SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended January 26, 2003
                          ----------------

         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 0-8513


                            CHEFS INTERNATIONAL, INC.
                 ----------------------------------------------
                 [Name of small business issuer in its charter]


                Delaware                                  22-2058515
     -------------------------------               ----------------------
     [State or other jurisdiction of                    [IRS Employer
      incorporation or organization]               Identification Number]


       62 Broadway, P.O. Box 1332
     Pt. Pleasant Beach, New Jersey                           08742
----------------------------------------                   ----------
[Address of principal executive offices]                   [Zip Code]


Issuer's telephone number, including area code: (732) 295-0350
                                                --------------

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

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


                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of Class)


Check  whether the issuer [1] filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months [or for such shorter
period  that the issuer was  required  to file such  reports],  and [2] has been
subject to such filing requirements for the past 90 days. YES _X_  NO ___

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

                                      [  ]

The issuer's revenues for the year ended January 26, 2003 totaled $22,953,925.

On April 11, 2003, the aggregate  market value of the voting stock of the issuer
(consisting  of  Common  Stock,  $.01  par  value)  held by  non-affiliates  was
approximately $1,950,000 based upon the last sale price for such Common Stock on
said date in the over-the-counter  market as reported by the Pink Sheets LLC. On
such date,  there were 3,926,038  shares of the issuer's Common Stock issued and
outstanding (excluding 43,550 Treasury Shares).

Transitional Small Business Disclosure Format (check one)

         Yes ___   No _X_



<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         (a) BUSINESS  DEVELOPMENT - Chefs  International,  Inc. ("Chefs" or the
"Company") was organized  under the laws of the State of Delaware in March 1975.
The Company currently  operates eleven  restaurants on a year-round basis, eight
of which are free-standing  seafood restaurants in New Jersey (four) and Florida
(four); two of which are Mexican theme restaurants,  one located in the Monmouth
Mall in Eatontown,  New Jersey and the other, a free-standing restaurant located
in Freehold,  New Jersey,  and one of which is a  free-standing  restaurant also
located in Freehold, New Jersey featuring an eclectic American food menu. Six of
the  seafood  restaurants  are  operated  under the name "Jack  Baker's  Lobster
Shanty"  one  under  the name  "Baker's  Wharfside"  and one under the name "Mr.
Manatee's  Casual Grille." The two Mexican theme  restaurants are operated under
the name "Escondido's Mexican Restaurant." The eclectic American food restaurant
is operated under the name "Moore's Tavern and  Restaurant."  The Company opened
its  first  seafood  restaurant  in  November  1978,  its  first  Mexican  theme
restaurant in April 1996 and "Moore's  Tavern and  Restaurant" in February 2000.
(As used  herein,  the term the  "Company"  may at times  include  Chefs and its
various  subsidiaries.)  See "Development Since the Beginning of the Last Fiscal
Year" as to the Company's  planned closing during the second quarter of calendar
year 2003 of its Mexican theme restaurant located at the Monmouth Mall.

         The  Company's  executive  offices  are located at 62  Broadway,  Point
Pleasant Beach, New Jersey 08742. Its telephone number is (732) 295-0350.

DEVELOPMENTS SINCE THE BEGINNING OF THE LAST FISCAL YEAR

RESTAURANT OPENINGS AND PLANNED CLOSING

         In February  2000,  the Company  executed a lease with  Moore's  Realty
Associates,  a New Jersey  partnership  ("Moore's  Realty")  whose  partners are
members of the Lombardi  Group and other  members of the Lombardi  family.  (The
Lombardi  Group,  consisting of various members of the Lombardi Family and their
affiliates,  purchased a substantial  number of shares of Chefs' Common Stock in
May 1999  resulting  in their  ownership  in May 1999 of in excess of 50% of the
issued  and  outstanding  shares of Chefs'  Common  Stock,  and as a result,  in
ownership of voting control of the Company. The Lombardi



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Group currently owns  approximately 64% of the issued and outstanding  shares of
Chefs' Common Stock.  Five  Lombardi  brothers,  each of whom is a member of the
Lombardi  Group,  serve as Chefs'  directors.) The lease was of premises on West
Main Street (Route 537) in Freehold,  New Jersey where an entity affiliated with
Moore's  Realty,  Moore's Inn, Inc. was operating a restaurant  and tavern under
the  name  "Moore's  Inn."  The  Company  provided  consulting  services  to the
operators  of Moore's Inn from  January 3, 2000 until  February 23, 2000 when it
executed a lease and various  purchase  agreements  and commenced to operate the
facility under the name "Moore's Tavern and Restaurant."

         In connection  with the February 2000 execution of the lease of Moore's
Inn to the  Company,  Moore's  Realty  agreed  not to sell or  lease a  building
("Building  B")  adjacent  to Moore's  Inn or the nearby pad site for a proposed
building  ("Building  C") to a third  party for a period  of one  year.  Moore's
Realty  also  agreed that if during the  initial  one-year  period,  the Company
entered into an agreement to purchase or lease  Building B, it would not sell or
lease the Building C pad site to anyone other than the Company for an additional
one-year  period.  In October 2001, the Company  leased  Building B from Moore's
Realty and in January  2002,  opened a Mexican  theme  restaurant  in Building B
under the name "Escondido's Mexican Restaurant."

         In  September  2002,  the Company  leased the  Building C pad site from
Moore's  Realty for use as a parking lot for its  Freehold,  New Jersey  Moore's
Tavern and Restaurant and its adjacent Escondido's Mexican Restaurant. The lease
is for a five-year term through  January 2007 and contains  provisions for three
consecutive  five-year  renewals at the Company's  option.  Either party has the
right to  terminate  the lease upon  twelve  (12) months  written  notice  after
conclusion of the initial term which  expires in January 2007,  provided that if
the Landlord  elects to terminate the lease,  it must offer the Tenant the right
to lease an adjoining  paved parking area sufficient to park at least fifty (50)
automobiles on terms and conditions similar to those contained in the lease. The
lease also  provides that if the Company is leasing  either  Building A (Moore's
Tavern and  Restaurant)  or Building B (Escondido's  Mexican  Restaurant) at the
time of  termination  by  Moore's  Realty,  Moore's  Realty  will  not  permit a
restaurant to be developed on the Building C pad site.

         The lease is a  "triple-net"  lease  pursuant to which the Company pays
real  estate  taxes,  insurance,  electricity  charges,  snow  and ice  removal,
cleaning  and  maintenance.  The lease  provides for a minimum rent at an annual
rate of $40,000 during each year of the initial  five-year term,  $44,000 during
each year of



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<PAGE>


the first  five-year  renewal  period;  $50,000  during  each year of the second
five-year  renewal  period and $55,000  during each year of the third  five-year
renewal period.  In addition to the minimum annual rent, the Company is required
to pay an amount to Moore's  Realty  equal to (i) 1% of the total gross sales of
food  and  beverages  etc.  at the  Moore's  Tavern  and  Restaurant  and at the
Escondido's  Mexican  restaurant in each year  (excluding  taxes and gratuities)
(the "gross  annual  rent"),  less (ii) the  minimum  annual rent for such year.
During fiscal 2003, the Company installed curbing, paving and other improvements
to the site at a cost of approximately  $134,000.  The site now provides parking
for  approximately  sixty-five (65)  automobiles for patrons of the two Freehold
restaurants. Moore's Realty has agreed to reimburse the Company's costs. Moore's
Realty's  reimbursement  obligation  will be  applied  as a credit  against  the
minimum rent and the gross annual rent, if any, due under the lease.

         The lease  for the  Building  C pad site  cannot be deemed as an "arm's
length"  transaction due to the interest of the Lombardi Group and other members
of the Lombardi  family.  The lease was negotiated for the Company by Anthony C.
Papalia,  its  president  and  chief  executive  officer.  Mr.  Papalia  and the
non-interested  directors concluded that the terms of the transactions were fair
and in the best interests of the Company.

         In April  2002,  the Company  commenced  operation  of a  free-standing
casual theme restaurant  primarily  featuring seafood items in a leased facility
in Vero Beach, Florida continuing the operation of the restaurant under the name
"Mr. Manatee's Casual Grille." See "Restaurant Operations" in this Item 1.

PLANNED RESTAURANT CLOSING

         During fiscal 2003,the  Company operated a second  Escondido's  Mexican
Restaurant  located  at  the  Monmouth  Mall  in  Eatontown,  New  Jersey.  This
restaurant  had been opened by the Company in April 1996 and operated  under the
name "Garcia's" until the Company changed the name of the restaurant in February
2002.  Prior to opening this restaurant as Garcia's,  the Company  operated a Le
Crepe  restaurant  at the site.  The La Crepe  restaurant  at the site closed in
December 1995 and the Company then spent approximately $720,000 to construct the
Garcia's restaurant at the site.

         The restaurant  consists of 4,371 square feet of leased space. It has a
bar and tables and booths which can accommodate  approximately 130 patrons.  The
Company has a liquor license permitting the



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consumption of wine and alcoholic beverages on the premises. The Company's lease
for the  restaurant,  due to expire in fiscal  2008,  currently  provides  for a
minimum annual rental of $118,017.

         The  Company  is  required  to pay  additional  rent equal to 5% of the
restaurant's  annual gross revenues in excess of approximately  $2,300,000.  The
Company is also required to pay a proportionate  share of the Mall's real estate
taxes,  utility  charges,  the  Landlord's  operating  costs and  certain  other
charges.

         As a result of continuing operating losses at its Monmouth Mall Mexican
theme restaurant,  management has decided to close this restaurant.  The closing
is expected to take place during the second  quarter of calendar year 2003.  The
Company is currently  in  negotiation  with the Landlord to terminate  the lease
prior to its expiration date and is also  negotiating to sell its liquor license
for use at the location.  Management believes that the proceeds from the sale of
the liquor license will exceed the amount the Company will be required to pay to
obtain early  termination  of the lease but no assurance  can be given that such
will be the case.

SHARE REPURCHASE PROGRAM

         On  June  8,  2000,  the  Company  announced  that  it had  decided  to
repurchase  up to 400,000  shares of Chefs'  Common Stock over the  following 24
months.  At  the  conclusion  of  this  Repurchase  Program,   the  Company  had
repurchased   an  aggregate   28,191  shares  of  Chefs'  Common  Stock  in  the
over-the-counter  market at prices  ranging from $.73 to $1.20 per share and had
repurchased an aggregate  262,603 shares in a block  transaction  with a limited
group of unaffiliated stockholders at $2.10 per share.

         On January 21, 2003,  the Company  announced a second Share  Repurchase
Program to purchase up to 100,000  shares of Chefs'  Common  Stock over the next
twelve months.  To date, the Company has repurchased an aggregate  40,000 shares
of  Chefs'  Common  Stock in the  over-the-counter  market  at $1.49  per  share
pursuant to the second Share Repurchase Program.

         The Company's Board of Directors  believes that Chefs' Common Stock was
undervalued  in the  public  market  and  that  the  Repurchase  Programs  would
constitute   an   appropriate   investment  to  the  benefit  of  the  Company's
stockholders.  All repurchases  were effected at prices per share  substantially
below the  Company's  per share book value.  The Company has utilized  available
cash reserves to effect each of its stock repurchases.



                                       4
<PAGE>


BANK LOANS

         At January 27, 2002, the Company owed approximately $93,000 pursuant to
a term loan  originally in the amount of $500,000 from First Union National Bank
("First Union"). This loan was payable in monthly installments of principal with
interest at an annual rate of 9 1/4% through  December 2002 and was paid in full
during fiscal 2003.

         At January 27, 2002, the Company also had a $500,000  revolving line of
credit ("L/C line") from First Union  expiring on June 30, 2003 and secured by a
first mortgage on the Toms River  restaurant.  No borrowings had been made under
the L/C line at said date. In March 2002,  the Company  borrowed  $500,000 under
this L/C line and applied the proceeds towards the purchase of the assets of Mr.
Manatee's. See "Restaurant Operations."

         On May 21, 2002, the Company borrowed  $500,000 from Wachovia Bank (the
successor  by merger to First  Union),  and applied the proceeds to repayment of
the balance under the L/C line.  Principal payments under this Term Loan are due
in  amounts  varying  from  $5,000 to  $25,000  in the  months of March  through
November in calendar years 2002 through 2007 together with interest at the LIBOR
Market  Index  Rate plus 2%.  Indebtedness  under this Term Loan is secured by a
mortgage on the Company's Toms River, New Jersey seafood restaurant.  At January
26,  2003,  the  outstanding   principal   balance  under  this  term  loan  was
approximately $415,000.

         In  September  2001,  the Company  borrowed  $600,000  from First Union
secured  by a first  mortgage  on its  Baker's  Wharfside  restaurant  in  Point
Pleasant Beach and borrowed an additional $600,000 from First Union secured by a
first mortgage on its Jack Baker's  Lobster Shanty  restaurant in Point Pleasant
Beach.  Each of these two loans have a ten year  maturity  providing  for annual
principal  payments of approximately  $60,000 commencing in fiscal 2003 together
with interest on the unpaid  balance at an annual rate of 7.57%.  At January 26,
2003, the outstanding principal balance of each of these loans was $537,500.

         The Company  applied  the  $1,200,000  of loan  proceeds as part of the
$1,300,000 it utilized to renovate, decorate and equip (kitchen, bar, furniture,
fixtures)  its  Escondido's  Mexican  Restaurant  in Freehold,  New Jersey which
opened in January 2002.

         In May  1998,  the  Company  borrowed  $124,000  from  First  Union  to
partially  fund the purchase of property  adjoining  its Toms River,  New Jersey
seafood restaurant. The loan is repayable in monthly



                                       5
<PAGE>


installments  of principal  with  interest at LIBOR plus 2 1/4% through May 2003
and is  secured by a first  mortgage  on the  property.  At  January  26,  2003,
approximately $8,300 was outstanding under this loan.

         In October 1998, the Company borrowed $880,000 from First Union to fund
the $1,100,000 purchase of its Vero Beach, Florida seafood restaurant. This loan
is  repayable in monthly  installments  of $8,319  comprised  of  principal  and
interest at an annual rate of 7.82%  through  November  2008 and is secured by a
first mortgage on the Vero Beach  property.  At January 26, 2003,  approximately
$733,700  was  outstanding  under  this  loan  (which  provides  for a  $431,429
"balloon" payment in November 2008).

         Repayment of the Company's term loans and of borrowings  under its line
of credit is guaranteed by each of the Company's subsidiaries.

         Pursuant to its principal  Loan  Agreements,  the Company has agreed to
certain  affirmative  and negative  covenants,  violation of which without First
Union's waiver would  constitute a default under the Loan  Agreements.  Included
are  affirmative  covenants  by the Company to maintain its  properties  in good
condition and repair; maintain adequate insurance coverage; conduct its business
in the  manner  and at the  locations  where it is  currently  being  conducted;
maintain  a Funds  Flow  Coverage  of not less  than  1.20 to 1.00;  maintain  a
Tangible  Net  Worth  at  fiscal  2003  year end of not  less  than  $12,550,000
increasing by not less than $50,000 in each subsequent year; maintain a ratio of
Senior  Liabilities to Effective Tangible Net Worth of not more than .50 to 1.00
measured  semi-annually;  and  maintain  liquid  assets  (cash,  time  deposits,
marketable  securities)  of not less than  $500,000.  Also included are negative
covenants of the Company not to permit or effect a material  change in ownership
or in management;  not to create or permit certain liens or  encumbrances on its
assets; not to guarantee third party obligations; and not to retire or otherwise
acquire any of its capital stock (excluding  repurchases of up to 400,000 shares
at market  prices  pursuant  to its June 2000 Stock  Repurchase  Program and the
262,000 share block  purchase  described  above as well as  repurchases of up to
100,000  shares at market prices  pursuant to its January 2003 Stock  Repurchase
Program also described  above. The Company received waivers from First Union for
these  repurchases).  The Company was in compliance with all material  covenants
under the Loan Agreements at January 26, 2003.



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<PAGE>


         (b)  BUSINESS OF ISSUER - The Company is engaged in one  business;  the
operation of eleven  restaurants in New Jersey and Florida on a year-round basis
but has decided to close one of the New Jersey restaurants in the second quarter
of calendar 2003.

                              RESTAURANT OPERATIONS

         The Company  currently  operates  eleven  restaurants  on a  year-round
basis, eight of which are free-standing seafood restaurants in New Jersey (four)
and Florida (four); two of which are Mexican theme  restaurants,  one located in
the  Monmouth  Mall in  Eatontown,  New Jersey and the  other,  a  free-standing
restaurant located in Freehold,  New Jersey, and one of which is a free-standing
restaurant also located in Freehold,  New Jersey featuring an eclectic  American
food menu.  Six of the seafood  restaurants  are  operated  under the name "Jack
Baker's  Lobster  Shanty," one under the name "Baker's  Wharfside" and one under
the name "Mr.  Manatee's  Casual Grille." The two Mexican theme  restaurants are
operated under the name "Escondido's  Mexican Restaurant." The eclectic American
food restaurant is operated under the name "Moore's Tavern and  Restaurant." The
Company opened its first seafood  restaurant in November 1978, its first Mexican
theme  restaurant in April 1996 and "Moore's  Tavern and Restaurant" in February
2000. See  "Developments  Since the Beginning of the Last Fiscal Year" as to the
Company's planned closing during the second quarter of calendar year 2003 of its
Mexican  theme   restaurant   located  at  the  Monmouth   Mall.  The  Company's
restaurants, all of which are operated on a year-round basis, are as follows:





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                                            Date of Opening Under
         Location                           the Company's Management
         --------                           ------------------------

SEAFOOD RESTAURANTS

JACK BAKER'S LOBSTER SHANTY

Vero Beach, Florida                         December 1979
Pt. Pleasant Beach, New Jersey              October 1980
Toms River, New Jersey                      October 1980
Jensen Beach, Florida                       December 1980
Cocoa Beach, Florida                        September 1981
Hightstown, New Jersey                      December 1981

BAKER'S WHARFSIDE

Pt. Pleasant Beach, New Jersey              October 1980

MR. MANATEE'S CASUAL GRILLE

Vero Beach, Florida                         April 2002

ESCONDIDO'S MEXICAN RESTAURANTS

Monmouth Mall, Eatontown,
  New Jersey                                April 1996*

Freehold, New Jersey                        January 2002

MOORE'S TAVERN AND RESTAURANT

Freehold, New Jersey                        February 2000

----------
* The  Company  plans to close this  restaurant  during  the  second  quarter of
  calendar year 2003.


SEAFOOD RESTAURANTS

         The Company's seafood  restaurants  provide a variety of seafood dishes
including shellfish such as lobster,  scallops,  shrimp,  oysters and clams, and
other fish  including  red snapper,  bluefish,  grouper and other  varieties.  A
limited  selection of non-seafood  entrees is also offered  including  steak and
chicken  as  well  as  a  dessert  selection.  Most  of  the  Company's  seafood
restaurants have a nautical decor.



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<PAGE>


         JACK BAKER'S LOBSTER SHANTY RESTAURANTS

         VERO BEACH,  FLORIDA - This  restaurant,  consisting  of  approximately
6,900 square feet, is free standing in Vero Beach,  Florida on the  intracoastal
waterway,  and seats approximately 200. It opened in December 1979 pursuant to a
lease from a partnership,  the principal partner of which was the Company's then
principal  stockholder.  During fiscal 1998, the Company  constructed an outdoor
deck  with  a bar  and  dining  facilities  at  this  restaurant  at a  cost  of
approximately  $125,000. At August 31, 1998, the Company was continuing to lease
this restaurant on a  month-to-month  "net" basis at a monthly rental of $10,000
with the Company also paying personal  property taxes and insurance  thereunder.
On that date, the United States  Bankruptcy Court for the District of New Jersey
ordered the  acceptance  of the Company's bid of $1,100,000 to purchase the Vero
Beach restaurant property from the partnership. On October 30, 1998, the Company
completed the purchase of the property for $1,100,000. To fund the purchase, the
Company  obtained an $880,000  first  mortgage loan from its  principal  lending
bank, First Union National Bank, and paid the balance of the purchase price from
working  capital.  The Company's  successful  bid was based upon an  independent
appraisal of the property and was equal to the appraised value. See "Bank Loans"
herein as to the repayment terms of this loan.

         During  fiscal  2002,  the Company was assessed and paid $62,674 as its
share for the  development  by the City of Vero Beach of the Royal  Palm  Pointe
project.  This project is a city park  development  contiguous  to the Company's
Jack  Baker's  Lobster  Shanty and its Mr.  Manatee's  restaurants.  Among other
amenities, it provides municipal parking which the Company believes will enhance
its restaurant business at those locations.

         PT.  PLEASANT  BEACH,  NEW  JERSEY  - This  restaurant,  consisting  of
approximately 17,000 square feet, is free standing with a waterfront location on
Channel Drive in Pt. Pleasant Beach, New Jersey and seats  approximately 750. It
shares parking with the Baker's Wharfside  restaurant in Pt. Pleasant Beach with
space for approximately  250 automobiles.  The Company purchased this restaurant
and three others  (including the land,  buildings,  improvements  and businesses
including  personal  property  and  fixtures,  liquor  licenses  and  all of the
outstanding stock of the four corporations operating these restaurants) from its
then principal stockholder, and from three partnerships owned by him, in October
1980 for an aggregate $7,750,000 less a subsequent $250,000 prepayment discount.



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<PAGE>


         TOMS RIVER, NEW JERSEY - This  restaurant,  consisting of approximately
10,750  square  feet,  is free  standing on Robbins  Parkway  with a  waterfront
location  on the Toms River in Toms  River,  New Jersey and seats  approximately
375.  Municipal parking  facilities are available nearby.  The Company purchased
this restaurant and three others (including the land,  buildings,  improvements,
and businesses including personal property and fixtures, liquor licenses and all
of the outstanding stock of the four corporations  operating these  restaurants)
from its then principal  stockholder,  and from three partnerships owned by him,
in  October  1980  for  an  aggregate  $7,750,000  less  a  subsequent  $250,000
prepayment  discount.  During  fiscal  1998,  the Company  commenced an interior
renovation  of this  restaurant,  the bulk of which was completed in fiscal 1998
with the  balance  completed  early  in  fiscal  1999.  The  total  cost of this
renovation was approximately  $338,000.  In fiscal 1999, the Company constructed
an  outdoor  deck with a bar and dining  facilities  at this  restaurant  adding
approximately 125 seats at a cost of approximately $188,000.

         In May 1998,  the Company spent $166,000 to purchase a lot and building
with a  waterfront  location  adjacent  to the Toms River  Lobster  Shanty.  The
Company  partially  funded  the  purchase  price  with the bank loan  previously
described. The Company has obtained the variances necessary for it to develop an
outdoor patio dining area with seating for 125 on this site. The issuance of the
variances to the Company is subject to appeal.  The time for any objecting party
to appeal expires in early May 2003.  Assuming  there is no appeal,  the Company
intends to obtain the necessary permits and to promptly commence construction of
the  planned  patio  dining  area.  The  Company  estimates  the total  costs of
construction  and  outfitting  at  approximately  $350,000  for an  opening  now
anticipated in fiscal 2005.

         JENSEN  BEACH,  FLORIDA  - This  200  seat  restaurant,  consisting  of
approximately  4,500 square feet, is located in a free standing  building on the
intracoastal  waterway in Jensen Beach,  Martin County,  approximately  50 miles
north of Palm Beach. The restaurant has parking for 100 automobiles. Acquired in
October 1980 were two lots, the restaurant with furnishings and a liquor license
from an  unaffiliated  party for  $975,000.  The  Company  made a $295,000  down
payment and paid the balance over a ten year period through September 1990.



                                       10
<PAGE>


         COCOA  BEACH,   FLORIDA  -  This  approximately  240  seat  restaurant,
consisting  of  approximately  9,600 square feet,  is located in a free standing
building on Highway A1A in Cocoa  Beach and has  parking  for  approximately  90
cars. The Company  acquired this  restaurant as well as a seafood  restaurant in
Titusville, Florida in September 1981 through the purchase from two unaffiliated
individuals of the outstanding capital stock of two corporations  engaged in the
ownership  and  operation  of a Florida  seafood  restaurant  at each of the two
sites.  The  corporations  owned the land on which the restaurants were located,
the restaurant buildings,  the restaurant businesses including personal property
and fixtures and liquor licenses for each restaurant, all of which were included
in the sale.  The  purchase  price paid by the  Company for the stock of the two
corporations  (prior to closing  adjustments) was $3,370,000,  the bulk of which
was  represented  by 20-year  promissory  notes  payable  monthly and secured by
mortgages on the restaurants.  The Company sold the Titusville  restaurant to an
unaffiliated  third  party in January  1988  realizing  a loss of  approximately
$942,000.  The Company prepaid the balance of the remaining  indebtedness  under
the notes in July  1993  using  the net  proceeds  from the sale in June 1993 of
another Florida restaurant property.

         HIGHTSTOWN,  NEW JERSEY - This restaurant,  consisting of approximately
4,600 square feet, is free standing on State Highway 33 approximately  two miles
east of Hightstown and seats  approximately  175. The restaurant has parking for
approximately  100 automobiles.  The Company purchased this restaurant and three
others  (including the land,  buildings,  improvements and businesses  including
personal property and fixtures, liquor licenses and all of the outstanding stock
of the four  corporations  operating these  restaurants) from its then principal
stockholder  and from three  partnerships  owned by him, in October  1980 for an
aggregate $7,750,000 less a subsequent $250,000 prepayment discount.

         BAKER'S WHARFSIDE RESTAURANT

         PT.  PLEASANT  BEACH,  NEW  JERSEY  - This  restaurant,  consisting  of
approximately  7,500 square feet, is free standing with a waterfront location on
Channel Drive in Pt. Pleasant Beach, New Jersey and seats  approximately 500. It
shares  parking with the Lobster  Shanty  restaurant in Pt.  Pleasant Beach with
space for approximately  250 automobiles.  The Company purchased this restaurant
and three others  (including the land,  buildings,  improvements  and businesses
including  personal  property  and  fixtures,  liquor  licenses  and  all of the
outstanding stock of the four corporations operating these restaurants) from its
then principal stockholder, and from three partnerships owned by him, in



                                       11
<PAGE>


October 1980 for an aggregate  $7,750,000 less a subsequent  $250,000 prepayment
discount.

         MR. MANATEE'S CASUAL GRILLE RESTAURANT

         VERO BEACH,  FLORIDA - This  restaurant,  consisting  of  approximately
4,000  square feet,  is free  standing at 30 Royal Palm Pointe in Vero Beach and
seats  approximately  165. It has parking for  approximately  40 automobiles but
there are additional  municipal parking spaces available at the contiguous Royal
Palm Pointe municipal park. Pursuant to a January 2002 asset purchase agreement,
the Company purchased the furnishings,  fixtures and equipment,  liquor license,
goodwill,  right  to the  name  and  the  business  of  Mr.  Manatee's  from  an
unaffiliated third party for $800,000. The Company paid $300,000 of the purchase
price from its available  cash reserves and borrowed the $500,000  balance under
its available Line of Credit. See Note 5 of Notes to the Company's  Consolidated
Financial  Statements as to the write down of the goodwill  associated  with Mr.
Manatee's in the amount of $583,922 as a result of the aggregate  capitalization
of the Company (i.e. market value of Chefs' outstanding Common Stock) being less
than its book value.  This amount is  included  as an  operating  expense in the
Company's  Consolidated  Statement of  Operations  for fiscal 2003.  On April 1,
2002, the Company entered into a five year lease of the restaurant property at a
monthly rental of $8,000 under a triple  "net-net" Lease. The Lease provides the
Company with an option to renew the lease for up to three  additional  five year
terms with the rental  increasing by ten percent for each  additional  five-year
renewal term. The Lease also provides the Company with the right to purchase the
Property for  $1,075,000 at the  expiration of the initial five year term of the
Lease.

         Mr.  Manatee's  Casual Grille opened under the Company's  management on
April 1, 2002.  It is a casual  theme  restaurant  primarily  featuring  seafood
items,  serving lunch meals,  dinner meals and sandwiches.  To date, the average
check at Mr.  Manatee's has been  approximately  15% to 20% lower than the check
average at the Company's other seafood restaurants.

MEXICAN THEME RESTAURANTS

         At January  26,  2003,  the  Company was  operating  two Mexican  theme
restaurants,  each under the name  "Escondido's  Mexican  Restaurant." One was a
free-standing  restaurant located in Freehold, New Jersey. The other was located
at the Monmouth Shopping Mall in Eatontown,  New Jersey. See "Developments Since
the Beginning of the Last Fiscal Year" as to the Company's planned



                                       12
<PAGE>


closing  during the  second  quarter of  calendar  year 2003 of its  Escondido's
Mexican Restaurant at the Monmouth Shopping Mall.

         The  Company's  Mexican  theme  restaurants   feature  Mexican  cuisine
including  fajitas,  tortillas,  burritos  and  enchiladas  with  cheese,  beef,
chicken, pork and seafood fillings. The menus also include appetizers, soups and
salads  and a limited  number of  American  style  offerings  such as steaks and
burgers.  Alcoholic  offerings such as margaritas and tequilas  complement fruit
drinks and other soft drinks.

         FREEHOLD,  NEW JERSEY - The  Company  opened its  Freehold,  New Jersey
"Escondido's  Mexican  Restaurant"  located on West Main  Street  (Route 537) in
January 2002. This free-standing  restaurant,  consisting of approximately 5,000
square feet of leased  space,  is  decorated in a bright  multi-colored  Mexican
motif.  The  restaurant  has a bar and tables and booths  which can  accommodate
approximately  225  patrons and shares  parking  facilities  with the  adjoining
Moore's  Tavern  and  Restaurant.   It  has  a  liquor  license  permitting  the
consumption of wine and alcoholic  beverages on the premises.  The restaurant is
open for lunch and dinner seven days per week.

         The Company  leased the facility  ("Building  B") from  Moore's  Realty
(whose partners are members of the controlling  Lombardi Group and other members
of the Lombardi family). The lease is a "triple-net" lease pursuant to which the
Company is  required  to pay real estate  taxes,  insurance  and heating and air
conditioning  costs.  The lease is for a five-year term through January 2007 and
contains  provisions for three consecutive  five-year  renewals at the Company's
option which are automatically effective unless the Company gives written notice
at least  six  months  before  the end of the  applicable  term that it does not
intend that such option be exercised. The Company has the right to terminate the
lease upon six months'  written  notice  during the initial  lease term provided
that such notice cannot be given until 18 months after the  commencement  of the
initial  lease term and upon twelve  months  written  notice  during any renewal
term.

         The lease is a  "triple-net"  lease  pursuant to which the Company pays
real estate taxes,  insurance and heating and air conditioning  costs. The lease
provides for a minimum  annual rental of $90,000 during each year of the initial
five-year term, $100,000 during each year of the first five-year renewal period,
$112,500  during each year of the second  five-year  renewal period and $125,500
during  each year of the third  five-year  renewal  period.  In  addition to the
minimum annual rental,  the Company is also required to pay an amount to Moore's
Realty equal to (i) 6% of the total



                                       13
<PAGE>


gross sales of food and beverages  etc. at the facility in each year  (excluding
taxes and  gratuities)  (the "gross annual rental") less (ii) the minimum annual
rental for that year.  Moore's  Realty has the right to terminate the lease upon
twelve months' prior written notice if, for the preceding  lease year, the gross
annual rental did not exceed the minimum  annual  rental for that year.  For the
fiscal year ended  January 26, 2003,  the Company was only  obligated to pay the
minimum annual rental of $90,000.

         The Company expended approximately $1,300,000 to renovate, decorate and
equip (kitchen, bar, furniture,  fixtures) its Escondido's Mexican Restaurant in
Freehold,  New Jersey.  The bulk of the costs were paid from the proceeds of two
bank loans from First Union aggregating $1,200,000.  See "Developments Since the
Beginning  of the Last  Fiscal  Year - Bank  Loans" in this Item 1.  During  the
renovation  period,  the Company paid an  aggregate  $15,000 in rents to Moore's
Realty with  respect to Building B. The Company had no  additional  cost for the
liquor license for these  premises,  the license being permitted as an expansion
of the license on the adjoining "Moore's Tavern and Restaurant."

         See  "Developments  Since the  Beginning of its Last Fiscal Year" as to
the Company's lease of the Building C pad site to provide additional parking for
both this restaurant and Moore's Tavern and Restaurant.

MOORE'S TAVERN AND RESTAURANT

         In February  2000,  the Company  executed a lease with  Moore's  Realty
(whose partners are members of the controlling  Lombardi Group and other members
of the Lombardi  family).  The lease was of premises on West Main Street  (Route
537) in Freehold,  New Jersey where an entity  affiliated  with Moore's  Realty,
Moore's Inn, Inc. was operating a restaurant  and tavern under the name "Moore's
Inn." The Company provided  consulting  services to the operators of Moore's Inn
from  January 3, 2000 until  February  23, 2000 when it executed  the  following
described  lease and purchase  agreements  and commenced to operate the facility
under the name "Moore's Tavern and Restaurant."

         The  lease was for a  five-year  term  through  February  22,  2005 and
contains  provisions for three consecutive  five-year  renewals at the Company's
option which are automatically effective unless the Company gives written notice
at least six months  before the end of the  initial  term or at least six months
before the end of the  applicable  renewal  period  that it does not intend that
such option be exercised.  After 18 months,  the Company can terminate the lease



                                       14
<PAGE>


upon six months'  written  notice  provided  that  during each of the  five-year
renewal periods,  the Company must provide at least twelve months' prior written
notice to terminate.

         The lease is a  "triple-net"  lease  pursuant to which the Company will
pay real estate taxes,  insurance and heating and air  conditioning  costs.  The
lease  provides for a minimum  annual rental of $90,000  during each year of the
initial five-year term, $100,000 during each year of the first five-year renewal
period,  $112,500  during each year of the second  five-year  renewal period and
$125,500 during each year of the third five-year  renewal period. In addition to
the minimum  annual  rental,  the  Company is also  required to pay an amount to
Moore's  Realty  equal to (i) 6% of the total gross sales of food and  beverages
etc. at the facility in each year (excluding  taxes and gratuities)  (the "gross
annual  rental")  less (ii) the  minimum  annual  rental for that year.  For the
fiscal year ended January 26, 2003, the gross annual rental aggregated $141,963.
Moore's  Realty has the right to terminate  the lease upon twelve  months' prior
written notice if, for the preceding lease year, the gross annual rental did not
exceed the minimum annual rental for that year.

         During the lease term, the Company has been granted the exclusive right
to the use of the names  "Moore's Inn" and "Moore's  Tavern" within the State of
New Jersey.  Moore's Realty has agreed not to operate,  lease, rent or permit to
be operated as a restaurant or tavern during the lease term, any premises owned,
leased or  occupied  by it or  members of the  Lombardi  family  (not  presently
occupied as such), located within ten miles of Moore's Inn.

         In connection with the lease, the Company purchased a New Jersey liquor
license from Moore's Inn,  Inc. for $350,000 and agreed to sell the license back
to the Seller or to Moore's Realty at the  termination of the lease for the same
$350,000.  In addition,  the Company purchased existing furniture,  fixtures and
equipment at Moore's Inn from Moore's Inn,  Inc. for $250,000  agreeing to leave
all of the furniture, fixtures and equipment at the premises "...in good working
condition, reasonable wear and tear excepted..." upon termination of the lease.

         The lease of the Moore's Inn and the purchase of the liquor license and
the  furniture,   fixtures  and  equipment   cannot  be  deemed  "arm's  length"
transactions  due to the interest of the Lombardi Group and other members of the
Lombardi family.  The transactions were negotiated for the Company by Anthony C.
Papalia,   its  president  and  chief  executive  officer.  In  negotiating  the



                                       15
<PAGE>


transactions, Mr. Papalia took into account his experience in similar restaurant
leases,  the prices at which  liquor  licenses  were sold in  neighboring  areas
(finding such prices to be comparable to the liquor license  purchase price paid
by the Company) and the condition of the furniture,  fixtures and equipment. The
bulk of the  furniture,  fixtures and equipment had been purchased by the Seller
during the twelve months ended June 30, 1999 at a price of $621,893. Mr. Papalia
and the  non-interested  directors  concluded that the terms of the  transaction
were fair and in the best interests of the Company.

         At the time of execution  of the lease,  Moore's  Realty  agreed not to
sell or lease a building  ("Building  B")  adjacent  to the  Moore's  Inn or the
nearby pad site for a proposed building ("Building C") for a period of one year.
If during the first year,  the Company  entered into an agreement to purchase or
lease  Building B,  Moore's  Realty  agreed not to sell or lease the pad site to
anyone other than the Company for an additional  one-year  period.  See "Mexican
Theme  Restaurants"  herein as to the Company's lease of Building B from Moore's
Realty in fiscal 2002, renovation of the facility and opening of an "Escondido's
Mexican  Restaurant"  at the  facility  in  January  2002.  At the  time  of the
Company's  leasing of Building B, the  Company  and Moore's  Realty  executed an
amendment to their January 21, 2000 lease  agreement  extending the initial term
of the earlier lease to the termination date provided for in the later lease and
similarly  extending  the renewal  periods of the earlier lease to coincide with
the renewal periods of the Building B lease.  Also see  "Developments  Since the
Beginning of its Last Fiscal Year" as to the  Company's  lease of the Building C
pad site to provide  additional  parking for this  restaurant  and its  Freehold
Escondido's Mexican Restaurant.

         The Moore's Tavern and Restaurant,  consisting of  approximately  7,700
square feet,  is free standing and is located on West Main Street (Route 537) in
Freehold,  New Jersey.  The restaurant seats  approximately 260 (with an outdoor
patio for warm weather use that can seat an additional approximately 40 persons)
and accommodates  parking for approximately  200 automobiles,  the parking to be
shared with any businesses operated from Building B (now operated by the Company
as  an  Escondido's   Mexican   Restaurant),   and  proposed   Building  C.  See
"Developments  Since the  Beginning of the Last Fiscal Year" as to the Company's
leasing of the Building C pad site to provide  additional parking for patrons of
its two Freehold, New Jersey restaurants.  The tavern portion of this restaurant
is of an historic  nature  having been  initially  constructed  in the late 18th
century and owned by an officer in the American  Revolutionary  Army. The entire
restaurant is decorated in a revolutionary period decor.



                                       16
<PAGE>


         The  Moore's  Tavern and  Restaurant  is open for lunch and dinner on a
year-round   basis.  It  features  an  eclectic   American  food  menu  offering
sandwiches,  burgers,  steak  and  other  meats,  chicken  and  fish,  potatoes,
vegetables and desserts, and alcoholic beverages.

SOURCES OF FOOD PRODUCTS

         The food  products  used by the Company in the operation of its seafood
restaurants,  its Moore's  Tavern and  Restaurant  and its  Escondido's  Mexican
Restaurants are readily available from a variety of sources  including  national
distributors and local sources on an order basis when needed.

SEASONAL ASPECTS

         The Company's New Jersey seafood  restaurants  experience a significant
portion of their sales from May through  September  whereas its Florida  seafood
restaurants experience a significant portion of their sales from January through
April. The Monmouth Mall Escondido's  Mexican  Restaurant  derives a significant
portion  of its sales  during  the  holiday  season  from  Thanksgiving  through
Christmas.  Moore's Tavern and Restaurant and the Freehold  Escondido's  Mexican
Restaurant have experienced a seasonality  factor similar to but not as dramatic
as the seasonality factor of the Company's New Jersey seafood  restaurants.  Mr.
Manatee's Casual Grille follows the seasonality pattern of the Company's Florida
restaurants.

TRADEMARKS

         The  Company  has  no  patents,  trademarks,  licenses,  franchises  or
concessions  which it regards as material to its  restaurant  business  with the
exception of the service mark "Jack Baker's Lobster Shanty"(R)  registered for a
20 year period with the U.S. Patent and Trademark Office in February,  1989, and
its rights to use of the names  "Moore's Inn" and "Moore's  Tavern" as described
above.  The  Company  also  believes  its use of the service  mark  "Escondido's
Mexican  Restaurant"(R)  is material  to its  restaurant  business.  The Company
applied to the United States  Commissioner of Trademarks and effective September
2002,   obtained   registration  of  the  service  mark   "Escondido's   Mexican
Restaurant."(R)



                                       17
<PAGE>


COMPETITION

         The restaurant  business is highly  competitive  and the success of any
restaurant  depends to a great  extent upon the  services  it  supplies  and its
location.  The Company's seafood  restaurants compete primarily with other local
seafood  restaurants and to a lesser extent,  with local  restaurants  serving a
more general fare. The principal  national  competition to the Company's seafood
restaurants is the Red Lobster  restaurant  chain.  This chain has substantially
greater resources than the Company.  The Company's  Florida seafood  restaurants
also face competition from Shells seafood  restaurants  operating in their area.
There are other  restaurants in the vicinity of the locations  where the Company
is now  operating  its  Escondido's  Mexican  Restaurants,  all of which  supply
competition to the Company's Mexican theme restaurants.  In addition,  there are
other Mexican style restaurants in the area. Typical "chain" competitors, all of
which are affiliated with better established and more prominent national chains,
are the  Friendly Ice Cream chain,  Ruby  Tuesdays and TGI Fridays.  The Moore's
Tavern and Restaurant faces  competition from local  restaurants as well as from
national chains including TGI Fridays and Chili's restaurants in the area. There
can be no  assurance  that  the  Company's  units  will be able to  successfully
compete with any of such other restaurants.

GOVERNMENT REGULATION

         The  Company  is  subject  to  various  Federal,  state and local  laws
affecting the operation of its restaurants,  including  licensing and regulation
by  health,  sanitation,  safety and fire  departments  and  alcoholic  beverage
control  authorities.  The Company is also  subject to the Fair Labor  Standards
Act,  which  governs such matters as minimum  wages,  overtime and other working
conditions.  While such regulations  have not had a material  negative impact on
the Company's  operations to date,  difficulties in obtaining necessary licenses
or  permits  could  result in  delays or  cancellations  in the  opening  of new
restaurants and increases in the minimum wage could increase the Company's labor
costs.

         Each of the Company's New Jersey and Florida  restaurants holds a state
liquor  license  and is subject to the  liquor  licensing  laws of New Jersey or
Florida (depending on location).  Management regards the aggregate and per claim
liability  insurance  which it  carries  to be  adequate  for the  nature of its
operations taking into account the fact that it serves liquor at each location.



                                       18
<PAGE>


EMPLOYEES

         The Company  maintains  its  administrative  employees at its executive
offices  including  its principal  officers (see "Item 9 - Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act"),  secretarial and  bookkeeping  personnel.  Each of the Company's
seafood  restaurant units employs a general manager,  two assistant managers and
between 40 and 130 other  employees to serve as  waitresses,  waiters,  busboys,
bartenders, cooks, dishwashers,  kitchen help, hostesses and cashiers (some on a
part-time basis). The Company's Escondido's Mexican Restaurant in Freehold,  New
Jersey employs between 30 and 40 employees and its Moore's Tavern and Restaurant
employs approximately 60 employees, in each case serving similar functions.  The
Company also presently  employs three area  supervisors,  each  responsible  for
certain of the Company's  restaurants.  Managerial  candidates are recruited for
the  Company's   restaurants  from  hotel  and  restaurant  management  schools,
restaurant  recruiting  agencies,  through advertising in restaurant  management
magazines  and by  promotion  from within the  Company's  own  organization.  At
January 26,  2003,  the  Company  had  approximately  550  employees  (including
part-time  workers).  The  Company is not a party to any  collective  bargaining
agreements and has enjoyed satisfactory employee relations since inception.

ITEM 2.  DESCRIPTION OF PROPERTY

     The  Company's  executive  and  administrative  offices  are  located in an
approximately 4,000 square foot two story Company owned building of cinder block
construction at 62 Broadway, Point Pleasant Beach, New Jersey.

         See  Item  1  herein  for a  description  of  the  Company's  operating
restaurants.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any material legal proceeding.

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

         No matters were submitted to a vote of the Company's  security  holders
during the quarter ended January 26, 2003.



                                       19
<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock was listed on the NASDAQ Stock Market Small Cap System
under the symbol "CHEF" until the close of business on December 16, 1998 when it
was  delisted  because of the failure of the Common  Stock to maintain a closing
bid price at or above $1.00 per share.  Commencing December 17, 1998, the Common
Stock has been traded in the  over-the-counter  market under the symbol  "CHEF."
The following  chart sets forth the range of high and low closing bid prices for
the Common  Stock in the  over-the-counter  market for the periods  indicated as
obtained from the Pink Sheets LLC.

                                                  Bid Prices
             Quarter                         --------------------
             Ended                            High           Low
             -------                         ------         -----
             April 27, 2001                  $  .90         $ .70
             July 27, 2001                     1.37           .81
             October 26, 2001                  1.41          1.07
             January 25, 2002                  2.15          1.15

             April 26, 2002                  $ 2.10        $ 1.42
             July 26, 2002                     1.72          1.42
             October 25, 2002                  1.46          1.33
             January 24, 2003                  1.50          1.35

         The  above  quotations  represent  prices  between  dealers  and do not
include retail  mark-ups,  mark-downs or  commissions.  They do not  necessarily
represent actual transactions.

         At April 11, 2003, the number of record holders of the Common Stock was
6,496.  Such  number  of  record  holders  was  determined  from  the  Company's
shareholder records and does not include beneficial owners whose shares are held
in nominee accounts with brokers, dealers, banks and clearing agencies.

         The Company did not sell any of its equity securities during the fiscal
year ended January 26, 2003.



                                       20
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Certain  statements  regarding future performance in this Annual Report
on  Form  10-KSB  constitute   forward-looking   statements  under  the  Private
Securities  Litigation  Reform Act of 1995.  No assurance  can be given that the
future results covered by the forward-looking  statements will be achieved.  The
Company cautions readers that important  factors may affect the Company's actual
results  and  could  cause  those   results  to  differ   materially   from  the
forward-looking  statements.  Such  factors  include,  but are not  limited  to,
changing  market  conditions,  weather,  the state of the  economy,  substantial
increases  in  insurance  costs,  the  impact of  competition  to the  Company's
restaurants, pricing and acceptance of the Company's food products.

FINANCIAL REPORTING

         Financial  Reporting  Release  No.  60,  issued by the  Securities  and
Exchange  Commission  ("SEC"),  requires  all  registrants  to discuss  critical
accounting policies or methods used in the preparation of financial  statements.
Note  1  to  the  consolidated   financial  statements  includes  a  summary  of
significant  accounting  policies  and methods  used in the  preparation  of the
Company's  consolidated  financial  statements.   However,  in  the  opinion  of
management,  the Company does not have any individual  accounting policy that is
critical to the preparation of its consolidated  financial  statements.  This is
due  principally to the nature of the accounting  requirements  of the Company's
business.  The following is a review of the more significant accounting policies
and methods used by the Company.

         Depreciation and  Amortization:  The Company  depreciates its property,
plant and equipment and  amortizes  its definite  life  intangible  assets using
straight-line  methods  over  the  estimated  useful  lives  of the  assets.  As
discussed in Note 5 to the  Consolidated  Financial  Statements,  on January 28,
2002 the Company adopted a new accounting  standard.  This new standard required
an initial  impairment  assessment  involving a comparison  of the fair value of
goodwill and other  intangible  assets to their current  carrying  values.  Upon
adoption, the Company recorded a loss for the cumulative effect of an accounting
change of $430,403.  The loss,  attributable  to a write-down  of goodwill,  was
based on the fact that the aggregate  market  capitalization  of the Company was
less



                                       21
<PAGE>


than its book value.  The Company was also  required to conduct an annual review
of goodwill and liquor licenses for potential  impairment.  The Company's annual
impairment test required the Company to write down the goodwill  associated with
its April 2002  acquisition  of Mr.  Manatee's  Casual Grille (see Note 2 to the
Consolidated  Financial  Statements).  Again, the write down was a result of the
market  capitalization  of the Company being less than its book value. The write
down of goodwill  associated  with Mr.  Manatee's  Casual  Grille of $583,922 is
included as an operating expense in the fiscal 2003 Statement of Operations.

         Income Taxes:  The Company accounts for income taxes in accordance with
statement of Financial  Accounting  Standards ("SFAS") No. 109,  "Accounting for
Income  Taxes."  Under SFAS No. 109,  deferred  tax assets and  liabilities  are
determined based on the difference  between book and tax assets and liabilities,
using  enacted  tax rates in effect  for the year in which the  differences  are
expected to reverse.  The  recognition  of the  deferred  tax assets is based on
management's  best  assumptions  and  estimates  of future  income.  A valuation
allowance is recorded when management determines that it is more likely than not
that  some  portion  of the  deferred  tax  asset  will not be  realized.  These
assumptions  and  estimates  will  be  periodically  reviewed  and,  if  needed,
adjustments will be made as required.

          Hedging  Instruments:  The Company has interest  rate swap  agreements
relating to a portion of its variable rate debt. The Company  accounts for these
hedging  instruments  under SFAS No. 133 "Accounting for Derivative  Instruments
and Hedging Activities," and its related amendment, SFAS No. 138 "Accounting for
Certain  Derivative  Instruments and Certain Hedging  Activities"  (collectively
referred to as "SFAS No. 133"). The interest rate swap agreements are designated
as cash flow hedges and are reflected at fair value in the Consolidated  Balance
Sheet and the related  losses on these  contracts are deferred in  shareholders'
equity as a component of accumulated other comprehensive loss.

OVERVIEW

         The Company's principal source of revenue is from the operations of its
restaurants.  The  Company's  cost of  sales  includes  food and  liquor  costs.
Operating  expenses include labor costs,  supplies and occupancy costs (rent and
utilities), marketing and maintenance costs. General and administrative expenses
include costs incurred for corporate support and  administration,  including the
salaries  and  related  expenses of  personnel  and the costs of  operating  the
corporate office at the Company's headquarters in



                                       22
<PAGE>


Point Pleasant Beach, New Jersey.

         The Company  currently  operates  eleven  restaurants  on a  year-round
basis. See Item 1, "Developments Since the Beginning of the Last Fiscal Year" as
to the Company's  planned closing of one of these  restaurants,  its Escondido's
Mexican  Restaurant in the Monmouth Mall,  during the second quarter of calendar
year 2003. The Company opened its first seafood  restaurant in November 1978 and
currently has seven free-standing  seafood restaurants in New Jersey and Florida
operating under the names "Jack Baker's Lobster Shanty" or "Baker's  Wharfside."
The Company opened its first Mexican theme restaurant, located in New Jersey, in
April 1996, under the name  "Garcia's." In February 2000, the Company  commenced
the  operation  of  the  ninth   restaurant,   Moore's  Tavern  and  Restaurant,
("Moore's"),  a  free-standing  restaurant  in Freehold,  New Jersey  serving an
eclectic  American  food type menu. On January 29, 2002,  the Company  commenced
operation of its tenth restaurant,  Escondido's Mexican Restaurant ("Freehold"),
a Mexican theme restaurant located in Freehold, New Jersey, adjacent to Moore's.
On February 1, 2002,  Garcia's began to operate under the trade name Escondido's
("Monmouth").  The  Company  plans to close  this  restaurant  during the second
quarter of  calendar  year 2003.  On April 1, 2002,  the  Company  acquired  the
operations   of  its  eleventh   restaurant,   Mr.   Manatee's   Casual   Grille
("Manatee's"),  a casual theme  restaurant  primarily  featuring  seafood items,
located in Vero Beach,  Florida near the Company's Vero Beach,  Florida  Lobster
Shanty.

         Generally,  the  Company's  New  Jersey  seafood  restaurants  derive a
significant  portion of their sales from May through  September.  The  Company's
Florida  seafood  restaurants  derive a significant  portion of their sales from
January through April. The Company's Monmouth  Escondido's  restaurant derives a
significant  portion of its sales  during the holiday  season from  Thanksgiving
through Christmas.  Moore's  experiences a seasonality factor similar to but not
as dramatic as the seasonality factor of the New Jersey seafood restaurants. The
Company's  Freehold  Escondido's  experiences  a seasonality  factor  similar to
Moore's.  Manatee's  follows  the  seasonality  pattern  of  the  other  Florida
restaurants.

         The Company operated nine restaurants during the year ended January 27,
2002.

         The statements of operations are comprised of a 52-week period for both
the year ended January 26, 2003  ("fiscal  2003") and the year ended January 27,
2002 ("fiscal 2002").



                                       23
<PAGE>


RESULTS OF OPERATIONS

SALES

         Sales for the year ended January 26, 2003 were $22,953,900, an increase
of $2,155,600 or 10.4%,  as compared to  $20,798,300  for the year ended January
27, 2002. The increase includes sales of $1,494,100 at the Freehold Escondido's,
which opened on January 29, 2002,  and sales of $1,359,300  at Manatee's,  which
opened on April 1, 2002. The other nine restaurants combined had decreased sales
of $697,800 or 3.4%  versus  last year.  The primary  reasons for the decline in
sales were the weak tourist and summer seasons in Florida,  where sales were off
by $322,400 or 5.1%,  due to public  concerns  about air  traffic  safety  after
9/11/01  (see reduced  customer  traffic at Disney in Orlando  where  attendance
plunged by  double-digit  percentages  and has not returned to pre 9/11 levels),
the slow  economy  and fears of another  recession,  the  continuing  bear stock
market  which  has  negatively  impacted  discretionary  spending  and  consumer
confidence,  concerns  about the Iraq war,  and similar to the  Florida  tourist
season,  a slow summer and third and fourth quarters in New Jersey,  where sales
were lower by $375,400 or 2.6%. The New Jersey  restaurants were also negatively
impacted by the unusually wet and cold winter  weather.  The number of customers
served  during fiscal 2003 in the nine  restaurants  decreased by 5.2% while the
average  check paid per customer  increased by 1.9%.  The average check paid per
customer at both Freehold  Escondido's  and Manatee's was less than at the seven
seafood restaurants and Moore's and higher than at Monmouth Escondido's.

GROSS PROFIT; GROSS MARGIN.

         Gross profit was 68.8% of sales for fiscal 2003 as compared to 68.4% of
sales for fiscal 2002. The primary reason for the improvement was lower costs of
high volume seafood items  including  shrimp,  scallops and flounder,  which are
primary  components of the Company's  menus.  Additionally,  the Company's gross
profit was improved by the addition of both Freehold  Escondido's which offers a
lower cost Mexican fare, and Manatee's which offers a lower cost seafood menu.

Operating Expenses.

         Total operating expenses increased by 18.3% from $13,766,200 for fiscal
2002 to $16,286,300 for fiscal 2003.  Payroll and related expenses were 32.2% of
gross  sales for fiscal 2003  compared to 30.1% of gross sales for fiscal  2002.
The primary reasons for the



                                       24
<PAGE>


increase were higher health insurance  premiums which increased by more than 30%
on April 1, 2002, the substantial decrease in sales in the nine restaurants that
operated during both years,  and the overall higher payroll costs at the two new
restaurants. Historically, new restaurants have higher operating expenses during
the first few months of operation.  Other operating  expenses increased to 22.4%
of sales for fiscal 2003 versus 21% in 2002 primarily due to the addition of the
two new  restaurants  and higher  occupancy costs resulting from higher property
insurance  premiums and higher real estate  taxes.  The  Company's  property and
casualty  insurance coverage was renewed in April 2002 at an overall increase of
26%. The property component of the insurance  package,  which is included in the
Company's occupancy costs, was renewed with a 56% rate increase.

         Depreciation  and  amortization  expenses  increased  by  approximately
$84,400  during  fiscal  2003  versus  the  prior  year  primarily  due  to  the
depreciation  expenses associated with the $1,334,200 renovation of the Freehold
Escondido's  and the  purchase  of the  furniture,  fixtures  and  equipment  of
Manatee's  offset by the  reduction in  amortization  costs due to the Company's
adoption of SFAS No. 142 (see Note 1 to the Consolidated Financial Statements).

         General and  administrative  expenses were $53,900 lower in fiscal 2003
versus the prior year. Despite an increase of approximately $81,400 in insurance
costs in fiscal  2003,  total  general and  administrative  expenses  were lower
because  the  total for  fiscal  2002  included  approximately  $61,300  more in
training  and  recruiting  costs  primarily  associated  with the opening of the
Freehold  Escondido's,  $80,000 to terminate an agreement  with  Garcimex of New
Jersey and  approximately  $26,000 in market research and legal costs to develop
the trade name Escondido's Mexican Restaurant. Salaries for fiscal 2003 included
$32,900  attributed  to the  Company's  Executive  Incentive  Bonus Plan ("Bonus
Plan") (see Note 9 to the Consolidated Financial Statements),  while salaries in
fiscal 2002 attributed to the Bonus Plan were $63,900.

GOODWILL IMPAIRMENT LOSS

         Pursuant  to SFAS No.  142 (see  Note 5 to the  Consolidated  Financial
Statements) the Company's annual review for impairment  resulted in a write down
of the goodwill  associated  with the April 2002  acquisition  of Manatee's (see
Notes 2 and 5 to the  Consolidated  Financial  Statements).  The  charge for the
write down of the  Manatee's  goodwill of  $583,900 is included as an  operating
expense for fiscal 2003.



                                       25
<PAGE>


OTHER INCOME AND EXPENSE.

         Interest  expense  was  $62,700  higher in fiscal  2003 due to interest
expense  associated with $1,200,000 in bank loans the Company  borrowed from its
primary  bank to finance the  renovation  of the  Freehold  Escondido's  and the
$500,000  bank line of credit  ("bank line") which the Company used to partially
finance the  acquisition  of Manatee's.  The  $1,200,000 is repayable in various
monthly  installments  of  principal  with  interest  at an annual rate of 7.57%
through September 2011. In June 2002 the Company borrowed $500,000 from the bank
to pay down its $500,000 bank line. The new loan is repayable in various monthly
installments  of  principal  with  interest at a variable  rate of LIBOR plus 2%
through May 2007. The entire  $500,000 bank line is currently  available for use
through  June 2003.  Investment  income was $90,300  lower in fiscal 2003 due to
substantially   lower  rates  of  interest   available   for   investments   and
approximately  $50,700 less in capital gains realized on the sale of investments
(see Note 7 to the Consolidated Financial Statements).

NET (LOSS) INCOME.

         For the year ended January 26, 2003,  the Company  realized a net loss,
before the $430,403  charge for a cumulative  effect of  accounting  change (see
Note 5 to the Consolidated Financial Statements),  of $683,900 or $.17 per share
compared  to net  income of  $1,727,000  or $.42 per  share  for the year  ended
January  27,  2002.  The  primary  reasons  for the loss in fiscal  2003 are the
reduced sales and profits  resulting  from weak tourist  seasons in both Florida
and New Jersey,  the higher operating  expenses of the two new restaurants,  the
substantial  increase in  insurance  costs,  the  increase  in interest  expense
associated  with the two new bank  loans and the  $583,900  charge for the write
down of the Manatee's goodwill (see Notes 2 and 5 to the Consolidated  Financial
Statements).  Net  income  for the prior  year  included  the  recognition  of a
deferred tax asset of $1,166,000  related to the  Company's  net operating  loss
carryforwards.

LIQUIDITY AND CAPITAL RESOURCES.

         The Company has financed its operations primarily from revenues derived
from its restaurants.

         The Company's ratio of current assets to current liabilities was 1.98:1
at January 26, 2003, compared to 1.90:1 at January 27, 2002. Working capital was
$2,091,800  at the end of fiscal 2003,  a decrease of $209,700  versus the prior
year. During fiscal 2003, net



                                       26
<PAGE>


cash  decreased by $338,200.  Net cash provided from  operating  activities  was
$1,261,100.  The  primary  components  were net  income,  after  adjustment  for
depreciation, deferred income taxes, a cumulative effect of an accounting change
and the goodwill  impairment  loss, of $1,283,900,  an increase in miscellaneous
receivables of $117,300  primarily due to costs associated with the construction
of a paved  parking area for the two  Freehold,  New Jersey  restaurants  and an
increase  of  $90,000  in  accrued  expenses  and  other  liabilities  resulting
primarily  from  an  increase  of  $50,300  in the  amount  of  unredeemed  gift
certificates  held  by  restaurant  patrons  at  year  end  and an  increase  of
approximately  $30,300 in accrued health  insurance costs. On September 1, 2002,
the  Company  entered  into  a  five  year  agreement  with  Moore's  Realty  (a
partnership owned by the principal shareholders of the Company), the landlord of
Moore's  and  Escondido's,  to lease land for use as an  enlargement  of the two
restaurants'  common parking area. The Company is obligated under this lease for
minimum annual rentals of $40,000,  payable in monthly  installments  of $3,333,
during the first five years of the agreement  which also includes three (3) five
(5) year  extensions.  The  landlord  agreed to  reimburse  the  Company up to a
maximum of $150,000 for costs  associated  with the  construction of the parking
area by providing credit against the monthly rent. During the third quarter, the
Company  spent  approximately  $134,000 to construct  the parking area which has
been  classified as a receivable on the balance sheet.  At January 26, 2003, the
landlord owed the Company approximately $117,600 in future rent credits.

         Investing  activities during fiscal 2003 resulted in a net cash outflow
of $1,736,600.  Capital  expenditures  were $1,916,200 with the major components
including  $417,100  associated  with the renovation at Escondido's in Freehold,
$893,500  to acquire  the  inventory,  furniture,  fixtures,  equipment,  liquor
license and  franchising  rights of  Manatee's  and  approximately  $605,600 for
restaurant  improvements  and  Company  vehicles.   Other  investing  activities
included  the  purchase  of  various  investments  totaling  $244,100  offset by
$409,800 primarily from the proceeds from maturing  certificates of deposit.  At
January 26, 2003, the fair value of the Company's holdings of available-for-sale
securities  resulted  in net  unrealized  losses  of  $281,300  compared  to the
investment  cost  of  those  securities,  primarily  due to the  continued  poor
performance  of the US stock  markets.  The  resulting  losses are  reported  in
stockholders' equity as a component of accumulated other comprehensive (loss).



                                       27
<PAGE>


         Financing  activities  for  fiscal  2003  generated  a net cash flow of
$137,300 and  included  debt  repayment  of $362,700  and bank loan  proceeds of
$500,000  which  were  used to  partially  finance  the  purchase  of  assets of
Manatee's.

         During fiscal 2002, net cash  increased by $248,500.  Net cash provided
from  operating  activities  was  $1,882,000.  The primary  components  were net
income,   after  adjustment  for  depreciation  and  deferred  income  taxes  of
$1,669,500,  an increase  in  accounts  payable of  $173,100  due  primarily  to
payables associated with the opening of Freehold Escondido's, and an increase in
accrued expenses of $68,800  resulting  primarily from an increase of $45,200 in
the amount of unredeemed  gift  certificates  held by restaurant  patrons at the
year end.  Investing  activities  for fiscal  2002  resulted in a net outflow of
$2,069,100. Capital expenditures were $1,444,500 which included $883,000 for the
renovation  costs at  Escondido's  in  Freehold  and  $561,600  for new  Company
vehicles and routine improvements at the other nine restaurants. Other investing
activities  included the  purchase of various  investments  totaling  $1,116,900
offset by $525,700  from the sale of  investments  and  proceeds  from  maturing
certificates  of deposit.  Financing  activities in fiscal 2002  generated a net
cash flow of  $435,200  and  included  debt  repayment  of  $177,700,  bank loan
proceeds of $1,200,000  used to finance the  construction  of  Escondido's,  and
$569,900 to repurchase a block of an aggregate  262,603  shares of the Company's
outstanding   common  stock  from  three   shareholders  and  their  affiliates.
Additionally, approximately $17,200 was paid by the Company to repurchase 17,916
shares of the Company's  outstanding  stock pursuant to a Stock  Repurchase Plan
("Stock Plan")  authorized by the Board in May 2000 and which  terminated on May
24, 2002.

         At the end of fiscal 2003,  the Company was in  compliance  with all of
the covenants under its loan  agreements  with its primary bank,  Wachovia Bank,
National Association  (formerly First Union National Bank.) The Company was also
in full compliance at the year ended January 27, 2002.

RECENT DEVELOPMENTS

         During  the  month of April  2003,  management  negotiated  the  annual
renewals for group  health  ("health")  and  property and casualty  ("property")
insurance coverages. Prior to the health renewal, in an effort to reduce Company
health  costs,  management  reduced the class of employees  who would be offered
coverage effective April 1, 2003. Additionally, dental coverage was discontinued
for the remaining group. As a result, despite an



                                       28
<PAGE>


approximate  20%  increase  in health  premium  costs for the  reduced  group of
employees,  the  overall  group  health  plan  was  renewed  at  a  decrease  of
approximately  25% versus last year.  The  property  coverage  was renewed at an
overall  decrease of  approximately  13%.  Factors  contributing to the decrease
included a reduction in the amount of  coverage,  larger  deductibles,  a slight
softening of the insurance  market and, in order to cover all markets  available
and ensure competition to the benefit of the Company, the use of two independent
insurance brokers.

         On December 24, 2002 the Board of Directors  authorized  the Company to
repurchase  up to 100,000  shares of its Common  Stock on or before  January 29,
2004.  The  Company  expects  to make  such  purchases  from time to time in the
over-the-counter  market at prevailing market prices. No shares were repurchased
between  December 24, 2002 and the year ended  January 26, 2003.  Subsequent  to
January 26, 2003, the Company purchased 40,000 shares for $59,600.

         Management anticipates that funds from operations will be sufficient to
meet obligations in fiscal 2004,  including  projected  capital  expenditures of
$430,000 for routine capital expenditures.

INFLATION

         It is not  possible  for the Company to predict  with any  accuracy the
effect of  inflation  upon the results of its  operations  in future  years.  In
general,  the Company is able to increase menu prices to counteract the majority
of the  inflationary  effects  of  increasing  costs with the  exception  of the
substantial  increase in insurance costs that the Company has had to absorb over
the last couple of years.

ITEM 7.  FINANCIAL STATEMENTS

         Attached.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE

         NONE



                                       29
<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The following table sets forth certain information with respect to each
of the current directors of the Company:

                                                            Date First
Name                       Age     Position                 Elected a Director
----                       ---     --------                 ------------------
Robert M. Lombardi(a)      51      Chairman of the Board      May 1999
Nicholas B. Boxter         55      Director                   December 1999
Kenneth Cubelli            49      Director                   December 1999
Raymond L. Dademo          45      Director                   December 1999
Anthony M. Lombardi(a)     47      Director                   July 1999
Joseph S. Lombardi(a)      52      Director                   July 1999
Michael F. Lombardi(a)     54      Director                   July 1999
Stephen F. Lombardi(a)     47      Director                   July 1999

----------
(a) The five Lombardis who serve as directors are brothers.


         The  following  table  sets forth  certain  information  regarding  the
executive officers of the Company.

Name                               Age       Office
----                               ---       ------

Anthony C. Papalia                 45        President, Treasurer, Chief
                                             Executive Officer, Chief Financial
                                             Officer and Director

Martin W. Fletcher                 50        Secretary


         The Company does not have an Executive Committee. The term of office of
each  director and executive  officer  expires when his successor is elected and
qualified.  Executive  officers are elected by and hold office at the discretion
of the Board of Directors.

         The  following is a brief  account of the business  experience  of each
director and executive officer of the Company during the past five years.



                                       30
<PAGE>


DIRECTORS

         Robert M. Lombardi,  M.D. is, and for more than the past five years has
been  principally  engaged  as a  physician  and  orthopedic  surgeon  with  the
Edison-Metuchen  Orthopedic  Group, a medical  practice group located in Edison,
New Jersey,  where he also serves as a senior officer.  He is also an officer of
Moore's Inn, Inc. and a partner in Moore's Realty.

         Nicholas B.  Boxter,  C.P.A.  is, and for more than the past five years
has been principally engaged in the practice of accountancy with his own firm in
Whitehouse, New Jersey.

         Kenneth  Cubelli,  M.D.  is,  and for more than the past five years has
been principally  engaged as a physician and orthopedic  surgeon with the Morris
County Orthopedic Group in Denville, New Jersey.

         Raymond L.  Dademo,  Esq. is, and for more than the past five years has
been  principally  engaged  as a  practicing  attorney  with his own law firm in
Brick, New Jersey.

         Anthony M. Lombardi,  D.D.S.  is, and for more than the past five years
has been principally engaged in the practice of dentistry in Edison, New Jersey.
He is also an officer of Moore's Inn, Inc.

         Joseph S. Lombardi,  M.D. is, and for more than the past five years has
been  principally  engaged  as a  physician  and  orthopedic  surgeon  with  the
Edison-Metuchen  Orthopedic Group,  where he is a senior officer.  He is also an
officer of Moore's Inn, Inc. and a partner in Moore's Realty.

         Michael F. Lombardi, Esq. is, and for more than the past five years has
been  principally  engaged  as a  practicing  attorney  and a senior  officer of
Lombardi & Lombardi, P.A., an Edison, New Jersey law firm. He is also an officer
of Moore's Inn, Inc. and a partner in Moore's Realty.

         Stephen F. Lombardi, Esq. is, and for more than the past five years has
been  principally  engaged  as a  practicing  attorney  and a senior  officer of
Lombardi & Lombardi, P.A., an Edison, New Jersey law firm. He is also an officer
of Moore's Inn, Inc. and a partner in Moore's Realty.



                                       31
<PAGE>


EXECUTIVE OFFICERS

         Anthony C.  Papalia has been  continuously  employed by the Company for
the  preceding  five  years.  He has served as a manager  of various  New Jersey
Lobster Shanty  restaurants  and as an area  supervisor.  Mr.  Papalia,  who was
elected  senior vice  president and a director of the Company in September  1985
and  president  and  treasurer in March 1988,  is currently  devoting all of his
working time to the  business of the  Company.  He resigned as a director of the
Company in July 1999.

         Martin W.  Fletcher has been  continuously  employed by the Company for
the preceding five years in various capacities. He has served as general manager
of the Company's Toms River,  New Jersey Lobster Shanty,  as area supervisor for
its Florida west coast  restaurants,  as assistant  controller,  since September
1987 as  controller  and since  March 1988 as  secretary  and a director  of the
Company.  He resigned as a director of the Company in July 1999. He is currently
devoting all of his working time to the business of the Company.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Based  solely upon a review of Forms 3, 4 and 5, the  Company  believes
that  with  respect  to fiscal  2003,  all  Section  16(a)  filing  requirements
applicable to its officers,  directors and beneficial owners of more than 10% of
its equity securities were timely complied with except for a late filing made in
April 2002 by Joseph S.  Lombardi  with respect to his purchase of 900 shares of
Chefs  Common  Stock on February 25, 2002 and another late filing made by Joseph
S.  Lombardi in April 2002 with respect to his purchase of an  additional  1,000
shares on March 20, 2002. In addition,  Joseph S.  Lombardi and Kenneth  Cubelli
intend  to file  Form 4s on or before  May 9,  2003  with  respect  to Joseph S.
Lombardi's agreement on July 23, 2002 to transfer 100,000 shares of Chefs Common
Stock to Kenneth Cubelli.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth  information  concerning the compensation paid or
accrued by the Company  during the three fiscal years ended  January 26, 2003 to
its Chief  Executive  Officer as well as to any other  executive  officer of the
Company or a subsidiary who earned at least $100,000 during fiscal 2003.  During
the  three-year  period ended  January 26,  2003,  the Company did not grant any
restricted  stock awards or have any  long-term  incentive  plan in effect.  The
Company maintains a non-qualified  Supplemental Employee Benefit Program for its
officers, supervisors,  restaurant managers and assistant managers paying annual
contributions  ranging from $1,000 to approximately  $3,000 per individual.  The
Program provides life insurance death benefits, disability income benefits and



                                       32
<PAGE>


retirement income benefits. A former officer and director,  James Fletcher,  the
father of Martin W. Fletcher,  is not covered under this Program but the Company
agreed that if he  remained  in its employ  until age 65 and left such employ at
any time thereafter, the Company would pay him $20,000 annually for the ten year
period  following such  termination of employment or until his death, if he dies
prior  thereto.  To date,  the Company has made annual  payments over a six year
period pursuant to this agreement.

                           SUMMARY COMPENSATION TABLE

                                      Annual Compensation
Name and                  Fiscal     ----------------------     Other Annual
Principal Position        Year        Salary       Bonus(a)    Compensation(b)
------------------        ------     --------      --------    ---------------

Anthony Papalia           2003       $174,630       $4,500         $2,088
  President and           2002       $169,497       $8,429         $2,088
  Chief Executive         2001       $164,557      $14,000         $2,088

Martin Fletcher           2003       $101,255       $5,367         $2,902
  Controller and          2002        $98,308       $8,500         $2,902
  Secretary               2001        $95,398      $10,910         $2,902

----------
(a)  In May  2000,  the  Company's  Board  of  Directors  adopted  an  executive
     incentive  bonus  plan  providing  for an annual  cash  bonus to be paid to
     Company employees  performing executive type functions with respect to each
     fiscal year  (commencing  with fiscal  2001) in which the Company  achieved
     certain  specified  levels of earnings before  deducting  interest,  income
     taxes, depreciation and amortization.  Extraordinary items are excluded for
     purposes  of the  computation.  The bonus pool for fiscal  2003  aggregated
     $32,867 and was  distributed to seven employees  including  Anthony Papalia
     who received $4,500 and Martin Fletcher who received $5,367.

(b)  Represents contributions under the Supplemental Employee Benefit Program.


EMPLOYMENT AGREEMENTS

         At the annual  meeting of the Company's  stockholders  held on December
19, 1995,  stockholders  ratified  employment  contracts between the Company and
Anthony  Papalia as chief  executive  officer  and chief  financial  officer and
between the Company and Martin Fletcher as controller.  Each contract expired at
the conclusion of the Company's 1999 fiscal year and was  automatically  renewed
on a



                                       33
<PAGE>


year by year basis for up to five consecutive  additional  one-year terms unless
either party gave at least six months' prior notice that he or it did not desire
such renewal.  As no such notice was given during fiscal 1999, each contract was
extended  for a first  renewal  year.  Mr.  Papalia's  annual  salary  under the
contract was $150,000 and Mr.  Fletcher's  annual  salary under the contract was
$87,000 but each individual's  salary was made subject to automatic  increase in
each  Renewal  Year based on  increases  in the  Consumer  Price  Index.  If the
employment  of either  individual is  terminated  other than for cause,  he will
become entitled to a Severance  Payment equal to the amount of his  compensation
over the balance of the  contract  term.  Each  individual  is also  entitled to
terminate his  employment  and receive a Severance  Payment equal to six months'
salary in the event of a "change of control" of the Company.  Amendments to each
employment  contract  executed in June 1999 and August 1999  extended  the first
renewal year through March 31, 2000,  renewed each contract for a second renewal
year  through  March 31, 2001 and recast each  renewal year so as to commence on
April 1 of each year and to expire on March 31 of the following year.  Notice of
intention not to renew must now be given no later than  September 30 of the year
preceding the year in which the renewal term  commences.  In November 2001, each
employment  contract  was further  amended to renew the term  through  March 31,
2005. The amendments  retained the automatic salary increase  provision based on
increases  in the Consumer  Price Index and  provided for an automatic  one year
renewal in the absence of prior notice not to renew.  During  fiscal  2003,  Mr.
Papalia's annual salary increased to $175,546 and Mr.  Fletcher's  annual salary
was increased to $101,817.

STOCK OPTIONS

         At January 27,  2002 and at January 26, 2003 there were no  outstanding
employee or non-employee stock options  exercisable to purchase shares of Chefs'
Common Stock.

DIRECTORS' COMPENSATION

         During  fiscal 2003, no  compensation  was paid to any of the Company's
directors for serving in such capacity.  Furthermore,  no method of compensation
has been established at this date for the current directors.



                                       34
<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  The  following  table sets forth  information  as of April 11,
2003 with respect to their  ownership of Chefs'  Common Stock by (i) each person
known  by the  Company  to be the  beneficial  owner of more  than 5% of  Chefs'
outstanding  Common  Stock,  (ii)  each  director  of the  Company,  (iii)  each
executive officer of the Company,  and (iv) all directors and executive officers
as a group.

Name and Address of                Shares of Common Stock       Percentage
Beneficial Owner                   Beneficially Owned           Ownership
-------------------                ----------------------       ----------

DIRECTORS*

Robert M. Lombardi                 1,335,825(1)                    34%
Nicholas B. Boxter                        --                       --
Kenneth Cubelli                      100,000                        3%
Raymond L. Dademo                      2,000                       --
Anthony Lombardi                     111,001                        3%
Joseph S. Lombardi                   598,633                       15%
Michael F. Lombardi                  246,010(1)(2)(3)               6%
Stephen F. Lombardi                  111,335(1)(2)(3)               3%

EXECUTIVE OFFICER*

Anthony C. Papalia                     5,000                       --

All executive officers and
 directors as a group
 (ten persons)                     2,509,804(1)(2)(3)              64%

----------
* The address of each  director and  executive  officer is c/o the  Company,  62
  Broadway, Point Pleasant Beach, New Jersey 08742.

(1)  Robert M.  Lombardi,  Anthony  Lombardi,  Joseph S.  Lombardi,  Michael  F.
     Lombardi  and  Stephen F.  Lombardi,  Lombardi  &  Lombardi,  P.A.  and the
     Lombardi & Lombardi,  P.A.  Defined Benefit Pension Plan previously filed a
     report on Schedule 13D and  amendments  thereto  indicating  that they were
     acting  separately and not as a group but subsequently  filed amendments to
     the  Schedule  13D  indicating  that they are acting as a "group." The five
     individual Lombardis are brothers and for purposes of this report, they and
     the above entities are deemed the "Lombardi Group."



                                       35
<PAGE>


(2)  Includes  24,500 shares  comprising  one-half of the 49,000 shares owned by
     Lombardi & Lombardi,  P.A.,  of which  Michael F.  Lombardi  and Stephen F.
     Lombardi are each senior officers.

(3)  Includes 55,834 shares  comprising  one-half of the 111,668 shares owned by
     the Lombardi & Lombardi,  P.A.  Defined  Benefit  Pension Plan.  Michael F.
     Lombardi and Stephen  Lombardi each have voting and dispositive  power with
     respect to all 111,668 of such shares.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         See Item 1 herein, "Developments Since the Beginning of the Last Fiscal
Year" as to the leasing by the Company from an  affiliate of the Lombardi  Group
of the Building C pad site in Freehold, New Jersey to provide additional parking
for patrons of its Moore's  Tavern and Restaurant  and its  Escondido's  Mexican
Restaurant.  See Note 10 of Notes to the Consolidated Financial Statements as to
rents paid by the Company  during fiscal 2003 to Moore's  Realty with respect to
these two restaurants.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (A)      EXHIBITS

3.1               Restated Certificate of Incorporation of the Company(A)

3.2               By-Laws of the Company, as amended(B)

4.1               Specimen Common Stock Certificate(C)

10.1              Monmouth Mall Shopping Center Lease for Garcia's restaurant(D)

10.2              Employment  Agreement  dated as of December  19, 1995  between
                  Chefs and Anthony Papalia(D)

10.3              Employment  Agreement  dated as of December  19, 1995  between
                  Chefs and Martin Fletcher(D)

10.4              Loan Agreement  dated October 30, 1998 between the Company and
                  First Union  National  Bank ("First  Union") and the Company's
                  $880,000  Promissory Note issued pursuant  thereto for funding
                  utilized by the Company to  purchase  the Vero Beach,  Florida
                  Lobster Shanty Restaurant(A)



                                       36
<PAGE>


10.4.1            Loan Agreement dated September 7, 2001 between the Company and
                  First Union containing the Company's  affirmative and negative
                  covenants(G)

10.5              Lease  Agreement  executed  in January  2000 for  Moore's  Inn
                  facility, between Moore's Realty Associates ("Moore's Realty")
                  as Landlord and the Company as Tenant(B)

10.5.1            Lease  Agreement  dated  October  1,  2001 for  Building  B in
                  Freehold,  New Jersey  between  Moore's Realty as Landlord and
                  the  Company  as  Tenant   (opened  as   Escondido's   Mexican
                  Restaurant)(G)

10.5.2            Lease Agreement dated September  1,2002 for the Building C pad
                  site between Moore's Realty and the Company.

10.6              Liquor  License  Sale/Purchase  Agreement  executed in January
                  2000 between  Moore's Inn, Inc. as Transferor  and the Company
                  as Transferee(B)

10.7              Sale/Purchase Agreement for Furniture,  Fixtures and Equipment
                  executed in January 2000 between  Moore's Inn,  Inc. as Seller
                  and the Company as Purchaser(B)

10.9              Chefs International Executive Incentive Bonus Plan(G)

10.10             Asset Purchase  Agreement  dated January 25, 2002 for personal
                  property, furnishings, fixtures and equipment, liquor license,
                  trade name and goodwill of Mr.  Manatee's  restaurant  in Vero
                  Beach,  Florida between Causeway Foods, Inc. and Mr. Manatee's
                  Franchise Corporation as Sellers and the Company as Buyer(G)

10.11             Commercial  Lease Option  dated April 1, 2002 between  Stephen
                  Craig  Long as Lessor  and the  Company  as Lessee for the Mr.
                  Manatee's facility




                                       37
<PAGE>


21                Subsidiaries - The following  table indicates the wholly owned
                  subsidiaries  of  the  Company,  their  respective  states  of
                  incorporation and the restaurants operated by each:

<TABLE>
<CAPTION>
                                          State of
                  Name                    Incorporation     Restaurants
                  ----                    -------------     -----------

<S>                                        <C>              <C>
                  Chefs International      Florida          Jack Baker's Lobster Shantys
                      Palm Beach, Inc.                          Vero Beach and Jensen
                                                                Beach, Florida

                  Hightstown REB, Inc.     New Jersey       Jack Baker's Lobster Shantys
                                                                Pt. Pleasant Beach,
                                                                Toms River and
                                                                Hightstown, New Jersey
</TABLE>


99                Certification of Principal  Executive and Principal  Financial
                  Officer  of the  Company  pursuant  to 18 United  States  Code
                  Section 1530.

----------
         (A)  Incorporated  by  reference  to exhibit  filed with the  Company's
annual report on Form 10-KSB for the fiscal year ended January 31, 1999.

         (B)  Incorporated  by  reference  to exhibit  filed with the  Company's
annual report on Form 10-KSB for the fiscal year ended January 30, 2000.

         (C)  Incorporated  by  reference  to exhibit  filed with the  Company's
Registration Statement on Form SB-2 (File No. 33-66936).

         (D)  Incorporated  by  reference  to exhibit  filed with the  Company's
annual report on Form 10-K for the fiscal year ended January 28, 1996.

         (E)  Incorporated by reference to exhibit filed with Amendment No. 1 to
the Company's current report on Form 8-K/A for April 1, 1999.

         (F)  Incorporated  by  reference  to exhibit  filed with the  Company's
current report on Form 8-K for October 6, 2000.

         (G)  Incorporated  by  reference  to exhibit  filed with the  Company's
annual report on Form 10-KSB for the fiscal year ended January 27, 2002



                                       38
<PAGE>


         (b) REPORTS ON FORM 8-K

         The  Company  did not file any  reports  on Form  8-K  during  the last
quarter of the fiscal year ended January 26, 2003.

ITEM 14. CONTROLS AND PROCEDURES

         (a) EXPLANATION OF DISCLOSURE  CONTROLS AND  PROCEDURES.  The Company's
principal  executive  and  principal  financial  officer  after  evaluating  the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules  13a-14(c)  and  15d-14(c) as of a date within 90 days of the
filing date of this annual report (the "Evaluation  Date") has concluded that as
of the Evaluation  Date, the Company's  disclosure  controls and procedures were
adequate  and  effective  to ensure that  material  information  relating to the
Company and its consolidated  subsidiaries  would be made known to him by others
within those  entities,  particularly  during the period in which this quarterly
report was being prepared.

         (b) CHANGES IN INTERNAL CONTROLS.  There were no significant changes in
the Company's  internal  controls or in other  factors that could  significantly
affect the  Company's  disclosure  controls  and  procedures  subsequent  to the
Evaluation Date, nor any significant deficiencies or material weaknesses in such
disclosure controls and procedures requiring corrective actions. As a result, no
corrective actions were taken.






                                       39
<PAGE>







                   CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

                                FINANCIAL REPORT

                                JANUARY 26, 2003


<PAGE>




                                    CONTENTS



--------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT                                                 F-1
--------------------------------------------------------------------------------

FINANCIAL STATEMENTS:

   Consolidated Balance Sheet                                              F-2-3

   Consolidated Statements of Operations                                     F-4

   Consolidated Statements of Stockholders' Equity                           F-5

   Consolidated Statements of Cash Flows                                     F-6

   Notes to Consolidated Financial Statements                             F-7-17

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


<PAGE>



McGladrey & Pullen
Certified Public Accountants




                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Chefs International, Inc. and Subsidiaries
Point Pleasant, New Jersey


We  have  audited  the   accompanying   consolidated   balance  sheet  of  Chefs
International,  Inc. and  subsidiaries  as of January 26, 2003,  and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the two  fiscal  years in the  period  ended  January  26,  2003.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Chefs International,
Inc.  and  subsidiaries  as of  January  26,  2003,  and the  results  of  their
operations  and their cash flows for each of the two fiscal  years in the period
ended  January 26,  2003 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

As discussed in Note 1 to the  consolidated  financial  statements,  the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill and
Other Intangible Assets," effective January 28, 2002.


                                             /s/ McGladrey & Pullen, LLP

New York, New York
March 25, 2003




McGladrey & Pullen, LLP is an independent member firm of
RSM International, an affiliation of independent accounting
and consulting firms.


                                       F-1


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JANUARY 26, 2003

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

ASSETS

Current Assets:
    Cash and cash equivalents                                        $ 1,069,857
    Investments                                                          151,000
    Available-for-sale securities                                      1,668,531
    Miscellaneous receivables                                             62,173
    Receivable - related party                                            40,000
    Inventories                                                        1,128,992
    Prepaid expenses                                                     107,988
                                                                     -----------

          TOTAL CURRENT ASSETS                                         4,228,541
                                                                     -----------

Property and Equipment, at cost                                       21,411,079
    Less: Accumulated depreciation                                     9,164,376
                                                                     -----------

          PROPERTY AND EQUIPMENT, NET                                 12,246,703
                                                                     -----------

Other Assets:
    Intangibles                                                          942,518
    Receivable - related party                                            77,563
    Equity in life insurance policies                                    602,822
    Deferred income taxes                                              1,064,000
    Other                                                                 34,635
                                                                     -----------

          TOTAL OTHER ASSETS                                           2,721,538
                                                                     -----------

                                                                     $19,196,782
                                                                     ===========




See notes to consolidated financial statements.

                                       F-2

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (CONTINUED)
JANUARY 26, 2003

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

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Notes and mortgages payable, current maturities                $    271,490
    Accounts payable                                                    702,233
    Accrued payroll                                                     157,637
    Accrued expenses                                                    493,450
    Gift certificates                                                   511,955
                                                                   ------------

          TOTAL CURRENT LIABILITIES                                   2,136,765
                                                                   ------------

Notes and Mortgages Payable                                           1,960,438
                                                                   ------------

Other Liabilities                                                       747,559
                                                                   ------------

Stockholders' Equity:
    Capital stock - common $.01 par value,
       Authorized 15,000,000 shares,
       Issued 3,969,540                                                  39,695
    Additional paid-in capital                                       31,549,492
    Accumulated deficit                                             (16,854,010)
    Accumulated other comprehensive (loss)                             (379,272)
    Treasury stock - 3,550 shares                                        (3,885)
                                                                   ------------

          TOTAL STOCKHOLDERS' EQUITY                                 14,352,020
                                                                   ------------

                                                                   $ 19,196,782
                                                                   ============




See notes to consolidated financial statements.

                                       F-3


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002

<TABLE>
<CAPTION>
                                                                       2003                                2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                                 <C>
Sales                                                              $ 22,953,925                        $ 20,798,333

Cost of Goods Sold                                                    7,151,181                           6,570,094
                                                                   ------------                        ------------

    GROSS PROFIT                                                     15,802,744                          14,228,239
                                                                   ------------                        ------------

Operating Expenses:
   Payroll and related expenses                                       7,390,019                           6,253,547
   Other operating expenses                                           5,136,653                           4,367,445
   Depreciation and amortization                                      1,192,910                           1,108,482
   General and administrative expenses                                1,982,785                           2,036,725
   Goodwill impairment loss                                             583,922                                  --
                                                                   ------------                        ------------

    TOTAL OPERATING EXPENSES                                         16,286,289                          13,766,199
                                                                   ------------                        ------------

    (LOSS) INCOME FROM OPERATIONS                                      (483,545)                            462,040
                                                                   ------------                        ------------
Other Income (Expense):
   Interest expense                                                    (178,041)                           (115,378)
   Investment income                                                    165,719                             256,054
                                                                   ------------                        ------------

    OTHER (EXPENSE) INCOME, NET                                         (12,322)                            140,676
                                                                   ------------                        ------------

    (LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES                  (495,867)                            602,716

Provision (credit) for Income Taxes                                     188,082                          (1,124,293)
                                                                   ------------                        ------------

    (LOSS) INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE     (683,949)                          1,727,009

Cumulative Effect of an Accounting Change - Goodwill
   Accounting Method                                                   (430,403)                                 --
                                                                   ------------                        ------------

    NET (LOSS) INCOME                                              $ (1,114,352)                       $  1,727,009
                                                                   ============                        ============
(Loss) Income Per Common Share Before Cumulative Effect
   of an Accounting Change                                         $      (0.17)                       $       0.42

Cumulative Effect of an Accounting Change - Goodwill
  Accounting Method                                                       (0.11)                                 --
                                                                   ------------                        ------------

Basic and Diluted (Loss) Income Per Common Share                   $      (0.28)                       $       0.42
                                                                   ============                        ============
</TABLE>


See notes to consolidated financial statements.

                                      F-4

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Accumulated
                                                                      Capital       Additional                         Other
                                                      Number           Stock         Paid-in        Accumulated    Comprehensive
                                                    of Shares        Par Value       Capital          Deficit      Income (Loss)
                                                   ------------    ------------    ------------    ------------    -------------
<S>                                                   <C>          <C>             <C>             <C>             <C>
Balance at January 29, 2001                           4,257,085    $     42,571    $ 32,138,798    $(17,466,667)   $     51,043


Comprehensive Income:
  Net income                                                 --              --              --       1,727,009              --

    Net unrealized (loss) on
      available-for-sale securities arising
      during period                                          --              --              --              --         (52,703)

    Reclassification adjustment for gains
      realized on available-for-sale securities              --              --              --              --         (32,117)

    Change in fair value of derivatives
      accounted for as hedges                                --              --              --              --         (55,422)


  TOTAL COMPREHENSIVE INCOME                                 --              --              --              --              --


Repurchase and retirement of
   common stock                                        (262,603)         (2,626)       (567,270)             --              --


Stock repurchase program                                (24,641)           (246)        (22,040)             --              --


Fractional shares conversion                               (333)             (4)              4              --              --
                                                   ------------    ------------    ------------    ------------    ------------

BALANCE AT JANUARY 27, 2002                           3,969,508          39,695      31,549,492     (15,739,658)        (89,199)


Comprehensive (Loss):
  Net loss                                                   --              --              --      (1,114,352)             --

    Net unrealized (loss) on
      available-for-sale securities arising
      during period, net of $58,000 of taxes                 --              --              --              --        (186,273)

    Reclassification adjustment for gains
      realized on available-for-sale securities              --              --              --              --          (3,244)

    Change in fair value of derivatives accounted
      for as hedges, net of $31,000 of taxes                 --              --              --              --        (100,556)


  TOTAL COMPREHENSIVE (LOSS)                                 --              --              --              --              --


Fractional shares conversion                                 32              --              --              --              --
                                                   ------------    ------------    ------------    ------------    ------------

BALANCE AT JANUARY 26, 2003                           3,969,540    $     39,695    $ 31,549,492    $(16,854,010)   $   (379,272)
                                                   ============    ============    ============    ============    ============
</TABLE>


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

                      Total
    Treasury      Stockholders'
      Stock          Equity
  ------------    ------------

  $     (8,980)   $ 14,756,765
                  ------------


            --       1,727,009



            --         (52,703)


            --         (32,117)


            --         (55,422)
                  ------------

            --       1,586,767
                  ------------


            --        (569,896)
                  ------------

         5,095         (17,191)
                  ------------

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

        (3,885)     15,756,445
                  ------------


            --      (1,114,352)



            --        (186,273)


            --          (3,244)


            --        (100,556)
                  ------------

            --      (1,404,425)
                  ------------

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

  $     (3,885)   $ 14,352,020
  ============    ============


See notes to consolidated financial statements.

                                       F-5

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 26, 2003 AND JANUARY 27, 2002

<TABLE>
<CAPTION>
                                                                        2003           2002
-----------------------------------------------------------------------------------------------

<S>                                                                 <C>            <C>
Cash Flows From Operating Activities:
    Net (loss) income                                               $(1,114,352)   $ 1,727,009
    Adjustments to reconcile net (loss) income to net
       cash provided by operating activities:
          Depreciation and amortization                               1,192,910      1,108,482
          Deferred income taxes                                         191,000     (1,166,000)
          Gain on sale of investments                                    (5,154)       (55,852)
          Cumulative effect of an accounting change                     430,403             --
          Goodwill impairment loss                                      583,922             --
          Changes in assets and liabilities:
             (Increase) decrease in:
                Miscellaneous receivables                              (117,268)        47,024
                Inventories                                              39,672        (14,929)
                Prepaid expenses                                         73,471         (5,272)
             Increase (decrease) in:
                Accounts payable                                        (53,109)       173,066
                Accrued expenses and other liabilities                   90,041         68,800
                Income taxes payable                                    (50,394)            --
                                                                    -----------    -----------

             NET CASH PROVIDED BY OPERATING ACTIVITIES                1,261,142      1,882,328
                                                                    -----------    -----------

Cash Flows From Investing Activities:
    Purchase of property and equipment                               (1,022,694)    (1,444,530)
    Acquisition of restaurant assets                                   (893,536)            --
    Sale or redemption of investments                                   409,820        525,696
    Purchase of investments                                            (244,087)    (1,116,928)
    Equity in life insurance policies                                   (12,960)       (44,747)
    Other                                                                26,856         11,457
                                                                    -----------    -----------

             NET CASH (USED IN) INVESTING ACTIVITIES                 (1,736,601)    (2,069,052)
                                                                    -----------    -----------

Cash Flows From Financing Activities:
    Proceeds from debt                                                  500,000      1,200,000
    Repayment of debt                                                  (362,746)      (177,707)
    Purchase of common stock                                                 --       (569,896)
    Purchase of treasury stock                                               --        (17,191)
                                                                    -----------    -----------

             NET CASH PROVIDED BY FINANCING ACTIVITIES                  137,254        435,206
                                                                    -----------    -----------

             NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS      (338,205)       248,482

Cash and Cash Equivalents:
    Beginning                                                         1,408,062      1,159,580
                                                                    -----------    -----------

    Ending                                                          $ 1,069,857    $ 1,408,062
                                                                    ===========    ===========

Supplemental Disclosure of Cash Flow Information:
    Cash payment for:
       Interest                                                     $   178,753    $   111,629
                                                                    ===========    ===========

       Income taxes                                                 $    34,273    $    58,626
                                                                    ===========    ===========

Noncash Transactions:
    (Decrease) in fair value of securities available for sale       $  (189,517)   $   (84,820)
                                                                    ===========    ===========

    Change in fair value of derivatives accounted for as hedges     $  (100,556)   $   (55,422)
                                                                    ===========    ===========

    Accounts payable for purchase of property and equipment         $        --    $   417,100
                                                                    ===========    ===========
</TABLE>


See notes to consolidated financial statements.

                                       F-6


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Business:

         Chefs International,  Inc. and its subsidiaries (the "Company") operate
         eleven restaurants. Seven of these restaurants are seafood restaurants,
         located in New  Jersey and  Florida,  generally  under the trade  name,
         "Lobster  Shanty".  The Company also operates two  Escondido's  Mexican
         Restaurant,   Moore's  Tavern  and  Restaurant,  an  eclectic  American
         restaurant,  and Mr. Manatee's Casual Grille, a casual theme restaurant
         primarily  featuring seafood items.  Escondido's and Moore's Tavern are
         located in New Jersey;  Mr.  Manatee's  is located in Florida.  Segment
         information  is not  presented  since all of the  Company's  revenue is
         attributable to a single reportable segment.

         Principles of Consolidation:

         The accompanying consolidated financial statements include the accounts
         of the Company and all of its wholly-owned  subsidiaries.  Intercompany
         transactions and balances have been eliminated in consolidation.

         Concentrations of Credit Risk:

         The Company maintains cash balances at several  financial  institutions
         in New Jersey and  Florida.  The  balances  are  insured by the Federal
         Deposit  Insurance   Corporation  up  to  $100,000  at  each  financial
         institution.  Uninsured  cash  balances  at January  26,  2003  totaled
         approximately $918,200.

         Cash and Cash Equivalents:

         Cash  equivalents  are comprised of certain  highly liquid  investments
         with a maturity of three months or less when purchased.

         Investments:

         Investments  consist of  certificates  of deposit and are classified as
         current or long-term  based on their  maturities  at the balance  sheet
         date.

         Available-for-Sale Securities:

         At  January  26,  2003,   available-for-sale   securities   consist  of
         convertible    bonds,    mutual   funds,    and   equity    securities.
         Available-for-sale securities are carried at fair value with unrealized
         gains or losses  reported  in a  separate  component  of  stockholders'
         equity.  Realized gains or losses are determined  based on the specific
         identification method.



                                       F-7

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

         Available-for-Sale Securities (Continued):

         Details as to available-for-sale  securities at January 26, 2003 are as
         follows:

                                          Gross          Gross
                                        Unrealized     Unrealized
                          Gross Cost      Gains         (Losses)      Fair Value
                         -----------   -----------    -----------    -----------

Convertible bonds        $    17,250   $    13,275    $        --    $    30,525
Mutual funds               1,362,340        23,183       (300,170)     1,085,353
Equity securities            570,235        61,847        (79,429)       552,653
                         -----------   -----------    -----------    -----------

                         $ 1,949,825   $    98,305    $  (379,599)   $ 1,668,531
                         ===========   ===========    ===========    ===========


         Inventories:

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

         Property and Equipment and Depreciation:

         Property and  equipment are carried at cost.  Depreciation  is computed
         over the estimated  useful lives of the assets using the  straight-line
         method.  The  estimated  useful  lives  range  from 5 to 40  years  for
         buildings and improvements, including leaseholds, and 5 to 10 years for
         furniture and equipment.

         Goodwill and Other Intangible Assets:

         Beginning  January 1, 2002,  goodwill and  indefinite  life  intangible
         assets are not amortized  but are tested  annually for  impairment,  or
         more frequently if events or changes in circumstances indicate that the
         asset might be impaired.  In assessing the  recoverability  of goodwill
         and  indefinite   life  intangible   assets,   the  Company  must  make
         assumptions  about the estimated future cash flows and other factors to
         determine the fair value of these assets.

         For goodwill,  the impairment  evaluation  includes a comparison of the
         carrying  value  of the  reporting  unit  (including  goodwill)  to the
         reporting  unit's fair value.  If the reporting  unit's  estimated fair
         value exceeds the reporting  unit's  carrying  value,  no impairment of
         goodwill  exists,  if the fair  value of the  reporting  unit  does not
         exceed  the unit's  carrying  value,  than an  additional  analysis  is
         performed  to allocate the fair value of the  reporting  unit to all of
         the assets and  liabilities of the reporting unit. If the excess of the
         fair  value  of  the  reporting   unit  over  the  fair  value  of  the
         identifiable  assets and liabilities is less than the carrying value of
         the unit's goodwill, an impairment charge is recorded.



                                       F-8


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

         Goodwill and Other Intangible Assets: (Continued)

         Similarly,  the impairment  evaluation for indefinite  life  intangible
         assets  includes the  comparison of the asset's  carrying  value to the
         asset's fair value.  When the carrying  value exceeds the fair value an
         impairment  charge is  recorded  for the amount of the  difference.  An
         intangible  asset is determined to have an indefinite  useful life when
         there are no legal, regulatory,  contractual,  competitive, economic or
         any other  factors  that may limit the  period  over which the asset is
         expected to contribute  directly or indirectly to the future cash flows
         of the Company.  In each reporting  period,  the Company also evaluates
         the  remaining  useful  life of an  intangible  asset that is not being
         amortized to determine  whether  events and  circumstances  continue to
         support an indefinite  useful life. If an intangible  asset that is not
         being  amortized is determined to have a finite useful life,  the asset
         will be amortized  prospectively  over the estimated  remaining  useful
         life and accounted for in the same manner as intangible  assets subject
         to amortization.

         The Company has determined  that the company's  liquor licenses have an
         indefinite  life  and  these  assets  are  no  longer  being  amortized
         effective January 28, 2002.

         Intangible   assets  subject  to   amortization   are  amortized  on  a
         straight-line method over their estimated useful lives.

         Net earnings and diluted  earnings per share ("EPS") would have been as
         follows had the  provisions  of the new  standards  been  applied as of
         January 29, 2001:

         Net income, as previously reported                     $ 1,727,009
         Adjustment for amortization of goodwill and liquor
           licenses                                                  53,743
                                                                -----------

         Net income, as adjusted                                $ 1,780,752
                                                                ===========

         Basic and diluted EPS, as previously reported          $      0.42
         Adjustment for amortization of goodwill and liquor
           licenses                                                     .01
                                                                -----------

         Basic and diluted EPS, as adjusted                     $      0.43
                                                                ===========

         Impairment of Long-Lived Assets:

         Effective   January  28,  2002,   the  Company   adopted  SFAS  No.144,
         "Accounting for the Impairment or Disposal of Long-Lived  Assets." SFAS
         No. 144  provides  updated  guidance  concerning  the  recognition  and
         measurement  of an  impairment  loss for  certain  types of  long-lived
         assets.  The  adoption  of this new  standard  did not have a  material
         impact on the consolidated financial statements.

         The Company reviews long-lived assets for impairment whenever events or
         changes in business  circumstances indicate that the carrying amount of
         the  assets  may  not  be  fully  recoverable.   The  Company  performs
         undiscounted  operating  cash flow  analyses to determine if impairment
         exists. If impairment exists, any related impairment loss is calculated
         based on fair value.  Impairment losses on assets to be disposed of, if
         any, are based on the  estimated  proceeds to be received less costs of
         disposal.



                                       F-9

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES (Continued)

         Income Taxes:

         Deferred taxes are provided on a liability  method whereby deferred tax
         assets  are  recognized  for  deductible   temporary   differences  and
         operating   loss  and  tax  credit   carryforwards   and  deferred  tax
         liabilities are recognized for taxable temporary differences. Temporary
         differences are the differences  between the reported amounts of assets
         and liabilities and their tax bases. Deferred tax assets are reduced by
         a valuation  allowance  when, in the opinion of management,  it is more
         likely  than not that some  portion or all of the  deferred  tax assets
         will not be realized.  Deferred tax assets and liabilities are adjusted
         for the  effects  of  changes  in tax  laws  and  rates  on the date of
         enactment.

         Advertising:

         The Company expenses  advertising costs as incurred.  Advertising costs
         for fiscal 2003 and 2002 were $593,055 and $471,172, respectively.

         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 estimates and  assumptions  that affect the reported
         amounts of assets and liabilities  and disclosure of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.

         Accounting for Costs Associated With Exit or Disposal Activities:

         In July  2002,  the FASB  issued  SFAS  No.146,  "Accounting  for Costs
         Associated  with  Exit  or  Disposal  Activities."  SFAS  146  requires
         companies  to  recognize   costs   associated  with  exit  or  disposal
         activities  when  they  are  incurred  rather  than  at the  date  of a
         commitment  to an exit or disposal  activity.  The adoption of this new
         standard did not have a material impact on the  consolidated  financial
         statements.

         52-53 Week Period:

         The Company's year-end is the last Sunday in January. The statements of
         operations  are comprised of a 52-week  period both for fiscal 2003 and
         2002.

2.       ACQUISITION

         On April 1, 2002,  the Company  acquired for  $893,536  the  inventory,
         furniture,  fixtures,  equipment, liquor license and franchising rights
         of a  restaurant  business  located in Florida  known as Mr.  Manatee's
         Casual  Grille.  Included  in the  acquisition  price  was a  five-year
         non-compete  agreement  with the  prior  owner of the  restaurant.  The
         Company also entered into a five-year  lease,  effective April 1, 2002,
         which requires  minimum  annual rentals of $96,000.  The lease contains
         three  five-year  renewal  options  and  includes  a Company  option to
         purchase  the  property   during  the  first  term  of  the  lease  for
         $1,075,000.



                                      F-10

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


3.       INVENTORIES

         Inventories consist of the following:

              Food                                                $    512,058
              Beverages                                                152,269
              Supplies                                                 464,665
                                                                  ------------
                                                                  $  1,128,992
                                                                  ============

4.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:

              Land                                                $  3,270,041
              Buildings and improvements, including leaseholds      15,582,811
              Furniture and equipment                                2,348,198
              Construction in progress                                 107,194
              China, glassware and utensils (a)                        102,835
                                                                  ------------
                                                                  $ 21,411,079
                                                                  ============

         (a)  Carried at  original  cost for each  restaurant.  All  replacement
              purchases are charged to expense as incurred.

         Depreciation  expense was $1,182,389 and $1,054,739 for fiscal 2003 and
         2002, respectively.

5.       INTANGIBLE ASSETS

         In June 2001, the Financial  Accounting  Standards  Board (FASB) issued
         SFAS No.'s 141 and 142, "Business Combinations" and "Goodwill and Other
         Intangible Assets." Under the new rules,  goodwill and other intangible
         assets deemed to have indefinite  useful lives are no longer  amortized
         but  are  subject  to  impairment  tests  at  least  annually,  or more
         frequently if  circumstances  occur that indicate  impairment  may have
         occurred.  Management has determined that the Company's liquor licenses
         have an indefinite life and these assets are no longer being amortized.

         During  the  required  transitional   impairment  testing  of  goodwill
         required by SFAS 142, the Company determined that the carrying value of
         the  Company's  reporting  unit  was less  than  the fair  value of the
         identifiable   assets   (including   goodwill)  and  liabilities.   The
         determination  of the fair  value  was  based on the  aggregate  market
         capitalization of the Company as compared to book value. As a result of
         the Company's market capitalization being less that its book value, the
         Company  reduced the carrying  value of goodwill by $430,403,  which is
         reflected  as a  cumulative  effect  of an  accounting  change  in  the
         accompanying  consolidated  statement of operations  for the year ended
         January 26, 2003. The Company's  transitional  testing of impairment of
         the liquor  license  intangible  asset  resulted in no impairment  upon
         adoption.



                                      F-11

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

5.       INTANGIBLE ASSETS (CONTINUED)

         The Company  completed  its required  annual  impairment  assessment of
         goodwill and liquor licenses for potential impairment as of October 28,
         2002.  As a  result  of  this  review,  a write  down  of the  goodwill
         associated  with the April 2002  acquisition  of Mr.  Manatee's  Casual
         Grille  resulted (see Note 2). Again,  the write down resulted from the
         aggregate market capitalization of the Company being less than its book
         value.  The charge for the write down of goodwill  associated  with Mr.
         Manatee's  of  $583,922  is  included  as an  operating  expense in the
         accompanying  consolidated  statement of operations  for the year ended
         January 26, 2003. The Company's  annual  impairment  test of the liquor
         license  intangible  asset  resulted in no  impairment  during the year
         ended January 26, 2003.

         Intangible assets at January 26, 2003 consist of:

                                                Liquor           Covenant Not
                                               Licenses           to Compete
                                              -----------        -----------
              Cost                            $ 1,263,305        $    63,126
              Accumulated amortization           (373,392)           (10,521)
                                              -----------        -----------
                                              $   889,913        $    52,605
                                              ===========        ===========

         In connection with the acquisition of Mr. Manatee's Casual Grille (Note
         2), the Company  entered into a  non-compete  agreement  with the prior
         owner of the restaurant.

         Amortization  expense was $10,521 and $53,743 for fiscal 2003 and 2002,
         respectively.

         The estimated  aggregate  amortization  expense for the covenant not to
         compete for each of the next five years is as follows: $12,625 annually
         for  the  fiscal   years  2004   through  2007  and  $2,105  for  2008.
         Amortization of liquor licenses is no longer required (see Note 1).






                                      F-12


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

6.       NOTES AND MORTGAGES PAYABLE

         Mortgages payable in various monthly installments
         to amortize the mortgages at the rate of $120,000
         annually, through September 2011 with interest at
         LIBOR plus 2.00%, collateralized by real estate
         located in Point Pleasant Beach, New Jersey                $ 1,075,000

         Mortgage payable in monthly installments of $8,319,
         inclusive of interest at LIBOR plus 2.00%, through
         November 2008, collateralized by real estate
         located in Vero Beach, Florida                                 733,663

         Mortgage payable in various monthly installments to
         amortize the mortgage at the rate of $105,000
         annually, through May 2007 with interest at LIBOR
         plus 2.00%, collateralized by real estate located
         in Toms River, New Jersey                                      415,000

         Mortgage payable in monthly installments of $2,067
         through May 2003, plus interest at LIBOR plus
         2.25%, collateralized by real estate located in
         Toms River, New Jersey                                           8,265
                                                                    -----------
                                                                      2,231,928
         Less: Current maturities                                       271,490
                                                                    -----------
                                                                    $ 1,960,438
                                                                    ===========

         Annual  maturities  for fiscal years 2005  through  2008 are  $266,346,
         $270,771, $274,909 and $194,283, respectively.

         At January 26, 2003, the Company has a $500,000 line of credit which is
         collateralized  by real estate located in Toms River,  New Jersey.  The
         line is due June 30, 2003 and bears  interest  at LIBOR plus 2.00%.  At
         January 26, 2003, there were no amounts used under the line of credit.

         LIBOR was 1.36% at January 26, 2003.

         As of January 26, 2003,  the Company had interest rate swap  agreements
         relating to a portion of the Company's  variable rate debt.  Unrealized
         net  losses   under  the   interest   rate  swap   agreements   totaled
         approximately $187,000 at January 26, 2003. These unrealized net losses
         are recorded in Accumulated  Other  Comprehensive  Income (Loss) in the
         consolidated  balance  sheet.  Since  the  Company  does not  intend to
         terminate the swap  agreements  during the upcoming  year,  the Company
         does  not  anticipate  that  any of  these  unrealized  losses  will be
         reclassified  into earnings in the next twelve months.  No gain or loss
         was recognized in earnings  during the year ended January 26, 2003 as a
         result of hedge ineffectiveness.

         All of the Company's  mortgages  and loans are with the same  financial
         institution.  The loan  covenants  governing the  borrowings  includes,
         among other items, requirements relating to tangible net worth, capital
         expenditures and working capital components.



                                      F-13


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

7.       INVESTMENT INCOME

         The components of investment income are summarized as follows:

                                                           2003         2002
                                                        ---------    ---------

         Interest income                                $  23,697    $  68,718
         Dividends                                        136,868      131,484
         Realized gain on sales of available-for-sale
           securities                                       5,154       55,852
                                                        ---------    ---------

                                                        $ 165,719    $ 256,054
                                                        =========    =========

8.       RETIREMENT PROGRAMS

         The Company has a non-qualified  supplemental  retirement program which
         provides life insurance to certain eligible  employees.  The Company is
         the owner of all cash  values of the  policies.  The death  benefit  is
         split,  reimbursing the Company for premiums paid with the balance paid
         to the  beneficiary  designated by the employee.  Employees vest in the
         program  after ten  years,  with the  option to take  ownership  of the
         policy at that time or let the Company continue to fund the policy. The
         Company has recorded,  as a long-term asset in the accompanying balance
         sheet,  its equity in life  insurance  for  premiums  advanced  and has
         included  in  other  long-term   liabilities  the  Company's  estimated
         liability  for the  amount of the  equity in life  insurance  which the
         Company will be required to turn over to employees.

         Additionally,   the   Company   has  an   agreement   with   a   former
         director/employee  which  provides  for the payment of $20,000 per year
         through  2007.  The  discounted  present  value  of this  agreement  is
         included in other long-term liabilities.  The amount has been partially
         insured with a life insurance contract owned by the Company.

         The  Company's  expense  for these  plans was  $34,577  and $44,521 for
         fiscal 2003 and 2002, respectively.

9.       EXECUTIVE INCENTIVE BONUS PLAN

         In Fiscal 2001, the Board of Directors approved an executive  incentive
         bonus plan which  provides  eligible  employees an annual cash bonus if
         the Company achieves certain  financial goals. The charge to operations
         applicable to the  incentive  plan for fiscal 2003 and 2002 was $32,867
         and $63,929, respectively.

10.      TRANSACTIONS WITH RELATED PARTIES

         The Company has a lease for Moore's Inn ("Moore")  restaurant  property
         with Moore's Realty Associates  ("Moore's Realty"), a partnership owned
         by the  principal  shareholders  of the  Company.  The  lease  requires
         minimum annual rentals of $90,000,  plus percentage rent of 6% of sales
         exceeding  $1.5 million.  The lease contains  three  five-year  renewal
         options.

         On October 1, 2001, the Company  entered into a five-year lease for the
         property   adjacent  to  Moore's  for  the  Company's  new  restaurant,
         Escondido's Mexican Restaurant  (Escondido's).  The terms of this lease
         are the same as the lease for Moore's Inn.



                                      F-14


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

10.      TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

         Effective  September  1, 2002,  the Company  entered  into a lease with
         Moore's   Realty  for  an  additional   parking  lot  for  Moore's  and
         Escondido's.  The initial term of the lease  expires  January 25, 2007,
         the same  expiration  date as Moore's and  Escondido's.  The lease also
         contains three five-year  renewal  options.  During the initial term of
         the lease, minimum annual rentals are $40,000,  plus percentage rent of
         1% of the combined  annual sales of Moore's and  Escondido's  exceeding
         $4million.  The lease also contains a provision  whereby Moore's Realty
         agreed to reimburse  the Company for  improvements  made to the parking
         lot up to $150,000.  During fiscal 2003, the Company made  improvements
         of  approximately  $134,000,  which is to be reimbursed by an offset to
         the monthly rent payment. Included in the accompanying balance sheet is
         a  current  receivable  of  $40,000,  with  the  remaining  of  $77,563
         classified as a long-term receivable.

         Rent expense paid pursuant to these leases for fiscal 2003 and 2002 was
         $248,629 and $150,859,  respectively, which included percentage rent of
         $51,963 and $45,859, respectively.

         The Company has a retirement agreement with a former  director/employee
         (see Note 8).

11.      COMMITMENTS AND CONTINGENCIES

         Leases:

         The  Company  leases  restaurants,  parking  lots and  equipment  under
         operating leases expiring at various times through fiscal 2009.

         Minimum future rental payments under noncancelable  operating leases as
         of January 26, 2003 are as follows:

                         2004                  $   474,233
                         2005                      483,375
                         2006                      485,558
                         2007                      482,678
                         2008                      160,159
                     Thereafter                     13,780
                                               -----------
                                               $ 2,099,783
                                               ===========

         Total  rent  expense,  including  rent  paid to  related  parties,  was
         $541,588 and $352,481 for fiscal 2003 and 2002, respectively.

         Employment Agreements:

         The  Company  has  employment  agreements  through  March 2005 with two
         employees for annual  amounts  ranging from  $101,800 to $175,500.  The
         agreements  provide for annual adjustments based on the increase in the
         consumer  price  index.  These  agreements  also  provide  for lump sum
         payments in the event of the termination of the employees without cause
         or a change in control of the Company, as defined, for a portion of the
         unexpired term of the contracts.



                                      F-15

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

11.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Stock Repurchase Plan:

         On May 24,  2000,  the Board of  Directors  authorized  the  Company to
         repurchase  over  a  two-year  period  up  to  400,000  shares  of  its
         outstanding  stock at market price.  Through May 24, 2002,  the Company
         had repurchased  28,191 shares for $26,171,  of which 24,641 shares had
         been retired.  On December 24, 2002, the Board of Directors  authorized
         the Company to repurchase  over a 13-month  period up to 100,000 shares
         of its  outstanding  stock at market  price.  Subsequent to January 26,
         2003, the Company purchased 40,000 shares for $59,600.

         Additionally, on August 14, 2001, the Board of Directors authorized the
         Company  to  purchase a block of 262,603  common  shares for  $569,896.
         These common shares were purchased on August 29, 2001.

12.      EARNINGS PER SHARE

         The weighted average number of shares outstanding used to compute basic
         and diluted  earnings per share for fiscal 2003 and 2002 was  3,969,540
         and 4,129,205, respectively.

13.      INCOME TAXES

         The provision  (credit) for income taxes charged to operations  consist
         of the following:

                                                2003              2002
                                            ------------      ------------

             Current    - Federal           $   (27,918)      $     3,338
                        - State                  25,000            38,369
             Deferred                           191,000        (1,166,000)
                                            ------------      ------------

                                            $   188,082       $(1,124,293)
                                            ============      ============

         The significant components of deferred tax assets and liabilities as of
         January 26, 2003 are as follows:

         Deferred Tax Assets:
             Tax loss carryforwards                            $1,570,000
             Alternative minimum tax credit carryforward           14,000
             Depreciation and amortization                        355,000
             Other comprehensive income                           179,000
             Other                                                 60,000
                                                               ----------

         Gross deferred tax assets                              2,178,000
         Valuation allowance                                    1,098,000
                                                               ----------

               TOTAL DEFERRED TAX ASSETS                        1,080,000

         Deferred Tax Liability:
             Other                                                 16,000
                                                               ----------

               NET DEFERRED TAX ASSETS                         $1,064,000
                                                               ==========



                                      F-16


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

13.      INCOME TAXES (CONTINUED)

         As of January 26, 2003, a valuation  allowance of  $1,098,000  has been
         provided for because,  in the opinion of management,  it is more likely
         than not that some  portion  of the  deferred  tax  assets  will not be
         realized. The net change in the valuation allowance for fiscal 2003 was
         a reduction of $132,000.  The  reduction for fiscal 2003 was due to the
         utilization and expiration of tax loss carryforwards.

         The  Company  has  available  at  January  26,  2003,   operating  loss
         carryforwards as follows:

              Year of Expiration

                  2004                                $ 2,942,316
                  2005                                    472,062
                  2006                                    220,595
                  2007                                    215,047
                  2008                                    196,704
                  2009                                    155,075
                  2010                                    103,553
                  2011                                    144,559
                  2012                                     88,405
                                                      -----------
                                                      $ 4,538,316
                                                      ===========

         The  difference  between the tax  provision  at the  statutory  Federal
         income  tax rate and the tax  provision  attributable  to  income  from
         continuing operations before income tax for the years ended January 26,
         2003 and January 27, 2002 are as follows:

                                                       2003        2002
                                                     ------      ------
         Federal statutory rate                       (34.0)%      34.0%
         State taxes net of Federal benefit            (5.0)        5.0
         Valuation allowance change                     7.4        11.2
         Deferred tax asset recognized                   --      (193.4)
         Non taxable income                            (6.1)         --
         (Utilization) expiration of operating
           loss carryforwards                          75.6       (43.3)
                                                     ------      ------
             EFFECTIVE RATE                            37.9%     (186.5)%
                                                     ======      ======


14.      FINANCIAL INSTRUMENTS

         The carrying amounts  reflected in the  consolidated  balance sheet for
         cash and cash  equivalents,  investments,  receivables  and  notes  and
         mortgages payable approximate their respective fair values. Fair values
         are based primarily on quoted prices for those or similar instruments.




                                      F-17


<PAGE>



                                   SIGNATURES


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


(Registrant)                                CHEFS INTERNATIONAL, INC.



                                            By s/ Anthony C. Papalia
                                               ---------------------------------
                                                  Anthony C. Papalia, President,
                                                  Principal Executive, Financial
                                                  and Accounting Officer


                                                  Date: April 25, 2003


         In accordance with 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 date indicated.




By s/ Robert M. Lombardi                    By s/ Michael F. Lombardi
   ---------------------------------           ---------------------------------
      Robert M. Lombardi, Chairman                Michael F. Lombardi,
        Of the Board of Directors                   Director

      Date: April 25, 2003                        Date: April 25, 2003




By s/ Anthony Lombardi                      By s/ Stephen F. Lombardi
   ---------------------------------           ---------------------------------
      Anthony Lombardi, Director                  Stephen F. Lombardi,
                                                    Director
      Date: April 25, 2003
                                                  Date: April 25, 2003



By s/ Joseph S. Lombardi
   ---------------------------------
      Joseph S. Lombardi, Director

      Date: April 25, 2003



<PAGE>


                     PRINCIPAL EXECUTIVE
               AND PRINCIPAL FINANCIAL OFFICER
                        CERTIFICATION


         I, Anthony C. Papalia, Principal Executive and Principal Financial
Officer of Chefs International, Inc. (the "Company") do hereby certify that:

         (1) I have reviewed this annual report on Form 10-KSB of the Company
for the year ended January 26, 2003;

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

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

         (4) I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the Company and I have:

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

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

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



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         (5) I have disclosed, based on my most recent evaluation, to the
Company's auditors and the Company's board of directors:

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

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

         (6) I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



Dated: April 25, 2003

                                                s/ Anthony C. Papalia
                                                --------------------------------
                                                Anthony C. Papalia
                                                Principal Executive and
                                                    Principal Financial Officer
                                                Chefs International, Inc.






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