<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D C. 20549

                                   FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Fiscal Year Ended September 30, 2001
                                      Or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from __________ to _____________

                       Commission File Number 000-21093

                          INTERFOODS OF AMERICA, INC.
            (Exact name of registrant as specified in its charter)

                  Nevada                              59-3356-011
    (State or other jurisdiction of        (IRS Employer Identification No.)
    incorporation or organization)

        9400 South Dadeland Boulevard, Suite 720, Miami, Florida 33156
        (Address of principal executive offices)        (Zip Code)

      Registrant's telephone number, including area code: (305) 670-0746

       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 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 in response 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.[_]
<PAGE>

The aggregate market value of the registrant's common stock held by non-
affiliates of the registrant as of November 20, 2001 was approximately
$1,503,206. Solely for purposes of the foregoing calculation, all of the
registrant's directors and officers are deemed to be affiliates.

There were 5,012,099 shares of the registrant's common stock outstanding as of
November 20, 2001.

                                       2
<PAGE>

                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         Interfoods of America, Inc., a Nevada corporation (the "Company"),
incorporated May 13, 1994, is through its wholly-owned subsidiary, Sailormen,
Inc., a Florida corporation ("Sailormen"), a franchisee and operator of
Popeye's/registered trademark /Chicken and Biscuits ("Popeye's") restaurants.
Pursuant to franchise agreements with AFC Enterprises, Inc. (the "Franchisor"),
the Company currently operates 165 Popeye's restaurants located in Florida,
Alabama, Illinois, Georgia, Mississippi, Louisiana and Missouri.

         The Company's headquarters are located at 9400 South Dadeland
Boulevard, Suite 720, Miami, Florida 33156. Its telephone number is (305) 670-
0746.

HISTORY

         Until September 1996, the Company was known as Sobik's Subs,
Inc.("Sobik's Subs"). In May 1996, the Company acquired Sailormen from the
Company's current Chief Executive Officer, Robert S. Berg, and President, Steven
M. Wemple, for a total of 2,500,000 shares of the Company's common stock. At the
time of the acquisition, Sailormen operated 11 Popeye's restaurants.

         Until December 1997, the Company operated two wholly-owned subsidiaries
in addition to Sailormen: (1) SBK Franchise Systems, Inc., which, through an
exclusive master license with Sobik's Sandwich Shops, Inc., the Franchisor of
Sobik's Subs restaurants, developed, franchised and serviced Sobik's Subs
franchises; and (2) Sobik's Restaurant Corp., which established, owned and
operated Sobik's Subs Shops. Sobik's Sub Shops offered a menu of submarine (sub)
style sandwiches (also referred to as hoagies or heroes).

         In December, 1997, the Company sold Sobik's Restaurant Corp and SBK
Franchise Systems, Inc. for total consideration valued at $1,100,000. Such
consideration consisted of cash, a note and stock of the purchaser, JRECK Subs
Group, Inc. These divestitures were made by the Company to streamline its
business operations and to focus its efforts on the expansion and development of
its Popeye's franchises.

         Consistent with its decision to concentrate on the ownership and
operation of its Popeye's restaurants, the Company consummated several
acquisitions during Fiscal 1997. In October 1996, the Company acquired four
existing Popeye's restaurants in the Birmingham, Alabama market for
consideration valued at $450,000, of which $50,000 was paid in cash and 228,640
shares of the Company's mandatory redeemable restricted Class A Preferred Stock
valued at $400,000. In September 1997, the Company acquired an existing Popeye's
restaurant in Ft. Pierce, Florida for 338,983 shares of the Company's common
stock valued at $400,000 and opened a new Popeye's restaurant in Homestead,
Florida.

         In December 1997 (Fiscal 1998), the Company acquired eight Popeye's
restaurants in the Baton Rouge, Louisiana market, for approximately $3.7 million
in cash. On July 6, 1998, the Company acquired five Popeye's restaurants in
Pensacola, Florida for consideration valued at $1.8 million. Such consideration
consisted of cash, newly issued restricted common stock and assumed liabilities.

         In March 1999, the Company acquired in two separate transactions,
nineteen Popeye's restaurants in the St Louis, Missouri area and the Baton
Rouge, Louisiana area, for approximately $19.9 million which was financed with
$8 million of debt and $11.9 million of the Company's cash. The Company also
opened five new Popeye's restaurants in Fiscal 1999 within its existing markets.

         In January 2000, the Company, through an Asset Purchase Agreement,
acquired 37 Popeye's restaurants located in Mississippi and Louisiana for
approximately $34.6 million in cash, which was financed with $35.7 million of
additional debt.

                                      3.
<PAGE>

         In July 2000, pursuant to an Asset Purchase Agreement, the Company
acquired the assets of four Popeye's restaurants in Illinois and the West Coast
of Florida for approximately $3.9 million cash. The Company financed the
acquisition with $3.4 million of additional debt.

         On September 14, 2000, the Company acquired 71 additional Popeye's
restaurants located in Central and Northern Florida and in Southern Georgia for
approximately $46.2 million. The Company financed the acquisition with $45.5
million of debt.

OPERATIONS

         The Popeye's menu features unique spicy fried chicken, which each
restaurant prepares daily on premises along with biscuits, which are served with
the chicken entrees. In addition to its spicy fried chicken, the Popeye's menu
contains up to 20-25 other items, including seasonal entrees, such as seafood
dishes, and side items, such as red beans and rice, french fries, mashed
potatoes with gravy, cole slaw, and Cajun rice. Similar to the chicken entrees,
virtually all of these items are prepared fresh daily on the premises of each
restaurant. The Popeye's menu is designed to appeal to a large cross-section of
the population with particular concentration on the 18-49 age group. The
Company's restaurants are generally open seven days a week, from 10:00 am to
midnight, and serve lunch and dinner.

         A typical Popeye's restaurant operated by the Company employs two full
time managers and at least one additional supervisory employee. Typically, all
restaurant managers (and other employees of the Company) are required to attend,
at the Company's expense, training courses conducted by the Franchisor. This
training program involves on-the-job training and an instructional class. Other
restaurant employees are trained by the restaurant manager in accordance with
the Company's and the Franchisor's guidelines.

         In 2001, there were 1,540 Popeye's restaurants in operations worldwide,
of which 1,248 were located in the United States. Popeye's ranks third worldwide
in the number of fast food fried chicken restaurants behind only KFC/registered
trademark/and Church's. Average sales per restaurant for Popeye's/registered
trademark/ located in the United States are estimated to be $832,979 annually.
The Company's restaurants averaged annual sales of approximately $ 921,000 per
unit. The Company has 81 of its 165 restaurants in the state of Florida from
which it derived approximately 56% of its revenue in Fiscal 2001.

SEASONALITY

      The Company's sales volumes fluctuate seasonally. During fiscal years 2001
and 2000, the Company's sales were highest in the spring and summer, and lowest
in the fall. Severe weather, storms and similar conditions may impact sales
volumes seasonally in some operating regions.


BUSINESS STRATEGY

         The Company's business strategy is (1) to increase the level of sales
at its currently owned Popeye's restaurants; and (2) to expand by (a) locating
and acquiring, at advantageous prices, existing Popeye's restaurants, which
management believes are under performing and (b) developing new Popeye's
restaurants in the Southeastern United States. There can be no assurance that
the Company will be able to achieve all or any part of its business strategy
(see "Risk Factors"). The Company is a restaurant operating company and will own
real estate only as it relates to stores which may be acquired or built by the
Company.


FRANCHISE AGREEMENT

         The Company franchises its Popeye's restaurants from the Franchisor.
The Franchisor maintains its principal place of business at Six Concourse
Parkway, Atlanta, Georgia, 30328, and does business under its corporate name and
under the trade names and service marks "Popeye's" and "Popeye's Chicken and
Biscuits".

         Each of the Company's Popeye's restaurants is operated under a separate
franchise agreement from the Franchisor. Retention of these franchise agreements
is important to the success of the Company. The Company believes that its
relationship with the Franchisor is satisfactory. The franchise agreements are
for an initial term of 20 years and are renewable for additional ten-year terms
upon the payment of one-half of the then-applicable franchise fee, which is
currently $25,000, and the execution of a renewal franchise agreement. The
renewal franchise agreement may provide for increased royalties and advertising
contributions, and may require the Company to remodel or re-equip its
restaurants to meet the then current standards of the Franchisor. The Company is
required to pay the Franchisor a royalty fee equal to 5% of the gross sales of
each franchise restaurant. The franchise agreements require the Company to
construct and operate its Popeye's restaurants in accordance with the detailed
requirements of the Popeye's system.

                                      4.
<PAGE>

SUPPLY AGREEMENTS

      The Franchisor has entered into a long-term agreement with Diversified
Foods and Seasoning, Inc., ("Diversified") under which they have designated
Diversified as the sole supplier of certain proprietary products for the Popeyes
system. Diversified sells these products to approved distributors, who in turn
sell them to our restaurants. The Company has various distribution agreements
with some of these approved distributors for the supply of food products, dry
goods and related supplies. Most agreements with the distributors continue until
either party elects to terminate, which shall require thirty (30) days prior
written notice to the other party.

      The principal raw material for our restaurants is fresh chicken. Our
restaurants purchase fresh chicken from approximately 5 suppliers. In Fiscal
2001 one vendor represented approximately 55% of the chicken purchases.

      In Fiscal 2001 and Fiscal 2000, approximately 38% of the cost of sales
were attributable to the purchase of chicken. The Company's cost of sales is
significantly affected by increases in the cost of chicken, which can result
from a number of factors, including seasonality, increases in the cost of grain,
disease and other factors that affect availability. In order to ensure favorable
pricing for our chicken purchases in the future, reduce volatility in chicken
prices, and maintain an adequate supply of fresh chicken, the Franchisor set up
a purchasing cooperative for the benefit of the franchisees, including the
Company. The purchasing cooperative has entered into two types of chicken
purchasing contracts with chicken suppliers. The first is a grain-based "cost-
plus" pricing contract that utilizes prices that are based upon the cost of feed
grains, such as corn and soybean meal, plus certain agreed upon non-feed and
processing costs. The other is a market-priced formula contract based on the
"Georgia whole bird market value". Under this contract, the Company pays the
market price plus a premium for the cut specifications for our restaurants. The
market-priced contracts have maximum and minimum prices that the Company will
pay for chicken during the term of the contract. The contracts have terms
ranging from three to five years with provisions for certain annual price
adjustments. The Company utilizes both contracts to ensure favorable chicken
prices.

      The Company's ability to maintain consistent quality depends in part upon
its ability to acquire food products from reliable sources in accordance with
the Franchisor's specifications. While the Company has not experienced any
problems to date in acquiring such food products, there can be no assurance that
such food products will be available in the future on terms acceptable to the
Company.

MARKETING AND ADVERTISING

      All Popeye's restaurants are required to contribute 3% of their weekly net
sales to the Popeye's Chicken & Biscuit Advertising Fund (the "Popeye's
Advertising Fund") for regional and local advertising conducted by the
Franchisor. The terms of the Popeye's Advertising Fund require that all
contributions to the fund and earnings of the fund are utilized by the
Franchisor exclusively for advertising and promotional activities for Popeye's
restaurants. In most of its markets, the Company voluntarily contributes amounts
in excess of the required 3% for additional advertising in the respective areas.

GOVERNMENT REGULATION

      Each of the Company's restaurants is subject to licensing and regulation
by a number of governmental authorities, which may include health, sanitation,
safety, fire, building and other agencies in the state and/or municipality in
which the restaurant is located. Difficulties in obtaining or failure to obtain
the required licenses could delay or prevent the development of a new restaurant
in a particular area.

      The Company also is subject to federal and state environmental
regulations. Requirements of local governmental bodies with respect to zoning,
land use, and environmental factors could delay or prevent the development of a
new restaurant in a particular area.

      The Company is also subject to state and federal labor laws that govern
its relationship with its employees. These laws govern minimum wage
requirements, overtime, working conditions and citizenship requirements.

COMPETITION

      The Company's restaurants face intense competition from quick-and full-
service restaurants and, in particular, from chains with operating concepts
similar to those of the Company. Management believes that its primary
competitors are other national fried chicken chains, including KFC/registered
trademark/, Church's Fried Chicken/registered trademark/ and Pollo
Tropical/registered trademark/. The franchisor of Popeye's Chicken, AFC
Enterprises Inc., is also the franchisor of Church's Chicken, a direct
competitor of the Company's restaurants. In general, the restaurant industry is
highly competitive and can be significantly affected by many factors, including
changes in local, regional or national economic conditions, changes in consumer
tastes, consumer concerns about the nutritional quality of food and increases in
the number of, and particular locations of, competing restaurants. Factors such
as inflation, increases in food, labor and energy costs and the availability of
an adequate number of hourly-paid employees also affect the restaurant industry.
Major chains, which have financial resources substantially greater than the
Company and operating histories longer than the Company, dominate the restaurant
industry. There can be no assurance that consumers will regard the Company's
menu items as significantly distinguishable from competitive products, that
substantially equivalent products will not be introduced by the Company's
competitors or that the Company will be able to compete successfully in any
given market.

                                      5.
<PAGE>

      The Company is required to respond to various factors affecting the
restaurant industry, including changes in consumer preferences, tastes, eating
habits, demographic trends and traffic patterns, increases in food and labor
costs and national, regional and local economic conditions. A number of fast
food restaurant companies have recently experienced flattening growth rates and
declines in average sales per restaurant, in response to which certain of such
companies have adopted discount pricing strategies such as "value meals" and
other marketing strategies. Such strategies could have an adverse effect upon
the Company and could also negatively impact the Company's operating margins,
should the Company elect to match competitors' price reductions. The principal
bases of competition in the industry are food quality, speed of service, and
price; but advertising, location, and attractiveness of facilities are also
important. Popeye's competes with other national fried chicken chains such as
KFC and Church's, as well as with all other national and regional quick-service
restaurant chains. Some of these competitors have greater financial resources,
larger advertising budgets and more national recognition than those of Popeye's.

      As a result of a national trend in increased chicken consumption, many
quick-service restaurant chains that are not identified with chicken, have added
a variety of chicken items to their menus. While the Company believes that its
spicy fried chicken is distinguished from the chicken offered by its competitors
by unique seasonings and tastes, product quality, and freshness, there can be no
assurances that consumers will not choose its competitors' chicken products over
those sold in the Company's restaurants.

EMPLOYEES

         As of September 30, 2001, the Company employed approximately 3,576
people, on a full-time and part-time basis. Of these employees, 690 were
employed as field management personnel and 38 were in corporate management and
administration. None of the Company's employees belong to a union and the
Company has not experienced any work stoppages. The Company believes that its
labor relations are satisfactory.


ITEM 2. DESCRIPTION OF PROPERTY

         The Company either owns or leases the land and buildings for the
Company-operated restaurants. In addition the Company owns two properties for
which the Company subleases the land and building to a related third party.
While the Company expects to continue to lease many of its sites in the future,
the Company also may purchase the land and/or buildings for restaurants to the
extent acceptable terms are available. The majority of the Company restaurants
are located in retail shopping centers and/or freestanding heavily traveled
locations.

         Restaurants leased to the Company are typically leased under "triple
net" leases that require the Company to pay real estate taxes, maintenance costs
and insurance premiums; in some cases the Company pays a percentage of rent
based on sales in excess of specified amounts. Generally, the leases have
initial terms of 20 years with options to renew for one or more additional
periods.


         The following table sets forth the locations of the Company's
restaurants by state as of September 30, 2001.

                                         Owned    Leased    Total
                                         -----    ------    -----
                     Florida               33       48        81
                     Georgia                2        9        11
                     Mississippi           30        3        33
                     Louisiana              6       17        23
                     Missouri               0        9         9
                     Alabama                0        6         6
                     Illinois               2        0         2
                                          ---      ---       ---
                              Totals       73       92       165
                                          ---      ---       ---

         The Company leases 6,078 square feet of office space at 9400 South
Dadeland Boulevard, Miami, Florida 33156. The monthly base lease expense for the
offices is $8,564. The lease expires on May 31, 2007. These offices are used to
administer all Company operations.

                                      6.
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      The Company and Sailormen are parties to certain legal proceedings arising
from matters incidental to their business. Management is of the opinion that
these actions will not have a material effect on the financial conditions,
results of operations or liquidity of the Company.


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

         In the fourth quarter of fiscal year ended September 30, 2001, no
matter was submitted to a vote of securities holders of the Company.


                                       7
<PAGE>

                                    PART II


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



     The Company's Common Stock trades in the over-the-counter market under
symbol IFDA.OB on the OTC electronic bulletin board. The following table shows
the quarterly high and low bid prices for fiscal years ended September 30, 2000
and 2001 as reported by the National Quotations Bureau Incorporated. These
prices reflect inter-dealer quotations without adjustments for retail markup,
markdown or commission and do not necessarily represent actual transactions.


          YEAR       PERIOD                        HIGH          LOW
          ----       ------                        ----          ---

          2000       First Quarter                 $0.88         $0.38

                     Second Quarter                $0.81         $0.38

                     Third Quarter                 $1.88         $0.44

                     Fourth Quarter                $0.94         $0.44

          2001       First Quarter                 $1.09         $0.41

                     Second Quarter                $1.19         $0.41

                     Third Quarter                 $1.01         $0.69

                     Fourth Quarter                $1.02         $0.57



     At September 30, 2001, there were 256 holders of record of the Company's
Common Stock.


DIVIDENDS

The Company has not declared any dividends on its Common Stock since its
inception, and has no present intention of paying any dividends on its Common
Stock in the foreseeable future.

                                       8
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following table should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Form 10-K.


<TABLE>
<CAPTION>
                                                                 Year Ended September 30,
                                               -----------------------------------------------------------------------------------
                                                          (Amounts in thousands, except share data)

                                                               2001         2000         1999         1998     1997  Income
                                                               ----         ----         ----         ----     ------------
Statement Data:
--------------
<S>                                            <C>                      <C>          <C>          <C>           <C>
   Revenues                                                $  152,088   $   77,589   $   37,796   $   18,345    $   14,092
   Costs and operating expenses:
     Cost of restaurant operations:
       Cost of sales                                           48,521       24,781       12,131        5,741         4,624
       Restaurant wages and related benefits                   40,263       20,545        9,834        4,820         3,735
       Occupancy and other operating expenses                  34,520       17.186        9,774        4,881         3,825
                                                           ----------   ----------   ----------   ----------    ----------
         Total cost of restaurant operations                  123,304       62,512       31,739       15,442        12,184

     General and administrative expenses                       12,420        7,193        3,992        2,647         1,575
     Depreciation and amortization                              4,878        2,188          778          278           188
                                                           ----------   ----------   ----------   ----------    ----------

     Total operating costs and expenses                       140,602       71,893       36,509       18,367        13,947
                                                           ----------   ----------   ----------   ----------    ----------

       Income (loss) from operations                           11,486        5,696        1,287          (22)          145
                                                           ----------   ----------   ----------   ----------    ----------

   Other income (expense)
     Interest expense                                         (10,136)      (4,440)        (893)        (199)          (54)
     (Loss)gain on investment in JRECK                              -          (94)        (183)         536             -
     Interest and other income (expense)                          459         (565)        (227)        (357)           63
                                                           ----------   ----------   ----------   ----------    ----------
   Income (loss) before income tax                              1,809          597          (16)         (42)          154
   Income tax (provision)benefit                                 (808)        (216)        (130)        (114)          165
                                                           ----------   ----------   ----------   ----------    ----------

   Net income (loss)before preferred
   stock dividend                                               1,001          381         (146)        (156)          319
   Preferred stock dividend                                         -            -           (1)         (10)          (21)
                                                           ----------   ----------   ----------   ----------    ----------

   Net income(loss)                                             1,001          381         (147)        (166)          298
                                                           ----------   ----------   ----------   ----------    ----------
   Basic and Diluted earnings
   (loss) per share                                        $     0.20   $     0.07   $    (0.03)  $    (0.03)   $     0.05
                                                           ----------   ----------   ----------   ----------    ----------

   Weighted average shares outstanding                      5,133,377    5,468,503    5,713,658    5,597,366     6,585,953
                                                           ----------   ----------   ----------   ----------    ----------
Balance Sheet Data
------------------

   Working capital deficiency                              $  (10,065)  $  (12,175)  $   (3,256)  $   (1,312)   $     (947)

   Total Assets                                               117,028      115,653       20,388       11,358         7,139
   Long-term debt, redeemable
   Preferred stock and capital lease
   obligations.                                                91,724       90,680       12,329        4,108         1,958

   Stockholders' equity                                         3,838        2,936        3,236        3,356         3,398
</TABLE>


     See Item 1 "History" for information regarding Company acquisitions, which
has contributed to the increased business commencing primarily in fiscal 1999.

                                      9.
<PAGE>

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

     The continuation of the economic slowdown, which was further compounded by
the events of September 11th, could continue to adversely effect consumer
                          --
spending during the upcoming year, which could have a negative impact on the
Company's operations.

     The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto, appearing elsewhere in this report.

FOR THE YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO YEAR ENDED SEPTEMBER 30, 2000

For the year ended September 30, 2001 ("Fiscal 2001"), the Company had total
revenues of $152,088,594 compared to total revenues of $77,589,129 for the year
ended September 30, 2000 ("Fiscal 2000"). The increase in revenues was primarily
attributable to the full year sales generated from the Company's acquisition of
71 restaurants in Central and Northern Florida on September 14, 2000 and 37
restaurants in Mississippi and Louisiana on January 11, 2000. Same store
restaurant revenues reflect an increase in comparable sales of 3.9% for the
year.

Cost of restaurant operations for the Fiscal 2001 were $123,304,366 or 81.1% of
revenues compared to $62,512,104 or 80.6% of revenues for Fiscal 2000. The
dollar increase is attributable to the full year of expenses generated from the
two fiscal 2000 acquisitions. The increase as a percentage of revenues is due to
additional expenses that were incurred to integrate the Company's procedures and
systems into the restaurants acquired in January 2000 and September 2000.

General and administrative expenses for Fiscal 2001 were $12,419,692 or 8.2% of
revenues as compared to $7,192,666 or 9.3% of revenues for Fiscal 2000. The
dollar increase is primarily attributable to the costs of additional personnel
hired to support the Company's current growth. The decrease as a percentage of
revenues was due to the efficiencies obtained through additional sales volume.

Depreciation and amortization for Fiscal 2001 were $4,878,386 as compared to
$2,188,118 for Fiscal 2000. The increase was primarily attributable to the full
year of depreciation expense related to the fixed assets obtained through the
acquisition of additional restaurants in January 2000 and September 2000. In
addition, Fiscal 2001 represents a full year of amortization related to goodwill
obtained through the fiscal 2000 acquisitions.

Operating income of the Company was $11,486,150 for Fiscal 2001 as compared to
$5,696,241 for Fiscal 2000. The increase in operating income is attributable to
the increase in the number of restaurants described above and the increase in
existing restaurant level profits resulting from the favorable comparable sales.

Interest expense increased in Fiscal 2001 to $10,135,891 as compared to
$4,439,756 for Fiscal 2000. The increase was due to higher average debt
outstanding in Fiscal 2001 compared to Fiscal 2000 which was attributable to
additional borrowings made by the Company in connection with its acquisition of
the additional restaurants described above.

The Company recorded an income tax provision of $808,109 during Fiscal 2001
compared to $216,029 in Fiscal 2000. The increase was primarily attributable to
the future taxable income and tax liabilities arising primarily from the result
of higher 2001 pre-tax income. The effective tax rate for fiscal 2001 is 44.7 %,
as compared to the fiscal 2000 effective tax rate of 36.7%. The increased
effective tax rate is due primarily to certain expenses incurred in Fiscal 2001
related to the Company's new deferred compensation plan that are not deductible
for Federal Income tax purposes.

                                      10.
<PAGE>

YEAR ENDED SEPTEMBER 30, 2000 COMPARED TO YEAR ENDED SEPTEMBER 30, 1999

The Company made four acquisitions during Fiscal 2000. The restaurant base went
from 54 restaurants at the beginning of Fiscal 1999 to 167 restaurants at the
end of Fiscal 2000.

For the year ended September 30, 2000 ("Fiscal 2000"), the Company had total
revenues of $77,589,129 compared to total revenues of $37,796,392 for the year
ended September 30, 1999 ("Fiscal 1999"). The increase in revenues was primarily
attributable to the sales generated from the Company's acquisition of 73
restaurants in Central and Northern Florida on September 14, 2000 and 37
restaurants in Mississippi and Louisiana on January 11, 2000. Additionally,
sales for Fiscal 2000 included a full year of sales of ten restaurants in Baton
Rouge, Louisiana, acquired on March 8, 1999 and nine stores in St. Louis,
Missouri, acquired on March 22, 1999. The remaining sales increase was due to an
increase in same store restaurant revenues of 10.4% for the year.

Cost of restaurant operations for the Fiscal 2000 were $62,512,104 or 80.6% of
sales compared to $31,738,872 or 84% of sales for Fiscal 1999. The dollar
increase is attributable to the number of restaurants and the additional
expenses that were incurred to integrate the Company's procedures and systems
into the acquired restaurants. The decrease as a percentage of sales is due to
lower food cost obtained through additional volume.

General and administrative expenses for Fiscal 2000 were $7,192,666 or 9.3% of
sales as compared to $3,992,330 or 10.6% of sales for Fiscal 1999. The dollar
increase is primarily attributable to the expenses related to the indirect costs
of 1999 and 2000 acquisition of restaurants and the costs of additional
personnel hired to support the Company's current growth. The decrease as a
percentage of sales is due to the efficiencies obtained through additional
volume.

Depreciation and amortization for Fiscal 2000 were $2,188,118 as compared to
$778,051 for Fiscal 1999. The increase was primarily attributable to the
acquisition of additional restaurants. Depreciation related to new restaurants
was $903,442 of the $2,188,118 in Fiscal 2000.

Operating income of the Company was $5,696,241 for Fiscal 2000 as compared to
$1,287,139 for Fiscal 1999. The increase in operating income is attributable to
the increase in number of restaurants and increase in existing restaurant level
profits resulting from the favorable comparable sales.

Interest expense increased in Fiscal 2000 to $4,439,756 as compared to $892,906
for Fiscal 1999. The increase was due to higher average debt outstanding in
Fiscal 2000 compared to Fiscal 1999 and this was attributable to additional
borrowings made under the Company's acquisition program. Interest expense in
Fiscal 2000 relating only to new debt acquired in Fiscal 2000 was $2,779,046.

Other expense for Fiscal 2000 was $565,631 as compared to $227,378 for Fiscal
1999. The increase in other expenses in Fiscal 2000 was primarily attributable
to the indirect acquisition costs related with the purchase during Fiscal 2000
of the restaurants in Central and Northern Florida, Mississippi and Louisiana
and the lease termination payments relating to a closed store.

The Company recorded an income tax provision of $216,029 during Fiscal 2000
compared to $130,370 in Fiscal 1999. The increase was primarily attributable to
the future taxable income and tax liabilities arising from the differences in
depreciation and amortization.

                                      11.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     On October 23, 2001, the Company announced that it had received a proposal
from Robert S. Berg and Steven M. Wemple for a going private transaction. The
proposed transaction, which would effect a change in control of the Company,
would be in the form of a merger with a corporation wholly-owned by Mr. Berg and
Mr. Wemple. Pursuant to the proposal, the Company's shareholders (other than Mr.
Berg and Mr. Wemple) would receive unsecured, subordinated notes of the Company
in the principal amount of $1.20 per share of Company Common Stock.

     The notes to be issued by the Company in the transaction would bear
interest at the rate of 5% per annum. Interest would be payable semi-annually,
with principal becoming due and payable in a single payment at maturity, which
would be the third anniversary of the date of issuance. The notes would be
subordinated to all senior debt of the Company and would be issued in minimum
principal amounts of $100 and thereafter in multiples of $25. Company
shareholders would receive the cash equivalent in lieu of any fractional notes.
If the proposed transaction is completed, the Company will no longer be a public
reporting entity and its stock will not be publicly traded.

     Net cash provided by operations for Fiscal 2001 was $ 7,317,871 as compared
to $10,802,056 for Fiscal 2000. The decrease in operating cash flow for Fiscal
2001 was primarily attributable to the receipt of $ 3,710,264 of advanced vendor
rebates during the Fiscal 2000.

     At September 30, 2001, the Company had current assets of $ 7,377,973 and
total assets of $117,028,224 compared to current assets of approximately
$6,678,902 and total assets of approximately $115,652,962 at September 30, 2000.
The increase in total assets was primarily attributable to an increase in net
property and equipment of $1,848,746.

     Net cash used in investing activities was $5,777,454 for Fiscal 2001 as
compared to $92,071,177 for Fiscal 2000. The substantial decrease in cash used
is primarily due to the Fiscal 2000 period having the acquisition of 37
restaurants in January 2000 and 71 restaurants in September 2000.

     Net cash used in financing activities was $1,541,750 for Fiscal 2001 as
compared to net cash provided by financing activities for Fiscal 2000 of
$83,272,576. The decrease resulted primarily from the Fiscal 2000 period having
additional proceeds for the financing of the acquisition of 37 restaurants in
January 2000 and 71 restaurants in September 2000.

     As of September 30, 2001, the Company had total outstanding debt of
approximately $ 97.8 million, of which approximately $6.1 million represents
the current portion. The Company expects to pay its current portion of debt with
cash flow generated from operations. As of September 30, 2001, the average
interest rate on the debt was 10.1%. The debt is secured by substantially all of
the assets of the Company and availability of amounts for borrowing is subject
to certain limitations and restrictions. In Fiscal 2001, the Company had cash
provided by operating activities of $7,317,871 as compared to $10,802,056 in
Fiscal 2000.

     The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures, will depend on its future performance. Based upon the current
level of operations and anticipated revenue growth and cost savings, management
believes that cash flow from operations and available cash from its existing
line of credit, and refinancing capabilities, will be adequate to meet the
Company's future liquidity needs. However, there can be no assurance that the
Company's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or that
future borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness or to fund its other liquidity needs. In
addition, there can be no assurance that the Company will be able to effect any
needed refinancing on reasonable terms or at all. At the present time, there are
no plans for significant capital expenditures during Fiscal 2002.

     The inflationary factors that have historically affected our results of
operations include increases in food and paper costs, labor and other operating
expenses. Wages paid in our restaurants are impacted by changes in the Federal
or State hourly minimum wage rates. Accordingly, changes in the Federal or State
hourly wage rates directly affect our labor cost. We and the restaurant industry
typically attempt to offset the effect of inflation, through periodic menu
increases and various cost reduction programs. However, no assurance can be
given that we will be able to offset such inflationary cost increases in the
future.

                                      12.
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board approved the issuance of
SFAS 141, "Business Combinations" and SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 141 requires that all business combinations initiated after June
30, 2001 must be accounted for under the purchase method. In addition, SFAS 142
requires that all intangible assets acquired that are obtained through
contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to at least an annual assessment
for impairment by applying a fair value based test. SFAS 142 is required to be
applied starting with fiscal years beginning after December 15, 2001, with early
adoption permitted in certain circumstances. The Company may elect to adopt SFAS
142 effective October 1, 2001 or October 1, 2002. This election must be made
prior the issuance of its financial statements for the quarter ended December
31, 2001. Due to the complexity of this new standard and its recent issuance,
the Company is continuing to evaluate whether it will adopt SFAS 142 effective
October 1, 2001. The Company continued to amortize goodwill under its current
method through September 30, 2001. Once the standard is adopted, annual goodwill
amortization of approximately $ 822,000, respectively, will no longer be
recognized.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     From time to time, including herein, the Company may disclose "forward-
looking" statements within the meaning of Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as
amended. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," or variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.

     In addition to factors discussed in this Form 10-K, among the other factors
that could cause the Company's results to differ materially are: general
economic and business conditions; the impact of competitive products and
pricing; success of operating initiatives; development and operating costs;
advertising and promotional efforts; adverse publicity; acceptance of new
product offerings; consumer trial and frequency; changes in business strategy or
development plans; quality of management; availability, terms, and deployment of
capital; the results of financing efforts; business abilities and judgment of
personnel; availability of qualified personnel; food, labor, and employee
benefit costs; changes in, or the failure to comply with, government
regulations; weather conditions and construction schedules; and risks that sales
growth resulting from the Company's current and future remodeling can be
sustained at the current levels.

     For a further discussion of some of these factors that could cause actual
results to differ materially from such forward-looking statements, see "Risk
Factors" below.

RISK FACTORS

     RECENT EVENTS. Uncertainties regarding the impact of the recent terrorist
activities may have a negative impact on the economy and the public's confidence
in general, which could have an adverse effect on our business

     DEPENDENCE ON EXECUTIVE OFFICERS. The Company is dependent upon the efforts
and abilities of Robert Berg, its Chief Executive Officer, Chairman of the
Board, and Steven Wemple, its President and Chief Operating Officer. The loss of
the services of either Messrs. Berg or Wemple would have a material adverse
effect upon the Company's business and future prospects. In addition, in order
to successfully implement its proposed expansion and manage anticipated growth,
the Company will be dependent upon its ability to retain existing and hire
additional qualified management and other personnel, including certain executive
officers. The competition for qualified management and other personnel in the
restaurant industry is intense and, accordingly, there can be no assurance that
the Company will be able to retain or hire the necessary personnel. The Company
will also be dependent on its ability to hire and train hourly employees. In
recent years, the restaurant industry has experienced a shortage in the
availability of qualified restaurant personnel, which could have an adverse
effect on the Company.

                                      13.
<PAGE>

     INCREASES IN OPERATING AND FOOD COSTS; AVAILABILITY OF SUPPLIES. An
increase in operating costs could adversely affect the profitability of the
Company. Factors such as inflation, increased utility, labor and employee
benefit costs are beyond the Company's control and may adversely affect the
restaurant industry in general and the Company's restaurants in particular. In
connection with any further expansion of the Company, of which there can be no
assurance, the Company's general and administrative costs likely would increase
as a percentage of revenues as the Company adds administrative staff, systems,
and other infrastructure to support these costs. A majority of the Company's
revenues and food costs are derived from the sale and purchase of chicken. The
cost of fresh chicken fluctuates from time to time depending on a variety of
factors beyond the control of the Company, such as weather conditions and
seasonal demand. There can be no assurance that fluctuations in the cost of
chicken or the price of other supplies will not adversely affect the Company's
results of operations. In addition, the Company is dependent on daily deliveries
of food supplies, such as chicken, produce, baked goods and other products. Any
delays or stoppages in such deliveries, as a result of, among other things,
labor unrest or adverse weather conditions, could subject the Company's
restaurants to shortages or interruptions which could materially adversely
affect the Company.

LIMITED MENU; UNCERTAINTY OF MARKET ACCEPTANCE. The Company's Popeye's
restaurants menu is comprised primarily of fried chicken and accompanying side
dishes. Achieving consumer awareness and market acceptance of the Company's
concepts, particularly as the Company seeks to open and expand into new markets,
will require substantial effort and expenditures by the Company. A general
decline in the sale of chicken products due to industry trends, change in
consumer preferences, increased prices or other reasons would adversely impact
the Company.

     The Company's future expansion plans are based upon Management's belief
that the Popeye's concept will have significant market appeal in the markets in
which the Company expects to enter. In the event the anticipated consumer
acceptance of the Popeye's concept in these markets is not realized, the Company
would be subject to a material adverse effect.

CERTAIN FACTORS AFFECTING THE QUICK-SERVICE RESTAURANT INDUSTRY.

     The Company is required to respond to various consumer preferences, tastes
and eating habits; demographic trends and traffic patterns; increases in food
and labor costs; and national, regional and local economic conditions. In the
past, several quick-service restaurant companies have experienced flat growth
rates and declines in average sales per restaurant, in response to which certain
of such companies have adopted "discount-pricing" strategies. Such strategies
could have the effect of drawing customers away from companies that do not
engage in discount pricing and could also negatively impact the operating
margins of competitors that do attempt to match competitors' price reductions.
Continuing or sustained price discounting in the fast food industry could have
an adverse affect on the Company.

     The Company's profits are dependent on discretionary spending by consumers,
particularly by consumers living in the communities in which the Company's
restaurants are located. Currently, the Company has locations in Florida,
Alabama, Illinois, Georgia, Mississippi, Missouri, and Louisiana. A significant
weakening in any of the local economies in which the Company operates may cause
the residents of such communities to curtail discretionary spending which, in
turn, could materially adversely affect the profitability of the entire Company.

     IMPORTANCE OF TRADEMARKS. The Company believes that its use of various
trademarks and service marks obtained pursuant to its franchise agreements with
the Franchisor are valuable to the marketing of its restaurants. There can be no
assurance that the Company's use of such marks does not or will not violate the
proprietary rights of others, that the Company's rights to utilize such marks
will be upheld if challenged, or that the Company will not be prevented from
using the marks, any of which could materially adversely affect on the Company.

GOVERNMENT REGULATION. The restaurant business is subject to extensive federal,
state and local regulation relating to the development and operation of
restaurants, including regulations relating to building and zoning requirements,
franchising, preparation and sale of food, and laws governing the Company's
relationship with its employees, including minimum wage requirements,
unemployment taxes and sales taxes, overtime and working conditions and
citizenship requirements. The failure to obtain or retain required licenses, or
a substantial increase in the minimum wage rate, could adversely affect the
quick service operations of the Company. The restaurant business in these
markets is subject to extensive regulation relating to the development and
operation of restaurants, including regulations relating to building
requirements, preparation and sale of quick service, and laws governing the
Company's relationship with its employees. Compliance with such regulations may
result in the Company incurring significant expenses. Failure to obtain required
licenses or to comply with applicable laws and regulations in such jurisdictions
could adversely affect the operations of the Company's restaurants in such
jurisdictions.

                                      14.
<PAGE>

         EXPANSION PLANS; CAPITAL RESOURCE REQUIREMENTS. There can be no
assurance that the Company will achieve its growth objectives or that new
restaurants will be profitable. The success of the Company's planned expansion
will be dependent upon numerous factors, many of which are beyond the Company's
control, including the identification of suitable markets, the availability and
leasing or purchase of suitable sites on acceptable terms, the hiring, training
and retention of qualified management and other restaurant personnel, the
ability to obtain necessary governmental permits and approvals, the availability
of appropriate financing and general economic conditions.

         DEPENDENCE ON CONCEPTS. Because the Company develops and operates
Popeye's restaurants, a failure of the Popeye's concept to compete successfully
in the quick service restaurant industry in the areas in which the Company
operates Popeye's restaurants or in which the Company intends to develop new
restaurants or acquire existing restaurants would have a material adverse effect
on the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

       The Company's major exposure is to changing interest rates. The Company's
policy is to manage interest risk through the use of a combination of fixed and
floating rate instruments, with respect to both its liquid assets and its debt
instruments. The Company maintains Certificates of deposits with original
maturities of 12 months or less. These financial instruments are subject to
interest rate declines. An immediate decline of 10 % in interest rates would
reduce the Company's annual interest income by approximately $19,500

       Interest rate risk is primarily limited to our variable rate debt
obligations, which totaled $3,477,000 as of September 30, 2001. In the event
that interest rates increased by 10 %, the Company's annual interest obligations
would increase by approximately $22,500.

Chicken Rate Risk

       The Company's cost of sales is significantly affected by increases in the
cost of chicken, which can result from a number of factors, including
seasonality, increases in the cost of grain, disease and other factors that
affect availability.

In order to insure favorable pricing for our chicken purchases in the future,
reduce volatility in chicken prices, and maintain an adequate supply of fresh
chicken, the Franchisor set up a purchasing cooperative for the benefit of the
franchisees, including the Company. The purchasing cooperative has entered into
two types of chicken purchasing contracts with chicken suppliers. The first is a
grain-based "cost-plus" pricing contract that utilizes prices that are based
upon the cost of feed grains, such as corn and soybean meal, plus certain agreed
upon non-feed and processing costs. The other is a market-priced formula
contract based on the "Georgia whole bird market value". Under this contract,
the Company pays the market price plus a premium for the cut specifications for
our restaurants. The market-priced contract has a maximum and minimum price that
the Company will pay for chicken during the term of the contract. The contracts
have terms ranging from three to five years with provisions for certain annual
price adjustments. The Company utilizes both contracts to ensure favorable
chicken prices. In Fiscal 2001 and Fiscal 2000 approximately 38% of the cost of
sales for the Company was attributable to the purchase of fresh chicken.

         Separately, in Fiscal 1999, the Company entered into a four year
agreement with Conagra Inc. in order to guarantee the supply of chicken products
to the distributors in the states that the Company operates.

ITEM 8. FINANCIAL STATEMENTS

         See the Financial Statements of the Company, which are attached hereto.

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

       Not applicable

                                      15.
<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The current executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
                                                     DIRECTOR
                                                     --------
           NAME                              AGE       SINCE           POSITION
           ----                              ---       -----           --------
<S>                                        <C>      <C>                <C>
           Robert S. Berg                    43        1996            Chairman of the Board,
                                                                       Chief Executive Officer

           Steven M. Wemple                  50        1996            President. Chief  Operating Officer,
                                                                       Treasurer, Secretary and Director

           Francis X. Maloney                58         N/A            Chief Financial Officer

           Marshal E. Rosenberg, Ph.D.       64        2001            Director
</TABLE>

     The following sets forth certain biographical information with respect to
     the executive officers and directors of the Company:

     Robert S. Berg has served as Chairman of the Board and Chief Executive
     Officer of the Company since April 1996. Since 1987, Mr. Berg has served as
     President of Sailormen, Inc.

     Steven M. Wemple has served as the President and Chief Operating Officer of
     the Company and as a director since April 1996. Mr. Wemple is in charge of
     all operational matters relating to the Company's business. Since 1985, Mr.
     Wemple has served as Vice-President of Sailormen, Inc.

     Francis X. Maloney joined the Company in 1998 as Chief Financial Officer.
     He served as Vice President and Controller for Tecno Consult International
     S.A., a real estate developer in the Caribbean, from January 1994 to August
     1998. Prior to that he served as Vice President of Finance for Ben Franklin
     Properties, a high rise condo developer in North Miami Beach, Florida from
     1988 to 1994.

     Marshal E. Rosenberg Ph.D. has served as a Director since June, 2001. Since
     1962, Mr. Rosenberg has been President of the Marshal Rosenberg
     Organization, Inc, a privately held corporation involved in investments,
     insurance, and banking.

     There are no family relationships among any of the executive officers or
     directors of the Company. None of the executive officers and directors of
     the Company are subject to any legal proceedings.

     The directors serve at the pleasure of the shareholders of the Company.

     Section 16(a) Beneficial Ownership Reporting Compliance:

     Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, the Company's directors, officers and any person beneficially owning
more than ten percent of the Company's common stock are required to report their
initial ownership of the Company's common stock and any subsequent changes in
that ownership to the Securities and Exchange Commission.

     Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during Fiscal 2001, and certain representations made by
the Company's directors, the Company has determined that all required filings
have been made except as provided below.

                                      16.
<PAGE>

     Robert S. Berg did not timely file a Form 3 when he became an officer and
director of the Company and did not timely report six separate acquisitions of
common stock directly by him and one separate disposition of common stock
directly by him, Steven M. Wemple did not timely report four separate
acquisitions of common stock directly by him and Francis X. Maloney did not
timely file a Form 3 when he became an officer of the Company. The transactions
have been reflected in subsequent filings made by such individuals.

     Andrew J. Nichols beneficially owns more than 10% of the Company's
outstanding common stock. Mr. Nichols has not filed a Form 3. The Company does
not have information available to it sufficient to allow the Company to
accurately disclose the number of reports that Mr. Nichols has not timely filed
or the number of transactions that were not reported on a timely basis.

ITEM 11. EXECUTIVE COMPENSATION

CASH COMPENSATION

     The following table shows, for the three-year period ended September 30,
2001, cash and other compensation paid to the Chief Executive Officer of the
Company and the Company's four most highly compensated executive officers of the
Company other than the Chief Executive Officer, each of whom received a total
annual salary and bonus in excess of $100,000 for the fiscal year ended
September 30, 2001.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         LONG-TERM COMPENSATION
                                                                         ----------------------
                                      ANNUAL COMPENSATION           AWARDS                     PAYOUTS
                                      -------------------           ----------------------------------
                                                         OTHER
                                                         ANNUAL     RESTRICTED  SECURITIES     OTHER        ALL
                                                         COMPEN-    STOCK       UNDERLYING     LTIP       COMPEN-
NAME AND                  FISCAL    SALARY    BONUS      SATION     AWARD(S)    OPTIONS/       PAYOUTS    SATION
PRINCIPAL POSITION         YEAR       ($)      ($)         ($)        ($)       SARS (#)         ($)        ($)
------------------         ----     ------    -----      ------     --------    --------       -------    --------
<S>                      <C>       <C>       <C>       <C>         <C>          <C>            <C>        <C>
Robert S. Berg             2001     768,043   10,000    5,212  (1)      0          0              0          0
Chairman of the Board      2000     452,043  300,000    4,322  (1)      0          0              0          0
 Chief Executive Officer   1999     328,580        0    4,165  (1)      0          0              0          0

Steve M. Wemple            2001     718,326   10,000    5,212  (1)      0          0              0          0
President, Chief           2000     422,326  300,000    4,322  (1)      0          0              0          0
Operating Officer,         1999     298,863        0    4,316  (1)      0          0              0          0
Treasurer, Secretary
and Director

Francis X.Maloney          2001     132,980    5,000    5,212  (1)      0          0              0          0
Chief Financial            2000     100,000    1,200    4,322  (1)      0          0              0          0
Officer                    1999      71,587        0    3,601  (1)      0          0              0          0
</TABLE>

(1) Represents premiums for health insurance paid by the Company.

DIRECTOR COMPENSATION

     Generally, Directors of the Company are not compensated for their services
to the Company.

                                      17.
<PAGE>

     On October 23, 2001, the Company announced that it had received a proposal
from Robert S. Berg and Steven M. Wemple for a going private transaction. See
Item 12 below. In connection with that proposal, the Board of Directors
appointed Marshal E. Rosenberg, Ph.D., the sole director of the Company other
than Messrs. Berg and Wemple, as a Special Committee to review the proposed
transaction. Mr. Rosenberg receives $1,000 for each month or portion of a month
during which he serves on the Special Committee.

REPORT ON EXECTIVE COMPENSATION

     The Company has not established a separate compensation committee. Instead,
the Board of Directors of the Company is responsible for setting the
compensation of the Company's executive officers, developing executive benefit
plans and establishing other employee benefit plans or programs for the benefit
of the Company's executive officers.

     During Fiscal 2001, Robert S. Berg and Steven M. Wemple were the Company's
only Directors until the appointment of Marshal E. Rosenberg, Ph.D. to the Board
of Directors in June, 2001. Additionally, during Fiscal 2001 Messrs. Berg and
Wemple were two of the three executive officers of the Company.

     Determination by the Board of the salaries and bonuses for its executive
officers are primarily made on the basis of industry and peer group standards
and regional and national economic considerations.

     The Company's executive compensation program has two components: salary and
bonus. Currently, the program emphasizes salary with slight emphasis placed on
bonus.

     The Board sets the base salary for its chief executive officer at levels
equal to the top levels of competitive peer companies. Base salary is reviewed
annually and is subject to adjustment based upon individual performance. The
chief executive officer's salary is related to the Company's performance and
growth. Based upon the Company's revenue growth of approximately 100% per year
for the last four years, and accomplishing certain profitability goals, the
Board established the base salary of Robert S. Berg, chairman of the Board and
chief executive officer of the Company, at $768,043 effective October 1, 2000.

     Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 in a taxable year the deduction a company may claim for compensation
paid to each of its chief executive officer and four other highest paid
officers, unless certain performance-based conditions are met. The Board has
reviewed this provision and does not anticipate the payment of any compensation
to an executive officer that would be affected by the limit.

     The Board believes that base salary levels and other incentives are
reasonable and sufficiently competitive.

     Marshal E. Rosenberg Ph.D. was not a director of the Company until June,
2001. As a result, this report is presented by the members of the Board of
Directors of the Company in office at the time that the compensation decisions
were reached:

         Robert S. Berg
         Steven M. Wemple


                                      18.
<PAGE>

PERFORMANCE GRAPH

     The performance graph set forth below compares the cumulative total
shareholder return on the Company's Common Stock with the Nasdaq Composite Index
and the Russell 2000 Index for the period from October 1, 1997 through September
30, 2001. The Company currently trades its common stock on the Nasdaq over-the-
counter bulletin board quotation system under the symbol "IFDA.OB". The graph
assumes $100 invested on October 1, 1997 in the Common's common stock, the
stocks of the Nasdaq Composite Index and the Russell 2000 Index. Historical
results are not necessarily indicative of future performance.

           COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE COMPANY
               NASDAQ COMPOSITE INDEX AND THE RUSSELL 2000 INDEX

                                GRAPHIC OMITTED

                                 1997       1998      1999     2000      2001
                                 ----       ----      ----     ----      ----

Interfoods of America            100.0      102.0      55.0     94.1     124.2
Nasdaq Composite Index (a)       100.0      100.5     162.9    217.9      88.9
Russell 2000 Index (b)           100.0       80.1      94.2    114.9      89.2

(a) The Nasdaq Composite Index comprises all Nasdaq domestic and international
based company stocks listed on The Nasdaq Stock Market.

(b) The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which is approximately 8% of the total
market capitalization of the Russell 3000 Index.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information regarding beneficial ownership
of the Company's Common Stock as of October 31, 2001 (a) by each person known to
the Company to own beneficially more than 5% of any class of the Company's
securities and (b) by each of the Company's executive officers and directors and
by all executive officers and directors of the Company as a group. As of October
31, 2001, there were 5,012,099 shares of Common Stock of the Company
outstanding. The address of each of the individuals described below is 9400 S.
Dadeland Boulevard, Suite 720, Miami, Florida 33156.

                                      19.
<PAGE>

NAME OF BENEFICIAL                       AMOUNT AND NATURE OF        PERCENT
OWNER                                    BENEFICIAL OWNERSHIP (1)    OF CLASS
------------------                       --------------------        --------
Robert S. Berg                               1,673,219 (2)           33.3%(2)
Chairman of the Board,
Chief Executive Officer,

Steven M. Wemple                               882,352               17.6%
President, Chief Operating
Officer, Treasurer, Secretary,
and Director

Francis X. Maloney                                 256                 *
Chief Financial Officer

Andrew J. Nichols                              741,317               14.8%

Kenneth Cramer                                 338,983                6.8%


All Executive Officers and Directors
as a Group (3 persons)                       2,555,827               51.0%(2)
                                             =========               =====
* less than 1% of outstanding shares.

(1) Except as provided in these footnotes, the persons named in the table have
    sole voting and investment power with respect to all shares of common stock
    shown as beneficially owned by them. The Company has no outstanding options,
    warrants or other rights to purchase its common stock.

(2) The amount shown in the table includes 1,477,219 shares owned of record by
    Robert S. Berg over which he exercises sole voting and investment power. The
    amount shown in the table also includes 188,000 shares owned of record by
    Lourdes T. Berg, the former wife of Robert S. Berg, over which Robert S.
    Berg exercises sole voting power and Lourdes T. Berg exercises sole
    investment power and 8,000 shares owned of record by Robert J. Berg over
    which Robert S. Berg exercises shared voting and investment power. Pursuant
    to Rule 13d-4 of the Securities Exchange Act of 1934, as amended, Robert S.
    Berg disclaims beneficial ownership of the 188,000 shares owned of record by
    Lourdes T. Berg and the 8,000 shares owned by Robert J. Berg. The amount in
    the table also includes 100,000 shares that Robert S. Berg may acquire at
    any time from Lourdes T. Berg pursuant to an option granted by Lourdes T.
    Berg to Robert S. Berg.

     On October 23, 2001, the Company announced that it had received a proposal
from Robert S. Berg and Steven M. Wemple for a going private transaction. The
proposed transaction, which would effect a change in control of the Company,
would be in the form of a merger with a corporation wholly-owned by Mr. Berg and
Mr. Wemple. Pursuant to the proposal, the Company's shareholders (other than Mr.
Berg and Mr. Wemple) would receive unsecured, subordinated notes of the Company,
in exchange for the principal amount of $1.20 per share of the Company's Common
Stock.

     The notes to be issued by the Company in the transaction would bear
interest at the rate of 5% per annum. Interest would be payable semi-annually,
with principal becoming due and payable in a single payment at maturity, which
would be the third anniversary of the date of issuance. The notes would be
subordinated to all senior debt of the Company and would be issued in minimum
principal amounts of $100 and thereafter in multiples of $25. Company
shareholders would receive the cash equivalent in lieu of any fractional notes.
If the proposal transaction is completed, the Company will no longer be a public
reporting entity and its stock will not be publicly traded.

                                      20.
<PAGE>

     The Board of Directors has appointed Marshal E. Rosenberg, Ph.D., the sole
director of the Company other than Messrs. Berg and Wemple, to head a Special
Committee to review the proposed transaction. The Special Committee has retained
an independent financial advisor and legal counsel for purposes of evaluating
the proposal.

     The proposed transaction would result in the acquisition of all of the
outstanding shares of common stock of the Company (other than the shares by
Messrs. Berg and Wemple and their acquisition corporation). The final terms of
any acquisition will be based on negotiations between the acquirers and the
Special Committee which is currently ongoing. The proposed acquisition is
subject to, among other things, (1) approval of the proposed transaction by the
Special Committee of the Board of Directors and the Company 's shareholders, (2)
receipt of a fairness opinion by the Special Committee, (3) receipt of any
applicable regulatory approvals and third-party consents and (4) the
inapplicability (either by their terms or as a result of Company Board action)
of certain business combination and control share provisions under Nevada law.
There can be no assurance that a definitive merger agreement will be executed
and delivered or that the proposed transaction will be consummated.

     The proposed acquisition may only be completed in accordance with
applicable state and federal laws including the Securities Act of 1933, the
Securities Act of 1934 and the Trust Indenture Act of 1939, as amended; however,
it is anticipated that exemptions from the registration requirements of the
Securities Act and the qualification requirements of the Trust Indenture Act
will be available to this transaction.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Robert S. Berg, Chairman of the Board of Directors and Chief Executive
Officer of the Company, and Steven M. Wemple, President, Chief Operating
Officer, Treasurer, Secretary and Director of the Company, jointly own all of
the outstanding stock of Elk River Aviation Inc. ("Elk River"), a charter
aircraft company whose sole business is the leasing of the airplane described in
this paragraph. On October 1,1998, the Company entered into an agreement whereby
the Company was charged the flat rate of $1,100 per hour of usage, on an as
needed basis. Elk River was responsible for all operating expenses of the
airplane, such as pilot salary, insurance, fuel, and maintenance. Subsequently,
the lease rate was amended to $1,500 per hour in June 1999, and to $3,500 per
hour in October 2000. In Fiscal Years 2001, 2000, and 1999 the Company paid
approximately $922,000, $724,000 and $440,000, respectively, to Elk River for
its use of the airplane. The Company believes that the lease of the aircraft is
important to the Company in order to permit management to effectively supervise
the operations of its restaurants which are located in seven states, as well as
in connection with the efforts of the Company to analyze potential future
restaurant locations. As of September 30, 2001 and 2000, the Company had a
receivable of $221,304 and $0, related to certain expenses paid by the Company
on behalf of Elk River Aviation, which is included in Accounts Receivable on the
Consolidated Balance Sheet. In Fiscal 2000, the Company fully reserved for a
deposit of $160,439 with Elk River Aviation as its collectibility was deemed to
be uncertain.

       On July 21, 2000, the Company invested $2,200,000 in land and building
for two Popeye's Chicken and Biscuit restaurants on the West Coast of Florida.
The Company obtained financing of $1,632,000 from an unrelated party in
connection with this transaction. The Company leased the two restaurants to T.T.
& D. Foods Inc., a Florida Corporation controlled by a party related to Mr.
Berg. Under the terms of the triple net lease, T. T. & D Foods Inc., pays annual
rent to the Company in the amount of $282,568 and pays insurance, taxes and
other expenses associated with the leased property. The Company's annual
payments on the debt incurred to finance the two restaurants is $222,662. During
Fiscal years 2001,and 2000 the Company netted income of $59,906 and $36,135 from
this transaction.

     The Company believes that the transaction described above are the same
terms and conditions as similar transactions with unaffiliated parties.

     Marshal Rosenberg Ph.D, the outside director of the Company, acted as agent
for the National Life Insurance Company that provided the Sailormen, Inc. Salary
Continuation Executive Retention plan and the Company's life insurance policies
on Robert S. Berg.,Chairman of the Board of Directors and Chief Executive
Officer of the Company, and Steven M. Wemple, President, Chief Operating
Officer, Treasurer, and Secretary of the Company. During Fiscal 2001, the
Company paid to National Life Insurance Company premiums aggregating $211,000 in
connection with such insurance policies. Mr. Rosenberg received approximately
$105,500 in commissions from the insurance company in connection with such
insurance policies. No such commissions were paid in Fiscal 2000 or Fiscal 1999.

                                      21.
<PAGE>

                                    PART IV

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

(a)      1. Financial Statements.
            See Index to Financial Statements which appears on page F-1 herein.

         2. Financial Statement Schedules:
            None

         3. Exhibits:

Exhibit No      Description
----------      -----------

       3.1      Articles of Incorporation of Interfoods of America, Inc.
                formerly Sobik's Subs, Inc. as amended (1)

       3.2      By-Laws of Interfoods of America, Inc. formerly Sobiik's Subs,
                Inc. as amended (1)

       4.2      Secured Promissory Note dated Septembe 14, 2000 by Interfoods of
                America, Inc. and Sailormen, Inc. in favor of American
                Commercial Capital LLC.

       4.3      Security Agreement dated September 14, 2000 by and among
                Interfoods of America, Inc., Sailormen, Inc. and American
                Commercial Capital LLC. (all schedules and exhibits have been
                omitted other than the schedule of defined terms; such omitted
                schedules and exhibits will be furnished upon request)

       9.1      Shareholders Voting Agreement dated April 17,1996 (1)

      10.1      Form of Franchise Agreement, entered into by the Company as
                Franchisee, including the Addendum to Franchise Agreement. (1)

      10.2      Trademark Licensing Agreement dated March 1, 1993 (1)

      10.9      Asset Purchase Agreement between the Company and Ellis
                Enterprise dated January 11, 2000 (3)

     10.10      Asset Purchase Agreement between the Company and RMS Family
                Restaurants dated September 14, 2000 (3)

     10.11      Executive Retention - Salary Continuation Plan dated January 15,
                2001 (3)

     21.1       List of Subsidiaries (1)

                (1) Incorporated herein by reference to Form 10-KBS under the
                Securities Exchange Act of 1934 filed with the Commission in
                July 1996, file number 000-21093

                (2) The Company hereby agrees to furnish to the Commission upon
                request all other instruments defining the rights of holders of
                long-term debt of the Company and its consolidated subsidiaries.

                (3) Incorporated herein by reference to Form 10-Q under the
                Securities Exchange Act of 1934 filed with the Commission in May
                2001, file number 000-21093

                                      22.
<PAGE>

(b.) Reports on Form 8-K

     The following reports were filed on Form 8-K/A during the fourth quarter of
the period covered by this report: On September 4, 2001, the Company filed on
Form 8-K/A under item 7(a) and 7(b) the financial statements and pro forma
financial information relating to the January 11, 2000 acquisition of 37
restaurants from Ellis Enterprises Inc.

     On September 21, 2001, the Company filed on Form 8-K/A under item 7(a) and
7(b) the financial statements and pro forma financial information relating to
the March 8, 1999 acquisition of 10 restaurants from The Moody Company.

                                      23.
<PAGE>

SIGNATURES

In accordance with 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.

                          INTERFOODS OF AMERICA, INC.
                                 (Registrant)

                     Dated: December 18, 2001       /s/ STEVEN WEMPLE
                                                    ------------------------
                                                    By: STEVEN WEMPLE, President




                     Dated: December 18, 2001       /s/ FRANCIS X. MALONEY
                                                    ------------------------
                                                    By: FRANCIS X. MALONEY,
                                                    Chief Financial Officer and
                                                    Principal Accounting 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:

<TABLE>
<CAPTION>
     SIGNATURE                                   TITLE                            DATE
<S>                                   <C>                                        <C>
ROBERT S. BERG                        Director, Chairman of the Board             December 18, 2001
                                       Chief Executive Officer

STEVEN M. WEMPLE                      Director, President, Chief Operating        December 18, 2001
                                       Officer, Secretary and Treasurer

FRANCIS X. MALONEY                    Chief Financial Officer and                 December 18, 2001
                                      Principal Accounting Officer

MARSHAL E. ROSENBERG Ph.D.            Director                                    December 18, 2001
</TABLE>
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
Report of Independent Certified Public Accountants                          F-2
Report of Independent Certified Public Accountants                          F-3

Consolidated Financial Statements:

        Consolidated Balance Sheets                                         F-4 - F-5

        Consolidated Statements of Operations                               F-6

        Consolidated Statement of Stockholders' Equity                      F-7

        Consolidated Statements of Cash Flows                               F-8 - F-9

Notes to Consolidated Financial Statements                                  F-10 - F-22
</TABLE>

                                      F-1
<PAGE>

                        REPORT OF INDEPENDENT CERTIFIED
                              PUBLIC ACCOUNTANTS


Board of Directors of
Interfoods of America, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Interfoods of
America, Inc. and Subsidiaries as of September 30, 2001 and 2000, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the two years in the period ended September 30, 2001
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Interfoods of
America, Inc. and Subsidiaries as of September 30, 2001 and 2000 and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended September 30, 2001, in conformity with
accounting principles generally accepted in the United States of America.

GRANT THORNTON LLP

Miami, Florida,
November 6, 2001.

                                      F-2
<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
          Interfoods of America, Inc.:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Interfoods of America, Inc. (a Nevada
corporation) and subsidiaries for the year ended September 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Interfoods of America, Inc. and subsidiaries for the year ended September 30,
1999, in conformity with accounting principles generally accepted in the United
States of America.

ARTHUR ANDERSEN LLP

Miami, Florida,
November 9, 1999.

                                      F-3
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          SEPTEMBER 30, 2001 AND 2000

<TABLE>
<CAPTION>
                               ASSETS                                                        2001                2000
                               ------                                                        ----                ----
<S>                                                                                   <C>                <C>
Current assets:
     Cash and cash equivalents                                                       $  2,370,032       $   2,371,365
     Certificates of deposit                                                            3,527,820           3,527,820
     Accounts receivable                                                                  276,275              29,378
     Inventories                                                                          792,577             746,524
     Prepaid expenses                                                                     411,269               3,815
                                                                                     ------------       -------------

           Total current assets                                                         7,377,973           6,678,902
                                                                                     ------------       -------------

Property and equipment, net                                                            79,926,823          78,078,077
                                                                                     ------------       -------------

Other assets:
     Deposits                                                                             354,930             371,501
     Goodwill, less accumulated amortization of
       $1,564,541 and $739,763 in 2001 and 2000, respectively                          24,736,114          25,668,497
     Other intangible assets, less accumulated
       amortization of $398,329 and $279,832 in
       2001 and 2000,respectively                                                       2,005,617           2,102,034


     Debt issuance cost, less accumulated
       amortization of $ 233,997 and $85,163 in
       2001 and 2000, respectively                                                      2,448,405           2,577,623
     Other assets                                                                         178,362             176,328
                                                                                     ------------       -------------

           Total other assets                                                          29,723,428          30,895,983
                                                                                     ------------       -------------
           Total assets                                                              $117,028,224       $ 115,652,962
                                                                                     ============       =============
</TABLE>

                                  (Continued)

                                      F-4
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          SEPTEMBER 30, 2001 AND 2000

                                  (Continued)

<TABLE>
<CAPTION>
                                                                                             2001                2000
                                                                                             ----                ----
<S>                                                                                  <C>                 <C>
                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses                                           $ 10,428,488        $  9,341,740
     Current portion of advanced vendor rebates                                           720,044             956,779
     Current portion of long term debt                                                  6,080,505           8,007,819
     Current portion of capital lease obligations                                         168,714             502,679
     Current portion of deferred income on
       sale-leaseback transactions                                                         45,248              45,248
                                                                                     ------------        ------------

           Total current liabilities                                                   17,442,999          18,854,265

Long-term debt, net of current portion                                                 91,724,266          90,511,023
Capital lease obligations, net of current portion                                               -             168,714
Advanced vendor rebates, net of current portion                                         2,256,230           1,953,633
Deferred taxes                                                                          1,103,703             295,594
Deferred income on sale-leaseback transactions,
     net of current portion                                                               663,161             708,413
                                                                                     ------------        ------------

           Total liabilities                                                          113,190,359         112,491,642
                                                                                     ------------        ------------

Redeemable preferred stock, Class B, nonvoting,
430,000 shares authorized, 0 shares and 225,000 shares
issued and outstanding in 2001 and 2000, respectively                                           -             225,000
                                                                                     ------------        ------------
Commitments and contingencies (Note 10)                                                        --                  --

Stockholders' equity:
     Common stock, 25,000,000 shares authorized
       at $.001 par value; 5,012,099 and 8,270,831
       shares issued and outstanding in
       2001 and 2000, respectively                                                          5,012               8,271
       Additional paid-in capital                                                       2,843,214           4,349,093
     Retained earnings (accumulated deficit)                                              989,639             (11,906)
     Common stock in treasury, at cost, 0 shares and
         3,125,399 shares in 2001 and 2000, respectively                                        -          (1,409,138)
                                                                                     ------------        ------------

           Total stockholders' equity                                                   3,837,865           2,936,320
                                                                                     ------------        ------------

           Total liabilities and stockholders' equity                                $117,028,224        $115,652,962
                                                                                     ============        ============
</TABLE>

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

                                      F-5
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                       2001                   2000               1999
                                                                       ----                   ----               ----
<S>                                                           <C>                     <C>                <C>
Total Restaurant sales                                        $   152,088,594         $ 77,589,129       $ 37,796,392

Costs and expenses:
     Cost of restaurant operations:
         Cost of sales                                             48,521,028           24,780,726         12,130,572
         Restaurant wages and related benefits                     40,262,997           20,545,181          9,834,523
         Occupancy and other operating expenses                    34,520,341           17,186,197          9,773,777
                                                              ---------------         ------------       ------------
           Total cost of restaurant operations                    123,304,366           62,512,104         31,738,872

     General and administrative expenses                           12,419,692            7,192,666          3,992,330
     Depreciation and amortization                                  4,878,386            2,188,118            778,051
                                                              ---------------         ------------       ------------

           Total operating expenses                               140,602,444           71,892,888         36,509,253
                                                              ---------------         ------------       ------------

Operating income                                                   11,486,150            5,696,241          1,287,139
                                                              ---------------         ------------       ------------
Other income (expense):
     Loss on investment in JRECK                                            -              (93,691)          (182,809)
     Interest expense                                             (10,135,891)          (4,439,756)          (892,906)
     Interest and other income (expense)                              459,395             (565,631)          (227,378)
                                                              ---------------         ------------       ------------

           Total other expense                                     (9,742,496)          (5,099,078)        (1,303,093)
                                                              ---------------         ------------       ------------

           Income (loss) before income tax provision                1,809,654              597,163            (15,954)

Income tax provision                                                 (808,109)            (216,029)          (130,370)
                                                              ---------------         ------------       ------------

           Net income (loss)                                  $     1,001,545         $    381,134       $   (146,324)
                                                              ===============         ============       ============


Net earnings (loss) per share - basic and diluted, less
     preferred stock dividends of $0, $0 and
     $750 in 2001, 2000, and 1999 respectively                $          0.20         $       0.07       $      (0.03)
                                                              ===============         ============       ============

Weighted average shares outstanding:

     Basic and diluted                                              5,133,377            5,468,503          5,713,658
                                                              ===============         ============       ============
</TABLE>

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

                                      F-6
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
             FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                       Retained        Common
                                             Common Stock            Additional        Earnings        Stock in
                                             ------------
                                                                      Paid-in        (Accumulated       Treasury
                                          Shares        Amount        Capital           deficit)         at cost           Total
                                          ------        ------        -------           --------         -------           -----
<S>                                    <C>            <C>           <C>            <C>                <C>                <C>
BALANCE, OCTOBER 1, 1998                8,262,405      $ 8,262      $ 4,321,727       $ (245,966)     $  (728,268)       $3,355,755

  Net loss                                      -            -                -         (146,324)               -          (146,324)

  Preferred stock - Class A dividend            -            -                -             (750)               -              (750)

  Common stock issued to employees          8,426            9           27,366                -                -            27,375
                                       ----------      -------      -----------       ----------      -----------        ----------

BALANCE, SEPTEMBER 30, 1999             8,270,831        8,271        4,349,093         (393,040)        (728,268)        3,236,056

  Net income                                    -            -                -          381,134                -           381,134

  Purchase of common stock in treasury          -            -                -                -         (680,870)         (680,870)
                                       ----------      -------      -----------       ----------      -----------        ----------

BALANCE, SEPTEMBER 30, 2000             8,270,831        8,271        4,349,093          (11,906)      (1,409,138)        2,936,320

  Net income -                                  -            -                -        1,001,545                -         1,001,545

  Purchase of common stock in treasury          -            -                -                -         (100,000)         (100,000)

  Retirement of common stock in
  treasury                             (3,258,732)      (3,259)      (1,505,879)               -        1,509,138                 -
                                       ----------      -------      -----------       ----------      -----------        ----------

BALANCE, SEPTEMBER 30, 2001             5,012,099      $ 5,012      $ 2,843,214       $  989,639      $         -        $3,837,865
                                       ==========      =======      ===========       ==========      ===========        ==========
</TABLE>





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

                                      F-7
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                   2001                2000                   1999
                                                                                   ----                ----                   ----
<S>                                                                           <C>                  <C>                 <C>
Cash flows from operating activities:
     Net income (loss)                                                        $ 1,001,545          $   381,134         $   (146,324)
     Adjustments to reconcile net income (loss) to net
       cash provided by operating activities
         Depreciation and amortization                                          4,878,386            2,188,118              778,051
         Deferred income tax expense                                              808,109              216,029              130,370
         Amortization of deferred income on sale-leaseback transactions           (45,252)             (45,252)             (38,974)
         Amortization of debt issuance costs                                      148,834               70,966               14,197
         Amortization of advanced vendor rebates                                 (493,968)            (799,852)                   -
         Write down of investment in JRECK                                             --               93,691              182,809
         Loss on closed stores                                                     90,320               47,942                   --
         Common stock issued to employees                                              --                   --               27,375
         Changes in assets and liabilities:
           Accounts receivable                                                   (246,897)            (262,180)              24,920
           Inventories                                                            (46,053)            (468,355)            (157,773)
           Prepaid expenses                                                      (407,454)              66,378              (21,649)
           Deposits                                                                16,571              221,331              (70,820)
           Other assets                                                           (32,848)                  --               52,500
           Accounts payable and accrued expenses                                1,086,748            5,381,842               87,610
           Advanced vendor rebates                                                559,830            3,710,264                   --
                                                                              -----------          -----------         ------------
                   Net cash provided by operating activities                    7,317,871           10,802,056              862,292
                                                                              -----------          -----------         ------------
Cash flows from investing activities:
     Acquisition of land, buildings and restaurants                            (4,145,189)         (85,184,792)         (19,718,278)
     Proceeds from sale of real estate                                            170,723              228,500           14,430,370
     Capital expenditures                                                      (1,802,988)          (3,547,065)          (5,022,163)
     Acquisition of other intangible assets                                             -              (40,000)            (109,500)
     Certificates of deposit investments                                                -           (3,527,820)                  --
                                                                              -----------          -----------         ------------

                   Net cash used in investing activities                       (5,777,454)         (92,071,177)         (10,419,571)
                                                                              -----------          -----------         ------------
Cash flows from financing activities:
     Proceeds from long-term debt                                               3,183,794           89,171,727            9,076,360
     Repayment of long-term debt                                               (4,400,544)          (2,820,282)            (340,666)
     Redemption of Restricted Class A Preferred stock                                  --                   --              (50,000)
     Redemption of Restricted Class B Preferred stock                            (225,000)             (60,000)             (60,000)
     Preferred stock - Class A dividend                                                --                   --                 (750)
     Purchase of treasury stock                                                  (100,000)            (680,870)                  --
     Debt issuance costs                                                                -           (2,337,999)            (223,670)
                                                                              -----------          -----------         ------------

                 Net cash provided by (used in) financing activities           (1,541,750)          83,272,576            8,401,274
                                                                              -----------          -----------         ------------

                 Net increase (decrease) in cash and cash equivalents              (1,333)           2,003,455           (1,156,005)

Cash and cash equivalents:
     Beginning of period                                                        2,371,365              367,910            1,523,915
                                                                              -----------          -----------         ------------

     End of period                                                            $ 2,370,032          $ 2,371,365         $    367,910
                                                                              ===========          ===========         ============
</TABLE>

                                  (Continued)

                                      F-8
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

                                  (Continued)

<TABLE>
<CAPTION>
                                                                     2001               2000                1999
                                                                     ----               ----                ----
<S>                                                              <C>                <C>                 <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
     INFORMATION:

       Interest paid                                             $ 9,825,326        $ 4,030,756         $    778,710
                                                                 ===========        ===========         ============
       Income taxes paid                                         $         0        $     3,114         $     12,211
                                                                 ===========        ===========         ============

SUPPLEMENTAL DISCLOSURES OF NONCASH
     INVESTING AND FINANCING ACTIVITIES:
       Net assets and assumed certain liabilities of
         acquired businesses-
           Total assets                                                   --        $85,995,072         $ 20,114,481
           Total liabilities assumed                                      --           (810,280)            (396,203)
                                                                                    -----------         ------------

           Net cash paid                                                  --        $85,184,792         $ 19,718,278
                                                                                    ===========         ============
</TABLE>

In Fiscal 2001, the Company retired 3,258,732 shares of common stock held in
treasury which had a cost of $1,509,138.





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

                                      F-9
<PAGE>

                 INTERFOODS OF AMERICA, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       SEPTEMBER 30, 2001, 2000 AND 1999

1.   ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS OPERATIONS

Interfoods of America, Inc., a Nevada corporation (the "Company"), is through
its wholly owned subsidiary, Sailormen Inc., a Florida corporation, a franchisee
and operator of Popeye's/registered trademark/Chicken and Biscuits ("Popeye's")
restaurants. Pursuant to franchise agreements with AFC Enterprises, Inc., the
Company currently operates 165 Popeye's restaurants located in Florida, Alabama,
Illinois, Georgia, Mississippi, Louisiana and Missouri . 81 of the 165
restaurants are located in the state of Florida and these restaurants derive
approximately 56% of its revenue in Fiscal 2001.

The accompanying consolidated financial statements include the accounts of
Interfoods of America, Inc. ("Interfoods" or the "Company" formerly known as
Sobik's Subs, Inc.) and its wholly owned subsidiaries, SBK Franchise Systems,
Inc. ("SBK"), Sobik's Restaurant Corp. ("Restaurant"), Tropic Foods Ltd., West
Point Partners, Inc. and Sailormen, Inc. ("Sailormen"). In September 1996, the
Company changed its name from Sobik's Subs, Inc. to Interfoods of America, Inc.
Intercompany balances and transactions are eliminated in consolidation.


CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.

CERTIFICATES OF DEPOSIT

The Company invests its excess cash in certificates of deposit which have
maturities of 12 months or less. These investments are pledged as collateral for
certain of the Company's debt.

INVENTORIES

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

REVENUE RECOGNITION

Restaurant sales are recognized at time of sale with delivery of product to the
customer.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.

ADVERTISING

All costs associated with advertising and promoting the Company products are
expensed when incurred.

                                      F-10
<PAGE>

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. The Company capitalizes construction
in progress. The Company does not depreciate the construction in progress until
the assets are placed in service. Significant store re-imaging costs and other
improvements are capitalized as additions to the property and equipment, while
repairs and maintenance costs are expensed as incurred. Depreciation is
calculated using the straight-line method over the following estimated useful
lives:

          Building                           39 years
          Leasehold improvements             Lesser of 20 years or life of lease
          Furniture and equipment            3-10 years

For income tax purposes, accelerated methods of depreciation are used.

START-UP COSTS

The Company currently expenses costs relating to new restaurant start-up
activities. Such costs include training and labor costs prior to opening a new
restaurant. On April 3, 1998, the Accounting Standards Executive Committee
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities", which requires the write-off of all previously capitalized start-up
costs. The effective date of SOP 98-5 is for fiscal years beginning after
December 15, 1998. The Company adopted SOP 98-5 in Fiscal 2000. In Fiscal 1999,
the Company expensed approximately $60,000 of start-up costs. As of September
30, 2001, the Company had no remaining capitalized start-up costs.

INTANGIBLE ASSETS

Goodwill represents the excess of purchase price over the fair value of assets
and liabilities acquired in acquisitions accounted for under the purchase method
of accounting. Goodwill is amortized on a straight line basis over periods
ranging from 30 to 40 years, which management believes is a reasonable life in
light of the characteristics present in the Popeye's Franchise community. Other
intangible assets are recorded at cost and consist of franchise rights, which
are being amortized using the straight-line method over 20 years. The franchise
agreements are for an initial term of 20 years and may be extended for
additional ten-year terms upon the payment of one-half of the then-applicable
franchise fee and the execution of a renewal franchise agreement. The franchise
agreement terms require the Company to pay royalties of 5% and advertising of 3%
of net sales on a weekly basis.

Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires that long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Under such circumstances, SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used or disposed of
be reported at the lower of their carrying amount or fair value less cost to
sell. Accordingly, when events or circumstances indicate that long-lived assets
may be impaired, the Company estimates the asset's future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future undiscounted cash flows is less than the carrying amount of the
asset, an impairment loss is recognized based on the excess of the carrying
amount over the fair value of the asset. In Fiscal 2001, 2000 and 1999, the
Company wrote off $90,320, $47,948 and $0 of goodwill and other assets relating
to store closures.

DEBT ISSUANCE COSTS

The costs of obtaining financing are deferred and included as debt issuance
costs in the accompanying consolidated balance sheets and are amortized over the
term of the loan to which such costs relate.

ADVANCED VENDOR REBATES

The Company has entered into certain contractual agreements with two vendors to
receive rebates for future use of its products. As a result of these agreements,
the Company received advanced rebates of $ 559,830 and $3,710,264 in Fiscal 2001
and 2000 which was recorded as deferred revenue. As rebates are earned, the cost
of restaurant operations is reduced in the Consolidated Statement of Operations
and a corresponding decrease is recorded to advanced vendor rebates in the

                                      F-11
<PAGE>

Consolidated Balance Sheet. The Company is amortizing the advanced vendor
rebates based on gallon's purchased in accordance with the contractual
agreements.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

USE OF ESTIMATES

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

DISCLOSURES ABOUT FAIR VALUES
OF FINANCIAL STATEMENTS

The carrying amounts of cash, accounts receivable, and accounts payable
approximate fair value due to the short-term nature of these accounts. The fair
value of debt and redeemable preferred stock approximates the carrying value of
such accounts.

NET INCOME PER SHARE

Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted net income per
common share assumes the maximum dilutive effect from stock options and warrants
and other potential dilutive securities. For all periods presented, basic and
diluted net income per share are the same. The Company currently does not have
any stock options or warrants outstanding.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board approved the issuance of
SFAS 141, "Business Combinations" and SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 141 requires that all business combinations initiated after June
30, 2001 must be accounted for under the purchase method. In addition, SFAS 142
requires that all intangible assets acquired that are obtained through
contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to at least an annual assessment
for impairment by applying a fair value based test. SFAS 142 is required to be
applied starting with fiscal years beginning after December 15,2001, with early
adoption permitted in certain circumstances. The Company may elect to adopt SFAS
142 effective October 1,2001 or October 1,2002. This election must be made prior
to the issuance of its financial statements for the quarter ended December 31,
2001. Due to the complexity of this new standard and its recent issuance, the
Company is continuing to evaluate whether it will adopt SFAS 142 effective
October 1,2001. The Company continued to amortize goodwill under its current
method through September 30,2001. Once the standard is adopted, annual goodwill
amortization of approximately $ 822,000, respectively, will no longer be
recognized.

BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION

In Fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which changed the way companies report
information about operating segments. The Company has one single reporting
segment, its revenues are derived from customers located in the United States
and all of the Company's long lived assets are located in the United States.

                                      F-12
<PAGE>

2.   ACQUISITIONS

The Company made four acquisitions and the purchase of real estate on an
existing store in Fiscal 2000. Consideration for these acquisitions was
primarily cash which was generated by long term debt financing. The acquisitions
have been accounted for using the purchase method and, accordingly, the acquired
assets and assumed liabilities, including goodwill, have been recorded at their
estimated fair values as of the date of acquisition. The operations of the
acquired businesses have been included in the Company's consolidated statement
of operations since the date of each respective acquisition.

The following table sets forth businesses acquired during 2000 and the
consideration paid:

<TABLE>
<CAPTION>
                                                                      Date of                               Total
                      Acquisition                                  Acquisition                        Consideration
                      -----------                                  -----------                        -------------
                                                                                                    (In Thousands)
             <S>                                               <C>                                  <C>
             73 stores from RMS Family Restaurants             September 14, 2000                           $46,178
             Store #9 - Real Estate                            August 9, 2000                               $ 1,300
             One store from Jack Scoville                      July 27, 2000                                $   819
             Two stores from Melin Corporation                 July 21, 2000                                $ 2,203
             37 stores from Ellis Enterprises                  January 11, 2000                             $34,685
                                                                                                            -------
                                                                                                            $85,185
                                                                                                            =======
</TABLE>

The following table sets forth the estimated fair value of the assets acquired
for the above acquisitions (in thousands):

<TABLE>
             <S>                                                                                           <C>
             Assets, including cash                                                                         $64,988
             Goodwill                                                                                       $19,168
             Other intangibles                                                                              $ 1,839
             Liabilities assumed                                                                            $   810
</TABLE>

The goodwill acquired is being amortized on a straight line basis over 30 years.

The Company made two acquisitions in Fiscal 1999. Consideration for these
acquisitions was cash, which was generated by sale-leasebacks and long term debt
financing. The acquisitions have been accounted for using the purchase method
and, accordingly, the acquired assets and assumed liabilities, including
goodwill, have been recorded at their estimated fair values as of the date of
acquisition. The operations of the acquired businesses have been included in the
Company's consolidated statement of operations since the date of each respective
acquisition.

The following table sets forth businesses acquired during 1999 and the
consideration paid:

<TABLE>
<CAPTION>
                      Name of Business                             Acquisition                        Consideration
                      ----------------                             -----------                        -------------
                                                                                                      (In Thousands)
            <S>                                                <C>                                    <C>
             TMC FOODS L.L.C.                                  March 8, 1999                                $ 9,250
             Tex Mo / San Nan Corporations                     March 22, 1999                                10,601
                                                                                                            -------
                                                                                                            $19,851
                                                                                                            =======
</TABLE>

                                      F-13
<PAGE>

The following table sets forth the estimated fair value of the assets acquired
for the above acquisitions (in thousands):

<TABLE>
             <S>                                                                                            <C>
             Assets, including cash                                                                         $15,380
             Goodwill                                                                                         4,689
             Other intangibles                                                                                  178
             Liabilities assumed                                                                                396
</TABLE>


3.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following at September 30:

<TABLE>
<CAPTION>
                                                                                  2001                          2000
                                                                                  ----                          ----
           <S>                                                            <C>                           <C>
           Land                                                           $ 12,528,580                  $ 11,759,922
           Building                                                         35,939,948                    32,511,578
           Leasehold improvements                                           16,706,490                    15,463,287
           Furniture and equipment                                          21,232,212                    19,307,248
           Construction in progress                                            242,400                     1,851,553
                                                                          ------------                  ------------
                                                                            86,649,630                    80,893,588
           Less - accumulated depreciation
                         and amortization                                   (6,722,807)                   (2,815,511)
                                                                          ------------                  ------------

                                                                          $ 79,926,823                  $ 78,078,077
                                                                          ============                  ============
</TABLE>

4.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at September 30:

<TABLE>
<CAPTION>
                                                                                  2001                          2000
                                                                                  ----                          ----
           <S>                                                              <C>                          <C>
           Accounts payable                                               $  4,713,704                   $ 4,471,779
           Accrued payroll                                                   1,277,135                     1,130,109
           Accrued property taxes                                            1,014,057                       953,690
           Accrued payroll and sales taxes                                   1,254,475                     1,066,102
           Accrued interest                                                    819,565                       509,000
           Other                                                             1,349,552                     1,211,060
                                                                          ------------                   -----------
                         Total accounts payable and
                              accrued expenses                            $ 10,428,488                   $ 9,341,740
                                                                          ============                   ===========
</TABLE>

                                      F-14
<PAGE>

5.   LONG-TERM DEBT

<TABLE>
<CAPTION>
Long-term debt consists of the following at September 30:                         2001                          2000
                                                                                  ----                          ----
<S>                                                                        <C>                                <C>
      Note payable to a financial institution, due in
      monthly installments totaling $26,584 including
      interest at 8.68% through October 2013. Collateralized
      by certain of the Company's assets.                                    2,382,830                    2,490,298

      Annual lines of credit with a financial institution
      for borrowings of $3,877,820. Interest is payable
      monthly at variable interest rates with the principal balances
      due October 28, 2001, and April 19, 2002
      subject to annual renewal approval by the
      financial institution. Collateralized by certificates
      of deposit and some of the Company assets.                             3,477,820                     3,500,000

      Notes payable to a financial institution, due in monthly
      installments totaling $36,659 including interest at 9.65%
      through April 2014. Collateralized by certain of the
      Company's assets.                                                      3,097,062                     3,230,998

      Notes payable to a financial institution, due in
      monthly installments totaling $46,990 including
      interest at 9.50% through April 2014. Collateralized
      by certain of the  Company's assets.                                   4,131,140                     4,294,059

      Notes payable to a financial institution, due in
      monthly installments totaling $368,797 including
      interest of 10.81% through November, 2019.
      Collateralized by certain of the Company assets.                      34,774,080                    35,403,124

      Notes payable to a financial institution, due in
      monthly installments totaling $398,587 including
      interest at 10.15% through April, 2019.
      Collateralized by certain of the Company's assets                     37,991,965                    38,800,000

      Notes payable to a financial institution, due in
      monthly installments totaling $51,762 including
      interest at 9.84% through October 2012. Collateralized
      by certain of the Company's assets.                                    4,181,893                     4,380,777

      Mortgage notes payable to a financial institution, due in
      monthly installments totaling $11,222 including
      interest of 10.02% through September 2020.
      Collateralized by land and building                                    1,131,355                     1,150,000

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $13,371 including
      interest of 10.43% through August 2020.
      Collateralized by land and building                                    1,309,706                     1,330,374
</TABLE>

                                      F-15
<PAGE>

<TABLE>
<CAPTION>
LONG-TERM DEBT   ( Continued )                                                    2001                          2000
                                                                                  ----                          ----
<S>                                                                             <C>                           <C>
      Mortgage note payable to a financial institution, due in
      monthly installments totaling $6,960 including
      interest of 10.29% through August 2020.
      Collateralized by land and building.                                      688,072                      699,129

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $7,698 including interest
      at 8.96% through April 2021.
      Collateralized by land and building.                                      843,614                            0

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $6,152 including interest
      at 9.58% through August 2021.
      Collateralized by land and building.                                      649,112                      650,000

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $5,596 including interest
      at 8.96% through June 2021.
      Collateralized by land and building.                                      597,454                            0

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $5,774 including interest
      at 8.52% through January 2021
      Collateralized by land and building.                                      650,000                            0

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $5,783 including interest
      at 8.52% through December 2020.
      Collateralized by land and building.                                      650,000                            0

      Mortgage note payable to a financial institution,
      payable in interest only payments at 7.0%
      due September 13, 2001. Collateralized by land and building.                    0                    1,047,565

      Mortgage payable to a financial institution,
      payable in interest only payments at 11.623% due
      October 14, 2000. Collateralized by certain of the Company's assets.            0                      600,000

      Mortgage note payable to a financial institution, due in
      monthly installments totaling $4,055 including
      interest at 8.00% through August 2005.                                    163,164                      197,278

      Various equipment notes payable to a financial institution,
      due in monthly installments totaling $16,011 including
      interest at various rates ranging from 9.4% to 11.14%
      Collateralized by certain of the Company's assets with
      maturities ranging from March 2005 through April 2008.                    801,708                      745,240
</TABLE>

                                      F-16
<PAGE>

<TABLE>
<CAPTION>
      LONG-TERM DEBT  (Continued)                                                         2001                          2000
                                                                                          ----                          ----
      <S>                                                                            <C>                            <C>
      Construction advances to long term commitments
      Interest is payable monthly at libor plus 4.27% until construction
      is completed and then is converted to a permanent long term fixed rate.
      Collateralized by land and building                                               283,796                            -
                                                                                   ------------                -------------

                                                                                     97,804,771                   98,518,842

      Less - current portion                                                         (6,080,505)                  (8,007,819)
                                                                                   ------------                -------------
      Long-term debt                                                               $ 91,724,266                $  90,511,023
                                                                                   ============                =============
</TABLE>

Annual maturities of long-term debt as of September 30, 2001 are as follows:

           2002                                                 6,080,505
           2003                                                 2,878,349
           2004                                                 3,184,255
           2005                                                 3,517,174
           2006                                                 3,830,189
           Thereafter                                          78,314,299
                                                             ------------
                                                             $ 97,804,771
                                                             ============

         Several of the notes payable and leases include certain restrictive
covenants, including maintenance of certain prescribed debt and fixed charge
coverage ratios and limitation on the incurrence of additional indebtedness
without prior written consent. As of September 30, 2001, management believes
that the Company was in violation of one of its restrictive covenants.
Accordingly, the Company is in technical default on certain of its leases. To
cure the default, the Company will be required to accelerate payment due under
the agreements of approximately $1,000,000 of additional principal on the
leases. The Company is currently in negotiations with the institutional landlord
to set up a master lease, which will eliminate the fixed charge coverage ratios
for all this landlord leases. The Company believes it will be successful in this
negotiation.

6.   CAPITAL LEASE

         In connection with one of its acquisitions in Fiscal 2000, the Company
assumed capital leases for certain equipment. The leases are treated as capital
leases for financial statement purposes, and the remaining obligation is
$168,714, at September 30, 2001. The related cost of $671,393 was recorded in
property and equipment at September 30, 2001 and 2000. The remaining term of the
leases range from 2 months to 8 months and the monthly lease payments range from
$11,083 to $13,616.

The following is a schedule of equipment under capital leases as of September
30:

<TABLE>
<CAPTION>
                                                                                    2001              2000
                                                                                    ----              ----
                                   <S>                                          <C>               <C>
                                            Equipment                           $671,393          $671,393
                                            Less: Accumulated amortization:     $ 69,936             2,797
                                                                                --------          --------
                                                                                $601,457          $668,596
                                                                                --------          --------
The minimum future payments on the capital leases are as follows:

                                    2002                                        $168,714
                                                                                --------
                                    Total minimum lease payments                $168,714

                                    Less: Amount representing interest          $  5,442
                                                                                --------

                                    Present value of minimum lease payments     $163,272
                                                                                --------
                                    Less: Current portion                       $168,714
                                                                                --------

                                    Long-term obligation under capital leases          -
                                                                                --------
</TABLE>

                                      F-17
<PAGE>

7.      COMMON AND PREFERRED STOCK

On April 22, 1997, the Company acquired 1,030,000 shares of its common stock
from a former director in exchange for 430,000 shares of mandatorily redeemable
Restricted Class B preferred stock, which were redeemable monthly at a rate of
5,000 shares for $5,000 per month for 86 months. No dividends are paid on this
preferred stock. During each of the two years ended September 30, 2000 and 1999,
the Company redeemed 60,000 of these preferred shares for $60,000. All remaining
outstanding preferred stock was redeemed in October 2000 for $225,000.

In October 1998, the Company redeemed its Class A Preferred Stock for $50,000.

In 1999, the Company issued 8,426 shares of common stock to its employees as
bonuses. Compensation expense of $27,375 was recorded in connection with this
issuance.

The Company purchased on the open market 572,066 shares of its common stock in
Fiscal 2000 for a total cost of $680,870 and an additional 133,333 shares of
common stock in Fiscal 2001 for a total cost of $100,000. In Fiscal 2001, the
Company retired 3,258,732 shares of common stock held in treasury which had a
cost of $1,509,138.

8.      RELATED PARTY TRANSACTIONS

Robert S. Berg, Chairman of the Board of Directors and Chief Executive Officer
of the Company, and Steven M. Wemple, President, Chief Operating Officer,
Treasurer, Secretary and Director of the Company, jointly own all of the
outstanding stock of Elk River Aviation Inc.("Elk River"), a charter aircraft
company whose sole business is the leasing of the airplane described in this
paragraph. On October 1,1998, the Company entered into an agreement whereby the
Company was charged the flat rate of $1,100 per hour of usage, on an as needed
basis. Elk River was responsible for all operating expenses of the airplane,
such as pilot salary, insurance, fuel, and maintenance. Subsequently, the lease
rate was amended to $1,500 per hour in June 1999, and to $3,500 per hour in
October 2000. In Fiscal Years 2001, 2000, and 1999 the Company paid $922,000,
$724,000 and $440,000, respectively, to Elk River for its use of the airplane.
The Company believes that the lease of the aircraft is important to the Company
in order to permit management to effectively supervise the operations of its
restaurants which are located in seven states, as well as in connection with the
efforts of the Company to analyze potential future restaurant locations. As of
September 30, 2001 and 2000, the Company had a receivable of $221,304 and $0,
related to certain expenses paid by the Company on behalf of Elk River Aviation,
which is included in Accounts Receivable on the Consolidated Balance Sheet. In
Fiscal 2000, the Company fully reserved for a deposit of $160,439 with Elk River
Aviation as its collectibility was deemed to be uncertain.

     On July 21, 2000, the Company invested $2,200,000 in land and building for
two Popeye's Chicken and Biscuit restaurants on the West Coast of Florida. The
Company obtained financing of $1,632,000 from an unrelated party in connection
with this transaction. The Company leased the two restaurants to T.T. & D. Foods
Inc., a Florida Corporation controlled by a party related to Mr. Berg. Under the
terms of the triple net lease, T. T. & D Foods Inc., pays annual rent to the
Company in the amount of $282,568 and pays insurance, taxes and other expenses
associated with the leased property. The Company's annual payments on the debt
incurred to finance the two restaurants is $222,662. During Fiscal years 2001,
and 2000, the Company netted income of $59,906 and $36,135 from this
transaction. The Company believes that the transaction described above are the
same terms and conditions as similar transactions with unaffiliated parties.

     Marshal E. Rosenberg Ph.D., the outside director of the Company, acted as
agent for the National Life Insurance Company that provided the Sailormen, Inc.
Salary Continuation Executive Retention plan and the Company's life insurance
policies on Robert S. Berg., Chairman of the Board of Directors and Chief
Executive Officer of the Company, and Steven M. Wemple, President, Chief
Operating Officer, Treasurer, and Secretary of the Company. During Fiscal 2001,
the Company paid to National Life Insurance Company premiums aggregating
$211,000 in connection with such insurance policies. Mr. Rosenberg received
approximately $105,500 in commissions from the insurance company in connection
with such insurance policies. No such commissions were paid in Fiscal 2000 or
Fiscal 1999.

                                      F-18
<PAGE>

9.   INCOME TAXES

The components of the income tax provision for federal income taxes for 2001,
2000 and 1999 are as follows:

                                      2001           2000           1999
                                      ----           ----           ----

       Current                     $       --     $       --     $       --
       Deferred                      (808,109)      (216,029)      (130,370)
                                   -----------    -----------    -----------
                                   $ (757,374)    $ (216,029)    $ (130,370)
                                   ----------     ----------     ----------

The tax effects of temporary differences that give rise to the deferred tax
liabilities at September 30, 2001 and 2000 are presented below:

                                             2001           2000
                                             ----           ----
       Depreciation and amortization     $(2,146,181)   $(1,218,166)
       Gain deferred for book purposes       274,508        283,376
       Capital losses                        148,800        109,156
       Other                                  47,968        (38,670)
       Deferred compensation                  50,340             --
       Net operating loss carryforward       520,862        568,710
                                         -----------    -----------
       Net deferred income tax liability $(1,103,703)   $  (295,594)
                                         =============  ===========

At September 30, 2001, the Company had net operating loss carryforwards
available to offset future taxable income and tax liabilities of approximately
$1,344,000 that expire primarily in 2020 and 2021. The Company believes that it
is more likely than not that all of the net operating loss carryforwards will be
utilized prior to their expiration, based on the Company's estimates of its
future earnings and the expected timing of temporary difference reversals.
Accordingly, there is no valuation allowance recorded as of September 30, 2001
or 2000.

The effective income tax provision (benefit) on pre-tax income (loss) differed
from the provision computed at the U.S. Federal statutory rate for the following
reasons:

<TABLE>
<CAPTION>
                                                         2001                    2000                        1999
                                                         ----                    ----                        ----
       <S>                                            <C>                      <C>                         <C>
       (Provision) Benefit computed at Federal
          statutory rate of 34%                       $ (615,282)              $ (203,035)                 $    5,302
       Non-deductible goodwill                           (55,150)                 (55,150)                    (37,824)
       State income taxes, net of federal benefit       ( 85,876)                 (26,135)                     (4,152)
       Life insurance premiums                           (53,101)                       -                           -
       Penalties                                         ( 2,177)                  (4,762)                    (31,063)
       Other                                               3,477                   73,053                     (62,633)
                                                      -----------              ----------                  ----------
                                                      $ (808,109)              $ (216,029)                 $ (130,370)
                                                     ============              ===========                 ===========
</TABLE>

10.  COMMITMENTS AND CONTINGENCIES

a. Office and Store Leases

During September 1996, under a sale-leaseback agreement, the Company sold five
owned stores (land and buildings) for $2,230,000 and leased them back under
twenty-year operating lease agreements. The transactions resulted in a total
gain of $309,741, which has been deferred and is being amortized over the
twenty-year lease terms. Proceeds from the sale were used to pay off existing
notes payable and other current liabilities. During December 1996, under a sale-
leaseback agreement, the Company sold a store for $425,000 and leased the store
back under a twenty-year operating lease. The transaction has resulted in a gain
of $100,000, which has been deferred and is being amortized over the twenty-year
lease term.

During December 1997, under a sale-leaseback agreement, the Company sold eight
owned stores (land and buildings) for approximately $3,700,000 and leased them
back under twenty-year operating lease agreements. The transactions resulted in
a gain of approximately $530,000, which is being amortized over the twenty-year
lease term.

                                      F-19
<PAGE>

During July 1998, under a sale and leaseback agreement, the Company sold two
owned stores (land and buildings) for $1,650,000 and leased them back under
twenty-year operating lease agreements.

During March 1999, under a sale-leaseback agreement, the Company sold twenty
owned stores (land and buildings) for approximately $12,800,000 and leased them
back under twenty-year operating lease agreements. During July 1999, under a
sale and leaseback agreement, the Company sold two owned stores (land and
buildings) for $1,100,000 and leased them back under twenty-year operating lease
agreements. During August 1999, under a sale-leaseback agreement, the Company
sold one owned store (land and building) for $530,370 and leased it back under a
twenty-year operating lease agreement.

The company leases certain restaurants under operating leases. These leases
generally have initial terms of twenty years and usually provide for renewal
options, ranging from 5 to 20 years. Several of the leases contain escalation
clauses and common area maintenance charges, taxes and insurance.

Certain of the leases require additional (contingent) percentage rental payments
based on attaining minimum monthly or annual gross sales, on the respective
restaurants. Contingent rental expense for the Fiscal years 2001, 2000 and 1999
is included in the rent expense shown below.

Future minimal rental commitments for operating leases over the next five years
with noncancellable terms in excess of one year as of September 30, 2001, are as
follows:

           2002                                    $ 5,011,000
           2003                                      4,924,000
           2004                                      4,708,000
           2005                                      4,299,000
           2006                                      3,644,000
           Thereafter                               42,853,000
                                                   -----------
                                                   $65,439,000
                                                   ===========

Rent expense for the years ended September 30, 2001, 2000, and 1999 was
$6,111,827, $3,509,961, and $2,525,779 respectively.

b.   Litigation

In October 2000, the Company settled the suit, filed by the former chairman of
the board of directors of the Company by purchasing all of the outstanding
shares of the Company's preferred stock for $225,000 and paid an additional
$15,000 for the settlement. The $15,000 was recorded as an expense in fiscal
2000.

The Company and Sailormen are parties to certain legal proceedings arising from
matters incidental to their business. Management is of the opinion that these
actions will not have a material effect on the financial conditions, results of
operations or liquidity of the Company.

c.   Significant Suppliers

The Company's restaurants purchase fresh chicken from approximately 5 suppliers.
In Fiscal 2001 one vendor represented approximately 55% of the total Company's
chicken purchases. In Fiscal 2000 and 1999, no one chicken vendor was a
significant supplier.


11.  RETIREMENT AND SAVINGS PLAN

The Company started a 401(k) retirement and savings plan during Fiscal 2000.
Eligible employees are allowed to contribute up to 15% of their compensation
annually. The Company did not match any portion of the employee contributions
during Fiscal 2001 or 2000.

The Company concluded that continued services of select key executives is
essential for the future growth and operations of Company. Therefore, effective
January 15, 2001, the Company started an Executive retirement plan for key
employees. Participants approved by the Executive committee will be 20% invested
after 10 years of service and 20% each year thereafter. Participants will be 100
% vested when they have been a participant in the Salary Continuation Executive
Retention Plan for a period of 15 years or at retirement (65th birthday),
whichever is earliest. As of September 30, 2001 the Company has an accrued
liability of $129,909 related to this plan.

                                      F-20
<PAGE>

12.  STOCK REDEMPTION AGREEMENT

         On June 30, 2001 the Company entered into a Stock Redemption Agreement
with certain of its stockholders providing for, among other things, restrictions
on the sale or transfer of the Company's common stock without the consent of the
other stockholders and the Company. The agreement provides that a stockholder
intending to dispose of an interest in the Company must first offer his stock to
the Company at a price determined in accordance with the agreement. Upon the
death of either of these stockholders, the agreement requires the Company to
purchase their outstanding common shares for a price ranging from $6.09 through
$6.43 per common share. The Agreement also provided for two key life insurance
policies: one for Robert S. Berg, Chairman of the Board of Directors and Chief
Executive Officer of the Company, and Steven M. Wemple, President, Chief
Operating Officer, Treasurer, Secretary and Director of the Company. During
Fiscal 2001, the Company paid premiums in the amount of approximately of $33,000
for these policies. The Company is the beneficiary on each of these policies.



13.  QUARTERLY FINANCIAL DATA (UNAUDITED)

         Summarized quarterly results of operations for the two years ended
September 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                                     First             Second               Third            Fourth
                                                    Quarter            Quarter             Quarter           Quarter
                                                    -------            -------             -------           -------
<S>                                               <C>               <C>                  <C>               <C>
Fiscal Year ended September 30, 2001

Revenues:                                         $36,842,626        $38,002,498         $38,479,463       $38,764,007

Operating income                                    3,045,681          2,992,244           2,839,130         2,609,095

Net income (loss)                                 $   363,913        $   435,903         $   308,267       $  (106,538)  *
                                                  ===========        ===========         ===========       ===========

Net income per share, basic and diluted           $      0.07        $      0.08         $      0.06           ($ 0.02)
                                                  ===========        ===========         ===========       ===========
Fiscal Year ended September 30, 2000

Revenues:                                         $12,494,684        $19,965,480         $20,906,917       $24,222,048

Operating income                                      858,877          1,791,683           1,715,474         1,330,207

Net income (loss)                                 $   306,284        $   288,831         $   299,917       $  (513,898) **
                                                  ===========        ===========         ===========       ===========

Net income (loss) per share, basic and diluted    $      0.05        $      0.05         $      0.06       $     (0.10)
                                                  ===========        ===========         ===========       ===========
</TABLE>

*    During fiscal 2001, the Company incurred certain costs in the fourth
quarter resulting in additional expenses of approximately $370,000 of which
approximately $225,000 represents costs incurred upon the sale of two closed
restaurants properties and approximately $74,000 relates to a change in the
Company's estimated effective tax rate during the fourth quarter.

**   Decrease in income is due to certain expenses incurred during the quarter
related to the RMS acquisition.

13.  SUBSEQUENT EVENT

On October 23, 2001, the Company announced that it had received a proposal from
Robert S. Berg and Steven M. Wemple for a going private transaction. The
proposed transaction, which would effect a change in control of the Company,
would be in the form of a merger with a corporation wholly-owned by Mr. Berg and
Mr. Wemple. Pursuant to the proposal, the Company's shareholders (other than Mr.
Berg and Mr. Wemple) would receive unsecured, subordinated notes of the Company,
in exchange for the principal amount of $1.20 per share of the Company's Common
Stock.

                                      F-21
<PAGE>

The notes to be issued by the Company in the transaction would bear interest at
the rate of 5% per annum. Interest would be payable semi-annually, with
principal becoming due and payable in a single payment at maturity, which would
be the third anniversary of the date of issuance. The notes would be
subordinated to all senior debt of the Company and would be issued in minimum
principal amounts of $100 and thereafter in multiples of $25. Company
shareholders would receive the cash equivalent in lieu of any fractional notes.

      If the proposed transaction is completed, the Company will no longer be a
public reporting entity and its stock will no longer be publicly traded.

      The Board of Directors has appointed Marshal E. Rosenberg, Ph.D., the sole
director of the Company other than Messrs. Berg and Wemple, to head a Special
Committee to review the proposed transaction. The Special Committee has retained
an independent financial advisor and legal counsel for purposes of evaluating
the proposal.

      The proposed transaction would result in the acquisition of all of the
outstanding shares of common stock of the Company (other than the shares by
Messrs. Berg and Wemple and their acquisition corporation). The final terms of
any acquisition will be based on negotiations between the acquirers and the
Special Committee which is currently ongoing. The proposed acquisition is
subject to, among other things, (1) approval of the proposed transaction by the
Special Committee of the Board of Directors and the Company's shareholders, (2)
receipt of a fairness opinion by the Special Committee, (3) receipt of any
applicable regulatory approvals and third-party consents and (4) the
inapplicability (either by their terms or as a result of Company Board action)
of certain business combination and control share provisions under Nevada law.
There can be no assurance that a definitive merger agreement will be executed
and delivered, that the proposed transaction will be consummated.

      The proposed acquisition may only be completed in accordance with
applicable state and federal laws including the Securities Act of 1933, the
Securities Act of 1934 and the Trust Indenture Act of 1939, as amended; however,
it is anticipated that exemptions from the registration requirements of the
Securities Act and the qualification requirements of the Trust Indenture Act
will be available to this transaction.

                                      F-22