii) we would  perform  recoverability
tests for  under-performing  restaurants  and take asset  impairment  charges if
necessary.  The asset impairment and estimated lease termination fees,  recorded
in the fourth  quarter of 2002,  were  $6,337,000,  including an  allocation  of
$860,000 of goodwill.

     Our five Bamboo Club  restaurants  open  during all of fiscal  2002,  which
consist of the two original restaurants acquired,  Tempe, Arizona, and West Palm
and Tampa,  Florida generated an average of approximately $2.7 million in annual
revenue.

OUR REDFISH SEAFOOD GRILL AND BAR RESTAURANTS

THE REDFISH CONCEPT

     Redfish Seafood Grill and Bar restaurants are  full-service,  casual dining
restaurants  that feature a broad  selection of New Orleans style fresh seafood,
Creole and  seafood  cuisine,  and  traditional  southern  dishes,  as well as a
"Voodoo" style lounge, all under one roof. The restaurants offer unique, freshly
prepared food that is served quickly and efficiently in a fun-filled New Orleans
atmosphere. Each Redfish restaurant's Voodoo lounge features a unique atmosphere
decorated with an eclectic collection of authentic New Orleans artifacts, signs,
and  antiques.  Some  locations  have local  bands and,  occasionally,  national
touring  acts  present  live  rhythm  and  blues  music  on  weekends.   Redfish
restaurants are open for lunch and dinner seven days a week, although our Denver
restaurant  is not open on Sundays.  Hours of  operation  are usually from 11:00
a.m.  until midnight  Monday through  Thursday and 11:00 a.m. until 2:00 a.m. on
weekends.

MENU

     We have developed a menu of more than 45 items for our Redfish restaurants.
Signature dishes include blackened redfish,  Bourbon Street jambalaya,  southern
fried catfish,  stuffed salmon,  and crawfish etoufee.  The menu also features a

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selection  of  appetizers,  including  Looziana egg rolls,  Maryland-style  crab
cakes,  fried green  tomatoes,  and crab & artichoke  dip. Our Redfish menu also
features a variety of fresh seafood,  steaks,  barbeque ribs,  delicious pastas,
fresh  seasonal  salads,  sandwiches,  and  tempting  desserts,  such as bananas
foster,  chocolate  bread pudding,  and our signature key lime pie. The spacious
Voodoo  lounge  offers a wide  selection of the finest beers on tap, a full wine
list, and an extensive specialty drink list.

     Menu  prices  range  from $7.00 to $25.00 for an entree and $5.00 to $11.00
for salads and appetizers. Alcohol sales currently account for approximately 31%
of total revenue.

RESTAURANT LAYOUT

     We developed the Redfish  restaurant  layout to provide a refined  southern
roadhouse  atmosphere.  Each  of  our  Redfish  restaurants  is  decorated  with
nostalgic  mementos of the South,  together  with  decorative  elements that are
derived from the individual  restaurant's  locale. The decor generally creates a
tribute to the legends of American  music that created the blues,  as well as to
the regions that  developed  the classic  Creole,  Cajun,  and American  cuisine
served in our Redfish restaurants.

     Most of our Redfish  restaurants are located in  high-traffic  urban office
environments.  These restaurants contain between 6,000 and 12,000 square feet of
space and average  approximately  8,500  square  feet.  Our Redfish  restaurants
contain an average of 60 dining tables,  seating an average of 250 guests, and a
bar area  seating an average of  approximately  25  additional  guests.  We have
developed a prototype for use in developing  Redfish  restaurants in the future.
We constructed two restaurants  using this prototype in Scottsdale and Chandler,
Arizona. We plan to use this prototype whenever possible in order to standardize
the construction  process and to reduce costs. We do not currently plan to build
any new Redfish restaurants in the foreseeable future.

UNIT ECONOMICS

     We  estimate  that our  total  cost of  opening  a new  Redfish  restaurant
currently  ranges from $2,400,000 to $2,600,000,  exclusive of annual  operating
expenses and assuming  that we obtain the  underlying  real estate under a lease
arrangement.  These costs include approximately (a) $1,650,000 to $1,850,000 for
building, improvements, and permits, including liquor licenses, (b) $600,000 for
furniture,  fixtures,  and equipment,  and (c) $150,000 in pre-opening expenses,
including  hiring  expenses,  wages  for  managers  and  hourly  employees,  and
supplies. Actual costs, however, may vary significantly depending upon a variety
of factors,  including the site and size of the restaurant and conditions in the
local real estate and  employment  markets.  Our four Redfish  restaurants  open
during all of fiscal 2002 generated an average of approximately  $2.2 million in
annual revenue.  During 2002, we opened our newest Redfish in Chandler,  Arizona
and closed an under-performing location in San Diego, California.

ALICE COOPER'STOWN RESTAURANT

THE ALICE COOPER'STOWN CONCEPT

     The Alice  Cooper'stown  concept was  developed by  Celebrity  Restaurants,
L.L.C.  and is rock and roll and sports themed,  featuring a connection to Alice
Cooper.  We own no interest in  Celebrity  Restaurants,  L.L.C.,  and it owns no
interest  in  us.  Celebrity   Restaurants   operates  one  Alice   Cooper'stown
restaurant,  which  opened  in  December  1998 in  Phoenix,  Arizona.  Our Alice
Cooper'stown restaurant opened in April 2002, in a location formally occupied by
a Redfish  Seafood Grill and Bar  restaurant in Cleveland,  Ohio.  The Cleveland
location's proximity to Jacobs Field, the home of the Cleveland Indians, and the
fact that  Cleveland is the home of the Rock and Roll Hall of Fame,  resulted in
our  decision  to convert the  location  into an Alice  Cooper'stown.  Our Alice
Cooper'stown restaurant is a full-service, casual dining establishment featuring
a wide selection of high quality,  freshly prepared popular foods and beverages,
including a number of innovative and distinctive menu items,  such as menu items
that are sports and rock and roll themed.  In  addition,  the  restaurant  sells
sports and rock and roll memorabilia.  The restaurant features quick, efficient,
and  friendly  table  service  designed  to minimize  customer-waiting  time and
facilitate  table  turnover.   Our  Alice   Cooper'stown   restaurant   benefits
significantly  from the name  recognition  of Alice Cooper and the  proximity to
Jacobs Field, the home of the Cleveland  Indians,  and the Rock and Roll Hall of
Fame.

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MENU

     Our menu in Cleveland  includes salads and sandwiches,  pizzas and burgers,
and tempting appetizers and desserts.

     Menu prices range from $4.00 to $9.00 for appetizers and desserts, $5.00 to
$18.00 for entrees, and $6.00 to $11.00 for pizzas and burgers.

RESTAURANT LAYOUT AND STAFFING

     Our Alice  Cooper'stown  restaurant was designed to feature a rock and roll
and sports theme, featuring the connection to rock and roll legend Alice Cooper.
The general decor is rock and roll and sports memorabilia. The logo reads "Where
Rock and Roll and Sports Collide".  The restaurant  features a video wall in the
bar and a large screen video in the dining room.  In keeping with its sports bar
theme,  there are more than 35 TV screens in the restaurant.  Some of our former
Cleveland Redfish staff,  including  management  personnel,  are involved in the
operation of this restaurant.

UNIT ECONOMICS

     Our construction costs to convert this location were approximately $400,000
and pre-opening expenses were approximately  $191,000. This restaurant generated
$1.9 million of revenue during the nine months it was open in 2002.

SITE SELECTION

     When  evaluating  whether  and where to seek  expansion  of our  restaurant
operations, we analyze a restaurant's profit potential. We consider the location
of a  restaurant  to be one of the most  critical  elements of the  restaurant's
long-term  success.  Accordingly,  we  expend  significant  time and  effort  in
investigating and evaluating  potential restaurant sites. In conducting the site
selection process, we obtain and examine detailed demographic  information (such
as population  characteristics,  density, and household income levels), evaluate
site characteristics  (such as visibility,  accessibility,  and traffic volume),
consider  the proposed  restaurant's  proximity  to demand  generators  (such as
shopping  malls,   lodging,   and  office  complexes),   and  analyze  potential
competition.  Our  senior  corporate  management  evaluates  and  approves  each
restaurant  site for all of our  brands  prior to  acquisition  after  extensive
consultation  with all  levels  of our  operations  group.  Carlson  Restaurants
Worldwide  provides  site  selection  guidelines  and  criteria  as well as site
selection counseling and assistance for our T.G.I. Friday's restaurant sites. We
also must obtain Carlson  Restaurants  Worldwide's  consent before we enter into
definitive agreements for a T.G.I. Friday's restaurant site.

CURRENT RESTAURANTS

     The following table sets forth  information  relating to each restaurant we
own or manage as of March 12, 2003.

<TABLE>
<CAPTION>
                                                                           SEATING      IN OPERATION    OPERATED BY OUR
LOCATION                                                 SQUARE FOOTAGE    CAPACITY        SINCE         COMPANY SINCE
--------                                                 --------------    --------        -----         -------------
<S>                                                      <C>               <C>          <C>             <C>
ACQUIRED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
   Phoenix, Arizona..................................         9,396           298           1985             1990
   Mesa, Arizona.....................................         9,396           298           1985             1990
   Tucson, Arizona...................................         7,798           290           1982             1990
   Las Vegas, Nevada.................................         9,194           298           1982             1990
   Overland Park, Kansas.............................         6,000           220           1992             1993
   San Diego, California.............................         8,002           234           1979             1993
   Costa Mesa, California............................         8,345           232           1980             1993
   Woodland Hills, California........................         8,358           283           1980             1993
</TABLE>

                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                                           SEATING      IN OPERATION    OPERATED BY OUR
LOCATION                                                 SQUARE FOOTAGE    CAPACITY        SINCE         COMPANY SINCE
--------                                                 --------------    --------        -----         -------------
<S>                                                      <C>               <C>          <C>             <C>
   Valencia, California..............................         6,500           232           1993             1993
   Torrance, California..............................         8,923           237           1982             1993
   La Jolla, California..............................         9,396           225           1984             1993
   Palm Desert, California...........................         9,194           235           1983             1993
   West Covina, California...........................         9,396           232           1984             1993
   North Orange, California..........................         9,194           213           1983             1993
   Ontario, California...............................         5,700           190           1993             1993
   Laguna Niguel, California.........................         6,730           205           1990             1993
   San Bernardino, California........................         9,396           236           1986             1993
   Brea, California..................................         6,500           195           1991             1993
   Riverside, California.............................         6,500           172           1991             1993
   Pleasanton, California............................         8,000           255           1995             1998
   Salinas, California...............................         6,500           240           1994             1998
   Oakland, California...............................         5,966           230           1994             1998
   Sacramento, California............................         6,200           230           1979             1998
   Citrus Heights, California........................         8,500           270           1982             1998
   Fresno, California................................         5,950           230           1978             1998

DEVELOPED T.G.I. FRIDAY'S RESTAURANTS (OWNED)
   Glendale, Arizona.................................         5,200           230           1993             1993
   Albuquerque, New Mexico...........................         5,975           270           1993             1993
   Reno, Nevada......................................         6,500           263           1994             1994
   Oxnard, California................................         6,500           252           1994             1994
   Carmel Mountain, California.......................         6,500           252           1995             1995
   Rancho Santa Margarita, California................         6,548           252           1995             1995
   Cerritos, California..............................         6,250           223           1996             1996
   Las Vegas, Nevada.................................         6,700           251           1997             1997
   Superstition Springs (Mesa), Arizona..............         6,250           240           1998             1998
   Puente Hills, California..........................         5,800           272           1999             1999
   San Diego, California.............................         6,800           277           1999             1999
   Independence, Missouri............................         5,800           240           1999             1999
   Rancho San Diego, California......................         5,800           240           1999             1999
   Yorba Linda, California...........................         5,800           240           1999             1999
   Simi Valley, California...........................         5,800           240           1999             1999
   Tucson, Arizona...................................         5,800           240           1999             1999
   Henderson, Nevada.................................         5,800           240           1999             1999
   Carlsbad, California..............................         8,146           302           1999             1999
   Temecula, California..............................         6,400           278           1999             1999
   Chandler, Arizona.................................         6,000           240           1999             1999
   Goodyear, Arizona.................................         6,000           207           2000             2000
   Shawnee, Kansas...................................         6,400           245           2000             2000
   Thousand Oaks, California.........................         6,400           249           2000             2000
   Union City - San Francisco, California............         6,400           240           2000             2000
   Leawood, Kansas...................................         7,248           240           2000             2000
   N. Long Beach, California.........................         7,177           291           2000             2000
   Scottsdale, Arizona...............................         7,100           263           2000             2000
   Albuquerque West, New Mexico......................         6,426           241           2001             2001
   Roseville, California.............................         6,426           245           2001             2001
   Porter Ranch, California..........................         6,426           245           2001             2001
   Chandler, Arizona.................................         6,800           322           2002             2002
   Desert Ridge Mall (Phoenix), Arizona..............         6,573           292        Currently        Currently
                                                                                           under            under
                                                                                        construction     construction
</TABLE>

                                       7
<PAGE>
<TABLE>
<CAPTION>
                                                                           SEATING      IN OPERATION    OPERATED BY OUR
LOCATION                                                 SQUARE FOOTAGE    CAPACITY        SINCE         COMPANY SINCE
--------                                                 --------------    --------        -----         -------------
<S>                                                      <C>               <C>          <C>             <C>
MANAGED T.G.I. FRIDAY'S RESTAURANTS
   San Bruno, California.............................         8,345           200           1980             1993
   San Jose, California..............................         8,002           228           1977             1993
   San Mateo, California.............................         9,396           252           1984             1993
   San Ramon, California.............................         6,000           182           1990             1993

ACQUIRED REDFISH RESTAURANTS
   Denver, Colorado..................................         7,925           321           1997             1997
   Chicago, Illinois.................................         6,200           214           1996             1997
   Cincinnati, Ohio..................................         7,133           239           1997             1997

DEVELOPED REDFISH RESTAURANTS
    Scottsdale, Arizona..............................         7,285           218           2001             2001
    Chandler, Arizona................................         7,216           334           2002             2002

ACQUIRED BAMBOO CLUB RESTAURANTS
   Phoenix, Arizona..................................         5,400           200           1995             2000
   Scottsdale, Arizona...............................         5,400           200           1997             2000

DEVELOPED BAMBOO CLUB RESTAURANTS
   Tampa, Florida....................................         8,100           235           2001             2001
   West Palm Beach, Florida..........................         6,317           180           2001             2001
   Tempe, Arizona....................................         6,400           210           2001             2001
   Tucson, Arizona...................................         6,422           277           2002             2002
   Newport, Kentucky.................................         6,735           236           2002             2002
   King of Prussia, Pennsylvania.....................         7,391           243           2002             2002
   Miami (Aventura), Florida.........................         6,544           236           2003             2003
   Novi, Michigan....................................         6,941           291        Currently        Currently
                                                                                           under            under
                                                                                        construction     construction
   Desert Ridge Mall (Phoenix), Arizona..............         7,000           293        Currently        Currently
                                                                                           under            under
                                                                                        construction     construction
DEVELOPED ALICE COOPER'STOWN RESTAURANT
   Cleveland, Ohio...................................        11,160           356           2002             2002
</TABLE>

     The  average  size  of  our  acquired   T.G.I.   Friday's   restaurants  is
approximately  7,800 square feet,  and the average size of our developed  T.G.I.
Friday's restaurants is approximately 6,375 square feet. The Redfish restaurants
average 7,150 square feet. The acquired  Bamboo Club  restaurants  average 5,400
square feet and our  developed  Bamboo Club  restaurants  average  approximately
6,875  square  feet.  The size of our Alice  Cooper'stown  restaurant  is 11,160
square feet.

RESTAURANT OPERATIONS

THE T.G.I. FRIDAY'S SYSTEM

     T.G.I.  Friday's  restaurants  are  developed  and  operated  pursuant to a
specified system.  Carlson  Restaurants  Worldwide maintains detailed standards,
specifications, procedures, and operating policies to facilitate the success and
consistency  of all T.G.I.  Friday's  restaurants.  To ensure  that the  highest
degree of  quality  and  service  is  maintained,  each  franchisee  of  Carlson
Restaurants Worldwide,  including our company, must operate each T.G.I. Friday's

                                       8
<PAGE>
restaurant   in  strict   conformity   with  these   methods,   standards,   and
specifications. The T.G.I. Friday's system includes

     *    distinctive  exterior and interior design,  decor,  color scheme,  and
          furnishings;

     *    uniform  specifications,  procedures for operations,  formal training,
          and standardized menus featuring special recipes and menu items;

     *    advertising and promotional programs;

     *    requirements  for quality and  uniformity  of  products  and  services
          offered; and

     *    requirements   that  franchisees   purchase  or  lease  from  approved
          suppliers equipment, fixtures, furnishings, signs, inventory, recorded
          music, ingredients, and other products and materials that conform with
          the standards and specifications of Carlson Restaurants Worldwide;

     The T.G.I.  Friday's  system is identified by means of certain trade names,
service  marks,  trademarks,  logos,  and  emblems,  including  the marks T.G.I.
Friday's(R)  and  Friday's(R).  We believe the support as well as the standards,
specifications,  and operating  procedures of Carlson Restaurants  Worldwide are
important elements to our restaurant operations.  Our policy is to execute these
specifications,  procedures,  and policies to the highest  level of standards of
Carlson Restaurants Worldwide.

T.G.I. FRIDAY'S, BAMBOO CLUB, REDFISH, AND ALICE COOPER'STOWN OPERATIONS

     Once a restaurant is integrated into our  operations,  we provide a variety
of corporate services to assure the operational  success of the restaurant.  Our
executive  management  continually  monitors  restaurant  operations,   inspects
individual  restaurants  to assure the quality of products  and services and the
maintenance  of  facilities,  institutes  procedures to enhance  efficiency  and
reduce costs, and provides centralized support systems.

     We also maintain quality assurance procedures designed to assure compliance
with the high quality of products and services  mandated by our company and, for
our T.G.I. Friday's restaurants, by Carlson Restaurants Worldwide. We respond to
and  investigate  inquiries  and  complaints,  initiate  on-site  resolution  of
deficiencies,  and consult  with each  restaurant's  staff to assure that proper
action  is taken  to  correct  any  deficiency.  Our  personnel  and  contracted
third-party   quality  assurance   professionals   make  unannounced  visits  to
restaurants to evaluate the facilities,  products, and services. We believe that
our  quality  review  program  and  executive   oversight   enhance   restaurant
operations,   reduce  operating  costs,  improve  customer   satisfaction,   and
facilitate the highest level of compliance with the T.G.I. Friday's system.

     We maintain a zero tolerance policy for  discrimination of any type towards
both our employees and customers, and to this end constantly enforce this policy
through our  training of new  employees,  our policy and training  manuals,  and
periodic re-enforcement programs.

RESTAURANT MANAGEMENT

     Our T.G.I.  Friday's  regional  and  restaurant  management  personnel  are
responsible  for  complying  with  Carlson   Restaurants   Worldwide's  and  our
operational  standards.  One of our Directors of  Operations,  together with one
Senior Regional Manager, and seven Regional Managers are responsible for between
4 and 13 of our  restaurants  within  their  region.  We have  one  Director  of
Operations  who is  responsible  for the  Alice  Cooper'stown  restaurant.  This
individual   has  signed  an  agreement   wherein  he  purchased  a  net  profit
participation  in this operation equal to 20% of a defined level of profits over
a  certain  EBDITA  level.  These  Regional  Managers  and  three  Directors  of
Operations  report to our Senior Vice  President of Restaurant  Operations.  The
Senior Vice  President of  Restaurant  Operations  reports to our  President and
Chief  Operating  Officer,  who  has  responsibility  for our  T.G.I.  Friday's,
Redfish, Bamboo Club, and Alice Cooper'stown operations. Restaurant managers are
responsible for day-to-day restaurant operations,  including customer relations,
food  preparation  and  service,  cost  control,  restaurant  maintenance,   and
personnel relations.  We typically staff our restaurants with an on-site general
manager,  two or three assistant  managers,  and a kitchen  manager.  Our T.G.I.
Friday's  restaurants  average between 80 and 90 hourly  employees.  Our Redfish
restaurants  average  approximately  65 hourly  employees  and our  Bamboo  Club
restaurants  average  approximately 72 hourly employees.  Our Alice Cooper'stown

                                       9
<PAGE>
restaurant averages 50 hourly employees.  We support these operational personnel
with a Director of New Store Openings,  a Director of Research and  Development,
and training personnel.

     We have established a program of appointing multi-location general managers
in geographic  areas having locations close enough to each other to support this
concept.  We currently  have six  multi-location  senior  general  managers.  In
addition  to  improving  efficiency,  this  program  allows  us to  promote  and
compensate key general  managers and create a position that improves our ability
to retain key employees in our company.

RECRUITMENT AND TRAINING

     We attempt to hire employees who are committed to the standards  maintained
by our company and, for our T.G.I. Friday's restaurants,  by Carlson Restaurants
Worldwide.  We also  believe  that our high  unit  sales  volume,  the image and
atmosphere of the T.G.I. Friday's,  Bamboo Club, Redfish, and Alice Cooper'stown
concepts,  and our career advancement and employee benefit programs enable us to
attract high quality management and restaurant personnel.

     Our T.G.I. Friday's restaurant personnel participate in continuing training
programs  maintained  by  Carlson  Restaurants  Worldwide  and our  company.  In
addition,  we supplement  those programs by hiring  personnel  devoted solely to
employee training. Each T.G.I. Friday's restaurant general and assistant manager
completes  a formal  training  program  conducted  by our  company  and  Carlson
Restaurants  Worldwide.  This program  provides our T.G.I.  Friday's  restaurant
managers 14 weeks of  training.  The training  covers all aspects of  management
philosophy and overall  restaurant  operations,  including  supervisory  skills,
operating  and  performance  standards,   accounting  procedures,  and  employee
selection and training necessary for restaurant operations.  We employ personnel
who are involved exclusively in training for both initial new store openings and
continued re-training.

     Our Redfish and Bamboo Club restaurant  managers and personnel  participate
in extensive training programs consistent with our operating standards.  Many of
our Redfish  restaurant  managers are experienced  T.G.I.  Friday's managers who
have accepted  positions in our Redfish  operations.  We have implemented all of
our policies and  training  programs in order to operate the Alice  Cooper'stown
restaurant  with the same  high  standards  we have  established  for our  other
brands.

MAINTENANCE AND IMPROVEMENT OF RESTAURANTS

     We maintain our restaurants and all associated fixtures,  furnishings,  and
equipment in  conformity  with the T.G.I.  Friday's  system or standards we have
developed for our Redfish and Bamboo Club  restaurants.  We also make  necessary
additions,  alterations,  repairs,  and  replacements  to  our  T.G.I.  Friday's
restaurants as required by Carlson  Restaurants  Worldwide,  including  periodic
repainting or replacement of obsolete signs, furnishings,  equipment, and decor.
We may be required, subject to certain limitations, to modernize our restaurants
to  the  then-current   standards  and  specifications  of  Carlson  Restaurants
Worldwide.  We are  currently  developing  plans to  convert  some of our T.G.I.
Friday's  locations to develop a take out  program,  and our Chandler and Desert
Ridge Mall,  Arizona  T.G.I.  Friday's have been designed for this program.  One
Bamboo Club restaurant lease requires us to periodically refurbish the location.

MANAGEMENT INFORMATION SYSTEMS

     We have devoted considerable  resources to develop and implement management
information systems that improve the quality and flow of information  throughout
our  company.  We use  five to seven  touch-screen  computer  registers  located
conveniently  throughout each of our restaurants.  Servers enter guest orders by
touching the  appropriate  sections of the  register's  computer  screen,  which
transfers the information electronically to the kitchen and bar for preparation.
These registers also are connected to a computer in the restaurant office and to
our corporate  information system via frame relay.  Management receives detailed
comparative  reports on each restaurant's  sales and expense  performance daily,
weekly, and monthly.

     We are currently  using three  different  in-store  systems;  at our T.G.I.
Friday's locations we use a proprietary system supported by Carlson  Restaurants
Worldwide,  our  Redfish  locations  use Micros  software,  and our Bamboo  Club
locations are on our new restaurant systems provided by Aloha Technology. We are
migrating  all of our concepts to a consistent  new point of sale (POS) and back
office  solution  from Aloha  Technology.  We are also moving to a new corporate

                                       10
<PAGE>
enterprise  resource planning system (ERP) from Lawson Software.  Management and
support of the new corporate ERP system will be outsourced to netASPx, Inc.

     We are in the process of installing  the POS and back office systems at all
of our stores and anticipate that this will be completed by the first quarter of
2004.  We are  currently  defining the  requirements  for the ERP system and our
conversion to this will commence when the new POS system has been implemented at
a majority of our stores. We anticipate the ERP implementation will be completed
by the middle of 2004.

     We believe that our  management  information  systems enable us to increase
the speed and  accuracy of order  taking and  pricing,  to better  assist  guest
preferences,  to efficiently  schedule labor to better serve guests,  to quickly
and accurately  monitor food and labor costs, to promptly  access  financial and
operating  data,  and to improve the  accuracy  and  efficiency  of  store-level
information and reporting.

EQUIPMENT, FOOD PRODUCTS, AND OTHER SUPPLIES

     We lease or purchase all fixtures, furnishings,  equipment, signs, recorded
music,  food  products,  supplies,  inventory,  and other products and materials
required for the  development and operation of our T.G.I.  Friday's  restaurants
from  suppliers  approved  by  Carlson  Restaurants  Worldwide.  In  order to be
approved  as  a  supplier,  a  prospective  supplier  must  demonstrate  to  the
reasonable satisfaction of Carlson Restaurants Worldwide its ability to meet the
then-current  standards and specifications of Carlson Restaurants  Worldwide for
such items, possess adequate quality controls,  and have the capacity to provide
supplies  promptly and reliably.  We are not required to purchase  supplies from
any  specified  suppliers,  but the  purchase  or  lease  of any  items  from an
unapproved   supplier  requires  the  prior  approval  of  Carlson   Restaurants
Worldwide.

     Carlson Restaurants  Worldwide maintains a list of approved suppliers and a
set  of  the  T.G.I.  Friday's  system  standards  and  specifications.  Carlson
Restaurants   Worldwide   receives  no   commissions  on  direct  sales  to  its
franchisees,   but  may  receive   rebates  and   promotional   discounts   from
manufacturers and suppliers,  some of which are passed on proportionately to our
company.  Carlson  Restaurants  Worldwide  is an  approved  supplier  of various
kitchen equipment and store fixtures,  decorative memorabilia, and various paper
goods, such as menus and in-store  advertising  materials and items. We are not,
however,  required to purchase such items from Carlson Restaurants Worldwide. If
we elect to purchase  such items from  Carlson  Restaurants  Worldwide,  Carlson
Restaurants Worldwide may derive revenue as a result of such purchases.

     Celebrity Restaurants assisted us in converting the Cleveland location into
an Alice Cooper'stown  restaurant.  They provided guidance in restaurant design,
acquisition  of themed  memorabilia  for decor,  and  locating  sources  for the
purchase of memorabilia for sale to guests.

     We  entered  into an  agreement  with U.S.  Foodservice,  a  national  food
distribution  service company,  to serve substantially all of our restaurants in
California,  Arizona,  and  Nevada and for all of our  Bamboo  Club and  Redfish
restaurants.  We have an  agreement  with  Performance  Food Group in  Missouri,
Kansas, Texas, and New Mexico for all of our T.G.I. Friday's restaurants located
in those states.  Orders are sent electronically to the supplier.  Our suppliers
have comprehensive warehouse and delivery outlets servicing each of our markets.
We believe that our purchases from our primary suppliers enable us to maintain a
high level of quality,  achieve  dependability  in the receipt of our  supplies,
avoid the costs of maintaining a large  purchasing  department,  and attain cost
advantages  as the result of volume  purchases.  We believe,  however,  that all
essential  products are available from other national  suppliers as well as from
local  suppliers in the cities in which our restaurants are located in the event
we determine to purchase our supplies from other suppliers.

ADVERTISING AND MARKETING

T.G.I. FRIDAY'S RESTAURANTS

     We participate in the national marketing and advertising programs conducted
by Carlson  Restaurants  Worldwide,  which were suspended by Carlson Restaurants
Worldwide  for the  fourth  quarter of 2001  because  they  changed  advertising
agencies.  These programs  resumed in February of 2002. The programs use network
and cable television and national  publications and feature new menu innovations
and various promotional programs. In addition,  from time to time, we supplement
the  marketing  and  advertising   programs  conducted  by  Carlson  Restaurants

                                       11
<PAGE>
Worldwide  through local radio,  newspaper,  and magazine  advertising media and
sponsorship  of  community  events.  In  conjunction  with  Carlson  Restaurants
Worldwide,  we maintain a "frequent diner" program that includes awards of food,
merchandise, and travel to frequent diners based upon points accumulated through
purchases.

     As a franchisee of Carlson  Restaurants  Worldwide,  we are able to utilize
the trade names,  service marks,  trademarks,  emblems, and indicia of origin of
Carlson  Restaurants  Worldwide,  including  the marks  T.G.I.  Friday's(R)  and
Friday's(R).  We advertise in various media utilizing these marks to attract new
customers to our restaurants.

REDFISH AND BAMBOO CLUB RESTAURANTS

     Our  in-house  marketing  department  develops  advertising  and  marketing
programs for our Redfish and Bamboo Club restaurants.  We develop these programs
with an emphasis on building awareness of the "Redfish" and "Bamboo Club" brands
in the communities in which we operate  Redfish and Bamboo Club  restaurants and
generate sales for those restaurants.  Advertising and marketing  campaigns have
included  radio  and  print  advertising,  as  well as  point-of-sale  marketing
promotions. We conduct a comprehensive advertising and public relations campaign
in advance of each Redfish and Bamboo Club restaurant grand opening.

ALICE COOPER'STOWN RESTAURANT

     Our in-house marketing  department is developing  advertising and marketing
programs for our Alice Cooper'stown restaurant. We will emphasize the sports and
rock and roll connection and feature Alice Cooper.

EXPANSION OF OPERATIONS

     Between 1990 and 2002, we acquired 31 existing T.G.I.  Friday's restaurants
as well as the exclusive and  co-development  rights to develop  restaurants  in
specified  territories.  The acquisitions  include 25 restaurants in California,
three  in  Arizona,  and  one in  each  of  Kansas,  Missouri,  and  Nevada.  We
subsequently  sold  five  of the  restaurants  we  had  previously  acquired  in
California,  and we continue to manage four of them.  Between 1990 and 2002,  we
also developed 32 new T.G.I.  Friday's  restaurants,  including one during 2002.
These include 16 in California,  seven in Arizona,  three in Nevada, two in each
of New Mexico and Kansas,  and one in each of Missouri  and Texas.  In 2001,  we
closed  our  T.G.I.  Friday's  restaurant  in Texas.  We plan to open one T.G.I.
Friday's restaurant in 2003, in Desert Ridge Mall in north Phoenix, Arizona.

     With the  concurrence of the franchisee for whom we managed,  we closed one
under-performing  T.G.I.  Friday's  restaurant in San  Francisco,  California in
2002. In addition, we closed one under-performing  T.G.I. Friday's restaurant in
El Paso, Texas during 2002.

     In 1997, we acquired a 52%  ownership  interest and in 1999 we acquired the
remaining  minority  interest in Redfish  America,  LLC, which operated our four
original  Redfish  Seafood Grill and Bar  restaurants.  We opened two additional
Redfish  restaurants  in 1999 and closed one in each of 2000,  2001 and 2002. We
opened one Redfish  restaurant in North  Scottsdale,  Arizona in 2001 and one in
Chandler,  Arizona in 2002. We also may explore  opportunities  to franchise the
Redfish concept to third parties in the future.

     In July 2000, we acquired the business and  substantially all of the assets
of two Bamboo Club restaurants. As part of the acquisition, we also acquired the
right,  title,  and  interest  under,  in,  and to the  "Bamboo  Club"  name and
restaurant  concept.  The two Bamboo Club restaurants are located in Phoenix and
Scottsdale,  Arizona.  In 2001 we opened three Bamboo Club  restaurants,  two in
Florida,  (one in Tampa and one in West Palm Beach), and one in Tempe,  Arizona.
In 2002 we opened three Bamboo Club  restaurants,  one each in Tucson,  Arizona,
Newport, Kentucky, and King of Prussia,  Pennsylvania. We opened one Bamboo Club
restaurant in Aventura  Mall,  Miami Florida in January 2003. We currently  have
under  construction  two  additional  Bamboo Clubs in 2003,  in Novi  (Detroit),
Michigan and Desert  Ridge Mall (North  Phoenix),  Arizona.  We also may explore
opportunities  to  franchise  the Bamboo  Club  concept to third  parties in the
future.

     We plan to expand our  restaurant  operations  through the  development  of
additional T.G.I.  Friday's restaurants in our existing development  territories
and the development of additional Bamboo Club restaurants in suitable  locations
as our  financial  capabilities  permit  (refer to the  "Liquidity  and  Capital
Resource" section for additional information regarding our financial condition).

                                       12
<PAGE>
As a result of our financial  capabilities,  other than the one T.G.I.  Friday's
location we currently have under construction (Desert Ridge Mall,  Arizona),  we
do not anticipate  building  additional T.G.I.  Friday's  locations during 2003.
With regard to our  development  agreement  with Carlson  Restaurants  Worldwide
(which requires the development of five T.G. I. Friday's in 2003), we have every
expectation,  based on past history, that we will be successful in obtaining the
appropriate waivers.

     We currently are considering  other sites for additional  restaurants,  but
have not entered into leases or purchase  agreements  for such sites.  We do not
know how many sites will  materialize,  as that  depends on a variety of factors
and economic conditions.

     The  opening  of  new  restaurants   also  may  be  affected  by  increased
construction,  utility,  and labor costs,  delays  resulting  from  governmental
regulatory  approvals,  strikes, or work stoppages,  adverse weather conditions,
and acts of God.  Newly  opened  restaurants  may operate at a loss for a period
following their opening.  The length of this period will depend upon a number of
factors,  including the time of year the restaurant is opened, sales volume, and
operating costs.

     The  acquisition  of existing  restaurants  will depend upon our ability to
identify and purchase  restaurants that meet our criteria on satisfactory  terms
and  conditions.  There  can be no  assurance  that  we will  be  successful  in
achieving  our  expansion  goals  through  the  development  or  acquisition  of
additional  restaurants or that any additional restaurants that are developed or
acquired will be profitable.  In addition, the opening of additional restaurants
in an  existing  market  may have the  effect of  drawing  customers  from,  and
reducing the sales volume of, our existing restaurants in those markets.

RESTAURANT CLOSURES AND LEASE TERMINATIONS

     Generally when we close a location due to underperformance or other reasons
that management  deems  appropriate,  our first priority is to transfer  useable
assets to other  locations.  Other assets that are not  transferable,  including
leasehold  improvements  and certain kitchen  equipment,  are written off at the
time of closure,  or when the formal decision to close or not renew the lease is
made. At the time of closure, allocated goodwill is also written off. During the
third quarter 2002, we closed one Friday's  restaurant and wrote off $300,000 of
allocated goodwill.

     In the fourth  quarter  of 2002,  in  response  to the  difficult  and soft
national economy,  we decided (i) that we would begin  negotiations to terminate
several  existing leases for Bamboo Club locations where we have not yet built a
restaurant  (these sites  included  San Antonio and Fort Worth Texas;  Columbus,
Ohio; Raleigh-Durham,  North Carolina; and Fairfax, Virginia), (ii) we would not
renew leases for two Friday's  restaurants whose lease terms expire in 2003, and
(iii) we would perform recoverability tests for under-performing restaurants and
take asset impairment  charges if necessary.  The asset impairment and estimated
lease termination fees, recorded in the fourth quarter of 2002, were $6,337,000,
including an  allocation of $860,000 of goodwill.  Currently,  there is no final
resolution to any of these negotiations, except the San Antonio lease, which has
been terminated.

DEVELOPMENT AGREEMENTS

     We are a party to four  development  agreements  with  Carlson  Restaurants
Worldwide.  Each development agreement grants us the right to develop additional
T.G.I. Friday's restaurants in a specified territory and obligates us to develop
additional  T.G.I.  Friday's  restaurants in that territory in accordance with a
specified   development  schedule.  We  own  the  exclusive  rights  to  develop
additional T.G.I. Friday's restaurants in territories encompassing the states of
Arizona,  Nevada,  and New Mexico, and the Kansas City,  Kansas/Missouri  and E1
Paso, Texas metropolitan areas. We also have the non-exclusive  right,  together
with  Carlson  Restaurants  Worldwide,  to develop  additional  T.G.I.  Friday's
restaurants in the state of  California.  We plan to develop  additional  T.G.I.
Friday's restaurants in our existing development territories.

     In the past, we have successfully  renegotiated our franchisee  development
obligations for new T.G.I.  Friday's  locations.  Our  renegotiated  development
schedule has reduced our development obligation in Northern California, extended
the dates for new store  development  in all of  California,  and increased to a
lesser extent our development obligations in other territories.  As part of this
agreement,  Carlson  Restaurants  Worldwide now has the right to co-develop  the
California  market,  although  they have not added any  locations  nor have they
informed us of their intention to do so.

                                       13
<PAGE>
     The  following   table  sets  forth   information   regarding  our  minimum
requirements  to  open  new  T.G.I.   Friday's  restaurants  under  our  current
development agreements as amended, as well as the number of existing restaurants
in each of our development territories.

<TABLE>
<CAPTION>
                                          SOUTHERN          NORTHERN
                                         CALIFORNIA        CALIFORNIA        SOUTHWEST          MIDWEST
YEAR                                    TERRITORY(1)      TERRITORY(1)      TERRITORY(2)      TERRITORY(3)      TOTAL
----                                    ------------      ------------      ------------      ------------      -----
<S>                                     <C>               <C>               <C>               <C>               <C>
2003 ..............................           2                 1                 1                 1               5
2004 ..............................          --                --                --                 2               2
                                           ----              ----              ----              ----            ----
     Total ........................           2                 1                 1                 3               7
                                           ====              ====              ====              ====            ====
Existing T.G. I. Fridays
Restaurants .......................          30                 6(4)             16                 4              56
</TABLE>

----------
(1)  Carlson Restaurants  Worldwide also may develop restaurants in this region.
     Agreement expires at the end of 2003.
(2)  Consists of the states of Arizona,  Nevada, and New Mexico and the E1 Paso,
     Texas metropolitan area. Agreement expires at the end of 2003.
(3)  Consists of metropolitan Kansas City, Kansas and Kansas City, Missouri.
(4)  Does not include the four  restaurants  managed in the Northern  California
     Territory.

     Each  development  agreement gives Carlson  Restaurants  Worldwide  certain
remedies  in the  event  that we fail to  comply  in a  timely  manner  with our
schedule  for  restaurant  development,   if  we  otherwise  default  under  the
development agreement or any franchise agreement relating to a restaurant within
that  development  territory as described above, or if our officers or directors
breach  the  confidentiality  or  non-compete   provisions  of  the  development
agreement.  The remedies available to Carlson Restaurants  Worldwide include (a)
the  termination  of our exclusive  right to develop  restaurants in the related
territory;  (b) a reduction in the number of  restaurants  we may develop in the
related territory;  (c) the termination of the development agreement; and (d) an
acceleration  of the  schedule for  development  of  restaurants  in the related
territory  pursuant to the development  agreement.  None of these remedies would
adversely  affect our ability to continue  to operate our  then-existing  T.G.I.
Friday's  restaurants.  Currently,  other than the one T.G.I.  Friday's location
currently under  construction,  we do not anticipate  building additional T.G.I.
Friday's  restaurants  during 2003. Based on waivers and amendments  received in
prior years,  we fully expect to receive the  appropriate  waivers for 2003 from
Carlson Restaurants Worldwide.

FRANCHISE AGREEMENTS

     We enter into or assume a separate franchise agreement with respect to each
T.G.I.  Friday's restaurant that we acquire or develop pursuant to a development
agreement.  Each franchise agreement grants us an exclusive license to operate a
T.G.I.  Friday's restaurant within a designated geographic area, which generally
is a three-mile  limit from each  restaurant,  and  obligates us to operate such
restaurant in accordance with the requirements and specifications established by
Carlson  Restaurants  Worldwide  relating  to food  preparation  and  quality of
service  as  well  as  general  operating   procedures,   advertising,   records
maintenance, and protection of trademarks. The franchise agreements restrict our
ability to transfer our interest in our T.G.I.  Friday's restaurants without the
consent of Carlson Restaurants Worldwide.

     Each franchise agreement requires us to pay Carlson  Restaurants  Worldwide
an initial  franchise  fee of $50,000.  In  addition,  we are  obligated  to pay
Carlson Restaurants Worldwide a royalty of 4% of the gross revenue as defined in
the  franchise  agreement  for each  restaurant.  Royalty  payments  under these
agreements totaled $7,477,000 during fiscal 2002, $7,444,000 during fiscal 2001,
and $6,634,000 during fiscal 2000. Each franchise  agreement also requires us to
spend at least 4% of gross  sales  on local  marketing  and to  contribute  to a
national marketing pool Carlson Restaurants Worldwide administers.  The national
marketing  pool  funds  are  used  to  develop  national  advertising  campaigns
(creative  material) and buy national,  spot, and local  advertising.  All funds
contributed  to the national  advertising  fund are  credited  against the local
advertising  requirement.  Carlson Restaurants Worldwide required us, as well as
all other franchisees, to contribute 2.1% of gross sales in fiscal year 2000 and
the  first  three  quarters  of  2001  to  the  national  marketing  fund.  This
requirement was reduced to 1.7% during the last fiscal quarter of 2001. In 2002,
the  marketing  fund  contributions  were  increased to 2.7% and are expected be

                                       14
<PAGE>
3.25% in  2003.  Marketing  expenses  totaled  $5,250,000  during  fiscal  2002,
$4,774,000 during fiscal 2001, and $4,163,000 in 2000.

     A default  under one of our  franchise  agreements  will not  constitute  a
default  under  any of our  other  franchise  agreements.  A  default  under the
franchise  agreement for a restaurant in a development  territory may,  however,
constitute  a  default  under the  development  agreement  for that  development
territory.

LICENSE AGREEMENTS

     Our license  agreement with Celebrity  Restaurants,  L.L.C.,  allowed us to
open an Alice Cooper'stown  restaurant in Cleveland,  Ohio. The agreement grants
us the right to use Celebrity  Restaurants'  exclusive  rights to Alice Cooper's
likeness  and its  trademarks  and trade  names to operate a sports and rock and
roll themed restaurant featuring Alice Cooper.

     The license  agreement  requires us to pay Celebrity  Restaurants a royalty
fee in the  amount of 1% of gross  sales for food and  beverage  sales up to the
amount of gross sales  derived in 2001 in each  location  through  its  existing
operations;  2.5% from that point to $3,500,000; and 3% over $3,500,000. For the
sale of merchandise products, such as logo and memorabilia,  we pay a royalty of
20% of gross sales.

     During 2002 we paid  approximately  $41,000 in royalties under this license
agreement.

GOVERNMENT REGULATION

     Each of our restaurants is subject to licensing and regulation by state and
local departments and bureaus of alcohol control, health,  sanitation,  and fire
and to periodic review by the state and municipal authorities for areas in which
the  restaurants  are located.  In  addition,  we are subject to local land use,
zoning,  building,  planning,  and traffic  ordinances  and  regulations  in the
selection and acquisition of suitable sites for  constructing  new  restaurants.
Delays in obtaining,  or denials of, or revocation or temporary  suspension  of,
necessary  licenses or  approvals  could have a material  adverse  impact on our
development of restaurants.

     We also are subject to regulation under the Fair Labor Standards Act, which
governs such matters as working conditions and minimum wages. An increase in the
minimum wage rate or the cost of workers' compensation insurance,  both of which
recently occurred in California,  or changes in tip-credit provisions,  employee
benefit  costs  (including  costs  associated  with  mandated  health  insurance
coverage),  or other costs  associated with employees could adversely affect our
company.

     In addition,  we are subject to the Americans with Disabilities Act of 1990
(ADA). That act may require us to make certain  installations in new restaurants
or renovations to existing restaurants to meet federally mandated  requirements.
To our  knowledge,  we are in  compliance  in all  material  respects  with  all
applicable  federal,  state,  and local laws  affecting our  business,  with the
exception of renovations  to restaurants  existing at the time of passage of the
ADA.

COMPETITION

     The  restaurant  business  is highly  competitive  with  respect  to price,
service,  food type,  and  quality.  In  addition,  restaurants  compete for the
availability of restaurant personnel and managers.  Our restaurants compete with
a large number of other restaurants,  including national and regional restaurant
chains and franchised  restaurant systems,  many of which have greater financial
resources,  more experience,  and longer operating histories than we possess. We
also compete with locally owned, independent restaurants.

     Our  casual  dining  business  also  competes  with  various  types of food
businesses,  as well as other businesses,  for restaurant locations.  We believe
that site selection is one of the most crucial decisions  required in connection
with the development of restaurants.  As the result of the presence of competing
restaurants  in  our  development  territories,  our  management  devotes  great
attention  to  obtaining  what we  believe  will be  premium  locations  for new
restaurants,  although we can provide no assurance that we will be successful in
these efforts.

                                       15
<PAGE>
EMPLOYEES

     We employ  approximately  2,100 people on a full-time basis, of whom 76 are
corporate  management and staff personnel.  We also employ  approximately  4,100
part-time  employees,  which results in our  employment of  approximately  6,000
total personnel,  of which approximately 5,950 are restaurant personnel.  Except
for corporate  and  management  personnel,  we generally pay our employees on an
hourly basis. We employ an average of  approximately  90 full-time and part-time
hourly employees at each of our  restaurants.  None of our employees are covered
by a collective  bargaining agreement with us. We have never experienced a major
work  stoppage,  strike,  or labor  dispute.  We consider our relations with our
employees to be good.

EXECUTIVE OFFICERS

     The following table sets forth certain information  regarding our executive
officers:

           NAME               AGE                      POSITION
           ----               ---                      --------
Bart A. Brown, Jr..........    71    Chief Executive Officer, and Director
William G. Shrader.........    55    President, Chief Operating Officer, and
                                     Director
Michael Garnreiter.........    51    Executive Vice President, Treasurer, and
                                     Chief Financial Officer
Jeff Smit..................    44    Senior Vice President-Restaurant Operations
Michael J. Herron..........    62    General Counsel and Secretary
Matthew J. Wickesberg......    28    Vice President-Financial Planning and
                                     Analysis
Stephanie Barbini..........    33    Vice President-Human Resources and Training

     BART A.  BROWN,  JR. has  served as our Chief  Executive  Officer  and as a
director  since  December  1996. Mr. Brown served as our President from December
1996 until June 2001. Mr. Brown was affiliated  with  Investcorp  International,
N.A.,  and an  international  investment-banking  firm,  from  April  1996 until
December 1996. Mr. Brown served as the Chairman and Chief  Executive  Officer of
Color Tile, Inc. at the request of Investcorp  International,  Inc., which owned
all of that  company's  common stock,  from  September 1995 until March 1996. In
January 1996, Color Tile filed for reorganization under Chapter 11 of the United
States  Bankruptcy Code. Mr. Brown served as Chairman of the Board of The Circle
K   Corporation   from  June  1990,   shortly   after  that  company  filed  for
reorganization  under Chapter 11 of the United  States  Bankruptcy  Code,  until
September  1995.  From September 1994 until  September 1996, Mr. Brown served as
the Chairman and Chief Executive Officer of Spreckels Industries, Inc. Mr. Brown
engaged in the private  practice of law from 1963 through 1990 after seven years
of employment with the Internal Revenue Service.

     WILLIAM G. (BILL)  SHRADER has served as our President and Chief  Operating
Officer and as a director  since June 2001.  Mr. Shrader served as our Executive
Vice  President  and Chief  Operating  Officer  from March 1999 until June 2001.
Prior to joining our company, Mr. Shrader was Senior Vice President of Marketing
for Tosco  Marketing  Company from February 1997 to March 1999. From August 1992
to February 1997,  Mr. Shrader served in several  capacities at Circle K Stores,
Inc.,  including  President of the Arizona  Region,  President of the  Petroleum
Products/Services  Division,  Vice  President of Gasoline  Operations,  and Vice
President of Gasoline  Marketing.  Mr.  Shrader  began his career in 1976 at The
Southland  Corporation  and  departed in 1992 as  National  Director of Gasoline
Marketing.

     MICHAEL  GARNREITER has served as our Executive Vice President,  Treasurer,
and Chief Financial Officer since April 2002. Prior to joining our company,  Mr.
Garnreiter served as a general partner of the  international  accounting firm of
Arthur Andersen LLP. Mr.  Garnreiter began his career in public  accounting with
the Los Angeles office of Andersen in 1974 after  graduating  with a Bachelor of
Science degree in accounting from California  State University at Long Beach. In
1986,  he  transferred  to their  Tucson,  Arizona  office to become  its Office
Managing  Partner.  Mr.  Garnreiter's  career as an accounting and audit partner
spanned many  different  industries but focused on the  entrepreneurial,  public
company.  Mr.  Garnreiter is a Certified  Public  Accountant in California,  New
Mexico and Arizona and retired from Andersen in March 2002.

     JEFF SMIT has served as our  Senior  Vice  President-Restaurant  Operations
since June 2001.  Mr.  Smit  served as our Vice  President  of  Operations  from
September  1998 to June 2001.  Mr. Smit joined us in 1994 and has been a general
and  regional  manager.  Prior to  joining  us,  Mr.  Smit  worked  for  Carlson
Restaurants  Worldwide as a general  manager in its T.G.I.  Friday's  operation.
Prior  to  that,  Mr.  Smit  worked  in  a  variety  of  capacities  in  various
restaurants.

                                       16
<PAGE>
     MICHAEL J.  HERRON has served as our General  Counsel  since March 2001 and
has been our  Secretary  since June 2001.  Prior to joining  us, Mr.  Herron was
actively engaged in the private practice of law in Miami Beach, Florida.  During
that time he served as outside General Counsel for a restaurant franchisor known
as the Orange  Bowl,  a  restaurant  concept  exclusively  located  in  regional
shopping centers through the United States. He thereafter engaged in the private
practice of law in Aspen,  Colorado,  and from April 1990 to February  2001, Mr.
Herron was a member of the law firm of Garfield & Hecht,  P.C.  Mr.  Herron is a
former President of the Miami Beach, Florida Bar Association and was a member of
the Florida Bar Association's standing Ethics Committee.

     MATTHEW  J.  WICKESBERG  has  served  as our Vice  President  of  Financial
Planning and Analysis since June 2002. Mr.  Wickesberg served as our Director of
Strategic Planning from May 2000 to June 2002. Prior to joining our company, Mr.
Wickesberg was a Senior Consultant with PricewaterhouseCoopers in Dallas, Texas.
As a member of the Financial  Advisory  Services group, he worked in the area of
corporate restructuring,  bankruptcy,  corporate finance and litigation support.
Mr.  Wickesberg is a Chartered  Financial  Analyst and attended  programs at the
London School of Economics,  and received his Bachelors in Finance from Oklahoma
State University.

     STEPHANIE  BARBINI has served as our Vice President of Human  Resources and
Training  since  September  2002.  Prior to joining  our  company,  from 1994 to
September  2002 Ms.  Barbini held a variety of senior  level HR  positions  with
Conoco / Phillips.  During her eight year tenure,  she provided  strategic human
resource  support  to  retail  operations,  corporate  headquarters,   petroleum
refining and distribution  through 5 separate multi billion dollar acquisitions.
Ms. Barbini holds a BA in Psychology from Oklahoma  University and a Master's in
Organizational Psychology from Columbia University.

                                       17
<PAGE>
                                  RISK FACTORS

     YOU SHOULD  CAREFULLY  CONSIDER THE FOLLOWING  FACTORS,  IN ADDITION TO THE
OTHER INFORMATION IN THIS REPORT, IN EVALUATING OUR COMPANY AND OUR BUSINESS.

WE FACE  RISKS  ASSOCIATED  WITH  CHANGES  IN  GENERAL  ECONOMIC  AND  POLITICAL
CONDITIONS THAT EFFECT CONSUMER SPENDING.

     Our  country  currently  is in a recession  and we believe  that these weak
general  economic   conditions  will  continue  through  2003.  As  the  economy
struggles,  we are concerned  that our  customers  may become more  apprehensive
about the economy and reduce their level of discretionary  spending.  We believe
that a decrease in discretionary  spending could impact the frequency with which
our customers  choose to dine out or the amount they spend on meals while dining
out,  thereby  decreasing  our revenues.  Additionally,  the continued  military
responses  to  terrorist  attacks  and  the  prospect  of a  protracted  war may
exacerbate  current  economic  conditions  and lead to further  weakening in the
economy.  Adverse economic  conditions and any related decrease in discretionary
spending  by our  customers  could have an adverse  effect on our  revenues  and
operating results.

OUR FUTURE SUCCESS IS DEPENDENT ON OUR BAMBOO CLUB CONCEPT.

     In July 2000, we acquired the Bamboo Club's two operating  restaurants  and
the entire concept.  Since then, we have opened seven new  restaurants.  Average
weekly  sales in 2002 for the  original  locations  were $49,633 and for the new
restaurants  opened in 2001 and 2002, the average weekly sales were $51,973.  As
discussed previously, the national economy has struggled and we have experienced
significant  economic  difficulties  in certain regions of the United States and
shifting buying habits of consumers.  As a result,  our sales  expectations were
not met. Our ability to finance  future growth in Bamboo Clubs is dependant upon
our ability to improve our revenue and achieve our  profitability  expectations.
We  believe  the  overall  economy  needs to  improve  and a  resolution  to the
geopolitical  uncertainties must be provided to strengthen  consumer  confidence
and increase  discretionary  restaurant spending. In addition, we are evaluating
other promotions,  advertising,  and other operational considerations to improve
overall profitability. There can be no assurance that any of these measures will
be successful.

WE PERFORM PERIODIC ASSET IMPAIRMENT TESTS.

     When we encounter a "triggering"  event,  decide to close a restaurant,  or
perform a periodic review of our marginally  performing locations  (particularly
in the fourth  quarter of each year),  we record  appropriate  asset  impairment
charges if  necessary.  The amount of impairment  charges and the  allocation of
goodwill,  if any,  is based upon  assessments  of current  and future  economic
conditions and their  estimated  impact on our ability to recover our investment
in long-lived assets. Even in strong economic conditions there can be conditions
or local  situations  that  might  require  the  recording  of asset  impairment
charges.  We will continue to perform  periodic asset impairment tests and it is
likely that we will record future asset impairment charges.

WE HAVE SIGNIFICANT DEBT.

     We have incurred  significant  indebtedness  in connection  with our growth
strategy. Our growth strategy in 2002 focused on internal restaurant development
instead of  acquisitions.  To finance this  development,  we have used cash flow
from  operations  and debt borrowed from banks.  As of December 30, 2002, we had
long-term debt of approximately $55.5 million (including current portion of $3.5
million), and a working capital deficit of $15.0 million. Our borrowings include
financial  covenants  generally  based on cash flow  (EBITDA),  which limits the
amount we can borrow.  At December 30, 2002,  we were in  compliance  with these
covenants,  with the  exception of one covenant with a lender with whom we had a
$5.0 million line of credit. We had not drawn upon this line and we cancelled it
in March 2003.  If we fail to meet any  financial  covenants,  each lender could
call their loan immediately.  There can be no assurance we will continue to meet
these covenants in the future.

     Our  borrowings  will  result in  interest  expense of  approximately  $4.5
million in 2003 and $4.7 million in 2004, based on currently prevailing interest
rates  and  assuming  outstanding  and  contemplated  indebtedness  is  paid  in
accordance  with the  existing  payment  schedules  without any  prepayments  or
additional  borrowings.  We must make these interest payments  regardless of our
operating  results.  Currently,  54 of our restaurants are pledged to secure our
debt obligations. In addition, our debt agreements have financial covenants that
we must meet each quarter.  Although we are in compliance  with our covenants at

                                       18
<PAGE>
December  30, 2002,  there can be no  assurance  we will  continue to meet these
covenants in the future. If we fail to meet any financial covenants, each lender
could call their loan immediately.

WE DEPEND ON A KEY FOOD PRODUCT DISTRIBUTOR.

     We  entered  into an  agreement  with U.S.  Foodservice,  a  national  food
distribution  service company,  to serve substantially all of our restaurants in
California,  Arizona,  and  Nevada and for all of our  Bamboo  Club and  Redfish
restaurants.  U. S.  Foodservice is a subsidiary of Royal Ahold,  which recently
announced a major  financial  restatement  in their 2001 and  earlier  financial
statements. If, as a result of these restatements or related consequences, U. S.
Foodservice is unable to continue  providing us with a high level of quality and
dependability in the receipt of our supplies,  at the cost advantages  resulting
from our volume purchases, this could have a material impact on our business.

     We believe that all essential  products are available  from other  national
suppliers as well as from local suppliers in the cities in which our restaurants
are located in the event we must  purchase  our products  from other  suppliers;
however,  there can be no assurance that we will be able to match quality, price
or dependability of supply.

WE DEPEND ON CARLSON RESTAURANTS WORLDWIDE, INC.

     We currently operate 56 T.G.I.  Friday's  restaurants as a T.G.I.  Friday's
franchisee.  We also manage an additional four T.G.I.  Friday's  restaurants for
another  franchisee.   Carlson  Restaurants  Worldwide,  Inc.  (formerly  T.G.I.
Friday's, Inc.) is the franchisor of T.G.I. Friday's restaurants. As a result of
the nature of franchising and our franchise  agreements with Carlson Restaurants
Worldwide,  our  long-term  success  depends,  to a significant  extent,  on the
continued  vitality of the T.G.I.  Friday's  restaurant  concept and the overall
success of the T.G.I. Friday's system.

     We  believe  that  the  experience,  reputation,  financial  strength,  and
franchisee support of Carlson  Restaurants  Worldwide represent positive factors
for our business. We have no control,  however, over the management or operation
of Carlson Restaurants Worldwide or other T.G.I. Friday's franchisees. A variety
of factors  affecting  Carlson  Restaurants  Worldwide  or the  T.G.I.  Friday's
concept  could have a material  adverse  effect on our  business.  These factors
include the following:

     *    any  business  reversals  that  Carlson   Restaurants   Worldwide  may
          encounter;

     *    a failure  by Carlson  Restaurants  Worldwide  to  promote  the T.G.I.
          Friday's name or restaurant concept;

     *    the inability or failure of Carlson  Restaurants  Worldwide to support
          its franchisees, including our company;

     *    the failure to operate  successfully the T.G.I.  Friday's  restaurants
          that Carlson Restaurants Worldwide itself owns; and

     *    negative  publicity with respect to Carlson  Restaurants  Worldwide or
          the T.G.I. Friday's name.

The future results of the  operations of our  restaurants  will not  necessarily
reflect  the  results  achieved by Carlson  Restaurants  Worldwide  or its other
franchisees,  but will  depend  upon such  factors as the  effectiveness  of our
management team, the locations of our restaurants,  and the operating results of
those restaurants.

FRANCHISE AGREEMENTS IMPOSE RESTRICTIONS AND OBLIGATIONS ON OUR BUSINESS.

     Our franchise agreement with Carlson Restaurants  Worldwide for each T.G.I.
Friday's  restaurant  that  we own  generally  requires  us to  pay  an  initial
franchise fee of $50,000,  pay royalties of 4% of the restaurant's  gross sales,
and spend up to 4% of the  restaurant's  gross sales on  advertising,  which may
include  contributions  to a national  marketing  pool  administered  by Carlson
Restaurants Worldwide.

     Carlson  Restaurants  Worldwide  requires us and its other  franchisees  to
contribute a percentage of gross sales to the national  marketing pool. The rate
was 2.1% in 2000 and through the first eight months 2001;  1.7% in the last four

                                       19
<PAGE>
months of 2001, since Carlson had no national campaign during that period;  2.7%
in 2002;  and it is  expected to be 3.25% in 2003.  We must pay or accrue  these
amounts regardless of whether or not our restaurants are profitable.

     If we fail to satisfy  these  requirements  or otherwise  default under the
franchise  agreements,  we could be subject to  potential  damages for breach of
contract  and could  lose our  franchise  rights  for some or all of our  T.G.I.
Friday's restaurants. We also could lose our rights to develop additional T.G.I.
Friday's restaurants.

OUR DEVELOPMENT AGREEMENTS WITH CARLSON RESTAURANTS WORLDWIDE REQUIRE US TO OPEN
ADDITIONAL T.G.I. FRIDAY'S RESTAURANTS.

     We may not be able to secure  sufficient  restaurant  sites that we believe
are  suitable  or we may  not be  able  to  develop  restaurants  on  terms  and
conditions  that we consider  favorable in order to satisfy the  requirements of
the development agreements.  The development agreements give Carlson Restaurants
Worldwide  certain  remedies  in the  event  that  we fail to  comply  with  the
development  schedule in a timely manner or if we breach the  confidentiality or
noncompete  provisions of the development  agreements.  These remedies  include,
under certain  circumstances,  the right to reduce the number of  restaurants we
may develop in the related  development  territory or to terminate our exclusive
right to develop restaurants in the related development territory.

     At our request,  Carlson Restaurants Worldwide from time to time has agreed
to amend the development  schedules to extend the time by which we were required
to develop new  restaurants  in certain  development  territories.  We requested
those  amendments  because we were unable to secure sites that we believed to be
attractive on favorable terms and conditions.  Carlson Restaurants Worldwide may
decline to extend the  development  schedule in the future if we experience  any
difficulty  in satisfying  the schedule for any reason,  including a shortage of
capital.

WE MAY NOT BE ABLE TO COMPLY  WITH ALL OF THE  REQUIREMENTS  OF OUR  DEVELOPMENT
AGREEMENTS.

     We expect to fulfill  our  obligations  under the terms of our  development
agreements with Carlson  Restaurants  Worldwide for the Southwestern and Midwest
areas and for  California.  However,  we can provide no  assurance  that we will
successfully fulfill these obligations.

WE FACE RISKS  ASSOCIATED  WITH THE  ACQUISITION AND INTEGRATION OF THE REDFISH,
BAMBOO  CLUB,  AND  ALICE  COOPER'STOWN  RESTAURANTS,  AND  ANY  OTHER  ACQUIRED
RESTAURANTS, WITH OUR EXISTING OPERATIONS.

     We must  integrate the  operations of our Redfish,  Bamboo Club,  and Alice
Cooper'stown  restaurants  with our  existing  operations  in  order to  enhance
revenue,  realize cost savings, and achieve anticipated operating  efficiencies.
Because Redfish, Bamboo Club, and Alice Cooper'stown restaurants feature diverse
menus  served in an upscale  atmosphere,  these  restaurants  present  operating
requirements that differ from our existing T.G.I.  Friday's  restaurants.  These
requirements could result in unanticipated challenges to our management team. We
may also  wish to  acquire  other  complementary  restaurant  operations  in the
future.

     We strive to take advantage of the opportunities created by the combination
of  acquired  operations  to  achieve  significant  revenue   opportunities  and
substantial cost savings,  including  increased  product offerings and decreased
operating expenses as a result of the elimination of duplicative  facilities and
personnel  associated  with sales,  marketing,  administrative,  and  purchasing
functions.   Significant   uncertainties,   however,   accompany   any  business
combination.  We  may  not be  able  to  achieve  revenue  increases;  integrate
facilities, functions, and personnel in order to achieve operating efficiencies;
or otherwise realize cost savings as a result of acquisitions.  The inability to
achieve revenue  increases or cost savings could have a material  adverse effect
on our business, financial condition, and operating results.

WE FACE RISKS ASSOCIATED WITH THE EXPANSION OF OUR OPERATIONS.

     The success of our business  depends on our ability to expand the number of
our restaurants,  either by developing or acquiring additional restaurants.  Our
success  also  depends on our  ability to operate  and manage  successfully  our
growing operations. Our ability to expand successfully will depend upon a number
of factors, including the following:

                                       20
<PAGE>
     *    the  availability  and  cost  of  suitable  restaurant  locations  for
          development;

     *    the availability of restaurant acquisition opportunities;

     *    the hiring,  training,  and  retention of  additional  management  and
          restaurant personnel;

     *    the availability of adequate financing;

     *    the continued development and implementation of management information
          systems;

     *    competitive factors; and

     *    general economic and business conditions.

     Increased   construction  costs  and  delays  resulting  from  governmental
regulatory  approvals,  strikes, or work stoppages,  adverse weather conditions,
and various  acts of God may also affect the opening of new  restaurants.  Newly
opened  restaurants  may operate at a loss for a period  following their initial
opening.  The  length of this  period  will  depend  upon a number  of  factors,
including the time of the year the restaurant is opened,  the sales volume,  and
our ability to control costs.

     We may not successfully achieve our expansion goals. Additional restaurants
that we develop or acquire may not be  profitable.  In addition,  the opening of
additional  restaurants  in an  existing  market  may have the effect of drawing
customers  from and reducing the sales  volume of our  existing  restaurants  in
those markets.

WE WILL NEED ADDITIONAL CAPITAL FOR EXPANSION.

     The development of new restaurants requires funds for construction,  tenant
improvements,  furniture,  fixtures,  equipment, training of employees, permits,
initial  franchise fees, and other  expenditures.  We expect that cash flow from
operations will be sufficient to develop the one new T.G.I.  Friday's restaurant
and the two new Bamboo Club  restaurants  that we plan to open during  2003.  We
will  require  funds to develop  additional  T.G.I.  Friday's  and  Bamboo  Club
restaurants  after 2003 and to pursue any additional  restaurant  development or
restaurant  acquisition  opportunities  that may  develop.  As a  result  of our
current financial  capabilities (see "Liquidity and Capital  Resources"  section
for  additional  information),  other than the one T.G.I.  Friday's  location we
currently  have under  construction  (Desert  Ridge  Mall,  Arizona),  we do not
anticipate building additional T.G.I Friday's locations during 2003. With regard
to our development  agreement with Carlson Restaurants Worldwide (which requires
the  development of five T.G. I. Friday's in 2003),  we have every  expectation,
based  on  waivers  and  amendments  received  in prior  years,  that we will be
successful in obtaining the appropriate waivers for 2003.

     In the future,  we may seek additional  equity or debt financing to provide
funds so that we can develop or acquire additional  restaurants.  Such financing
may not be available or may not be available on satisfactory terms. If financing
is not  available  on  satisfactory  terms,  we may be  unable  to  satisfy  our
obligations under our development  agreements with Carlson Restaurants Worldwide
or otherwise to expand our  restaurant  operations.  While debt  financing  will
enable us to add more  restaurants  than we otherwise would be able to add, debt
financing  increases  expenses  and is  limited  as to  availability  due to our
financial  results,  and we must  repay  the debt  regardless  of our  operating
results. Future equity financings could result in dilution to our stockholders.

WE WILL BE SUBJECT TO THE RISKS  ASSOCIATED  WITH  FRANCHISING  OPERATIONS IF WE
BEGIN FRANCHISING THE REDFISH OR BAMBOO CLUB CONCEPTS.

     We will be subject to the risks  associated  with  franchising  if we begin
franchising  activities in the future. If we develop a franchising  program, our
success as a franchisor  will depend upon our ability to develop and implement a
successful  system of  concepts  and  operating  standards  and to  attract  and
identify suitable  franchisees with adequate  business  experience and access to
sufficient  capital to enable them to open and operate  restaurants  in a manner
consistent  with  our  concepts  and  operating  standards.  We  cannot  provide
assurance  that we would be able to  successfully  meet  these  challenges  as a
franchisor.  In addition,  as a  franchisor  we would be subject to a variety of
federal  and state laws and  regulations,  including  Federal  Trade  Commission
regulations,  governing  the  offer  and  sale of  franchises.  These  laws  and
regulations  could  result  in  significant  increased  expenses  and  potential
liabilities for our company in the event we engage in franchising  activities in
the future.

                                       21
<PAGE>
WE FACE RISKS THAT AFFECT THE RESTAURANT INDUSTRY IN GENERAL.

     A variety of factors over which we have no control may affect the ownership
and operation of restaurants. These factors include adverse changes in national,
regional,  or local economic or market  conditions;  increased costs of labor or
food products; fuel, utility, and energy and other price increases;  competitive
factors;  the  number,  density  and  location  of  competitors;   and  changing
demographics,  traffic  patterns,  and  consumer  tastes,  habits,  and spending
priorities.

     Third  parties  may file  lawsuits  against  us  based  on  discrimination,
personal  injury,  claims for  injuries or damages  caused by serving  alcoholic
beverages  to an  intoxicated  person  or to a  minor,  or  other  claims.  As a
multi-unit  restaurant  operator,  our business  could be adversely  affected by
publicity  about  food  quality,  illness,  injury,  or other  health and safety
concerns  or  operating  issues  at  one  restaurant  or  a  limited  number  of
restaurants  operated  under the same name,  whether or not we  actually  own or
manage the restaurants in question.  We cannot predict any of these factors with
any degree of certainty.  Any one or more of these factors could have a material
adverse effect on our business.

     Employees may file claims or lawsuits against us based on discrimination or
wrongful  termination  or based  upon  their  rights  created  by the state laws
wherein we do  business.  These claims or lawsuits  could result in  unfavorable
publicity and could have a material adverse effect on our business.

WE FACE RISING INSURANCE COSTS.

     The cost of insurance (workers  compensation  insurance,  general liability
insurance, health insurance, and directors and officers liability insurance) has
risen  significantly in the past year and is expected to continue to increase in
2003.  In  California,  new  legislation  effective  January 1,  2003,  provides
significantly  increased  benefits and higher  costs to  companies  for workers'
compensation  claims.   Approximately  50%  of  our  owned  restaurants  are  in
California. These increases could have a negative impact on our profitability if
we are unable to make the  improvements  in our  operations  that  mitigate  the
effects of these increased costs.

WE FACE INTENSE COMPETITION.

     The  restaurant  business  is highly  competitive  with  respect  to price,
service,  and food type and  quality.  Restaurant  operators  also  compete  for
attractive restaurant sites and qualified restaurant personnel and managers. Our
restaurants compete with a large number of other restaurants, including national
and regional  restaurant chains and franchised  restaurant  systems,  as well as
with  locally  owned,  independent  restaurants.  Many of our  competitors  have
greater financial  resources,  more experience,  and longer operating  histories
than we possess.

WE DEPEND UPON OUR SENIOR MANAGEMENT.

     Our  success  depends,  in large  part,  upon the  services  of our  senior
management.  The loss of the  services of any  members of our senior  management
team could have a material adverse effect on our business.

WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION.

     Various federal, state, and local laws affect our business. The development
and operation of restaurants depend to a significant extent on the selection and
acquisition  of suitable  sites.  These  sites are subject to zoning,  land use,
environmental,  traffic,  and other regulations of state and local  governmental
agencies.  City  ordinances or other  regulations,  or the  application  of such
ordinances  or  regulations,  could  impair our ability to  construct or acquire
restaurants in desired locations and could result in costly delays.

     The  delay or  failure  to obtain  or  maintain  any  licenses  or  permits
necessary for operations  could have a material  adverse effect on our business.
In addition,  an increase in the minimum wage rate,  employee  benefit costs, or
other costs  associated with employees could adversely  affect our business.  We
also are subject to the  Americans  with  Disabilities  Act of 1990 that,  among
other things,  may require us to install certain fixtures or  accommodations  in
new restaurants or to renovate existing  restaurants to meet federally  mandated
requirements.

     Sales of alcoholic  beverages  represent an important source of revenue for
each of our  restaurants.  The  temporary  suspension  or permanent  loss or the
inability to maintain a liquor license for any restaurant  would have an adverse

                                       22
<PAGE>
effect on the operations of that restaurant. We do not plan to open a restaurant
in any  location  for which we  believe  we cannot  obtain or  maintain a liquor
license.

WE FACE INCREASED EXPENDITURES OF TIME AND MONEY ASSOCIATED WITH COMPLIANCE WITH
CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE.

     Keeping abreast of, and in compliance with, changing laws, regulations, and
standards relating to corporate governance and public disclosure,  including the
Sarbanes-Oxley  Act of 2002, new SEC  regulations,  and Nasdaq  National  Market
rules,  has required an increased  amount of  management  attention and external
resources.  We remain  committed  to  maintaining  high  standards  of corporate
governance  and  public  disclosure.  As a  result,  we  intend  to  invest  all
reasonably  necessary  resources  to comply with  evolving  standards,  and this
investment  may result in increased  general and  administrative  expenses and a
diversion of management time and attention from revenue generating activities to
compliance activities.

LITIGATION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

     We are from time to time the  subject  of  complaints  or  litigation  from
guests  alleging  food-borne  illness,  injury or other food quality,  health or
operational  concerns.  We may be adversely affected by publicity resulting from
such allegations  regardless of whether such allegations are valid or whether we
are liable.  We are also subject to  complaints  or  allegations  from former or
prospective  employees  from time to time. A lawsuit or claim could result in an
adverse  decision  against us that could have a material  adverse  effect on our
business.

     We are subject to state "dram shop" laws and  regulations,  which generally
provide  that a person  injured  by an  intoxicated  person  may seek to recover
damages from an establishment that wrongfully served alcoholic beverages to such
person.  While  we  carry  liquor  liability  coverage  as part of our  existing
comprehensive general liability insurance, we may still be subject to a judgment
in excess of our insurance coverage and we may not be able to obtain or continue
to maintain such insurance coverage at reasonable costs, or at all.

THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE.

     Historically,  the market price of our common stock has been  volatile.  In
the  future,  the  market  price of our  common  stock  will be  subject to wide
fluctuations as a result of a variety of factors, including the following:

     *    quarterly  variations  in our  operating  results  or  those  of other
          restaurant companies;

     *    changes in analysts' estimates of our financial performance;

     *    changes in national and regional  economic  conditions,  the financial
          markets, or the restaurant industry;

     *    natural disasters; and

     *    other   developments   affecting  our  business  or  other  restaurant
          companies.

     The trading volume of our common stock has been limited, which may increase
the volatility of the market price for our stock. In addition,  the stock market
has  experienced  extreme price and volume  fluctuations  in recent years.  This
volatility  has had a  significant  effect on the  market  prices of  securities
issued by many  companies for reasons not  necessarily  related to the operating
performances of these companies.

     According to NASDAQ rules,  if the price of a company's  Common Stock falls
below $1.00 for 20 consecutive trading days, NASDAQ will notify the company that
its stock is subject to being de-listed. NASDAQ can allow the company's stock to
remain listed and traded for up to six additional  months based upon information
provided by the  registrant of its actions in this regard.  To date, we have not
received any such formal  notification.  If our stock price remains below $1.00,
our stock may be de-listed.

OUR MANAGEMENT  CONTROLS A SIGNIFICANT PORTION OF THE VOTING POWER OF OUR COMMON
STOCK.

     Our  directors  and  officers   currently  own,   directly  or  indirectly,
approximately 5,680,658 shares, or 40.2%, of our outstanding common stock. These
directors  and officers  also hold options to purchase an aggregate of 2,439,500

                                       23
<PAGE>
shares of common stock at exercise prices ranging from $1.88 to $5.81 per share.
As a result, these persons voting together will have significant voting power.

THE EXISTENCE OF STOCK  OPTIONS AND WARRANTS MAY  ADVERSELY  AFFECT THE TERMS OF
FUTURE FINANCINGS.

     Stock  options to persons  other than  directors  or officers to acquire an
aggregate of 1,047,922  shares of common stock  currently  are  outstanding.  An
additional  821,000  shares of common stock have been reserved for issuance upon
exercise of options that may be granted  under our existing  stock option plans.
In addition,  warrants to acquire  231,000 shares of common stock  currently are
outstanding.  During the terms of those  options  and  warrants,  the holders of
those  securities  will have the  opportunity  to profit from an increase in the
market  price of our common  stock.  The  existence  of options and warrants may
adversely  affect the terms on which we can obtain  additional  financing in the
future,  and the  holders of options  and  warrants  can be expected to exercise
those options and warrants at a time when, in all  likelihood,  we would be able
to obtain  additional  capital by offering  shares of common stock on terms more
favorable  to us  than  those  provided  by the  exercise  of such  options  and
warrants.

SALES OF LARGE NUMBERS OF SHARES COULD ADVERSELY  AFFECT THE PRICE OF OUR COMMON
STOCK.

     Sales of substantial  amounts of common stock in the public market, or even
the potential for such sales,  could adversely affect  prevailing  market prices
for our common stock and could adversely affect our ability to raise capital. As
of March 12, 2003, there were 14,141,928 shares of our common stock outstanding.
All of these  shares  are  freely  transferable  without  restriction  under the
securities  laws,  unless  they are held by our  "affiliates,"  as that  term is
defined in the securities  laws.  Affiliates  also are subject to certain of the
resale  limitations  of Rule 144.  Generally,  under Rule 144,  each person that
beneficially owns restricted  securities with respect to which at least one year
has elapsed  since the later of the date the shares were acquired from us or one
of  our  affiliates  may,  every  three  months,   sell  in  ordinary  brokerage
transactions  or to market makers an amount of shares equal to the greater of 1%
of our  then-outstanding  common stock or the average  weekly trading volume for
the four weeks prior to the proposed sale of such shares.

WE DO NOT ANTICIPATE THAT WE WILL PAY DIVIDENDS.

     We have  never  paid  any  dividends  on our  common  stock,  and we do not
anticipate  that we will pay dividends in the foreseeable  future.  We intend to
apply  any  earnings  to the  expansion  and  development  of our  business.  In
addition,  the terms of our credit facilities limit our ability to pay dividends
on our common stock.

ITEM 2. PROPERTIES

     In January 2003,  we entered into a 10-year lease renewal and  modification
agreement for our corporate  offices.  This agreement  increased the size of the
existing  space,  allowing us to combine  our three  office  locations  into one
contiguous space. This will result in a reduction in total space leased and will
provide a reduction in annual rent expense.  We believe that the leased space is
adequate for our current and reasonably anticipated future needs.

     We also lease space for all of our  restaurants.  The  initial  lease terms
range  from 10 to 20 years and  usually  contain  renewal  options  for up to 20
years. The leases typically provide for a fixed rental payment plus a percentage
of our revenue in excess of a specified amount.

ITEM 3. LEGAL PROCEEDINGS

     From  time  to  time,  we are  subject  to  routine  contract,  negligence,
employment related, and other litigation in the ordinary course of business.

     In January 2002, we were served with a lawsuit filed on behalf of a current
employee,  seeking  damages,  under  California  law, for both missed breaks and
missed meal breaks the employee alleges she did not receive.  This lawsuit seeks
to establish a class action relating to our California operations.  We intend to
vigorously  defend this lawsuit,  both on the merits of the employee's  case and
the issues relating to class action status.

     Other than the preceding, we are not subject to any pending litigation that
we believe  will have a material  adverse  effect on our  business or  financial
condition, results of operations or liquidity.

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

     Not applicable.

                                       24
<PAGE>
                                     PART II

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

     Our common  stock has been quoted on the Nasdaq  National  Market under the
symbol "MAIN" since 1992. The following  table sets forth the quarterly high and
low sales  prices of our common  stock for the periods  indicated as reported by
the Nasdaq National Market.

                                                        HIGH         LOW
                                                       ------      ------
     2001
       First Quarter............................       $ 3.13      $ 2.50
       Second Quarter...........................         4.15        2.94
       Third Quarter............................         5.91        3.35
       Fourth Quarter...........................         5.81        3.55
     2002
       First Quarter............................       $ 6.00      $ 4.00
       Second Quarter...........................         6.37        5.73
       Third Quarter............................         6.00        3.07
       Fourth Quarter...........................         3.25        1.72
     2003
       First Quarter (through March 12, 2003)...       $ 2.12      $  .70

     On March 12, 2003, there were 889 holders of record of our common stock. On
March 12,  2003,  the  closing  sale  price of our  common  stock on the  Nasdaq
National  Market was $.70 per share.  See "The market  price of our common stock
has been volatile" in the "Risk Factors" section, for de-listing considerations.

     We have never declared or paid any cash dividends.  We intend to retain any
earnings to fund the growth of our  business  and do not  anticipate  paying any
cash  dividends  in the  foreseeable  future.  In addition,  our  existing  debt
obligations limit our ability to pay cash dividends.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The following table sets forth selected consolidated financial data for our
company for the periods indicated.  The selected consolidated financial data for
each of the five fiscal  years in the period  ended  December  30, 2002 has been
derived from our consolidated  financial statements,  which have been audited by
Arthur Andersen LLP, our former independent accountants,  for the period through
December  25, 2000,  and for the years ended  December 31, 2001 and December 30,
2002, by KPMG LLP, our current independent accountants.

                                       25
<PAGE>
     This  data  should  be read in  conjunction  with,  and  are  qualified  by
reference to, our  consolidated  financial  statements and the notes thereto and
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                            FISCAL YEAR ENDED
                                                              (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
                                                   ------------------------------------------------------------------
                                                    DEC. 30,      DEC. 31,      DEC. 25,      DEC. 27,      DEC. 28,
                                                      2002          2001          2000          1999          1998
                                                   ----------    ----------    ----------    ----------    ----------
<S>                                                <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Revenue ........................................   $  220,151    $  211,823    $  186,542    $  140,294    $  114,242
Restaurant operating expenses:
   Cost of sales ...............................       61,270        59,139        53,671        39,960        33,242
   Payroll and benefits ........................       67,603        64,435        55,971        42,405        33,701
   Depreciation and amortization ...............        7,895         7,845         7,490         4,664         3,730
   Other operating expenses ....................       65,912        61,285        52,008        38,923        31,004
   Reduction of disputed liabilities ...........           --            --        (1,591)           --            --
                                                   ----------    ----------    ----------    ----------    ----------
     Total restaurant operating expenses .......      202,680       192,704       167,549       125,952       101,677
                                                   ----------    ----------    ----------    ----------    ----------
Income from restaurant operations ..............       17,471        19,119        18,993        14,342        12,565
   Amortization of intangibles .................          461         1,831           996           990           983
   General and administrative expenses .........        8,946         8,105         7,868         5,955         4,906
   Pre-opening expenses ........................        1,619         1,417         1,370         2,228           661
   New manager training expenses ...............        1,820         1,676         1,914         1,748           731
   Impairment charges and other ................        7,943         3,453           (92)          494           (17)
   Management fee income .......................           --          (432)         (611)         (865)       (1,082)
                                                   ----------    ----------    ----------    ----------    ----------
Operating income (loss) ........................       (3,318)        3,069         7,548         3,792         6,383

   Interest expense and other, net (1) .........        3,950         3,825         3,620         2,604         2,218
                                                   ----------    ----------    ----------    ----------    ----------
Income (loss) before income taxes ..............       (7,268)         (756)        3,928         1,188         4,165
Income tax expense (benefit) (3) ...............        1,309          (645)          250            50            --
                                                   ----------    ----------    ----------    ----------    ----------
Net income (loss)(1)(2) ........................   $   (8,577)   $     (111)   $    3,678    $      970    $    4,165
                                                   ==========    ==========    ==========    ==========    ==========
DILUTED EARNINGS PER SHARE:
   Net income (loss) (2) .......................   $    (0.61)   $    (0.01)   $     0.33    $     0.09    $     0.39
   Weighted average shares outstanding - diluted       14,105        14,048        11,117        10,407        10,608

BALANCE SHEET DATA:
   Working capital (deficiency) ................   $  (15,028)   $   (7,987)   $   (7,692)   $  (16,652)   $   (2,807)
   Total assets ................................      112,395       112,462       108,261        86,525        70,255
   Long-term debt, net of current portion ......       51,998        47,232        44,395        31,513        28,264
   Stockholders' equity ........................       29,610        40,207        40,499        27,383        26,372
</TABLE>

----------
(1)  Fiscal  2000  and  2002   includes  a  charge  of  $16,000   and   $46,000,
     respectively, for early extinguishment of debt.
(2)  Fiscal 1999 includes a charge of $168,000,  or $0.02 per share,  due to the
     cumulative effect of change in accounting principle related to the adoption
     of SOP 98-5.
(3)  Fiscal  2002  includes a full  valuation  allowance  against  deferred  tax
     assets.

                                       26
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

     The  following  table  presents   unaudited   consolidated   statements  of
operations  data for each of the eight quarters in the period ended December 30,
2002.  We believe that all necessary  adjustments  have been included to present
fairly the quarterly  information when read in conjunction with our consolidated
financial statements.  The operating results for any quarter are not necessarily
indicative of the results for any subsequent quarter.

<TABLE>
<CAPTION>
                                                                              FISCAL QUARTER ENDED
                                            ---------------------------------------------------------------------------------------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                2002                                          2001
                                            -------------------------------------------   -----------------------------------------
                                             APR. 1     JULY 1    SEPT. 30     DEC. 30    MAR. 26    JUNE 25    SEPT. 24    DEC. 31
                                            --------   --------   --------    --------    --------   --------   --------   --------
<S>                                         <C>        <C>        <C>         <C>         <C>        <C>        <C>        <C>
Revenue .................................   $ 55,329   $ 57,898   $ 54,026    $ 52,898    $ 51,705   $ 53,229   $ 52,222   $ 54,667
Cost of sales ...........................     15,183     15,775     15,145      15,167      14,598     14,783     14,628     15,130
Income (loss) before income taxes .......      1,557      1,541     (2,446)     (7,920)        788      1,554        723     (3,821)
Net income (loss) (1) (2) (3) ...........   $  1,268   $  1,264   $ (2,006)   $ (9,103)   $    788   $  1,554   $    723   $ (3,176)
                                            ========   ========   ========    ========    ========   ========   ========   ========
Net income (loss) per share
 before income taxes ....................       0.11       0.11      (0.17)      (0.56)       0.06       0.11       0.05      (0.28)
Net income (loss) per share .............   $   0.09   $   0.09   $  (0.14)   $  (0.64)   $   0.06   $   0.11   $   0.05   $  (0.23)
                                            ========   ========   ========    ========    ========   ========   ========   ========
</TABLE>

----------
(1)  Fourth quarter fiscal 2002 includes asset impairment  charges and estimated
     lease  termination fees of $6,337,000,  including an allocation of $860,000
     of goodwill.
(2)  Third quarter fiscal 2002 includes asset  impairment  charges of $1,206,000
     and a write-down of land held for sale of $400,000.
(3)  Fourth quarter fiscal 2001 includes asset impairment  charges of $1,838,000
     and write-down of a management agreement receivable of $1,615,000.

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

BACKGROUND

     We commenced our restaurant  operations in May 1990 with the acquisition of
four T.G.I.  Friday's restaurants in Arizona and Nevada.  During the past twelve
years, we have grown through acquisitions and development of new restaurants. We
currently own 71 restaurants and manage an additional four restaurants.

     In 1996, we had a change in management and implemented a long-term business
strategy to enhance our financial position, to place more emphasis on our casual
dining business in certain designated markets, and to dispose of underperforming
assets.

     The first step was to strengthen our financial  position by (i) the sale of
1,250,000  shares of common  stock for  $2,500,000  through a private  placement
transaction  in January  1997;  (ii) the sale of five  restaurants  in  northern
California in January 1997 for $10,800,000, of which $8,000,000 in proceeds were
used to repay debt;  (iii) new borrowings of $21,300,000 with a repayment period
of 15 years; and (iv) recording  writeoffs related to the disposition of various
non-core assets and the write-down of certain core assets to realizable  values.
Proceeds  from the new  borrowings  were  used  primarily  to pay off debt  with
shorter repayment periods.

     We also  renegotiated our development  agreements with Carlson  Restaurants
Worldwide,  Inc.  to reduce the number of T.G.I.  Friday's  restaurants  we were
required  to build,  with the intent to focus on those  development  territories
that were most economically favorable.

     We strengthened our operations and commenced  expansion plans,  principally
through developing T.G.I. Friday's  restaurants.  This expansion was financed by
borrowings from various lenders.

                                       27
<PAGE>
     In 1999,  we acquired our Redfish  restaurants  and in 2000 we acquired the
Bamboo Club restaurants and concept. The Bamboo Club acquisition was financed in
part with cash raised by a rights offering to stockholders in 2000.

     In 2001,  we entered into a new loan with Bank of America for  $15,000,000,
which was sufficient to fund all of the T.G.I. Friday's restaurants completed by
June 2002.  We executed an interest rate swap and locked in our interest rate on
$12,500,000 of the loan total.  We believe that this is a favorable rate, as our
existing  financing is at a higher rate,  and that this portion of the loan will
be sufficient to fund our current construction and expansion of T.G.I.  Friday's
restaurants.  The interest  rate is  performance  based and indexed to the LIBOR
rate plus a predetermined  spread based upon our adjusted senior funded debt (as
defined in the loan documents) to EBITDA.  As of December 30, 2002, the interest
rate was  8.5%.  The  interest  rate  swap  qualifies  as a cash  flow  hedge in
accordance  with SFAS No. 133. On a quarterly  basis,  we adjust the fair market
value of the swap on the  balance  sheet and  offset the amount of the change to
other comprehensive income.

     In 2001,  operations were impacted by soft economic conditions,  especially
in the fourth  quarter and  subsequent to the September 11th attacks on America.
These  conditions  halted our positive  same store sales  increase  record at 18
consecutive quarters and predicated the fourth quarter impairment  write-down of
five  owned  restaurants  and the  management  agreement  receivable  impairment
write-down for six stores we managed in Northern  California and El Paso, Texas.
The total  impairment  charges were $3,453,000,  of which $1,838,000  related to
owned  assets and  $1,615,000  related to the  management  agreement  receivable
impairment.  We also faced two  distinctive  challenges  in our T.G. I. Friday's
California market,  which affected  operational  profitability:  (i) a $0.50 per
hour minimum  wage  increase  effective  January 1, 2001,  and (ii)  controlling
escalating   utility  prices.  To  effectively   combat  these  challenges,   we
implemented  a new labor program for our top store  managers to manage  multiple
locations,  where it was geographically  efficient;  and we implemented  utility
programs to measure optimum usage and to ensure cost efficiency.

     We opened seven new restaurants in 2001,  including  three  T.G.I.Friday's,
one Redfish,  and three Bamboo Club locations.  The T.G.I.  Friday's restaurants
are located in West Albuquerque,  New Mexico; Roseville,  California (Sacramento
area); and Porter Ranch,  California (Los Angeles area). The Redfish  restaurant
is located in North  Scottsdale,  Arizona;  and the Bamboo Club  restaurants are
located in Tampa,  Florida;  Wellington,  Florida  (West Palm Beach  area);  and
Tempe, Arizona (Phoenix area).

     We opened six new  restaurants in 2002,  including one T.G.I.  Friday's and
one  Redfish in  Chandler,  Arizona;  three  Bamboo  Clubs in  Tucson,  Arizona,
Newport, Kentucky, and King of Prussia, Pennsylvania; and one Alice Cooper'stown
in  Cleveland,  Ohio in the  location  formally  occupied by an  underperforming
Redfish restaurant we closed. In addition, we closed an underperforming  Redfish
in San  Diego,  California  and  subleased  the  premises  to a local  San Diego
nightclub operator. We also closed  underperforming  T.G.I. Friday's restaurants
in Kansas City, Missouri and in El Paso, Texas.

     During  the  third  quarter  of  2002,  we  recorded  charges  for  (i) the
write-down  of land held for sale of $400,000  and (ii)  impairment  charges and
other  of  $1,206,000,   including  asset  impairment  for  an  under-performing
restaurant  location that was closed,  an allocation of $300,000 of goodwill and
$95,000 in lease cancellation charges related to this closure.

     In the fourth quarter of 2002, in response to a difficult and soft national
economy,  we decided (i) we would terminate  several  existing leases for Bamboo
Club  locations,  where we have not yet  built a  restaurant;  (ii) we would not
renew leases for  restaurants  whose lease terms  expired in 2003,  and (iii) we
would record  impairment  charges for  under-performing  restaurants.  The asset
impairment and estimated lease  termination  fees recorded in the fourth quarter
of 2002 were $6,037,000, including an allocation of $860,000 of goodwill.

CRITICAL ACCOUNTING POLICIES

     The  preparation of  consolidated  financial  statements in conformity with
accounting  principles  generally  accepted in the United States  requires us to
make a number of estimates and assumptions  that affect the reported  amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial statements.  Such estimates and assumptions affect the
reported  amounts of revenues and expenses  during the reporting  period.  On an
ongoing basis, we evaluate our estimates and  assumptions  based upon historical

                                       28
<PAGE>
experience and various other factors and circumstances. We believe our estimates
and assumptions are reasonable in the circumstances; however, actual results may
differ from these estimates under different future conditions.

     We believe that the estimates and  assumptions  that are most  important to
the portrayal of our financial condition and results of operations, in that they
require management's most difficult,  subjective or complex judgments,  form the
basis for the accounting  policies deemed to be most critical to our operations.
These critical accounting policies relate to the valuation and amortizable lives
of long-lived assets,  goodwill,  and to other  identifiable  intangible assets,
valuation of deferred tax assets, reserves related to self-insurance for workers
compensation  and general  liability,  and  recognition  of stock based employee
compensation. These policies are as follows:

     (1) We periodically  perform asset impairment analysis of long-lived assets
related to our restaurant locations, goodwill, and other identifiable intangible
assets. We perform these tests whenever we experience a "triggering" event, such
as a decision to close a location  or major  change in the  locations  operating
environment,  or other event that might  impact our ability to recover our asset
investment.  Also, we have a policy of reviewing the financial operations of our
restaurant  locations  on at least a  quarterly  basis.  Locations  that are not
meeting   expectations  are  identified  and  continue  to  be  watched  closely
throughout  the year.  Primarily  in the  fourth  quarter,  actual  results  are
reviewed  and  budgets  for the  ensuing  year are  analyzed.  If we deem that a
locations results will continue to be below  expectations,  alternatives for its
continued operation are considered. At this time, we perform an asset impairment
test,  if it is  determined  that the asset's fair value is less than book value
and we  will  be  unable  to  recover  our  investment  through  operations,  an
impairment  charge is  recorded.  Upon an event  such as a formal  decision  for
abandonment  (restaurant closure), we may record additional impairment of assets
and an  allocation  of goodwill if the location was one that was  acquired.  Any
carryover basis of assets is depreciated  over the respective  remaining  useful
lives.

     (2) Periodically we record (or reduce) the valuation  allowance against our
deferred  tax assets to the amount that is more likely than not to be  realized,
based upon  recent past  financial  performance,  tax  reporting  positions  and
expectations of future taxable income.

     (3)  We  use  an  actuarial  based  methodology  utilizing  our  historical
experience factors to periodically  adjust  self-insurance  reserves for workers
compensation and general  liability claims and settlements.  These estimates are
adjusted  based  upon  annual  information  received  in July  of  each  year in
connection  with policy  renewals.  Estimated  costs for the following  year are
accrued on a monthly  basis and progress  against this  estimate is  reevaluated
based upon actual claim data received each quarter.

     (4) We use the method of  accounting  for employee  stock  options  allowed
under APB Opinion 25 and have adopted the disclosure provisions of SFAS No. 123,
which require pro forma disclosure of the impact of using the fair value at date
of grant method of recording stock-based employee compensation.

     We believe estimates and assumptions  related to these critical  accounting
policies are appropriate under the circumstances;  however, should future events
or occurrences result in unanticipated  consequences,  there could be a material
impact on our future financial condition or results of operations.

                                       29
<PAGE>
RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated,  the percentages
that certain items of income and expense bear to total revenue:

<TABLE>
<CAPTION>
                                                           FISCAL YEAR ENDED
                                              --------------------------------------------
                                              DECEMBER 30,    DECEMBER 31,    DECEMBER 25,
                                                  2002            2001            2000
                                                 -----           -----           -----
<S>                                              <C>             <C>             <C>
Revenue .................................        100.0%          100.0%          100.0%
Restaurant operating expenses:
   Cost of sales ........................         27.8            27.9            28.8
   Payroll and benefits .................         30.7            30.4            30.0
   Depreciation and amortization ........          3.6             3.7             4.0
   Other operating expenses .............         29.9            28.9            27.9

   Reduction of disputed liabilities ....           --              --            (0.9)
                                                 -----           -----           -----
   Total restaurant operating expenses ..         92.1            91.0            89.8
                                                 -----           -----           -----
Income from restaurant operations .......          7.9             9.0            10.2
   Amortization of intangibles ..........          0.2             0.9             0.6
   General and administrative expenses ..          4.1             3.8             4.2
   Preopening expenses ..................          0.7             0.7             0.7
   New manager training expenses ........          0.8             0.8             1.0
   Impairment charges and other .........          3.6             1.6             0.0
   Management fee income ................           --            (0.2)           (0.3)
                                                 -----           -----           -----
Operating income (loss) .................         (1.5)            1.4             4.0
Interest expense and other, net .........          1.8             1.8             1.9
                                                 -----           -----           -----
Income (loss) before income taxes .......         (3.3)%          (0.4)%           2.1%
                                                 =====           =====           =====
</TABLE>

FISCAL 2002 COMPARED TO FISCAL 2001

     Revenue  for the fiscal year ended  December  30,  2002  increased  3.9% to
$220.2  million  compared  with $211.8  million for the year ended  December 31,
2001.  This  increase was primarily a result of opening six new  restaurants  in
2002 and the full year of  revenues  for the seven  restaurants  opened in 2001.
Same-store  sales increased 0.4% for fiscal 2002 as compared with an increase in
same-store sales of 1.9% for 2001. Same-stores sales percentages represent sales
for stores that have been open for at least 18 months.  Revenue  from  alcoholic
beverages accounted for 24.4% of revenue in 2002 and 24.2% in 2001.

     Cost of sales as a  percentage  of revenue  decreased  slightly to 27.8% in
2002 from 27.9% in 2001.  This  decrease  was due  primarily  to lower prices on
certain proteins and partially offset by higher costs for produce,  seafood, and
grocery products.

     Payroll and benefit costs  increased as a percentage of revenue to 30.7% in
2002 from 30.4% for the comparable  period in 2001.  This increase was primarily
due to a $0.50 per hour minimum wage increase in our California market effective
January 1, 2002, and increases in management  labor and benefits  resulting from
lower turnover.  As discussed below, new manager labor expense is charged to the
new manager training expense account.  Therefore,  when turnover is lower,  less
labor is charged to the new  manager  training  expense  account  and more labor
remains in the payroll and benefits account. Payroll and benefits increases were
also the result of higher health insurance costs.

     Depreciation  and  amortization  before income from  restaurant  operations
includes  depreciation of restaurant  property and equipment and amortization of
franchise fees and liquor licenses. Depreciation and amortization decreased as a
percentage  of  revenue to 3.6% in 2002 from 3.7% for the  comparable  period in
2001, primarily due to a reduction in depreciation expense due to the impairment
of assets for several under-performing  locations recorded in December 2001, and
additional asset impairments recorded in the third quarter of 2002.

                                       30
<PAGE>
     Other  operating  expenses  include rent,  real estate  taxes,  common area
maintenance charges, advertising,  insurance,  maintenance, and utilities. Other
operating  expenses  increased as a percentage  of revenue to 29.9% in 2002 from
28.9% for the  comparable  period in 2001.  The  increase  was due  primarily to
additional unit level  advertising  costs,  store rent increases  related to new
store openings,  and marketing fee increases.  The franchise  agreements between
Carlson Restaurants  Worldwide and our company require a 4% of net sales royalty
and up to a 4% of net sales marketing contribution. Each year we contribute to a
T.G.I. Friday's national marketing pool. In 2001, the pool contribution was 2.1%
of net sales for the first three  fiscal  quarters and 1.7% of net sales for the
fourth  quarter.  The pool  contribution  percentage  decreased  because Carlson
Restaurants   Worldwide  cancelled  its  T.G.I.  Friday's  national  advertising
campaign for the entire fourth quarter of 2001. In 2002, the contribution to the
fund was 2.7% of sales,  resulting  in an  increase  over the prior  year.  This
contribution offsets a portion of our general 4% marketing requirement.

     Depreciation  and  amortization  after  income from  restaurant  operations
includes  depreciation  of corporate  property and  equipment,  amortization  of
identifiable   intangibles,   and   amortization   of  goodwill  as  applicable.
Depreciation  and  amortization  decreased as a percentage of revenue to 0.2% in
2002 from 0.9% for the comparable period in 2001, as a result of the elimination
of goodwill amortization under SFAS No. 142, effective as of January 1, 2002.

     General and administrative expenses increased as a percentage of revenue to
$8,946,000,  or 4.1% in 2002 from $8,105,000,  or 3.8% for the comparable period
in 2001.  The increase was due primarily to increases in salaries,  benefits and
travel  related to building of the Bamboo Club  infrastructure  and increases in
technology  support costs,  higher legal costs and higher rent due to additional
office space.

     Pre-opening  expenses were $1,619,000,  or 0.7% of revenue, at December 30,
2002 as compared to $1,417,000,  or 0.7% of revenue, for the year ended December
31,  2001.  Although we opened six stores in 2002  compared  to seven  stores in
2001, our expenses were higher in 2002 due primarily to incurring  costs in 2002
for new store openings in 2003,  combined with increases in employee  recruiting
and  training,  new store  opening  team travel,  and  promotional  events.  The
majority of pre-opening  expenses occur during the two months prior to opening a
store.

     New manager  training  expenses are those costs  incurred in training newly
hired or promoted  managers,  as well as those costs  incurred to relocate those
managers to permanent management  positions.  New manager training expenses were
$1,820,000, or 0.8% of revenue, for the year ended December 31, 2002 as compared
with  $1,676,000,  or 0.8% of  revenue,  for the  period in 2001.  Although  new
manager  training  expenses  were  consistent  as a percentage  of revenue,  the
increases  in 2002 were  primarily  the  result of new  store  openings  in 2002
compared  to 2001 and  expenses  incurred  in 2002  related  to new stores to be
opened in early 2003.

     In 2002, the impairment  charges and other account  included the impairment
of certain  leasehold  improvements  and other  operating  assets.  The  account
included (i)  $3,908,000 to primarily  reduce the carrying value of these assets
on under-performing  locations to their estimated fair value, (ii) $1,160,000 of
goodwill  allocated to one closed  location  (Kansas  City,  Missouri),  and two
impaired California  locations where we have decided not to renew the lease when
the initial terms expire in 2003, (iii) $760,000 in lease  cancellation  charges
and $415,000 in asset write downs for three Bamboo Club  locations  that we have
elected not to open,  and (iv) lease  cancellation  costs of $1,300,000  for one
location  where we decided to cancel a lease  early  (Leawood,  KS).  During the
third quarter of 2002, we also reduced the value of the land and building we are
holding for sale in El Paso,  Texas by  $400,000.  During the fourth  quarter of
2001,  we recorded an  impairment  expense of  $1,615,000  against a  management
agreement with CNL.

     Under  management  agreements,  we manage  four T.G.I.  Friday's  stores in
Northern  California and managed one T.G. I. Friday's  store in El Paso,  Texas.
During the fourth  quarter 2002, the El Paso,  Texas location was closed.  Under
these  agreements,  we are  entitled to a  management  fee if certain  cash flow
levels  are  achieved.  Based  on the cash  flow  provisions  of the  management
agreements,  we were unable to record management fee income during 2002 compared
to $432,000, or 0.2% of revenue, in 2001.

     Interest expense and other, net was  approximately  $3,950,000,  or 1.8% of
revenue in 2002 compared with $3,825,000,  or 1.8% of revenue in 2001.  Although
we incurred additional debt and a corresponding  increase in interest expense in
2002,  the increased  expenses  compared with 2001 were offset by more favorable

                                       31
<PAGE>
interest rate conditions on our variable  interest rate debt. As of December 30,
2002,  approximately  59% of our total debt was tied to variable interest rates.
During the years ended  December  30, 2002 and  December 31, 2001 we had average
outstanding  borrowings  of  $54,200,000  and  $48,300,000,  respectively,  with
effective interest rates of 7.3% and 7.9%, respectively.

     As a  result  of a  substantial  net  loss  during  2002,  we  provided  an
additional  valuation  allowance  to fully  reserve all of its net  deferred tax
asset.  An income tax benefit of $645,000 was recorded in 2001 because we offset
net operating loss  carryforwards  against taxable income.  We were in a taxable
income  situation in 2001 due to the  recognition of various timing  differences
from  2000.  At  December  30,  2002,  we had  approximately  $7,463,000  of net
operating loss  carryforwards and tax credit  carryforwards  available to offset
future income for federal income tax purposes.

FISCAL 2001 COMPARED TO FISCAL 2000

     Revenue for the fiscal year ended  December  31,  2001  increased  13.6% to
$211.8  million  compared  with $186.5  million for the year ended  December 25,
2000.  This increase was primarily a result of opening seven new  restaurants in
2000 and seven new  restaurants  in 2001.  Same-store  sales  increased 1.9% for
fiscal 2001 as compared  with an  increase in  same-store  sales of 5.1% for the
comparable period in 2000.  Same-stores  sales  percentages  represent sales for
stores  that have  been  open for at least 18  months.  Revenue  from  alcoholic
beverages accounted for 24.5% of revenue in 2001 and 24.4% in 2000.

     Cost of sales as a  percentage  of revenue  decreased to 27.9% in 2001 from
28.8% in 2000.  This decrease from the  comparable  period in 2000 resulted from
multiple  factors.  Food costs were higher in 2000  because we were  required to
find alternative food suppliers to replace Ameriserve, our primary food supplier
who  declared  bankruptcy  in  the  first  quarter  of  2000.  Additionally,  we
experienced  increased food costs in 2001 due to sales mix changes and increases
in meat and cheese costs. We offset these increases through improved operations,
better margins on alcohol sales, and maturing  relationships  with our suppliers
that led to more favorable contract terms.

     Payroll and benefit costs  increased as a percentage of revenue to 30.4% in
2001 from 30.0% for the comparable  period in 2000.  This increase was primarily
due to a $0.50 per hour minimum wage increase in our California market effective
January 1, 2001 and higher  management  labor and benefits  resulting from lower
turnover.  As discussed  below,  new manager labor expense is charged to the new
manager training expense account.  Therefore, when turnover is lower, less labor
is charged to the new manager training expense account and more labor remains in
the payroll and benefits account.

     In total,  depreciation  and  amortization  increased  as a  percentage  of
revenue  to 4.1% in 2001  from  4.0% for the  comparable  period  in  2000.  The
increase was due  primarily to the number of new  restaurants  we opened in 2000
and 2001.

     Other  operating  expenses  include rent,  real estate  taxes,  common area
maintenance charges,  advertising,  insurance,  maintenance,  and utilities.  In
addition, the franchise agreements between Carlson Restaurants Worldwide and our
company  require  a 4% of net  sales  royalty  and a 4% of net  sales  marketing
contribution.  Each year we contribute to a T.G.I.  Friday's national  marketing
pool. In 2000, the pool  contribution  was 2.1% of net sales.  In 2001, the pool
contribution  was 2.1% of net sales for the first three fiscal quarters and 1.7%
of net sales for the fourth quarter. The pool contribution  percentage decreased
because Carlson  Restaurants  Worldwide  cancelled its T.G.I.  Friday's national
advertising  campaign for the entire fourth quarter of 2001.  This  contribution
offsets a portion  of our  general 4%  marketing  requirement.  Other  operating
expenses  increased as a  percentage  of revenue to 28.9% in 2001 from 27.9% for
the comparable period in 2000. The increase was due primarily to additional unit
level  advertising  efforts,  store rent  increases,  and additional  energy and
workers' compensation costs, especially in California.

     Reduction  of  disputed   liabilities  in  2000   represents  the  one-time
settlement proceeds paid to us for the Ameriserve  bankruptcy claim.  Ameriserve
was our  primary  food  supplier  until they  declared  bankruptcy  in the first
quarter of 2000.

                                       32
<PAGE>
     Amortization  of intangible  expenses  include  amortization on capitalized
liquor  licenses,  loan financing  fees,  franchise  fees,  and goodwill.  These
amortization  expenses decreased as a percentage of revenue to 0.5% in 2001 from
0.6% for the  comparable  period in 2000. The decrease in 2001 was primarily due
to spreading a small increase in fixed expenses over a larger revenue base.

     General and administrative expenses decreased as a percentage of revenue to
$8,105,000,  or 3.8% in 2001 from $7,868,000,  or 4.2% for the comparable period
in 2000.  The decrease was primarily  due to reduced  legal fees and  recruiting
expenses as we hired both an in house  attorney and  recruiter  during 2001.  In
addition,  reduction in travel expenses related to postponing all  non-mandatory
travel  during the fourth  quarter  of 2001  after the  events of  September  11
contributed to the overall decrease.

     Pre-opening  expenses of  $1,417,000,  or 0.7% of revenue,  were charged to
operations during the year ended December 31, 2001 as compared to $1,370,000, or
0.7% of revenue,  being charged to operations during the year ended December 25,
2000.  The increase  was due to the opening of two Bamboo  Clubs  outside of our
Phoenix,  Arizona market  (Central  Florida) that resulted in additional  travel
expenses for our new store opening teams.

     New manager  training  expenses are those costs  incurred in training newly
hired or promoted  managers,  as well as those costs  incurred to relocate those
managers  to  permanent  management  positions.   These  expenses  decreased  to
$1,676,000, or 0.8% of revenue, for the year ended December 31, 2001 as compared
to  $1,914,000,  or 1.0 % of  revenue,  for the year  ended  December  25,  2000
primarily as a result of lower turnover.

     In 2001 and 2000,  impairment  charges and other included the impairment of
certain  leasehold  improvements  and other operating  assets in accordance with
SFAS No. 121. The charges  amounted to  $1,838,000 in 2001 and $832,000 in 2000,
to reduce the carrying value of these assets to their  estimated fair value.  In
addition,  we recorded an impairment expense of $1,615,000 in the fourth quarter
of 2001  against  a  management  agreement  with  CNL  for six  under-performing
locations we managed in Northern  California and one location in El Paso, Texas.
Other charges in 2000 included the final settlement  proceeds of $924,000,  net,
received  from the City and County of San  Francisco,  California  in connection
with condemnation proceedings against a restaurant we owned.

     Management fee income  represents 3% of store gross revenue charged to five
T.G.I.  Friday's locations we managed in Northern California and one location in
El Paso,  Texas for CNL. Based on the impairment of the management  agreement in
the fourth  quarter of 2001, we did not record any management fee income for the
fourth quarter of 2001.

     Interest  expense  and  other,  net was  approximately  $3,825,000  in 2001
compared with  $3,615,000 in 2000. The net expense  decreased as a percentage of
revenue to 1.8% in 2001 from 1.9% for the comparable period in 2000. Although we
incurred  additional debt and a subsequent increase in interest expense in 2001,
the increased expenses compared with 2000 were offset by more favorable interest
rate  conditions  on our variable  interest  rate debt. As of December 31, 2001,
approximately 50% of our total debt was tied to variable interest rates.  During
the  years  ended  December  31,  2001  and  December  25,  2000 we had  average
outstanding  borrowings  of  $48,300,000  and  $42,300,000,  respectively,  with
effective interest rates of 7.9% and 8.5%, respectively.

     An income tax benefit of $645,000  was  recorded in 2001  because we offset
net operating loss  carryforwards  against taxable income.  We were in a taxable
income  situation in 2001 due to the  recognition of various timing  differences
from 2000. In 2000, we recorded a $250,000 expense related to state income taxes
due in certain  states where net  operating  loss  carryforwards  were no longer
available to us.

LIQUIDITY AND CAPITAL RESOURCES

     Our  primary  use of  funds  over  the  past  five  years  has been for the
acquisition of existing  T.G.I.  Friday's  restaurants,  the  development of new
T.G.I. Friday's restaurants,  and the acquisition and development of the Redfish
and Bamboo Club  restaurants  and  concepts.  These  acquisitions  were financed
principally  through a new stock  (rights  offering)  issuance,  the issuance of
long-term debt, and internally generated cash.

     In October  2002,  we renewed a $5 million  revolving  line of credit  with
Comerica  Bank.  The agreement  contained  financial  covenants  which limit the
amount of total debt we can incur. We did not borrow any amounts under this line

                                       33
<PAGE>
and had no amounts outstanding at December 30, 2002. Because of the restrictions
placed by the financial covenants of this agreement, we cancelled this agreement
in March 2003.

     In July  2002,  we  amended  our Bank of America  development  facility  to
provide for an additional  $1,000,000 in financing.  During 2002, we borrowed an
additional $9,465,000 to fund construction on two locations (T.G.I. Friday's San
Tan,  Chandler,  Arizona and Porter  Ranch,  California)  and to  refinance  two
existing   locations  (T.G.  I.  Friday's   Cerritos,   California  and  Oxnard,
California)  for which we paid off higher rate debt.  By September  30, 2002, we
had  fully  utilized  our  development  facility  with Bank of  America.  We are
currently in negotiations  with Bank of America to finance the T. G. I. Friday's
location being built at Desert Ridge Mall, Arizona.

     In October 2002, we secured a $15 million financing  commitment  through GE
Franchise  Finance.  The terms include $6 million for financing of equipment and
leasehold improvements for the seven Bamboo Clubs already open and approximately
$9 million for new Bamboo Club development.  At December 30, 2002, there were no
amounts borrowed under this commitment.

     All of our loan  agreements  contain various  financial  covenants that are
generally measured at the end of each quarter.  At December 30, 2002, we met all
of the financial  covenants for all debt  agreements,  with the exception of one
covenant with Comerica Bank with whom we had a $5.0 million line of credit.  Due
to the restrictive  covenants contained in this agreement,  at December 30, 2002
we were  unable to utilize the line of credit.  Since we were  required to pay a
non-use fee under this financing agreement,  we made the decision to cancel this
line in March 2003. Our recent  operations have been  negatively  impacted by an
economic slow down, and resulting same-store sales declines. We have reduced new
store development,  and cancelled certain leases on locations where construction
has not yet begun to reduce the need for capital. If the economic trend worsens,
coupled  with the new  restaurant  development  planned in 2003,  and  resulting
borrowings to finance the cost of building these new restaurants, we may violate
one or more of these  covenants  with any one of our  lenders  at the end of the
second quarter of 2003.  Based on our debt  covenants,  at December 30, 2002, we
have no significant  borrowing  capabilities  under any of our debt  agreements.
Some of our financial  covenants are dependant  upon  profitable  operations and
limit the total amount of debt we can have outstanding.  If economic  conditions
remain depressed,  this could have a material adverse effect on our business and
prevent us from having the cash availability to fund new restaurant development.

     We believe we will remain in compliance with our current debt agreements or
will receive the necessary modifications,  if needed, to our debt covenants, and
if  there  is an  improvement  in the  general  economic  conditions  in our key
markets,  we believe that our current cash resources,  additional debt financing
commitments,  sale of assets,  and expected cash flows from  operations  will be
sufficient to fund our planned development through 2003. As discussed previously
discussed,  other  than  the one  T.G.  I.  Friday's  we  currently  have  under
construction  (Desert  Ridge  Mall,  Arizona),  we do  not  anticipate  building
additional  T.G.  I.  Friday's  during  2003.  With  regard  to our  development
agreement (which requires the development of five T.G. I. Friday's  locations in
2003), we have every  expectation,  based on amendments and waivers  received in
prior years,  that we will receive the appropriate  waivers for 2003. We believe
we may need to obtain capital to fund additional  growth beyond 2003.  Potential
sources of any such capital include bank  financing,  strategic  alliances,  and
additional  offerings  of our  equity  or debt  securities.  We  cannot  provide
assurance  that such  capital will be  available  from these or other  potential
sources,  and the lack of capital  could have a material  adverse  effect on our
business.

     Net cash flows from  operating  activities  were  $9,195,000  in 2002,  and
$12,529,000 in 2001, and $3,824,000 in 2000. These were supplemented by net cash
flows from financing of $5,538,000 in 2002,  $3,864,000 in 2001,  $22,496,000 in
2000, which we used to fund our acquisitions and development of new restaurants.

     Net cash used in investing activities was $18,578,000 in 2002,  $11,492,000
in 2001, and  $24,810,000 in 2000,  which we used primarily to fund property and
equipment  purchases for our new restaurants and to acquire franchise rights and
goodwill  related to both the  purchase  and opening of new  restaurants.  These
amounts  were  offset by cash  received  from the sale of assets  related to our
sale-leaseback transactions.

     Our  current  liabilities  exceed  our  current  assets due in part to cash
expended on our  development  requirements  and because the restaurant  business
receives  substantially  immediate payment for sales,  while payables related to

                                       34
<PAGE>
inventories and other current  liabilities  normally carry longer payment terms,
usually 15 to 30 days. At December 30, 2002, we had a working capital deficit of
approximately $15,028,000.

     At December 30, 2002, we had a cash balance of  $5,621,000,  long-term debt
of $51,998,000 and current portion of long-term debt of $3,502,000. Monthly cash
receipts have been sufficient to pay all obligations as they become due.

     Approximately  $16,535,000  of this debt is a term loan  comprised  of five
notes payable to one lender.  Three of the notes bear interest at 9.5% per annum
and two of the notes bear  interest  at the one month  LIBOR rate plus 320 basis
points. The notes mature on May 1, 2012.

     During  November 1999, we entered into two working  capital  revolving loan
agreements  with  another  lender.  One  agreement  provides  for a  maximum  of
$8,050,000  to finance up to 80% of the costs to develop  seven T.G.I.  Friday's
restaurants.  Borrowings  under this  agreement  will mature in 10 years.  These
borrowings  are  secured  by the assets  financed  with the  borrowings  and are
guaranteed by certain of our  subsidiaries.  The other agreement  provides for a
maximum of  $3,150,000  to finance  80% of the costs to furnish  and equip seven
T.G.I. Friday's restaurants.  Borrowings under this agreement are secured by the
assets  financed with the borrowings and will mature in seven years.  Borrowings
under both agreements bear interest at 2.65% over the "30-Day Dealer  Commercial
Paper  Rate," as  defined  in the  agreements,  or a  combined  rate of 3.95% at
December  30,  2002.  At December 30, 2002,  we had  outstanding  borrowings  of
$5,484,985 under these agreements. These agreements include covenants related to
our fixed charge coverage ratio and debt to adjusted cash flow ratio. We were in
compliance with these covenants at December 30, 2002.

     The  remainder of our  long-term  debt consists of notes payable to various
lending  institutions.  These notes bear  interest at rates ranging from 3.9% to
10.6% and mature at various times over the next 15 years.

     We lease all of our restaurants with terms ranging from 10 to 20 years. Our
future debt,  lease, and purchase  obligations are summarized by year as follows
(in thousands):

CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

<TABLE>
<CAPTION>
                                                                                        Greater
                                            Less than    One to Three  Three to five   than five
                                Total        one year       years         years          years
                               --------      --------      --------      --------      --------
<S>                            <C>           <C>           <C>           <C>           <C>
Debt Maturities                $ 55,500      $  3,502      $  7,960      $  9,150      $ 34,888
Minimum Lease Commitments       129,221        11,499        21,065        18,935        77,722
Purchase Commitments              2,511         2,511            --            --            --
                               --------      --------      --------      --------      --------
Total                          $187,232      $ 17,512      $ 29,025      $ 28,085      $112,610
                               ========      ========      ========      ========      ========
</TABLE>

     Minimum lease commitments represent operating leases, which are off-balance
sheet financings. We have no other off-balance sheet financings. A default under
a lease  agreement  could result in damages or the  acceleration  of amounts due
under the lease. Total purchase commitments include remaining construction costs
for the three restaurants currently under construction (one T. G. I. Friday's at
Desert Ridge Mall,  Arizona,  and the two Bamboo Club  restaurants  one in Novi,
Michigan and one at Desert Ridge Mall, Arizona).

     As a result of our  substantial  loss in 2002,  we submitted a quick refund
application  to the Internal  Revenue  Service for refund of an  overpayment  of
federal taxes of approximately $850,000.

     We  believe  that our  current  resources  and  expected  cash  flows  from
operations  will be  sufficient  to fund our capital  needs and debt  maturities
during the next 12 months.  Prolonged  future adverse  geopolitical and economic
conditions could have a material adverse effect on our financial capabilities.

                                       35
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

     During 2002, we adopted the provisions of SFAS No. 142 which eliminates the
amortization of all existing and newly acquired  goodwill on a prospective basis
and requires companies to assess goodwill impairment,  at least annually,  based
on the fair value of the  reporting  unit.  As of the date of adoption,  January
2002,  we had  unamortized  goodwill  of  $25,149,000  that  is  subject  to the
transition provisions of SFAS Nos.141 and 142. Accumulated  amortization related
to goodwill is $5,914,000 as of the date of adoption.  During 2002, we wrote off
$1,160,000 of allocated  goodwill  associated with one closed  location  (Kansas
City,  Missouri) and two impaired locations (Palm Desert,  California and Citrus
Heights,  California).  After this goodwill  write off, at December 30, 2002, we
performed  a  valuation  in  accordance  with SFAS  No.142  for the  purpose  of
determining  the  amount of  goodwill  impairment.  Based on the  results of the
valuation, no additional impairment was required. Additionally,  during 2002, we
reclassified $994,000 of goodwill to franchise area goodwill which is classified
as an intangible asset that requires  amortization under SFAS No.142.  Franchise
area goodwill  represents  the  estimated  value the company paid to acquire the
franchise  rights to develop  restaurants in certain  locations,  at the date of
original  purchase.  As  a  result  of  these  transactions,  net  goodwill  was
$22,995,000 at the end of 2002.

     During 2002,  we adopted SFAS No. 144,  ACCOUNTING  FOR THE  IMPAIRMENT  OR
DISPOSAL  OF  LONG-LIVED  ASSETS,   which  addresses  financial  accounting  and
reporting for the impairment or disposal of long-lived  assets.  While Statement
No.  144  supersedes  Statement  No.  121,  ACCOUNTING  FOR  THE  IMPAIRMENT  OF
LONG-LIVED  ASSETS AND FOR LONG-LIVED  ASSETS TO BE DISPOSED OF, it retains many
of the fundamental  provisions of that Statement.  In 2002, we recognized  asset
impairments of $4,454,000 on under-performing properties.

     In April 2002, the FASB issued SFAS No. 145,  RESCISSION OF FASB STATEMENTS
NO.  4,  44,  AND  64,  AMENDMENT  OF  FASB  STATEMENT  NO.  13,  AND  TECHNICAL
CORRECTIONS.  This Statement rescinds the requirement to report gains and losses
from  extinguishment  of  debt  as an  extraordinary  item.  Additionally,  this
statement amends Statement 13 to require  sale-leaseback  accounting for certain
lease  modifications  that  have  economic  effects  similar  to  sale-leaseback
transactions.  The  provisions  of this  statement  relating to  Statement 4 are
applicable in fiscal years  beginning after May 15, 2002. The provisions of this
Statement related to Statement 13 are effective for transactions occurring after
May 15, 2002. All other provisions of this Statement are effective for financial
statements  issued on or after May 15, 2002.  We adopted FASB No. 145 related to
Statement No. 4 for year ended  December 30, 2002;  the  implementation  of this
statement  did not have a  material  effect  on our  financial  statements.  The
adoption  of SFAS No.  145  related  to  Statement  No.  13 had no effect on our
financial statements for the year ended December 30, 2002.

     In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL  ACTIVITIES.  SFAS No. 146 nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination Benefits and Other Costs to Exit an Activity".  For purposes of this
Statement,  an exit activity includes, but is not limited to, a restructuring as
that  term  is  defined  in IAS 37,  "Provisions,  Contingent  Liabilities,  and
Contingent  Assets".  The Statement is effective for exit or disposal activities
initiated  after December 31, 2002. If we have  restructuring  activities in the
future, we will adopt SFAS No. 146.

     In December 2002, the FASB issued SFAS No. 148,  ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION  AND DISCLOSURE.  This statement amends prior statements
to provide  alternative  methods of  transition  for an entity that  voluntarily
changes  to fair value  based  method of  accounting  for stock  based  employee
compensation.  We did  not  adopt  the  cost  recognition  method  of  recording
stock-based  employee  compensation  under SFAS No. 123 (which  adoption was and
remains optional), however, we provide the pro forma disclosures in notes to our
annual  financial  statements as if we had adopted the cost  recognition  method
under SFAS 123. We will adopt the new required  disclosures  about those effects
in future interim financial information.

     In June 2001,  FASB issued SFAS No. 143,  ACCOUNTING  FOR ASSET  RETIREMENT
OBLIGATIONS.  SFAS No. 143  requires  the Company to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal obligation  associated with the retirement of tangible  long-lived  assets
that result from the acquisition,  construction,  development, and/or normal use
of  the  assets.  The  Company  also  records  a  corresponding  asset  that  is

                                       36
<PAGE>
depreciated over the life of the asset. Subsequent to the initial measurement of
the asset retirement  obligation,  the obligation will be adjusted at the end of
each period to reflect the passage of time and changes in the  estimated  future
cash flows underlying the obligation.  The Company is required to adopt SFAS No.
143 on January 1, 2003.  The  adoption of SFAS No. 143 is not expected to have a
material effect on the Company's financial statements.

     In  November  2002,  the FASB  issued  Interpretation  No. 45,  GUARANTOR'S
ACCOUNTING  AND  DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,  INCLUDING  INDIRECT
GUARANTEES OF INDEBTEDNESS TO OTHERS,  AN  INTERPRETATION OF FASB STATEMENTS NO.
5,  57  AND  107  AND  A  RESCISSION  OF  FASB   INTERPRETATION   NO.  34.  This
Interpretation  elaborates on the  disclosures  to be made by a guarantor in its
interim and annual financial  statements about its obligations  under guarantees
issued.  The  Interpretation  also  clarifies  that a  guarantor  is required to
recognize,  at inception of a guarantee,  a liability  for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of the
Interpretation  are  applicable to guarantees  issued or modified after December
31,  2002  and are not  expected  to have a  material  effect  on the  Company's
financial  statements.  The disclosure  requirements are effective for financial
statements of interim and annual periods ending after December 15, 2002.

     In January 2003, the FASB issued  Interpretation  No. 46,  CONSOLIDATION OF
VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51. This Interpretation
addresses  the  consolidation  by  business  enterprises  of  variable  interest
entities  as  defined  in  the   Interpretation.   The  Interpretation   applies
immediately to variable  interests in variable  interest  entities created after
January 31,  2003,  and to variable  interests  in  variable  interest  entities
obtained after January 31, 2003. For public enterprises with a variable interest
in  a  variable   interest   entity  created   before   February  1,  2003,  the
Interpretation  is applied to the  enterprise no later than the beginning of the
first interim or annual  reporting  period  beginning  after June 15, 2003.  The
application of this  Interpretation is not expected to have a material effect on
the  Company's  financial  statements.   The  Interpretation   requires  certain
disclosures  in  financial  statements  issued  after  January 31, 2003 if it is
reasonably  possible that the Company will  consolidate or disclose  information
about variable interest entities when the Interpretation becomes effective.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of  December  30,  2002,  we  were  participating  in  three  derivative
financial instruments for which fair value disclosure is required under SFAS No.
133. The fair value liability of the interest rate swap agreements  discussed in
note  2 to  the  financial  statements  increased  to  $2,638,104  using  "hedge
accounting" under SFAS No. 133.

     Our market risk exposure is limited to interest rate risk  associated  with
our credit  instruments.  We incur  interest on loans made at variable  interest
rates of 3.20% over  LIBOR,  2.75% over  LIBOR,  and 2.65% over  "30-Day  Dealer
Commercial Paper Rates." At December 30, 2002, we had outstanding  borrowings on
these loans of approximately $32,792,589.  Our net interest expense for 2002 was
$3,950,000;  a one percent  variation  on any of the  variable  rates would have
increased or decreased our total interest expense by approximately  $328,000 for
the year.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference  is made to the  consolidated  financial  statements,  the report
thereon, the notes thereto, and the supplementary data commencing at page F-1 of
this report, which consolidated  financial  statements,  report, notes, and data
are incorporated by reference.

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

     On August 27, 2001, we engaged the  accounting  firm of KPMG LLP as our new
independent  public  accountants and dismissed Arthur Andersen LLP. The decision
to  change  our  accounting  firm was  recommended  and  approved  by the  audit
committee  of our board of  directors  and  approved by our board of  directors.
During the two most recent fiscal years and subsequent interim reporting periods
preceding the date of this report,  there were no  disagreements  between us and
Arthur  Andersen  LLP on any  matter  of  accounting  principles  or  practices,
financial  statement  disclosure,   accounting  scope  or  procedures,   or  any
reportable  events.  The  report  of  Arthur  Andersen  LLP on our  consolidated
financial  statements  for the last two  fiscal  years in which  they did report
contained no adverse  opinion or  disclaimer of opinion and was not qualified or
modified as to  uncertainty,  audit scope,  or accounting  principles.  Prior to
their  engagement,  we had not consulted with KPMG LLP on either the application
of  accounting  principles  or type of  opinion  KPMG  LLP  might  issue  on our
consolidated  financial  statements.  Arthur  Andersen LLP agreed with the above
statements and a letter from it was attached to our Form 8-K filed on August 27,
2001.

                                       37
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required  by  this  Item  relating  to our  directors  is
incorporated by reference to our Proxy Statement to be filed for our 2003 Annual
Meeting of Stockholders.  The information  required by this Item relating to our
executive officers is included in Item 1, "Business - Executive Officers."

ITEM 11. EXECUTIVE COMPENSATION

     The  information  required by this Item is incorporated by reference to our
Proxy Statement to be filed for our 2003 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     All  of  our  equity  based  compensation  plans  have  been  adopted  with
stockholder approval. Other than the preceding, the information required by this
Item is  incorporated  by reference  to our Proxy  Statement to be filed for our
2003 Annual Meeting of Stockholders.

     The following table sets forth information with respect to our common stock
that may be issued upon the exercise of stock  options  under our various  stock
option Plans as of December 30, 2002:

<TABLE>
<CAPTION>
                                                                                                       Number of Securities
                                                                                                      Remaining Available for
                                         (a)Number of securities to                                    Future Issuance Under
                                         be Issued Upon Exercise of   (b)Weighted Average Exercise   Equity Compensation Plans
                                             Outstanding Options,          Price of Outstanding        (Excluding Securities
Plan Category                                Warrants and Rights      Options, Warrants and Rights    Reflected in Column (a))
-------------                                -------------------      ----------------------------    ------------------------
<S>                                      <C>                          <C>                             <C>
Equity Compensation Plans
Approved by Stockholders ........                 3,487,420                    $      3.32                     821,078

Equity Compensation Plans Not
Approved by Stockholders ........                        --                             --                          --
                                                -----------                    -----------                 -----------

Total ...........................                 3,487,420                    $      3.32                     821,078
                                                ===========                    ===========                 ===========
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this Item is incorporated by reference to our
Proxy Statement to be filed for our 2003 Annual Meeting of Stockholders.

ITEM 14. CONTROLS AND PROCEDURES

     As of a date 90 days  prior to the date of filing  this  report,  our Chief
Executive  Officer and Chief  Financial  Officer have reviewed and evaluated the
effectiveness of our disclosure controls and procedures, which included inquires
made to certain other of our employees.  Based on their  evaluations,  our Chief
Executive  Officer and Chief  Financial  Officer  have each  concluded  that our
disclosure  controls and  procedures are effective and sufficient to ensure that
we record, process,  summarize,  and report information required to be disclosed
by us in our periodic reports filed under the Securities Exchange Act within the
time period  specified by the  Securities  and Exchange  Commission's  rules and
forms.  Subsequent  to the date of  their  evaluation,  there  have not been any
significant  changes to our  internal  controls or in other  factors  that could
significantly affect these controls, including any corrective action with regard
to significant deficiencies and material weaknesses.

                                       38
<PAGE>
                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

     (1)  Financial  statements  are  listed  in the  index to the  consolidated
          financial statements on page F-1 of this Report.

     (2)  No financial  statement  schedules  are included  because they are not
          applicable or are not required or the  information  required to be set
          forth therein is included in the consolidated  financial statements or
          notes thereto.

(b)  REPORTS ON FORM 8-K.

     Not applicable.

(c)  EXHIBITS

EXHIBIT
NUMBER         EXHIBIT
------         -------
 3.1           Certificate of Incorporation of the Company(1)
 3.2           Certificate of Amendment of Restated Certificate of
               Incorporation(l)
 3.3           Amended and Restated Bylaws of the Company(1)
 10.1          Company's 1990 Stock Option Plan(2)
 10.5          Form of Franchise Agreement between the Company and TGI Friday's,
               Inc.(3)
 10.9          Form of Management Agreement between Main St. California II, Inc.
               and Main St.  California,  Inc., a wholly owned subsidiary of the
               Company(4)
 10.10         Master Incentive  Agreements between Main St. California II, Inc.
               and Main St.  California,  Inc., a wholly owned subsidiary of the
               Company(4)
 10.11         Employment Agreement with Bart A. Brown, Jr.(5)
 10.11A        Employment  Agreement  dated  January 1, 1999 between the Company
               and Bart A. Brown, Jr.(6)
 10.13         Promissory Note between the Company and CNL Financial I, Inc.(5)
 10.14         Promissory Note between the Company and CNL Financial I, Inc.(5)
 10.15         Promissory Note between the Company and CNL Financial I, Inc.(5)
 10.16         1995 Stock Option Plan(7)
 10.17         Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Cornerstone Productions, Inc., a wholly owned subsidiary
               of the Company(8)
 10.18         Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Main St. California,  Inc., a wholly owned subsidiary of
               the Company(8)
 10.18A        First Amendment to Development Agreement dated February 10, 1999,
               between TGI  Friday's,  Inc.  and Main St.  California,  Inc.,  a
               wholly owned subsidiary of the Company(6)
 10.18B        Second Amendment to Development Agreement dated November 6, 2001,
               between T.G.I.  Friday's.  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
 10.19         Amended and Restated Development  Agreement between TGI Friday's,
               Inc. and Main St. Midwest, Inc., a wholly owned subsidiary of the
               Company(8)
 10.20         Amended and Restated  Purchase  Agreement  between RJR  Holdings,
               Inc. and Main St. California,  Inc., a wholly owned Subsidiary of
               the Company(8)
 10.21         Development  Agreement  dated  April 22,  1998  between  Main St.
               California,  Inc. and TGI Fridays,  Inc., and First  Amendment to
               Development   Agreement  dated  February  10,  1999  between  TGI
               Friday's,  Inc.  and Main St.  California,  Inc.,  a wholly owned
               subsidiary of the Company (6)
 10.21A        Second Amendment to Development  Agreement dated October 20, 1999
               between T.G.I.  Friday's,  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
 10.21B        Third Amendment to Development  Agreement dated  November6,  2001
               between T.G.I.  Friday's,  Inc. and Main St. California,  Inc., a
               wholly owned subsidiary of the Company.
 10.22         Stock Option Agreement dated August 5, 1996,  between the Company
               and John F. Antioco for 800,000 shares of Common Stock(9)

                                       39
<PAGE>
EXHIBIT
NUMBER         EXHIBIT
------         -------
 10.22A        Stock Option  Agreement dated June 15, 1998,  between the Company
               and John F. Antioco  amending the Stock  Option  Agreement  dated
               August 5, 1996(9)
 10.23         Stock Option  Agreement  dated  December  16,  1996,  between the
               Company  and Bart A.  Brown,  Jr.  for  250,000  shares of Common
               Stock.   (The  Company  issued  three   additional  Stock  Option
               Agreements  that  are  substantially  identical  in all  material
               respects,  except as to number of shares.  The four Stock  Option
               Agreements  give rights to purchase a total of 625,000  shares of
               Common Stock.)(9)
 10.23A        Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit  10.23(9)  Stock  Option  Agreement  dated July 14, 1997,
               between the Company and Bart A. Brown,  Jr. for 75,000  shares of
               Common Stock.  (The Company  issued one  additional  Stock Option
               Agreement  that  is  substantially   identical  in  all  material
               respects, except as to number of shares. The two
 10.24         Stock  Option  Agreements  give  rights  to  purchase  a total of
               175,000  shares of Common  Stock.)(9)  10.24A  Schedule  of Stock
               Option Agreements substantially identical to Exhibit 10.24(9)
 10.25         Stock Option  Agreement dated June 15, 1998,  between the Company
               and James Yeager for 15,000 shares of Common Stock.  (The Company
               issued  two   additional   Stock  Option   Agreements   that  are
               substantially  identical in all material  respects,  except as to
               option  holder  and  number of  shares.  The three  Stock  Option
               Agreements  give rights to  purchase a total of 50,000  shares of
               Common Stock.)(9)
 10.25A        Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.25(9)
 10.26         Stock Option  Agreement  dated  December  31,  1998,  between the
               Company  and Tim Rose for  10,000  shares of Common  Stock.  (The
               Company  issued one  additional  Stock Option  Agreement  that is
               substantially  identical in all material  respects,  except as to
               option  holder  and  number  of  shares.  The  two  Stock  Option
               Agreements  give rights to purchase a total of 160,000  shares of
               Common Stock.)(9)
 10.26A        Schedule of Stock Option  Agreements  substantially  identical to
               Exhibit 10.26(9)
 10.27         Registration  Rights Agreement dated August 5, 1996,  between the
               Company and John F. Antioco(10)
 10.28         1999 Incentive Stock Plan.(11)
 10.29         Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement dated November 2, 1999, between the Company and Merrill
               Lynch Business Financial Services, Inc. (12)
 10.30         Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement  dated  November  22,  1999,  between  the  Company and
               Merrill Lynch Business Financial Services, Inc. (12)
 10.31         Form  of  Unconditional  Guaranty  executed  in  connection  with
               Working  Capital  Management  Agreement  Reducing  Revolver  Loan
               Agreement dated November 22, 1999. (Such guarantees were executed
               by Main St. California, Inc., Cornerstone Productions,  Inc., and
               Redfish America, LLC.) (12)
 10.32         Form of Security  Agreement  executed in connection  with Working
               Capital  Management  Agreement  Reducing  Revolver Loan Agreement
               dated November 22, 1999. (Such security  agreements were executed
               by Main St. California,  Inc. and Cornerstone Productions,  Inc.)
               (12)
 10.35         Credit  Agreement  dated  April 2, 1999,  between the Company and
               Imperial Bank (13)
 10.35A        First Amendment to Credit Agreement dated August 2, 1999, between
               the Company and Imperial Bank (13)
 10.35B        Second Amendment to Credit Agreement dated July 13, 2000, between
               the Company and Imperial Bank (13)
 10.35C        Third  Amendment  to  Credit  Agreement  and First  Amendment  to
               Promissory  Note dated  July 5, 2001,  between  the  Company  and
               Imperial Bank
 10.36         Revolving  Promissory  Note dated July 13, 2000, in the principal
               amount of $5,000,000 from the Company,  as Borrower,  to Imperial
               Bank, as Lender (13)
 10.37         Term Promissory Note dated July 13, 2000, in the principal amount
               of $5,000,000 from the Company, as Borrower, to Imperial Bank, as
               Lender (13)

                                       40
<PAGE>
EXHIBIT
NUMBER         EXHIBIT
------         -------
 10.38         Unconditional  Guarantee  of  Payment  of  Term  Promissory  Note
               executed by John F. Antioco,  as Guarantor,  in favor of Imperial
               Bank, as Lender (13)
 10.39         Unconditional  Guarantee  of  Payment  of  Term  Promissory  Note
               executed  by Bart A.  Brown,  Jr.,  as  Guarantor,  in  favor  of
               Imperial Bank, as Lender (13)
 10.40         401(k) Profit Sharing Plan (14)
 10.41         Loan and Security  Agreement dated January 31, 2001, between Bank
               of America,  N.A., the Company,  and certain  subsidiaries of the
               Company listed therein (15)
 16            Letter  from  Arthur   Andersen  LLP   regarding  the  change  in
               certifying accountant (16)
 21            List of Subsidiaries
 23.1          Consent of KPMG LLP
 23.2          Notice Regarding Consent of Arthur Andersen LLP
 99.1          Certification  of the Chief Executive  Officer of the Registrant,
               pursuant  to 18 U.S.C.  Section  1350,  as  adopted  pursuant  to
               Section 906 of the Sarbanes-Oxley Act of 2002.
 99.2          Certification  of the Chief Financial  Officer of the Registrant,
               pursuant  to 18 U.S.C.  Section  1350,  as  adopted  pursuant  to
               Section 906 of the Sarbanes-Oxley Act of 2002.

----------
(1)  Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 30, 1991, filed with the Securities and Exchange  Commission on or
     about March 31, 1992.
(2)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (Registration No. 33-40993), which became effective in September 1991.
(3)  Incorporated  by  reference  to the  Company's  Form  8-K  filed  with  the
     Securities and Exchange Commission on or about April 15, 1994.
(4)  Incorporated  by reference to the Company's  Form 8-K Report filed with the
     Commission in January 1997.
(5)  Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 30, 1996, filed with the Securities and Exchange  Commission on or
     about April 14, 1997.
(6)  Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 28, 1998,  filed with the  Securities  and Exchange  Commission on
     March 29, 1999.
(7)  Incorporated  by reference to Company's Proxy Statement for its 1995 Annual
     Meeting of Stockholders.
(8)  Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 29, 1997,  filed with the  Securities  and Exchange  Commission on
     March 27, 1998.
(9)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-8  (Registration No.  333-78155),  filed with the Securities and Exchange
     Commission on May 10, 1999.
(10) Incorporated by reference to the Company's  Registration  Statement on Form
     S-3 (Registration No. 333-78161) as declared effective on May 14, 1999.
(11) Incorporated by reference to Company's  Registration  Statement on Form S-8
     (Registration  No.  333-89931),  filed  with the  Securities  and  Exchange
     Commission on October 29, 1999.
(12) Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 27, 1999,  filed with the  Securities  and Exchange  Commission on
     March 28, 2000
(13) Incorporated by reference to the Company's Form 8-K dated July 21, 2000, as
     filed with the Securities and Exchange Commission on July 24, 2000.
(14) Incorporated by reference to the Company's  Registration  Statement on Form
     S-8  (Registration  No.  333-55100)  filed with the Securities and Exchange
     Commission on February 6, 2001.
(15) Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 25, 2000,  filed with the  Securities  and Exchange  Commission on
     March 29, 2001.
(16) Incorporated  by reference  to the  Company's  Form 8-K dated  September 4,
     2001, as filed with the Securities and Exchange  Commission on September 4,
     2001.

                                       41
<PAGE>
                                   SIGNATURES

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

                                        MAIN STREET AND MAIN INCORPORATED

Date: March 29, 2003                    By: /s/ Bart A. Brown
                                            ------------------------------------
                                            Bart A. Brown, Jr.
                                            Chief Executive Officer

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

       SIGNATURE                      POSITION                         DATE
       ---------                      --------                         ----

/s/ John F. Antioco          Chairman of the Board                March 29, 2003
------------------------
John F. Antioco

/s/ Bart A. Brown, Jr.       Chief Executive Officer              March 29, 2003
------------------------     and Director (Principal
Bart A. Brown, Jr.           Executive Officer)

/s/ William G. Shrader       President, Chief Operating           March 29, 2003
------------------------     Officer, and Director
William G. Shrader

/s/ Michael Garnreiter       Chief Financial Officer,             March 29, 2003
------------------------     Executive Vice President
Michael Garnreiter           and Treasurer

/s/ Michael J. Herron        Secretary and General Counsel        March 29, 2003
------------------------
Michael J. Herron

/s/ Jane Evans               Director                             March 29, 2003
------------------------
Jane Evans

/s/ John C. Metz             Director                             March 29, 2003
------------------------
John C. Metz

/s/ Debra Bloy               Director                             March 29, 2003
------------------------
Debra Bloy

/s/ Wanda Williams           Director                             March 29, 2003
------------------------
Wanda Williams

                                       42
<PAGE>
                                 CERTIFICATIONS

     I, Bart A. Brown, Jr., certify that:

     1. I have  reviewed this annual report on Form 10-K of Main Street and Main
Incorporated;

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

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

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

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

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

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

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

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

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

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

Date: March 29, 2003

                                        /s/ Bart A. Brown, Jr.
                                        ------------------------------
                                        Bart A. Brown, Jr.
                                        Chief Executive Officer

                                       43
<PAGE>
     I, Michael Garnreiter, certify that:

     1. I have  reviewed this annual report on Form 10-K of Main Street and Main
Incorporated;

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

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

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

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

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

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

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

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

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

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

Date: March 29, 2003

                                        /s/ Michael Garnreiter
                                        ------------------------------
                                        Michael Garnreiter
                                        Chief Financial Officer

                                       44
<PAGE>
                        MAIN STREET AND MAIN INCORPORATED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----

Independent Auditors' Report - KPMG LLP ..................................   F-2

Independent Auditors'  Report - Arthur Andersen LLP ......................   F-3

Consolidated Balance Sheets as of December 30, 2002 and
  December 31, 2001 ......................................................   F-4

Consolidated Statements of Operations for the fiscal years ended
  December 30, 2002, December 31, 2001, and December 25, 2000 ............   F-5

Consolidated Statements of Changes in Stockholders' Equity and
  Comprehensive Income (Loss) for the fiscal years ended
  December 30, 2002, December 31, 2001, and December 25, 2000 ............   F-6

Consolidated Statements of Cash Flows for the fiscal years ended
  December 30, 2002, December 31, 2001, and December 25, 2000 ............   F-7

Notes to Consolidated Financial Statements ...............................   F-8

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Main Street and Main Incorporated:

We have audited the accompanying  2002 and 2001  consolidated  balance sheets of
Main Street and Main  Incorporated  and subsidiaries as of December 30, 2002 and
December  31,  2001,  and the related  consolidated  statements  of  operations,
changes in stockholders'  equity and comprehensive  income (loss) and cash flows
for the years  then  ended.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  based on our audits.  The
statements of  operations,  changes in  stockholders'  equity and  comprehensive
income  (loss) and cash flows for the year ended  December 25, 2000 were audited
by other  auditors  who have ceased  operations.  Those  auditors  expressed  an
unqualified  opinion on those  financial  statements in their report dated March
12, 2001.

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

In our opinion, the 2002 and 2001 consolidated  financial statements referred to
above present fairly, in all material  respects,  the financial position of Main
Street and Main  Incorporated  and  subsidiaries  as of  December  30,  2002 and
December 31, 2001 and the results of their  operations  and their cash flows for
the years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in United States of America.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
adopted the provisions of SFAS No. 142,  "Goodwill and Other Intangible  Assets"
which  changed  the  Company's  method  of  accounting  for  goodwill  and other
intangible assets effective January 1, 2002.

As discussed  above,  the  consolidated  statements  of  operations,  changes in
stockholders' equity and comprehensive income (loss) and cash flows for the year
ended  December  25, 2000 of Main Street and Main  Incorporated  were audited by
other  auditors  who have  ceased  operations.  As  described  in Note 2,  these
consolidated  financial statements have been revised to include the transitional
disclosures  required by Statement of Financial  Accounting  Standards  No. 142,
"Goodwill and Other Intangible  Assets",  which was adopted by the Company as of
January  1,  2002.  In our  opinion,  the  disclosures  for  2000  in Note 2 are
appropriate.  However,  we were not  engaged  to  audit,  review,  or apply  any
procedures to the 2000 consolidated  financial statements of the Company,  other
than with respect to such  disclosures  and,  accordingly,  we do not express an
opinion  or any  other  form of  assurance  on the 2000  consolidated  financial
statements taken as a whole.

/s/ KPMG LLP

Phoenix, Arizona
March 4, 2003

                                      F-2
<PAGE>
                               ARTHUR ANDERSEN LLP
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

THIS REPORT OF INDEPENDENT  CERFIFIED  PUBLIC  ACCOUNTANTS IS A COPY OF A REPORT
PREVIOUSLY  ISSUED BY ARTHUR  ANDERSEN  LLP AND HAS NOT BEEN  REISSUED BY ARTHUR
ANDERSEN LLP

To Main Street and Main Incorporated:

We have audited the accompanying  consolidated  balance sheet of MAIN STREET AND
MAIN INCORPORATED (a Delaware corporation) AND SUBSIDIARIES, (the Company) as of
December 25, 2000 and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for the years ended December 25, 2000 and
December  27,   1999.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Company as of December 25,
2000 and the results of its  operations and its cash flows for each of the years
ended  December 25, 2000 and December 27, 1999,  in conformity  with  accounting
principles generally accepted in the United States of America.

/s/ Arthur Andersen LLP

Phoenix, Arizona
March 12, 2001

                                      F-3
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)

<TABLE>
<CAPTION>
                                                              DECEMBER 30,   DECEMBER 31,
                                                                  2002           2001
                                                               ---------      ---------
<S>                                                           <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents ...............................   $   5,621      $   9,466
   Accounts receivable .....................................       1,997          2,683
   Inventories .............................................       2,832          2,416
   Prepaid expenses ........................................       2,104          1,255
                                                               ---------      ---------
          Total current assets .............................      12,554         15,820
Property and equipment, net ................................      71,265         65,222
Other assets, net ..........................................       2,449          2,319
Deferred tax asset, net of valuation allowance .............          --          1,650
Goodwill, net ..............................................      22,995         24,155
Franchise area fees, net ...................................       3,132          3,296
                                                               ---------      ---------

          Total assets .....................................   $ 112,395      $ 112,462
                                                               =========      =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt .......................   $   3,502      $   3,012
   Accounts payable ........................................       8,073          7,336
   Other accrued liabilities ...............................      16,007         13,459
                                                               ---------      ---------
        Total current liabilities ..........................      27,582         23,807
Long-term debt, net of current portion .....................      51,998         47,232
Other liabilities and deferred credits .....................       3,205          1,216
                                                               ---------      ---------

              Total liabilities ............................      82,785         72,255
                                                               ---------      ---------
Commitments, contingencies and subsequent events
(see notes 4, 7, 8, 9 and 10)

Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares
   authorized, no shares issued and outstanding in
   2002 and 2001 ...........................................          --             --
Common stock, $.001 par value, 25,000,000 shares ...........
   authorized, 14,142,000 and 14,052,600 shares issued
   and outstanding in 2002 and 2001, respectively ..........          14             14
Additional paid-in capital .................................      53,927         53,645
Accrued other comprehensive loss ...........................      (2,504)          (202)
Accumulated deficit ........................................     (21,827)       (13,250)
                                                               ---------      ---------
          Total stockholders' equity .......................      29,610         40,207
                                                               ---------      ---------
              Total stockholders' equity and liabilities ...   $ 112,395      $ 112,462
                                                               =========      =========
</TABLE>

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

                                      F-4
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                         YEARS ENDED
                                                          ------------------------------------------
                                                          DECEMBER 30,   DECEMBER 31,   DECEMBER 25,
                                                              2002           2001           2000
                                                           ---------      ---------      ---------
<S>                                                        <C>            <C>            <C>
Revenue ...............................................    $ 220,151      $ 211,823      $ 186,542
                                                           ---------      ---------      ---------
Restaurant operating expenses
  Cost of sales .......................................       61,270         59,139         53,671
  Payroll and benefits ................................       67,603         64,435         55,971
  Depreciation and amortization .......................        7,895          7,845          7,137
  Other operating expenses ............................       65,912         61,285         52,008
  Reduction of disputed liabilities ...................           --             --         (1,591)
                                                           ---------      ---------      ---------
      Total restaurant operating expenses .............      202,680        192,704        167,196
                                                           ---------      ---------      ---------
Income from restaurant operations .....................       17,471         19,119         19,346

Other operating expense and income:
  Amortization of intangible assets ...................          461          1,831          1,349
  General and administrative expenses .................        8,946          8,105          7,868
  Pre-opening expenses ................................        1,619          1,417          1,370
  New manager training expenses .......................        1,820          1,676          1,914
  Impairment charges and other ........................        7,943          3,453            (92)
  Management fee income ...............................           --           (432)          (611)
                                                           ---------      ---------      ---------
Operating income (loss) ...............................       (3,318)         3,069          7,548

  Non-operating gain ..................................           --             --            (11)
  Interest expense and other, net .....................        3,950          3,825          3,631
                                                           ---------      ---------      ---------

Net income (loss) before income taxes .................       (7,268)          (756)         3,928
  Income tax expense (benefit) ........................        1,309           (645)           250
                                                           ---------      ---------      ---------
    Net income (loss) .................................    $  (8,577)     $    (111)     $   3,678
                                                           =========      =========      =========
Basic earnings per share:
    Net income (loss) .................................    $   (0.61)     $   (0.01)     $    0.34
                                                           =========      =========      =========
Diluted earnings per share:
    Net income (loss) .................................    $   (0.61)     $   (0.01)     $    0.33
                                                           =========      =========      =========
    Weighted average number of shares outstanding:
      Basic ...........................................       14,105         14,048         10,944
                                                           =========      =========      =========
      Diluted .........................................       14,105         14,048         11,117
                                                           =========      =========      =========
</TABLE>

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

                                      F-5
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        AND COMPREHENSIVE INCOME (LOSS)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   COMMON STOCK                                        ACCUMULATED
                                               --------------------      ADDITIONAL                       OTHER
                                                             PAR          PAID-IN      ACCUMULATED    COMPREHENSIVE
                                                SHARES      VALUE         CAPITAL        DEFICIT           LOSS           TOTAL
                                               --------    --------       --------       --------        --------        --------
<S>                                            <C>         <C>            <C>          <C>            <C>                <C>
BALANCES, December 27, 1999 ................     10,026    $     10       $ 44,190       $(16,817)       $     --        $ 27,383
  Shares issued in connection with rights
    offering (net) .........................      4,012           4          9,421             --              --           9,425
  Shares issued to employees ...............          7          --             13             --              --              13
  Net income ...............................         --          --             --          3,678              --           3,678
                                               --------    --------       --------       --------        --------        --------
BALANCES, December 25, 2000 ................     14,045          14         53,624        (13,139)             --          40,499
                                               --------    --------       --------       --------        --------        --------
  Shares issued in connection with
    options exercised (net) ................          7          --             21             --              --              21
  Shares issued to employees ...............          1          --             --             --              --              --
  Comprehensive income (loss):
    Unrealized loss on hedging contract, net
      of $135 tax benefit ..................         --          --             --             --            (202)           (202)
    Net loss ...............................         --          --             --           (111)             --            (111)
                                               --------    --------       --------       --------        --------        --------
  Comprehensive loss:                                                                                                        (313)
                                                                                                                         --------

BALANCES, December 31, 2001 ................     14,053    $     14       $ 53,645       $(13,250)       $   (202)       $ 40,207
  Shares issued in connection with .........
    options exercised (net) ................         89          --            282             --              --             282
  Comprehensive income (loss):
    Unrealized loss on hedging contract ....         --          --             --             --          (2,302)         (2,302)

    Net loss ...............................         --          --             --         (8,577)             --          (8,577)
                                               --------    --------       --------       --------        --------        --------
  Comprehensive loss:                                                                                                     (10,879)
                                                                                                                         --------
BALANCES, December 30, 2002 ................     14,142    $     14       $ 53,927       $(21,827)       $ (2,504)       $ 29,610
                                               ========    ========       ========       ========        ========        ========
</TABLE>

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

                                      F-6
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             YEARS ENDED
                                                               ----------------------------------------
                                                               DECEMBER 30,  DECEMBER 31,  DECEMBER 25,
                                                                   2002          2001          2000
                                                               ------------  ------------  ------------
<S>                                                            <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss) ........................................    $ (8,577)     $   (111)     $  3,678
   Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
      Depreciation and amortization .........................       8,356         9,676         8,486
      Gain on sale of assets ................................          --            --          (289)
      Impairment charges and other ..........................       5,674         3,453           (92)
      Deferred income taxes .................................       1,650        (1,048)          250
      Extraordinary loss from debt extinguishments ..........          --            --            16
   Changes in assets and liabilities:
      Accounts receivable ...................................         686         1,994        (2,829)
      Inventories ...........................................        (416)         (792)         (171)
      Prepaid expenses ......................................        (849)         (511)         (123)
      Other assets, net .....................................        (300)         (580)         (664)
      Accounts payable ......................................         737        (1,892)       (4,805)
      Other accrued liabilities .............................       2,234         2,340           367
                                                                 --------      --------      --------
         Cash provided by operating activities ..............       9,195        12,529         3,824
                                                                 --------      --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Net additions to property and equipment ..................     (18,548)      (14,013)      (18,103)
   Cash paid to acquire franchise rights and goodwill .......         (30)         (330)      (12,139)
   Cash received from the sale of assets ....................          --         2,851         5,432
                                                                 --------      --------      --------
         Cash used by investing activities ..................     (18,578)      (11,492)      (24,810)
                                                                 --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock .......................          --            --         9,541
   Financing and offering costs paid ........................          --            --          (103)
   Proceeds received from the exercise of stock options .....         282            21            --
   Long-term debt borrowings ................................       9,465         6,583        16,442
   Principal payments on long-term debt .....................      (4,209)       (2,740)       (3,384)
                                                                 --------      --------      --------
         Cash provided by financing activities ..............       5,538         3,864        22,496
                                                                 --------      --------      --------
NET CHANGE IN CASH AND CASH EQUIVALENTS .....................      (3,845)        4,901         1,510

CASH AND CASH EQUIVALENTS, BEGINNING ........................       9,466         4,565         3,055
                                                                 --------      --------      --------
CASH AND CASH EQUIVALENTS, ENDING ...........................    $  5,621      $  9,466      $  4,565
                                                                 ========      ========      ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   Cash paid during the year for interest ...................    $  4,139      $  4,259      $  4,163
                                                                 ========      ========      ========
   Cash paid during the year for income taxes ...............    $    118      $  1,408      $    539
                                                                 ========      ========      ========
</TABLE>

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

                                      F-7
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BASIS OF PRESENTATION

     Main Street and Main Incorporated (the "Company") is a Delaware corporation
engaged in the business of acquiring, developing, and operating restaurants. The
Company currently owns 56 T.G.I.  Friday's  restaurants and operates four T.G.I.
Friday's  restaurants  under a management  agreement.  The Company also owns and
operates  eight  Bamboo  Clubs,  five  Redfish,   and  one  Alice   Cooper'stown
restaurant.

     PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements include the accounts of the Company
and its wholly owned subsidiaries.  All material intercompany  transactions have
been eliminated in consolidation. All references herein refer to the Company and
its subsidiaries.

     FISCAL YEAR

     The Company  operates on a fiscal year that ends on the Monday on or before
December 31.

     USE OF ESTIMATES

     The  preparation of  consolidated  financial  statements in conformity with
accounting   principles   generally  accepted  in  the  United  States  requires
management  to make a number  of  estimates  and  assumptions  that  affect  the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and  liabilities  at the date of the financial  statements.  Such  estimates and
assumptions  affect the reported  amounts of revenues  and  expenses  during the
reporting  period.  On an ongoing basis,  we evaluate  estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our  estimates and  assumptions  are  reasonable  in the  circumstances;
however,  actual results may differ from these estimates under different  future
conditions.

     We believe that the estimates and  assumptions  that are most  important to
the portrayal of our financial condition and results of operations, in that they
require management's most difficult,  subjective or complex judgments,  form the
basis for the accounting  policies deemed to be most critical to our operations.
These critical accounting policies relate to the valuation and amortizable lives
of long-lived assets,  goodwill,  and to other  identifiable  intangible assets,
valuation of deferred tax assets,  and reserves  related to  self-insurance  for
workers compensation and general liability:

     (1) We periodically  perform asset impairment analysis of long-lived assets
related to our restaurant locations, goodwill, and other identifiable intangible
assets. We perform these tests whenever we experience a "triggering" event, such
as a decision to close a location  or major  change in the  locations  operating
environment,  or other event that might  impact our ability to recover our asset
investment.  Also, we have a policy of reviewing the financial operations of its
restaurant  locations  on at least a  quarterly  basis.  Locations  that are not
meeting   expectations  are  identified  and  continue  to  be  watched  closely
throughout  the year.  Primarily  in the  fourth  quarter,  actual  results  are
reviewed  and  budgets  for the  ensuing  year are  analyzed.  If we deem that a
locations results will continue to be below  expectations,  alternatives for its
continued operation are considered. At this time, we perform an asset impairment
test, if it is  determined  that the asset's fair value is less than book and we
will be unable to recover the value through operations,  an impairment charge is
recorded.  Upon an event such as a formal decision for  abandonment  (restaurant
closure),  the Company may record additional impairment of assets,  including an
allocation of goodwill.  Any carryover  basis of assets is depreciated  over the
respective remaining useful lives.

     (2) Periodically, we record (or reduce) the valuation allowance against our
deferred  tax assets to the amount  that is more  likely than not to be realized
based upon  recent past  financial  performance,  tax  reporting  positions  and
expectations of future taxable income.

     (3)  We  use  an  actuarial  based  methodology  utilizing  our  historical
experience factors to periodically  adjust  self-insurance  reserves for workers
compensation and general  liability claims and settlements.  These estimates are
adjusted  based  upon  annual  information  received  in July  of  each  year in
connection  with policy  renewals.  Estimated  costs for the following  year are

                                      F-8
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

accrued on a monthly  basis and progress  against this  estimate is  reevaluated
based upon actual claim data each quarter.

     (4) We use the method of  accounting  for employee  stock options under APB
Opinion 25 and have adopted the pro forma disclosure provisions of SFAS No. 123,
which require  disclosure of the impact of using the fair value at date of grant
method of recording stock-based employee compensation.

     We believe estimates and assumptions  related to these critical  accounting
policies are appropriate under the circumstances;  however, should future events
or occurrences result in unanticipated  consequences,  there could be a material
impact on our future financial condition or results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

     During 2002, we adopted the provisions of SFAS No. 142 which eliminates the
amortization of all existing and newly acquired  goodwill on a prospective basis
and requires companies to assess goodwill impairment,  at least annually,  based
on the fair value of the  reporting  unit.  As of the date of adoption,  January
2002,  we had  unamortized  goodwill  of  $25,149,000  that  is  subject  to the
transition provisions of SFAS Nos.141 and 142. Accumulated  amortization related
to goodwill is $5,914,000 as of the date of adoption.  During 2002, we wrote off
$1,160,000 of allocated  goodwill  associated with one closed  location  (Kansas
City,  Missouri) and two impaired locations (Palm Desert,  California and Citrus
Heights,  California).  After this goodwill  write off, at December 30, 2002, we
performed  a  valuation  in  accordance  with SFAS  No.142  for the  purpose  of
determining  the  amount of  goodwill  impairment.  Based on the  results of the
valuation, no additional impairment was required. Additionally,  during 2002, we
reclassified $994,000 of goodwill to franchise area goodwill which is classified
as an intangible asset that requires  amortization under SFAS No.142.  Franchise
area goodwill  represents  the  estimated  value the company paid to acquire the
franchise  rights to develop  restaurants in certain  locations,  at the date of
original  purchase.  As  a  result  of  these  transactions,  net  goodwill  was
$22,995,000 at the end of 2002.

     During 2002,  we adopted SFAS No. 144,  ACCOUNTING  FOR THE  IMPAIRMENT  OR
DISPOSAL  OF  LONG-LIVED  ASSETS,   which  addresses  financial  accounting  and
reporting for the impairment or disposal of long-lived  assets.  While Statement
No.  144  supersedes  Statement  No.  121,  ACCOUNTING  FOR  THE  IMPAIRMENT  OF
LONG-LIVED  ASSETS AND FOR LONG-LIVED  ASSETS TO BE DISPOSED OF, it retains many
of the fundamental  provisions of that Statement.  In 2002, we recognized  asset
impairments of $4,454,000 on under-performing properties.

     In April 2002, the FASB issued SFAS No. 145,  RESCISSION OF FASB STATEMENTS
NO.  4,  44,  AND  64,  AMENDMENT  OF  FASB  STATEMENT  NO.  13,  AND  TECHNICAL
CORRECTIONS.  This Statement rescinds the requirement to report gains and losses
from  extinguishment  of  debt  as an  extraordinary  item.  Additionally,  this
statement amends Statement 13 to require  sale-leaseback  accounting for certain
lease  modifications  that  have  economic  effects  similar  to  sale-leaseback
transactions.  The  provisions  of this  statement  relating to  Statement 4 are
applicable in fiscal years  beginning after May 15, 2002. The provisions of this
Statement related to Statement 13 are effective for transactions occurring after
May 15, 2002. All other provisions of this Statement are effective for financial
statements  issued on or after May 15, 2002.  We adopted FASB No. 145 related to
Statement No. 4 for year ended  December 30, 2002,  the  implementation  of this
statement  did not have a  material  effect  on our  financial  statements.  The
adoption  of SFAS No.  145  related  to  Statement  No.  13 had no effect on our
financial statements for the year ended December 30, 2002.

     In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL  ACTIVITIES.  SFAS No. 146 nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination Benefits and Other Costs to Exit an Activity".  For purposes of this
Statement,  an exit activity includes, but is not limited to, a restructuring as
that  term  is  defined  in IAS 37,  "Provisions,  Contingent  Liabilities,  and
Contingent  Assets".  The Statement is effective for exit or disposal activities
initiated  after December 31, 2002. If we have  restructuring  activities in the
future, we will adopt SFAS No. 146.

                                      F-9
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In December 2002, the FASB issued SFAS No. 148,  ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION  AND DISCLOSURE.  This statement amends prior statements
to provide  alternative  methods of  transition  for an entity that  voluntarily
changes  to fair value  based  method of  accounting  for stock  based  employee
compensation.  We did  not  adopt  the  cost  recognition  method  of  recording
stock-based  employee  compensation  under SFAS No. 123 (which  adoption was and
remains optional), however, we provide the pro forma disclosures in notes to our
annual  financial  statements as if we had adopted the cost  recognition  method
under SFAS 123. We will adopt the new required  disclosures  about those effects
in future interim financial information.

     In June 2001,  FASB issued SFAS No. 143,  ACCOUNTING  FOR ASSET  RETIREMENT
OBLIGATIONS.  SFAS No. 143  requires  the Company to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal obligation  associated with the retirement of tangible  long-lived  assets
that result from the acquisition,  construction,  development, and/or normal use
of  the  assets.  The  Company  also  records  a  corresponding  asset  that  is
depreciated over the life of the asset. Subsequent to the initial measurement of
the asset retirement  obligation,  the obligation will be adjusted at the end of
each period to reflect the passage of time and changes in the  estimated  future
cash flows underlying the obligation.  The Company is required to adopt SFAS No.
143 on January 1, 2003.  The  adoption of SFAS No. 143 is not expected to have a
material effect on the Company's financial statements.

     In  November  2002,  the FASB  issued  Interpretation  No. 45,  GUARANTOR'S
ACCOUNTING  AND  DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,  INCLUDING  INDIRECT
GUARANTEES OF INDEBTEDNESS TO OTHERS,  AN  INTERPRETATION OF FASB STATEMENTS NO.
5,  57  AND  107  AND  A  RESCISSION  OF  FASB   INTERPRETATION   NO.  34.  This
Interpretation  elaborates on the  disclosures  to be made by a guarantor in its
interim and annual financial  statements about its obligations  under guarantees
issued.  The  Interpretation  also  clarifies  that a  guarantor  is required to
recognize,  at inception of a guarantee,  a liability  for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of the
Interpretation  are  applicable to guarantees  issued or modified after December
31,  2002  and are not  expected  to have a  material  effect  on the  Company's
financial  statements.  The disclosure  requirements are effective for financial
statements of interim and annual periods ending after December 15, 2002.

     In January 2003, the FASB issued  Interpretation  No. 46,  CONSOLIDATION OF
VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51. This Interpretation
addresses  the  consolidation  by  business  enterprises  of  variable  interest
entities  as  defined  in  the   Interpretation.   The  Interpretation   applies
immediately to variable  interests in variable  interest  entities created after
January 31,  2003,  and to variable  interests  in  variable  interest  entities
obtained after January 31, 2003. For public enterprises with a variable interest
in  a  variable   interest   entity  created   before   February  1,  2003,  the
Interpretation  is applied to the  enterprise no later than the beginning of the
first interim or annual  reporting  period  beginning  after June 15, 2003.  The
application of this  Interpretation is not expected to have a material effect on
the  Company's  financial  statements.   The  Interpretation   requires  certain
disclosures  in  financial  statements  issued  after  January 31, 2003 if it is
reasonably  possible that the Company will  consolidate or disclose  information
about variable interest entities when the Interpretation becomes effective.

2.   SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES

     The  consolidated  financial  statements  reflect  the  application  of the
following accounting policies:

     CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents  include funds on hand,  short-term money market
investments,  and certificate of deposit accounts with original maturities of 90
days or less.

     REVENUE RECOGNITION

     The  Company's   principal  source  of  revenue  is  from  customer  dining
transactions.  Revenue  is  recognized  at the  time the meal is paid for by the
customer, in the form of cash or credit card.

                                      F-10
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     DEFERRED GAINS

     Deferred gains on  sale-leaseback  transactions are accreted to income as a
reduction  of rent  expense  over the  related  lease terms in  accordance  with
Statement of Financial  Accounting  Standards  ("SFAS") No. 98,  ACCOUNTING  FOR
LEASES.

     MANAGEMENT FEE INCOME

     The Company earns  management fees on restaurants  operated under contracts
with a single owner. The management fees are based upon a percentage of adjusted
revenues  in  accordance  with the  respective  management  agreements  for each
restaurant.  During  2002,  two  restaurants  were  closed  by  the  owner  (San
Francisco, California and El Paso, Texas), terminating the management agreements
for those  restaurants  and reducing the number of  restaurants  operated  under
management  agreements to four.  Management  fee income has not been recorded by
the  Company  since  September  2001 as a result  of not  meeting  the cash flow
provisions pursuant to the management agreement.

     INVENTORIES

     Inventories  consist  primarily  of food,  beverages,  and supplies and are
stated at the lower of cost,  determined on a first-in,  first-out basis (FIFO),
or net realizable value.

     FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

     The carrying value of cash equivalents,  accounts receivable, other assets,
accounts payable,  accrued liabilities,  and other liabilities  approximate fair
value due to the short-term nature of these instruments.  The revolving lines of
credit approximate fair value as they bear interest at indexed rates. Fixed rate
long-term  debt is currently at rates similar to current  quotations for similar
debt.

     PROPERTY AND EQUIPMENT

     Property  and   equipment  are  stated  at  cost  and   depreciated   on  a
straight-line  basis over the  estimated  useful  lives,  while  leaseholds  are
amortized  over the  shorter  of 20 years or the  lease  term  including  option
periods,  which  have  economic  penalties,  and  consist of the  following  (in
thousands):

<TABLE>
<CAPTION>
                                                             USEFUL LIVES
                                                                (YEARS)       DECEMBER 30, 2002     DECEMBER 31, 2001
                                                             ------------     -----------------     -----------------
<S>                                                          <C>              <C>                   <C>
Land ....................................................          --             $     534             $     534
Land held for sale ......................................          --                 1,203                    --
Building and leasehold improvements .....................        5-20                58,599                53,650
Kitchen equipment .......................................        5-7                 22,913                21,591
Restaurant equipment ....................................        5-10                10,183                 9,094
Smallwares and decor ....................................        5-10                 7,677                 7,557
Office equipment, software, and furniture ...............        5-7                  6,445                 4,711
                                                                                  ---------             ---------
                                                                                    107,554                97,137

Less: Accumulated depreciation and amortization .........                           (39,854)              (33,277)
                                                                                  ---------             ---------
                                                                                     67,700                63,860

Construction in progress ................................                             3,565                 1,362
                                                                                  ---------             ---------
   Total ................................................                         $  71,265             $  65,222
                                                                                  =========             =========
</TABLE>

                                      F-11
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     Depreciation  expense was  $8,038,000  for 2002,  $7,912,000  for 2001, and
$7,087,000 for 2000.

     Construction  in progress  (CIP)  represents  costs incurred by the Company
during the  development  of future  restaurant  sites for  fixtures and building
improvements.  As a result of lease  cancellations  of not yet built Bamboo Club
locations  (Fairfax,  Virginia,  San Antonio,  Texas, and Fort Worth Texas),  we
wrote off Construction in progress costs of $415,000.

     FRANCHISE FEES

     Franchise fees represent the value assigned to the franchise  agreements in
the regions  acquired  and to the  licenses to operate  the  restaurants.  These
agreements provide for an initial term of 20 to 30 years, with two renewal terms
of 10 years each.  Franchise area goodwill  represents goodwill allocated to the
geographic area for developing T.G.I.  Friday's purchased and it qualifies as an
intangible asset with a determinable  life. These costs are being amortized on a
straight-line  basis over the life of the agreement and consist of the following
(in thousands):

<TABLE>
<CAPTION>
                                           AMORTIZATION
                                              PERIOD
                                              (YEARS)     DECEMBER 30, 2002   DECEMBER 31, 2001
                                           ------------   -----------------   -----------------
<S>                                        <C>            <C>                 <C>
Franchise area goodwill ................        20            $   994             $   994
Franchise fees and license costs .......      20-30             3,173               3,163
Less:  Accumulated amortization ........                       (1,035)               (861)
                                                              -------             -------
   Total ...............................                      $ 3,132             $ 3,296
                                                              =======             =======
</TABLE>

     GOODWILL

     The Company has recorded  significant  goodwill in  conjunction  with major
acquisitions.  During 2002, the Company adopted FASB Statement No. 142, GOODWILL
AND OTHER  INTANGIBLE  ASSETS.  Statement 142 eliminates the amortization of all
existing  and newly  acquired  goodwill  on a  prospective  basis  and  requires
companies to assess goodwill  impairment,  at least annually,  based on the fair
value of the reporting unit.  Effective January 1, 2002 the Company discontinued
amortizing goodwill.

     The following table presents reported net loss and loss per share exclusive
of goodwill amortization expense for the years ended December 30, 2002, December
31, 2001 and December 25, 2000 (in thousands):

                                                  2002        2001        2000
                                                --------    --------    --------
Reported net income (loss)                      $ (8,577)   $   (111)   $  3,678
  Add back goodwill amortization                      --       1,455       1,019
                                                --------    --------    --------
    Adjusted net income (loss)                  $ (8,577)   $  1,344    $  4,697
                                                ========    ========    ========

Basic Income (loss) Per Share:
  Reported net income (loss) per common share   $  (0.61)   $  (0.01)   $   0.34
  Add back goodwill amortization                      --        0.11        0.09
                                                --------    --------    --------
    Adjusted net income (loss) per share        $  (0.61)   $   0.10    $   0.43
                                                ========    ========    ========
Diluted Income (loss) Per Share:
  Reported net income (loss) per common share   $  (0.61)   $  (0.01)   $   0.33
  Add back goodwill amortization                      --        0.11        0.09
                                                --------    --------    --------
    Adjusted net income (loss) per share        $  (0.61)   $   0.10    $   0.42
                                                ========    ========    ========

                                      F-12
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

During  2002 we wrote off  goodwill  related  to  closing  one  T.G.I.  Friday's
location  (Kansas City, MO) and impairing two other  under-performing  locations
(Palm Desert,  California and Citrus  Heights,  California) in  anticipation  of
closing these locations in 2003 when their leases expire.

<TABLE>
<CAPTION>
GOODWILL ALLOCATED TO AREAS                               DECEMBER 30, 2002   DECEMBER 31, 2001
                                                          -----------------   -----------------
<S>                                                       <C>                 <C>
Acquisition of California T.G.I. Friday's .............        $10,750             $11,991
Acquisition of Midwest and Arizona T.G.I. Friday's ....          1,495               1,414
Acquisition of Redfish ................................            450                 450
Acquisition of Bamboo Club ............................         10,300              10,300
                                                               -------             -------
         Total ........................................        $22,995             $24,155
                                                               =======             =======
</TABLE>

     OTHER ACCRUED LIABILITIES

     Other accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                          DECEMBER 30, 2002   DECEMBER 31, 2001
                                                          -----------------   -----------------
<S>                                                       <C>                 <C>
         Accrued payroll...............................        $ 3,736             $ 2,264
         Accrued property and sales tax................          1,912               1,763
         Accrued insurance.............................          1,415               2,616
         Accrued rent..................................          3,142               2,120
         Gift certificate liability....................          1,249                 951
         Other accrued liabilities.....................          4,553               3,745
                                                               -------             -------
                  Total................................        $16,007             $13,459
                                                               =======             =======
</TABLE>

     INCOME TAXES

     The Company  utilizes  the asset and  liability  method of  accounting  for
income taxes. Under the asset and liability method,  deferred taxes are provided
based on temporary differences between the financial reporting basis and the tax
basis of the Company's  assets and  liabilities,  using enacted tax rates in the
years in which the differences are expected to reverse.  Deferred tax assets are
reviewed  periodically for recoverability and valuation  allowances are provided
as necessary.

     EARNINGS (LOSS) PER SHARE

     Basic  earnings  (loss) per share ("EPS") is computed by dividing  earnings
(loss)  available  to  stockholders  by the  weighted-average  number  of shares
outstanding  for the period.  Diluted  earnings  (loss) per share  reflects  the
potential  dilution  that could occur if securities or contracts to issue common
stock were  exercised or converted to stock or resulted in the issuance of stock
or resulted in the  issuance of stock that then shared in the earnings or losses
of the Company.  The assumed exercise of outstanding  stock options and warrants
has been excluded from the  calculations  of diluted net loss per share as their
effect is antidilutive.

                                      F-13
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The Company has  calculated  earnings per share ("EPS") in accordance  with
SFAS No. 128,  "EARNINGS  PER SHARE." The  following  table sets forth basic and
diluted EPS  computations  for the years ended  December 30, 2002,  December 31,
2001, and December 25, 2000 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                            2002                             2001                            2000
                               -----------------------------    ----------------------------    ----------------------------
                                                       PER                             PER                             PER
                                 NET                  SHARE       NET                 SHARE       NET                 SHARE
                                 LOSS      SHARES     AMOUNT    INCOME      SHARES    AMOUNT    INCOME      SHARES    AMOUNT
                               -------    -------    -------    -------    -------   -------    -------    -------   -------
<S>                            <C>         <C>       <C>        <C>         <C>      <C>        <C>         <C>      <C>
Basic EPS ..................   $(8,577)    14,105    $ (0.61)   $  (111)    14,048   $ (0.01)   $ 3,678     10,944   $  0.34
Effect of stock options
  and warrants .............        --        594         --         --        533        --         --        173      0.01
Anti-dilutive stock
  options and warrants .....        --       (594)        --         --       (533)       --        --          --        --
                               -------    -------    -------    -------    -------   -------    -------    -------   -------
Diluted EPS ................   $(8,577)    14,105    $ (0.61)   $  (111)    14,048   $ (0.01)   $ 3,678     11,117   $  0.33
                               =======    =======    =======    =======    =======   =======    =======    =======   =======
</TABLE>

     SEGMENT REPORTING

     The  Company has three  operating  segments  that are managed  based on its
restaurant  concepts,   T.G.I.   Friday's,   Redfish,   Bamboo  Club  and  Alice
Cooper'stown.  SFAS No. 131 allows for aggregation of similar operating segments
into a single  reportable  operating  segment if the  components  are considered
similar  under  certain  criteria.  As a result of the  foregoing,  the  Company
believes that its restaurants  meet the criteria  supporting  aggregation of all
restaurants into one reporting unit. Accordingly,  the Company has not presented
separate  financial  information  for  each of its  operating  segments,  as the
Company's consolidated financial statements present its one reporting unit.

STOCK-BASED COMPENSATION PLANS

     FASB Statement No.123,  ACCOUNTING FOR STOCK-BASED  COMPENSATION was issued
by the FASB in 1995 and, if fully adopted,  changes the methods for  recognition
of cost on plans similar to those of the Company. Adoption of FASB Statement No.
123 is optional;  however,  pro forma  disclosures as if the Company had adopted
the cost  recognition  method  are  required.  Had  compensation  cost for stock
options awarded under these plans been determined consistent with FASB Statement
No. 123, the  Company's  net income  (loss) and earnings  (loss) per share would
have reflected the following pro forma amounts:

                                DECEMBER 30,      DECEMBER 31,      DECEMBER 25,
                                   2002              2001              2000
                                 --------          --------          --------
                                   (In Thousands, Except Per Share Amounts)
     Net Income (loss):
         As Reported ........    $ (8,577)         $   (111)         $  3,678
         Pro Forma ..........    $ (9,624)         $   (961)         $  2,736

     Diluted EPS:
         As Reported ........    $  (0.61)         $  (0.01)         $   0.33
         Pro Forma ..........       (0.68)            (0.07)             0.25

     The weighted  average  fair value at the date of grant for options  granted
during fiscal 2002, 2001 and 2000 were estimated using the Black-Scholes pricing
model with the following  assumptions:  weighted average risk-free interest rate
of 2.73%, 5.22%, and 6.29%;  weighted average volatility of 53.72%,  50.00%, and
52.70% and;  expected life of 4 years;  and weighted  average  dividend yield of
0.0%.

                                      F-14
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     Details  regarding the options  outstanding  as of December 30, 2002 are as
follows:

<TABLE>
<CAPTION>
                                       OUTSTANDING                         EXERCISABLE
                       ------------------------------------------    ----------------------
                                                         WEIGHTED                  WEIGHTED
                                     WEIGHTED AVERAGE     AVERAGE                   AVERAGE
RANGE OF EXERCISE       NUMBER OF       REMAINING        EXERCISE     NUMBER OF    EXERCISE
       PRICE             SHARES      CONTRACTUAL LIFE      PRICE       SHARES        PRICE
-----------------      ----------    ----------------    --------    ----------    --------
<S>                    <C>           <C>                 <C>         <C>           <C>
  $1.88 - $2.75         1,055,167       4.07 years         $2.27      1,035,722      $2.30
  $3.00 - $3.65         1,678,003       6.73 years         $3.35      1,347,391      $3.30
  $4.00 - $6.01           754,250       8.01 years         $4.66        241,667      $4.71
                       ----------                                    ----------
Total...............    3,487,420                                     2,624,780
                       ==========                                    ==========
</TABLE>

     DERIVATIVE FINANCIAL INSTRUMENTS

     The  Company  has  only  limited  involvement  with  derivative   financial
instruments and does not use them for trading purposes.  The Company utilizes an
interest rate swap  agreement to hedge the effects of  fluctuations  in interest
rates related to one of its long-term debt  instruments.  The interest rate swap
agreement meets the criteria for cash flow hedge accounting.  Amounts receivable
or payable due to settlement of the interest rate swap  agreement are recognized
as interest expense on a monthly basis. A mark-to-market  adjustment is recorded
as a component of stockholders'  equity, net of taxes, to reflect the fair value
of the interest rate swap agreement.  The Company  discontinues hedge accounting
prospectively if it is determined that the derivative is no longer effective.

     In conjunction with the Bank of America development  facility,  the Company
entered into an interest  rate swap  agreement  with Bank of America which fixes
the  Company's  base  interest  rate at 6.26% per annum on a notional  amount of
$12,500,000  from July 2002 through June 2014. The swap qualifies as a cash flow
hedge in accordance with SFAS No. 133. On a periodic basis,  the Company adjusts
the fair market value of the swap on the balance sheet and offsets the amount of
the change to other  comprehensive  income.  As of December 30,  2002,  the fair
value of the hedge resulted in a liability of $1,884,919.

     On March 26, 2002, the Company entered into an interest rate swap agreement
with Bank of  America  on a note held by CNL  Funding  with a  remaining  unpaid
balance of $5,516,000. The interest rate on the note, 9.457%, is the same as the
interest rate to be received  under the interest rate swap  agreement.  The swap
effectively floats the 9.457% note to a 30-day LIBOR base plus a spread of 4.34%
on a notional amount of $5,516,000.  On a quarterly  basis,  the Company adjusts
the fair market value of the swap on the balance sheet and offsets the amount of
the change to other  comprehensive  income.  As of December 30,  2002,  the fair
value of the hedge resulted in an asset of $450,114.

     On April 18, 2002,  the Company  entered into an  additional  interest rate
swap agreement with Bank of America.  This swap agreement  effectively fixes the
Company's  interest  rate to 5.65% per annum (plus credit  spread) on a notional
amount of  $10,700,000  from May 2002 through May 2012.  The swap qualifies as a
cash flow  hedge in  accordance  with SFAS No.  133.  On a periodic  basis,  the
Company  adjusts  the fair  market  value of the swap on the  balance  sheet and
offsets the amount of the change to other  comprehensive  income. As of December
30, 2002, the fair value of the hedge resulted in a liability of $1,203,299.

                                      F-15
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
COMPREHENSIVE INCOME (LOSS)                          DECEMBER 30, 2002     DECEMBER 31, 2001
                                                     -----------------     -----------------
<S>                                                  <C>                   <C>
Net Income (loss) ................................       $ (8,577)             $   (111)
Other comprehensive income (loss), net of
  taxes of $0 and $135,000  for the periods
  ended December 30, 2002 and December 31, 2001,
  respectively ...................................         (2,302)                 (202)
                                                         --------              --------
Comprehensive income (loss) ......................       $(10,879)             $   (313)
                                                         ========              ========
</TABLE>

     RECLASSIFICATIONS

     Certain  amounts in 2001 and 2000 have been  reclassified to conform to the
current year presentation.

     ACCOUNTING FOR LONG-TERM ASSETS AND IMPAIRMENT CHARGES

     Long-lived   assets  are  reviewed  for  impairment   whenever   events  or
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable.  If the sum of the  expected  future cash flows  (undiscounted  and
without  interest  charges)  from an asset to be held and used in  operations is
less than the carrying value of the asset, an impairment loss must be recognized
in the amount of the difference between the carrying value and the fair value of
the assets.

     The Company  has a policy of  reviewing  the  financial  operations  of its
restaurant  locations  on at least a  quarterly  basis.  Locations  that are not
meeting   expectations  are  identified  and  continue  to  be  watched  closely
throughout  the year.  Primarily  in the  fourth  quarter,  actual  results  are
reviewed and budgets for the ensuing year are analyzed. If management deems that
a locations results will continue to be below expectations, alternatives for its
continued  operation are  considered.  At that time, the Company  performs asset
impairment  testing,  if it is  determined  that the  fair  value of an asset is
greater than its  carrying  value,  an  impairment  charge is  recorded.  Upon a
triggering event such as a formal decision for abandonment (restaurant closure),
the Company may record additional impairment of assets,  including an allocation
of goodwill.  Any carryover  basis of assets is depreciated  over the respective
remaining useful lives.

     Fair value of assets is  determined  primarily on the  likelihood of future
use of the assets through  operations or by the value that could be received for
the asset if sold.

     Other charges include write-offs of allocated goodwill, severance, contract
termination,  professional  service costs, and settlement of litigation.  During
the  fourth  quarter  2001,  the  Company  recorded  an  impairment   charge  of
approximately  $1,615,000  against its  management  agreement  with CNL for five
Northern  California  locations and the El Paso location.  Other charges in 2000
represent  the final  settlement  gain (in  excess of book  value)  the  Company
received  from the City and County of San  Francisco,  California  in connection
with condemnation proceedings against a restaurant the Company operated.

     As a result of applying this policy,  during fiscal years ended 2002, 2001,
and 2000,  the  Company  recognized  a loss  (gain)  on the sale of  assets  and
impairment of certain assets as follows (in thousands):

                                      F-16
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                           DECEMBER 30, 2002    DECEMBER 31, 2001    DECEMBER 25, 2000
                                                           -----------------    -----------------    -----------------
<S>                                                        <C>                  <C>                  <C>
IMPAIRMENT CHARGES AND OTHER:
Long-lived asset impairments and other ..............            $4,323               $1,838               $  832
Condemnation settlement (San Francisco, CA) .........                --                   --                 (924)
Write-off of goodwill allocated to closed stores ....             1,160                   --                   --
Lease cancellation charges ..........................             2,060                   --                   --
Impairment of receivables (Mngmt Agreement) .........                --                1,615                   --
Write-down of land (El Paso, Texas) .................               400                   --                   --
                                                                 ------               ------               ------
Total impairment charges and other ..................            $7,943               $3,453               $  (92)
                                                                 ======               ======               ======
</TABLE>

     The long-lived  asset  impairment  amount in the table above represents the
net book value of the fixed assets which will not be recovered  through  regular
operations,  computed  on a  discounted  cash flow  basis.  This  amount in 2002
consists primarily of impairments  related to six Fridays  locations,  three not
yet built Bamboo Club locations and one Redfish location.

     REDUCTION OF DISPUTED LIABILITIES

     During the first quarter of 2000,  the Company's  primary food  distributor
(Ameriserve)  declared  bankruptcy.  Leading up to the  bankruptcy,  the Company
experienced a reduction in performance by Ameriserve,  causing disruption in the
Company's  operations  and an increase in delivery and food costs as the Company
searched for  alternative  sources of supply.  The level of service  provided by
Ameriserve  continued to decline  subsequent to the bankruptcy.  When Ameriserve
declared bankruptcy,  the Company had open accounts payable due Ameriserve,  but
also had the right of offset for costs incurred because Ameriserve dissolved its
causal dining business.  As of December 25, 2000, the Company was in negotiation
to resolve the dispute with  Ameriserve.  A final  settlement  was reached which
reduced the liability due by approximately $1,591,000.  This amount was recorded
in the fourth quarter of 2000.

     VALUATION RESERVES

     Valuation  reserves for the years ended  December  30,  2002,  December 31,
2001, and December 25, 2000, consist of the following:

<TABLE>
<CAPTION>
                                          BALANCE AT
                                         BEGINNING OF         EXPENSE                           BALANCE AT
                                            PERIOD           RECORDED       PAYMENTS MADE      END OF PERIOD
                                         ------------      ------------     -------------      -------------
<S>                                      <C>               <C>              <C>                <C>
RESERVE FOR LEGAL SETTLEMENT LOSSES:
  Year ended December 30, 2002           $     34,000      $    (30,000)     $     (4,000)     $         --
  Year ended December 31, 2001                149,000                --          (115,000)           34,000
  Year ended December 25, 2000              1,153,000            90,000        (1,094,000)          149,000

INSURANCE AND CLAIMS RESERVES:
  Year ended December 30, 2002           $  2,616,300      $  9,629,935      $(10,830,935)        1,415,300
  Year ended December 31, 2001              1,668,700         5,258,539        (4,310,939)        2,616,300
  Year ended December 25, 2000              1,593,800         3,764,600        (3,689,700)        1,668,700
</TABLE>

     In 2001,  the Company  paid the balance of the legal fees  reserved  for in
2000  amounting  to  $111,000.  The  remaining  balance of $34,000  represents a
reserve for the settlement of the remaining  outstanding gift  certificates from
stores acquired in California during 1998.

                                      F-17
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3.   INCOME TAXES

     Income tax expense (benefit) consists of the following (in thousands):

                                                 CURRENT    DEFERRED    TOTAL
                                                 -------    --------   -------
          Year ended December 30, 2002:
             U.S. Federal ................       $  (341)    $ 1,536   $ 1,195
             State and local .............            --         114       114
                                                 -------     -------   -------
                                                 $  (341)    $ 1,650   $ 1,309
                                                 =======     =======   =======
             Year ended December 31, 2001:
             U.S. Federal ................       $   228     $  (913)  $  (685)
             State and local .............           175        (135)       40
                                                 -------     -------   -------
                                                 $   403     $(1,048)  $  (645)
                                                 =======     =======   =======
             Year ended December 25, 2000:
             U.S. Federal ................       $    --     $    --   $    --
             State and local .............            --         250       250
                                                 -------     -------   -------
                                                 $    --     $   250   $   250
                                                 =======     =======   =======

     Deferred  income taxes arise due to  differences in the treatment of income
and  expense  items for  financial  reporting  and income tax  purposes.  In the
current  year,  the  Company  generated  a net  operating  loss.  The  effect of
temporary  differences and carryforwards that gave rise to deferred tax balances
at December 30, 2002 and December 31, 2001, were as follows (in thousands):

<TABLE>
<CAPTION>
NET DEFERRED TAX ASSETS/(LIABILITIES)                     DECEMBER 30, 2002    DECEMBER 31, 2001
-------------------------------------                     -----------------    -----------------
                                                                      (In Thousands)
<S>                                                       <C>                  <C>
Temporary differences:
  Basis differences in investments .....................       $   366              $   652
  Basis differences in depreciable and amortizable
    assets .............................................        (4,942)              (3,944)
  Provision for estimated expenses .....................         3,403                2,301
  Revenue recognition ..................................            50                   63
  Interest rate swap ...................................           921
Tax carryforwards:
  General business and AMT credits .....................         5,791                5,958
  Net operating loss and capital loss carryforwards ....         3,621                2,320
Valuation reserve ......................................        (9,210)              (5,700)
                                                               -------              -------
      Total ............................................       $    --              $ 1,650
                                                               =======              =======
</TABLE>

     The net change in the total valuation allowance for the year ended December
30,  2002 is the result of  providing  a full  valuation  allowance  against all
deferred  tax assets  because of the  significant  loss in 2002.  At December 30
2002,  the Company had  approximately  $7,463,000  federal net operating and tax
credit  carryforwards  to be used to offset future income for federal income tax
purposes. These carryforwards expire in the years 2003 to 2020.

     Management  believes  that its  ability to utilize its net  operating  loss
carryforwards  and  certain of its  general  business  and AMT credits to offset
future  taxable income within the  carryforward  periods under existing tax laws
and regulations is subject to future profitability. However, because the Company
has suffered  significant net losses in the last two years it has concluded that
a 100%  valuation  allowance  against its net deferred tax assets is  warranted.
Reconciliations  of the federal  income tax rate to the Company's  effective tax
rate were as follows:

                                      F-18
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                        DECEMBER 30, 2002   DECEMBER 31, 2001   DECEMBER 25, 2000
                                        -----------------   -----------------   -----------------
<S>                                     <C>                 <C>                 <C>
Statutory federal rate ...............         (34.0)%             (34.0)%              34.0%
State taxes, net of federal benefit ..           1.2                51.4                 6.0
Nondeductible expenses ...............          0.23                 4.4                 0.4
Benefit of FICA credit ...............            --                  --               (17.5)
Expiration of Capital loss                      13.3
Change in valuation allowance ........          37.2              (107.1)              (16.5)
                                             -------             -------             -------
                                                18.0%              (85.3)%               6.4%
                                             =======             =======             =======
</TABLE>

     At December 30, 2002 and December 31,  2001,  $1,216,000,  and  $1,072,000,
respectively, of estimated income tax payments are included in prepaid expenses.
As a result of our significant loss in 2002, we have submitted an application of
quick refund to the Internal Revenue Service for approximately $850,000.

4.   LINE OF CREDIT

     During the quarter  ended  September  21,  2001,  we renewed our $5 million
operating line at 1.125% over prime. The line of credit matured on July 15, 2002
and was renewed with similar terms in October 2002. No amounts were  outstanding
under  this line in 2001 or 2002.  The  renewal  agreement  contained  financial
covenants  which limit the amount of total debt we can borrow.  At December  30,
2002,  we violated one of the  financial  covenants and were unable to borrow on
the line.  As a result of the  financial  restrictions  placed by the  financial
covenants of this agreement, we cancelled this agreement in March 2003.

5.   LONG-TERM DEBT

     Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                          INTEREST RATES         ANNUAL
                                            MATURITY    AS OF DECEMBER 30,     PRINCIPAL      DECEMBER 30,    DECEMBER 31,
                                             DATES             2002             PAYMENTS          2002            2001
                                             -----      ------------------      --------      ------------    ------------
<S>                                         <C>         <C>                    <C>            <C>             <C>
CNL Term Loan II, secured by assets of
  16 T.G.I Friday's Restaurants .........    2012         9.457% and the        $  1,004        $ 16,535        $ 17,539
                                                         one month LIBOR
                                                          rate plus 320
                                                           basis points
Bank of America..........................    2013             3.75%                  252          15,738           6,525
Merrill Lynch............................   2007-15           3.96%                  440           5,485           5,925
FFCA.....................................   2002-16           10.5%                  174              32             985
GE Capital...............................   2002-14           4.81%                  288           2,774           3,442
FMAC.....................................   2010-15        7.64%-11.0%               891          14,936          15,828
                                                                                --------        --------        --------
    Total................................                                       $  3,049          55,500          50,244
Less current portion.....................                                       ========          (3,502)         (3,012)
                                                                                                --------        --------
    Total................................                                                       $ 51,998        $ 47,232
                                                                                                ========        ========
</TABLE>

     As of September 30, 2002, we had fully utilized our $15,000,000 development
facility  with Bank of America  to  finance  construction  or  refinance  T.G.I.
Friday's restaurants.

                                      F-19
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In October 2002, we secured a $15 million financing  commitment  through GE
Franchise  Finance.  The terms include $6 million for financing of equipment and
leasehold improvements for the seven Bamboo Clubs already open and approximately
$9 million for new Bamboo Club  development.  At December 30, 2002 there were no
borrowings outstanding under this commitment.

     In July  2002,  we  amended  our Bank of America  development  facility  to
provide for an additional  $1,000,000 in financing.  During 2002, we borrowed an
additional $9,465,000 to fund construction on two locations (T.G.I. Friday's San
Tan,  Chandler,  Arizona and Porter  Ranch,  California)  and to  refinance  two
existing   locations  (T.G.  I.  Friday's   Cerritos,   California  and  Oxnard,
California)  for which we paid off higher rate debt.  By September  30, 2002, we
had fully utilized our development facility with Bank of America.

     All of our loan  agreements  contain various  financial  covenants that are
generally measured at the end of each quarter.  At December 30, 2002, we met all
of the financial covenants for all debt agreements.

     All  long-term  debt is  secured by  certain  assets of various  restaurant
locations.

     Maturities of long-term  debt,  giving effect to the  borrowings  discussed
above, were as follows at December 30, 2002 (in thousands):

          2003.......................................       $   3,502
          2004.......................................           3,792
          2005.......................................           4,168
          2006.......................................           4,412
          2007.......................................           4,738
          Thereafter.................................          34,888
                                                            ---------
               Total.................................       $  55,500
                                                            =========

6.   STOCKHOLDERS' EQUITY

     In  October  2000,  the  Company  completed  a rights  offering  by selling
4,011,740  shares of its  common  stock to its  existing  stockholders.  The net
proceeds were $9,425,000.

STOCK OPTIONS

     On April 30, 2002, the Company's  Board of Directors  adopted,  and on June
24, 2002, its stockholders  approved,  the 2002 Incentive Stock Option Plan (the
"2002  Plan").  The 2002 Plan provides for the issuance of options to acquire up
to 1,000,000  shares of the Company's  Common Stock. The options are intended to
qualify as  incentive  stock  options  within the meaning of Section 422A of the
Internal  Revenue  Code or as  options  which  are  not  intended  to  meet  the
requirements of such section  ("non-qualified  stock  options").  Awards granted
under the 2002 Plan also may include stock  appreciation  rights and  restricted
stock awards.

     The exercise  price of all incentive  stock options  granted under the 2002
Plan must be at least  equal to the fair  market  value of such shares as of the
date of grant or, in the case of incentive  stock options  granted to the holder
of 10% or more of the Company's  Common Stock,  at least 110% of the fair market
value of such shares on the date of grant. The plan administrator (currently the
Board of Directors)  shall set the term of each stock  option,  but no incentive
stock option shall be exercisable  more than 10 years after the date such option
is granted.  The Company also has granted options under the 1990, 1995, and 1999
Incentive  Stock option Plans,  all of which  contain  similar terms to the 2002
Incentive Stock Option Plan.

     On July 22, 2002, the Company's Board of Directors approved the issuance of
an additional  262,000 options to acquire the Company's Common Stock. The record

                                      F-20
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

date of the awards was set to the close of business on July 23, 2002. The market
price of the Company's Common Stock on July 23, 2002 was $4.16.

     The Company is also  authorized to issue or has  outstanding  options under
all of its unexpired  stock option plans.  In addition,  the Company's  Board of
Directors approved the issuance of 50,000  non-statutory stock options to one of
the Company's  officers during 2000 and 150,000  non-statutory  stock options to
one of the Company's officers in 2001.

     A summary of the status of the Company's stock option plans at December 30,
2002, December 31, 2001, and December 25, 2000 and changes during the years then
ended is presented in the table and narrative below:

<TABLE>
<CAPTION>
                                                 2002                         2001                         2000
                                       ------------------------     ------------------------     ------------------------
                                                      WTD. AVG.                    WTD. AVG.                    WTD. AVG.
                                         SHARES         PRICE         SHARES         PRICE         SHARES         PRICE
                                       ----------     ---------     ----------     ---------     ----------     ---------
<S>                                    <C>            <C>           <C>            <C>           <C>            <C>
Options outstanding at beginning
  of period ....................        3,234,497      $ 3.14        2,733,000      $ 3.05        2,439,000      $ 3.22
Granted ........................          444,250        2.87          644,000        3.79          473,000        3.38
Exercised ......................         (117,664)       3.26           (6,999)       3.02               --          --
Cancelled ......................          (73,663)       3.43         (135,504)       3.47         (179,000)       2.88
                                       ----------                   ----------                   ----------
Options outstanding at end
  of period ....................        3,487,420        3.30        3,234,497        3.14        2,733,000        3.05
                                       ==========                   ==========                   ==========

Exercisable at end of period ...        2,624,780        3.03        2,112,332        2.96        1,859,333        2.91
                                       ==========                   ==========                   ==========
Weighted average fair value of
  options granted ..............                       $ 3.04                       $ 2.56                       $ 1.52
                                                       ======                       ======                       ======
</TABLE>

     COMMON STOCK WARRANTS

     As of December  30, 2002 and  December  31,  2001,  the Company had 231,277
outstanding  warrants to acquire its common stock with its lenders in connection
with the issuances of previously  paid off debt. The warrants are exercisable at
$9.08 per share and expire in March 2004.

7.   COMMITMENTS AND CONTINGENCIES

     DEVELOPMENT AGREEMENTS

     The Company is obligated under separate development agreements with Carlson
Restaurants  Worldwide to open 5 new T.G.I.  Friday's  restaurants through 2003.
The development  agreements give Carlson Restaurants  Worldwide certain remedies
in the event the Company fails to timely comply with the development agreements,
including  the  right,  under  certain  circumstances,  to reduce  the number of
restaurants  the  Company  may  develop in related  franchised  territory  or to
terminate the Company's  exclusive rights to develop  restaurants in the related
franchised  territory.  The Company's  development  territories include Arizona,
Nevada,  New Mexico,  California,  and the Kansas City and El Paso  metropolitan
areas.  The  Company  currently  has  one  T.G.I.   Friday's   restaurant  under
construction  and does not anticipate  building any additional  T.G.I.  Friday's
during 2003. With regard to the development  agreements,  the Company,  based on
past  history,   expects  to  receive  the  appropriate   waivers  from  Carlson
Restaurants Worldwide.

     FRANCHISE, LICENSE, AND MARKETING AGREEMENTS

     In accordance with the terms of the T.G.I.  Friday's  restaurant  franchise
agreements,  the Company is required to pay  franchise  fees of $50,000 for each
restaurant  opened. The Company also is required to pay a royalty of up to 4% of
gross sales.  Royalty  expense was  approximately  $7,476,000,  $7,444,000,  and
$6,656,000, under these agreements during 2002, 2001, and 2000, respectively. In
addition,  the  Company  could be  required  to spend up to 4% of gross sales on

                                      F-21
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

marketing.   Marketing  expense  for  T.G.I.   Friday's  locations  under  these
agreements were approximately  $5,250,000,  $4,772,000,  and $4,163,000,  during
2002, 2001, and 2000, respectively.

     OPERATING LEASES

     The Company leases land and restaurant  facilities  under operating  leases
having terms  expiring at various dates through  January  2020.  The  restaurant
leases have from two to three  renewal  clauses of five years each at the option
of the  Company,  and  have  provisions  for  contingent  rentals  based  upon a
percentage of gross sales.  The Company's  minimum  future lease  payments as of
December 30, 2002, were as follows (in thousands):

          2003.......................................       $  11,499
          2004.......................................          10,835
          2005.......................................          10,230
          2006.......................................           9,708
          2007.......................................           9,227
          Thereafter.................................          77,722
                                                            ---------
               Total.................................       $ 129,221
                                                            =========

     Rent expense  during 2002,  2001, and 2000 was  approximately  $11,950,000,
$10,836,000,  and  $8,662,000,  respectively.  In  addition,  the  Company  paid
contingent  rentals of $1,061,000,  $1,060,000,  and $957,000 during 2002, 2001,
and 2000,  respectively.  The  difference  between rent expense and rent paid is
included  in  other   liabilities  and  deferred  credits  in  the  accompanying
consolidated balance sheets.

     SALE-LEASEBACK TRANSACTIONS

     Historically,  the Company has entered into sale-leaseback  transactions in
order to  provide  further  funds  for  development  activities.  There  were no
sale-leaseback  transactions  in 2002.  During the first quarter of fiscal 2001,
the  Company  completed  three  sale-leaseback  transactions  with regard to the
buildings,  fixtures,  and  improvements  at two  restaurant  sites  whereby the
Company  leased  back  the  restaurant  sites  under  operating  leases  over  a
twenty-year period under terms similar to those in the preceding paragraph.  The
Company received proceeds of approximately $4,993,000. The transactions resulted
in a deferred loss of approximately $41,000, which will be accreted to income as
a reduction  of rent over the  twenty-year  lease  terms.  Pursuant to the lease
agreements, annual base rent was approximately $833,000 as of December 30, 2002,
with 10% increases in base rent occurring in 2005,  2010, and 2015. In addition,
the  Company  may be required to pay  percentage  rent if revenue  levels  reach
certain  break points.  In 2002 and 2001,  no  percentage  rent was required for
these locations.

     During fiscal 2000, the Company completed five sale-leaseback  transactions
at an aggregate  selling price of $14,494,000.  The  transactions  resulted in a
deferred gain of approximately $1,009,000, which will be accreted to income as a
reduction  of rent  expense over the  twenty-year  lease terms.  Pursuant to the
lease  agreements,  annual  base  rent  equals  approximately  $1,449,000  as of
December 30, 2002, with 10% increases in base rent occurring in 2005,  2010, and
2015. In addition, the Company may be required to pay percentage rent if revenue
levels reach certain break points.  In 2002,  2001 and 2000, no percentage  rent
was required for these locations.

     CONTINGENCIES

     In the normal  course of  business,  the Company is named as a defendant in
various  claims and  litigation  matters.  From time to time,  we are subject to
routine contract,  negligence,  employment related,  and other litigation in the
ordinary  course of  business.  In January  2002,  we were served with a lawsuit
filed on behalf of a current  employee,  seeking damages,  under California law,
for both missed  breaks and missed meal breaks the employee  alleges she did not
receive.  This  lawsuit  seeks  to  establish  a class  action  relating  to our
California operations.  We intend to vigorously defend this lawsuit, both on the
merits of the  employee's  case and the issues  relating to class action status.

                                      F-22
<PAGE>
               MAIN STREET AND MAIN INCORPORATED AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Other than the preceding,  we are not subject to any pending  litigation that we
believe  will have a  material  adverse  effect  on our  business  or  financial
condition, results of operations or liquidity.

     The Company is also subject,  from time to time, to audit by various taxing
authorities  reviewing the Company's income,  property,  sales, use, and payroll
taxes.  Management  believes  that any finding  from such audits will not have a
material impact on its financial position, results of operations, or liquidity.

8.   BENEFIT PLANS

     The Company  maintains a 401(k) Savings Plan for all of its employees.  The
Company currently  matches 50% of the participants'  contributions for the first
4%  of  the  participants'  compensation.  Contributions  by  the  Company  were
approximately  $257,000,  $ 248,000,  and $174,000 during 2002,  2001, and 2000,
respectively.

9.   RELATED PARTY TRANSACTIONS

     In December 1993, the Company  entered into a five-year lease agreement for
corporate office space with an entity  controlled by Steven Sherman,  who served
as a director  of the Company  until  February  2000.  During 1998 the lease was
amended to extend the  original  term through  January 31,  2004.  Approximately
$315,000, $253,000, and $224,000, were paid in rent for this leased space during
2002, 2001, and 2000,  respectively.  In addition,  a new lease was entered into
with the same entity in 2002 wherein the Company leased  additional office space
with a 10- year term commencing on April 1, 2002.

     The Company is under contract to manage four  restaurants with an unrelated
party.  The  Company  is  obligated  to  provide  restaurant  management  to the
operations.  The Company receives a management fee for these services if certain
cash flow provisions are met. The fees totaled  $432,000 and $611,000 in each of
fiscal  years 2001 and 2000,  respectively.  Management  fee income has not been
earned or recorded by the Company  since the end of the first quarter of 2001 as
a result of not meeting  the cash flow  provisions  pursuant  to the  management
agreement.  At December  31, 2001,  the Company  recorded an  impairment  charge
against the management  agreement of $1,615,000.  The Company had receivables of
approximately  $471,000 and  $1,167,000 as of December 30, 2002 and December 31,
2001, respectively, related to the funding of operations.

10.  SUBSEQUENT EVENT

     In January 2003,  we entered into a 10-year lease renewal and  modification
agreement for our corporate  offices.  This agreement  increased the size of the
existing  space,  allowing us to combine  our three  office  locations  into one
contiguous  space.  This will result in a reduction  in total space leased and a
reduction in annual rent  expense.  We believe that the leased space is adequate
for our current and reasonably anticipated future needs.

                                      F-23