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 27, 2002

         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)

Indicate by check mark whether the issuer [1] has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the preceding 12 months [or for such shorter period that the issuer was required
to file such reports],  and [2] has been subject to such filing requirements for
the past ninety 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 27, 2002 totaled $20,798,333.

On March 26, 2002, the aggregate  market value of the voting stock of the issuer
(consisting  of  Common  Stock,  $.01  par  value)  held by  non-affiliates  was
approximately $2,205,000 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 3,965,958  shares of the issuer's Common Stock issued and
outstanding.

<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 an Eatontown,
New Jersey  shopping mall 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."  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.)

     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

     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  Group  currently owns
approximately  63% 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


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<PAGE>

February  23,  2000  when it  executed  the lease  and the  purchase  agreements
described under "Restaurant Operations" in this Item 1, 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 the Moore's Inn or the nearby pad site for a proposed  building
("Building  C") to a third party for a period of one year. 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 February 2002, the Company changed the name of its Mexican theme
restaurant in the Monmouth Mall in Eatontown,  New Jersey to "Escondido's."  The
Company had previously operated this mall restaurant under the name "Garcia's."

     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." See "Restaurant Operations" in this Item 1.

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.  In its
press  release,  the Company  stated that the Board  believed that Chefs' Common
Stock was  undervalued and that the Repurchase  Program,  if effected at current
prices,  could  constitute  an  appropriate  investment  to the  benefit  of the
Company's stockholders. Through January 27, 2002, 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 in addition, in August 2001, in
a  block  transaction  with  a  limited  group  of  unaffiliated   stockholders,
repurchased  an  aggregate  262,603  shares of Chefs'  Common Stock at $2.10 per
share. The block purchase was authorized by the Company's Board of Directors. It
was the Board's opinion that although the repurchase  price was greater than the
then market price for the stock, the size of the block and the fact that the per
share  repurchase  price was  substantially  below the per share  book  value of
Chefs' Common Stock made the repurchase an appropriate investment to the benefit
of Chefs'  stockholders.  The Company utilized available cash reserves to effect
each of its stock  repurchases.  To date,  an  aggregate  287,244 of the 290,794
repurchased shares have been cancelled.

BANK LOANS

     At January 29, 2001,  the Company's  principal  bank financing was provided
pursuant to a term loan  originally  in the amount of  $525,000  ("Term Loan X")
from First Union National Bank ("First


                                       3
<PAGE>

Union") and a $500,000  revolving  line of credit ("L/C line") from First Union.
At said date,  approximately  $204,000 was outstanding under Term Loan X payable
in monthly  installments  of principal with interest at an annual rate of 9 1/4%
through  December  2002 and no  amounts  were  outstanding  under  the L/C line.
Indebtedness  under Term Loan X was secured by a first mortgage on the Company's
Toms River, New Jersey seafood  restaurant and  indebtedness  under the L/C line
was secured by first  mortgages on the Company's two Point Pleasant  Beach,  New
Jersey  seafood  restaurants.  During  fiscal  2002,  the  Company  reduced  the
outstanding principal balance of Term Loan X to $93,000.

     In September 2001, the Company  restructured  the above  indebtedness.  The
existing L/C line under which there was no outstanding indebtedness was replaced
with a new L/C line of  $500,000  expiring  June  30,  2003  secured  by a first
mortgage on the Toms River  restaurant.  No borrowings  were made by the Company
under the new L/C line in fiscal  2002.  In March  2002,  the  Company  borrowed
$500,000 under the new L/C line and applied the proceeds towards the purchase of
the assets of Mr. Manatee's. See "Restaurant Operations."

     At the same time,  the Company  borrowed  $600,000  from First Union ("Term
Loan Y")  secured by a first  mortgage on its Baker's  Wharfside  restaurant  in
Point Pleasant Beach and borrowed an additional $600,000 from First Union ("Term
Loan  Z")  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 27, 2002, the outstanding  principal balance of
each of these loans was $597,500.

     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  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  27,  2002,  approximately  $33,000  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 27, 2002, approximately $774,000
was outstanding under this loan (which provides for a $431,429 "balloon" payment
in November 2008).


                                       4
<PAGE>

     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  2002  year end of not  less  than  $12,500,000
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 for which First Union delivered a
waiver).  The Company was in compliance  with all material  covenants  under the
Loan Agreements at January 27, 2002.

     (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.

                              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 an
Eatontown,  New Jersey shopping mall 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."  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. The Company's
restaurants, all of which are operated on a year-round basis, are as follows:


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<PAGE>

                                                        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

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  operated this restaurant under the name "Garcia's" until February
1, 2002.

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.

     JACK BAKER'S LOBSTER SHANTY RESTAURANTS

     VERO BEACH,  FLORIDA - This restaurant,  consisting of approximately  6,900
square  feet,  is free  standing  in Vero  Beach,


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<PAGE>

Florida on the intracoastal  waterway, and seats approximately 200. It opened in
December,  1979 pursuant to a lease from Gourmet Associates ("Gourmet") owned by
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  Gourmet.  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.

     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


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<PAGE>

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 but has  delayed  construction
pending resolution of a lawsuit initiated by a neighboring  landowner attempting
to prevent construction.  The Company has been advised that the landowner is now
attempting to sell his property for  commercial  use and if the property is sold
for such use,  management  assumes  there  will be no further  objection  to the
Company's  planned  patio dining area.  If it is  successful  in resolving  this
matter,  the Company estimates the total costs of construction and outfitting at
approximately $350,000 for an opening anticipated in fiscal 2004.

     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.

     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


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<PAGE>

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

     MR. MANATEE'S 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.  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.


                                       9
<PAGE>

     Mr. Manatee's 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.  Management believes that the check average
at Mr. Manatee's will be  approximately  15% lower than the check average at its
other seafood restaurants.

MEXICAN THEME RESTAURANTS

     In November  1995,  the Company  entered into an agreement with Garcimex of
New Jersey, Inc.  ("Garcimex"),  the purported exclusive owner of the "Garcia's"
trademark,  service mark and trade name along with the goodwill and recipes of a
Mexican  restaurant  business  associated  with  the  marks.   Pursuant  to  the
agreement,  the Company was granted the  exclusive  right to establish  and open
Mexican  restaurants  using the marks,  goodwill  and  recipes in six New Jersey
counties,  Hunterdon,  Mercer,  Middlesex,  Monmouth,  Ocean and  Somerset  (the
"Territory"). The Company was granted the right but not the obligation to open a
restaurant  utilizing  the marks and goodwill in each of the first five 12-month
periods,  in the Territory,  with a six-month  grace period with respect to each
such 12-month period. If the Company did not open a Garcia's  restaurant in each
of the first five 12-month periods  (including the grace period),  the agreement
provided that the Company would lose the right to develop additional restaurants
within the Territory.  The Company opened a Garcia's  restaurant at the Monmouth
Mall in  Eatontown,  New  Jersey in April  1996 but did not open any  additional
Garcia's restaurants thereafter.

     The agreement was for an initial term of 20 years.  The agreement  required
the Company to pay a royalty to Garcimex  equal to 3% of the gross  annual sales
of its Garcia's  restaurants  during the term of the  agreement  and granted the
Company  certain  additional  rights  including  a right of first  refusal  with
respect to certain offers made to Garcimex.

     In September 2001 after the Company raised questions concerning  Garcimex's
rights to the "Garcia's" tradename and withheld certain of the royalties owed to
Garcimex,  the parties  entered  into a  settlement  agreement.  Pursuant to the
settlement  agreement,  the  parties  agreed  to  terminate  the  November  1995
agreement and the Company agreed to pay the withheld  royalties,  a continuation
of the royalty through  January 27, 2002 and an additional  $80,000 to Garcimex.
The Company  paid these sums and was released by Garcimex  from the  restriction
that  prevented it from opening any other Mexican  restaurants  in the Territory
prior to 2015.

     After  consummating  the settlement with Garcimex,  the Company changed the
name of its "Garcia's" restaurant at the Monmouth Mall to Escondido's at the end
of  January  2002  and  commenced  to  operate  the  restaurant  under  the name
"Escondido's  Mexican  Restaurant"  on February 1, 2002.  The Company opened its
second  Mexican theme


                                       10
<PAGE>

restaurant in Freehold,  New Jersey in January 2002 under the name  "Escondido's
Mexican Restaurant" as hereinafter described.

     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.

     MONMOUTH  MALL,  EATONTOWN,  MONMOUTH  COUNTY,  NEW JERSEY - The  Company's
"Escondido's  Mexican  Restaurant" at the Monmouth Mall consists of 4,371 square
feet of leased space and is decorated in a bright,  multi-color  Mexican  motif.
The  restaurant  has  a  bar  and  tables  and  booths  which  can   accommodate
approximately  130  patrons.  The Company 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's lease for this restaurant is for a twelve-year term ending in
2008 providing for a minimum annual rental of $109,275  during each of the first
five years and a minimum  annual  rental of $118,017 per annum  thereafter.  The
Company was granted a $24,000 per year Construction  Allowance for the five-year
period  commencing  January  1, 1997  which was  applied  on a monthly  basis in
reduction of the minimum  annual rental  through  December  2001. The Company is
also  required to pay  additional  rent equal to 5% of the  restaurant's  annual
gross  revenues in excess of  $2,185,000  in each of the first five years and in
excess of $2,360,340 in each  subsequent  year.  The Company is also required to
pay a proportionate  share of the Mall's real estate taxes,  utility charges and
the Landlord's  operating costs as well as certain other charges. The Company is
attempting  to  negotiate a reduction  in the  minimum  annual  rental and other
charges under this lease with the Mall  Landlord.  Although it was successful in
previously  negotiating  a reduction in the minimum  annual rental (to $102,675)
for the  twelve-month  period ended January 31, 2001, no assurances can be given
that it will be able to obtain any reduction in future periods.

     The  restaurant is on the site of the Company's La Crepe  restaurant  which
closed in December 1995. The Company spent  approximately  $720,000 to construct
its Garcia's  restaurant on this site and after its  settlement  agreement  with
Garcimex, changed the name of the restaurant to "Escondido's Mexican Restaurant"
on February 1, 2002.

     The Monmouth Mall has been in operation for approximately 20 years.  Macy's
and J.C.  Penny are  major  department  stores in the Mall.  The Mall is a large
shopping  center with  1,500,000  square feet of shopping area on 105 acres with
parking for 7,200 cars.


                                       11
<PAGE>

     FREEHOLD,  NEW JERSEY - The Company  opened a second  "Escondido's  Mexican
Restaurant"  on West Main Street (Route 537) in Freehold,  New Jersey 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
similar to the Monmouth Mall  restaurant.  The Freehold mexican theme 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 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.  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.

     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


                                       12
<PAGE>

license being permitted as an expansion of the license on the adjoining "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
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 27, 2002, the gross rental aggregated $135,859. 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


                                       13
<PAGE>

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 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.

     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


                                       14
<PAGE>

with any businesses  operated from Building B (now operated by the Company as an
Escondido's Mexican Restaurant),  and proposed Building C. 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.

     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

     To date, the Company's New Jersey seafood  restaurants  have  experienced a
significant  portion  of their  sales from May  through  September  whereas  its
Florida  seafood  restaurants  have  experienced a significant  portion of their
sales from January through April.  During its initial period of operation by the
Company,  Moore's Tavern and Restaurant experienced a seasonality factor similar
to but not as dramatic as the  seasonality  factor of the  Company's  New Jersey
seafood restaurants.  The Company's Monmouth Mall restaurant (operated under the
name Garcia's until February 1, 2002 and now operated under the name Escondido's
Mexican  Restaurant)  has  experienced  its  greatest  sales  volume  during the
Thanksgiving  through Christmas period.  Management  believes that the Freehold,
New Jersey  Escondido's  Mexican Restaurant will experience a seasonality factor
more similar to Moore's  Tavern and  Restaurant  due to its location then to the
Monmouth Mall restaurant.

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" is material to its restaurant  business.  The Company has applied to
the United  States  Commissioner  of  Trademarks  to register  the service  mark
"Escondido's  Mexican  Restaurant."  The application is pending and no assurance
can be given that the mark will be registered.


                                       15
<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.

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


                                       16
<PAGE>

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 the Monmouth  Mall
employs  approximately  40 employees.  It's  Escondido's  Mexican  Restaurant in
Freehold,  New Jersey employs between 60 and 70 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 27, 2002, 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 27, 2002.


                                       17
<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 28, 2000                  $ 1.07       $  .68
          July 28, 2000                      .72          .60
          October 27, 2000                   .75          .63
          January 26, 2001                   .85          .71875

          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

     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 January 27, 2002,  the number of record  holders of the Common Stock was
6,684.  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 27, 2002.

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


                                       18
<PAGE>

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,  which was  recently  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 and
equipment  and amortizes its goodwill and liquor  licenses  using  straight-line
methods.  Through  January  27,  2002 the  Company  used forty years to amortize
goodwill and liquor licenses.  Beginning January 28, 2002 with the adoption of a
new accounting standard,  the Company will no longer be required to amortize its
goodwill and liquor  licenses.  The Company will continue to review annually its
goodwill and liquor licenses for possible impairment or loss of value;  however,
the Company does not currently  anticipate  having to record an impairment  loss
when it adopts the new standard.

     Income  Taxes:  In fiscal  2002,  the Company  determined  that it was more
likely  than not that it would able to utilize a portion of its  operating  loss
carryforwards,  and accordingly,  recognized a deferred tax asset of $1,166,000.
Prior to fiscal 2002 the Company had not recognized any benefit  associated with
the operating loss carryforwards.  The recognition of the deferred tax asset was
based on management's  best  assumptions  and estimates of future income.  These
assumptions  and  estimates  will  be  periodically  reviewed  and,  if  needed,
adjustments will be made as required.

     Hedging  Instruments:  As of January  29,  2001,  the  Company  adopted the
provisions of the new accounting  standard which requires that the fair value of
all derivative financial  instruments be recorded on the Company's  consolidated
balance  sheet as assets or  liabilities.  The  Company has  interest  rate swap
agreements relating to substantially all of its variable rate debt.


                                       19
<PAGE>

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 Point Pleasant  Beach,  New
Jersey.

     At January 27,  2002,  the  Company was  operating  nine  restaurants  on a
year-round basis. Seven of the restaurants are free-standing seafood restaurants
in New Jersey and Florida and are operated under the names "Jack Baker's Lobster
Shanty" or "Baker's  Wharfside."  At said date, the Company was also operating a
Mexican theme  restaurant in New Jersey under the name  "Garcia's."  The Company
opened its first  seafood  restaurant  in November  1978 and opened its Garcia's
restaurant in April 1996. 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").
On April 1, 2002, the Company commenced  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  anticipates  that Freehold  Escondido's  will  experience a seasonality
factor similar to Moore's and that Manatee's will follow the seasonality pattern
of the other Florida restaurants.


                                       20
<PAGE>

     The Company  operated  nine  restaurants  during the year ended January 28,
2001.

     The statements of operations are comprised of a 52-week period for both the
year ended January 27, 2002 ("fiscal  2002") and the year ended January 28, 2001
("fiscal 2001").

RESULTS OF OPERATIONS

SALES

     Sales for the year ended January 27, 2002 were $20,798,300,  an increase of
$641,400  or 3.2%,  as compared to  $20,156,900  for the year ended  January 28,
2001. The increase includes  increases in sales of $321,400 or 13.9% at the Vero
Beach,  Florida restaurant ("Vero")  attributable in part to the completion of a
municipal park ("Vero Park")  adjacent to the restaurant and a sales increase of
$356,000 or 18.7% at Moore's.  Moore's operated for the entire thirteen weeks of
the first  quarter of fiscal  2002 as  compared  to ten weeks for fiscal  2001's
first quarter,  whereas the last three quarters of the year include  thirty-nine
weeks of operations for each year. The remaining seven restaurants  combined had
decreased  sales of $36,000  versus last year primarily due to the September 11,
2001 ("9/11")  tragedy and the weak national  economy.  The 9/11 tragedy had the
greatest impact on the Cocoa Beach,  Florida  restaurant  ("Cocoa")  because the
location  of Patrick Air Force Base,  a military  base south of the  restaurant,
resulted in the closure of Route A1A, the sole access  highway to the restaurant
from the south.  A1A was closed for  approximately  four months.  During the A1A
closure,  Cocoa sales dropped  approximately 29% versus last year. The number of
customers  served  during fiscal 2002 in the nine  restaurants  increased by .6%
versus fiscal 2001 while the average check paid per customer increased by 2.6%.

GROSS PROFIT; GROSS MARGIN

     Gross  profit was 68.4% of sales for fiscal  2002 as  compared  to 67.8% of
sales for fiscal 2001. The primary reason for the improvement was lower costs of
high volume seafood items including shrimp, flounder, lobster and scallops which
are primary  components  of the  Company's  menus.  Additionally,  Moore's gross
profit percentage improved compared to the prior year.

OPERATING EXPENSES

     Total operating expenses increased by 5.5% from $13,053,500 for fiscal 2001
to $13,766,200 for fiscal 2002. Payroll and related expenses were 30.1% of gross
sales for fiscal 2002  compared to 29.8% of sales for fiscal  2001.  The primary
reasons  for  the  increase  were  salary  increases,  higher  health  insurance
premiums,  and to a lesser  extent,  the 9/11 impact at Cocoa  where  management
maintained  salaries despite the substantial  decrease in sales. Other operating
expenses  increased  to 21% of  sales  for  fiscal  2002


                                       21
<PAGE>

versus  20.5% in 2001  primarily  due to  increases  in  utility  costs,  higher
occupancy costs due to higher property insurance  premiums and rent expenses,  a
one-time  special  property  assessment of $62,700 at Vero for the  restaurant's
portion of the Vero Park project and approximately $22,000 in rent and insurance
costs at Freehold incurred during construction of Escondido's  (Freehold) in the
fourth quarter.

     Depreciation and amortization increased by $4,200 during fiscal 2002 versus
the prior year.  Increases include $5,800 in increased  depreciation  associated
with the purchase of Company vehicles in fiscal 2002 offset by the expiration of
fully depreciated assets at the existing restaurants.

     General and  administrative  expenses were  $244,400  higher in fiscal 2002
versus 2001.  The primary  components of the increase were  increases in workers
compensation  and group health  insurance costs of $33,000,  higher salaries and
payroll taxes of $49,000 and $67,500 more in training and recruiting  costs, the
majority of which was spent on training the  management  team and  employees for
Escondido's  (Freehold)  which opened  during the week  following the year ended
January 27, 2002.  Salaries for fiscal 2002 included  $63,900  attributed to the
Company's  Executive  Incentive  Bonus  Plan  ("Bonus  Plan")  (see  "Notes"  to
Consolidated  Financial  Statements  - Note 9) while  salaries  in  fiscal  2001
attributed to the Bonus Plan were $79,900.  Additionally,  the Company  incurred
costs of $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 ("Escondido's"). In 1995 the Company entered
into an agreement with Garcimex to open Mexican  restaurants in New Jersey under
the trade name of  Garcia's  in  exchange  for  royalty  payments of 3% of gross
sales.  The Company  opened its only Garcia's at the Monmouth Mall in Eatontown,
New Jersey in April 1996. The Company operated the Monmouth Mall restaurant as a
Garcia's  and paid the royalty  fees  through  the year end,  and on February 1,
2002, the Monmouth Mall restaurant  began  operating as  Escondido's.  Trademark
applications  have been filed to register  federal service marks for Escondido's
Mexican Restaurant.

     The $2,100 gain on  disposal  of assets in fiscal 2001 was  realized on the
disposal of a Company vehicle.

OTHER INCOME AND EXPENSE

     Interest expense was $9,400 higher in fiscal 2002 due to interest  expenses
associated with  $1,200,000 in bank loans the Company  borrowed from its primary
bank to  finance  the  renovation  of the  Freehold  Escondido's.  The loans are
repayable  in various  monthly  installments  of principal  with  interest at an
annual rate of 7.57% through  September  2011.  Investment  income  increased by
approximately  $48,000 due primarily to dividend  income received on investments
and capital gains on the sale of investments (see Note 7). Investment income for
fiscal 2001 included  approximately


                                       22
<PAGE>

$44,700 in interest income  associated  with notes  receivable from the February
1997 sale of discontinued operations (see Note 12).

NET INCOME

     For the year ended January 27, 2002, income from continuing  operations was
$1,727,000 or $.42 per share,  which includes the  recognition of a deferred tax
asset of $1,166,000  relating to the Company's net operating loss  carryforwards
(see Note 14). For the previous  year,  income from  continuing  operations  was
$632,600  or $.15 per share and net income was  $954,800 or $.22 per share which
included a gain of $322,200 realized on the disposal of a discontinued  business
(see Note 12).

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 1.90:1 at
January 27, 2002,  compared to 2.15:1 at January 28, 2001.  Working  capital was
$2,301,500  at the end of fiscal  2002,  an increase of $192,600  over the prior
year. During fiscal 2002, net cash increased by $248,500. Net cash provided from
operating  activities  was  $1,882,000.   The  primary  changes  in  assets  and
liabilities  included an increase in accounts  payable of $173,100 due primarily
to payables associated with the opening of Escondido's in Freehold,  an increase
in accrued expenses and other  liabilities of $68,800  resulting  primarily from
additional  rent of  $15,700  due to the  percentage  rent  requirements  of the
Moore's  lease  (see Note 10) and in an  increase  of  $45,200  in the amount of
unredeemed gift certificates held at the year end.

     Investing  activities  during fiscal 2002 resulted in a net cash outflow of
$2,069,100.  Capital  expenditures  were  $1,444,600  with the major  components
including  approximately  $883,000  for  design,  construction,   furniture  and
equipment costs at Escondido's in Freehold, $66,800 for new Company vehicles and
$494,800 for 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 for 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  at $2.10 per  share,  for cash.  The
repurchase was  authorized by the  Company's'  Board of Directors and the shares
were subsequently canceled. 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.


                                       23
<PAGE>

During the year ended January 27, 2002, the Company  cancelled a total of 24,641
of the repurchased  shares,  including  repurchases  incurred during fiscal 2001
(see Note 11).  During the third quarter  ended October 28, 2001,  the Company's
$500,000  bank  line  of  credit  ("bank  line")  was  modified  to  extend  the
termination  date from June 30,  2002 to June 30,  2003.  The  interest  rate is
variable,  equal to the monthly LIBOR Market Index Rate plus 2.00%.  At the year
ended  January 27, 2002 the entire  $500,000 was  available  for use (see Recent
Developments below).

     During fiscal 2001, net cash decreased by $154,700.  Net cash provided from
operating  activities  was  $1,697,000.   The  primary  changes  in  assets  and
liabilities  were an increase in  inventories of $165,100 due to the addition of
Moore's and bulk seafood purchases and an increase in accrued expenses resulting
primarily from an increase of $98,200 in accrued  payroll  costs,  including the
incentive bonus plan charge,  additional rent of $30,200 at Moore's  pursuant to
percentage  rent  requirements  and an  increase  of $27,200  in accrued  health
insurance costs.  Investing activities for fiscal 2001 resulted in a net outflow
of $1,304,600.  Capital  expenditures  were $949,300 which included $339,000 for
the  acquisition  of furniture,  fixtures,  and equipment  and  improvements  at
Moore's,  $40,500  for  Company  vehicles,   $93,100  for  improvements  at  the
Hightstown, New Jersey restaurant,  $106,600 for significant improvements at the
Florida   restaurants   and  $369,600  for  routine   restaurant   improvements.
Additionally, Moore's liquor license was purchased for $357,900. Other investing
activities include payments of $570,300 attributed to the sale of a discontinued
business and the purchase of various  investments  totaling  $947,900  offset by
$459,500 from the sale of investments and proceeds from maturing certificates of
deposit.  Financing  activities in fiscal 2001 resulted in a net cash outflow of
$547,100 and include  debt  repayment of  $370,100,  the  repurchase  of 233,334
shares  of Chefs'  common  stock for  $168,000  (see Note 12) and  approximately
$9,000 to repurchase  10,275 shares of Chefs'  outstanding stock pursuant to the
Stock Plan.

     At the end of fiscal 2002,  the Company was in  compliance  with all of the
covenants  under its loan  agreements  with its primary bank,  First Union.  The
Company was also in full compliance at the year ended January 28, 2001.

RECENT DEVELOPMENTS

     On January 29, 2002, the Company opened its tenth  restaurant,  Escondido's
Mexican Restaurant  ("Escondido's") in Freehold, New Jersey. Escondido's is open
for  lunch  and  dinner  on  a  daily  basis.  Sales  have  exceeded  management
expectations and in addition, sales at Moore's, a Company restaurant adjacent to
Escondido's,  have continued to increase  versus last year on a weekly basis. On
February 1,2002,  Garcia's, the Company's other Mexican theme restaurant located
in the Monmouth Mall in Eatontown,  New Jersey,  began operating under the trade
name Escondido's.


                                       24
<PAGE>

     On April 1, 2002,  the Company,  after a three month due diligence  period,
purchased the furniture,  fixtures, equipment, liquor license, business name and
franchise rights of Mr.  Manatee's  Casual Grille, a restaurant  located in Vero
Beach,  Florida,  for $800,000.  The purchase was paid for by a  combination  of
$300,000 in cash and $500,000 in bank  financing  by drawing down the  Company's
bank  credit  line.  Management  and  the  bank  have  agreed  in  principle  to
restructure  the  $500,000 as a five-year  term loan.  In  addition,  Management
negotiated  a five year  triple net lease of the real  property at an $8,000 per
month rental with three five year renewal  options and an option to purchase the
real property at the end of the first five year term. Mr.  Manatee's  features a
casual menu primarily  offering  seafood items;  has been in business for twelve
years in Vero  Beach and is located  approximately  a quarter of a mile from the
Company's  Lobster  Shanty  restaurant.  Mr.  Manatee's has also  experienced an
increase in sales as a result of the  completion of the Vero Park and management
is pleased to add the Manatee's  concept to the Company's other ten restaurants.
Mr. Manatee's serves lunch and dinner, seven days a week and began operations as
a Company restaurant on April 1, 2002. Management anticipates that Mr. Manatee's
will not negatively impact sales at the Vero Beach Lobster Shanty.

     During the month of April 2002,  management  negotiated the annual renewals
for group health  ("health")  and property and casualty  ("property")  insurance
coverages.  Following a nationwide  trend which started before the 9/11 tragedy,
the Company  renewed  both  coverages at higher  rates than were  previously  in
force.  The health  renewal  resulted  in a 20%  increase in  premiums,  despite
increased co-pays and deductibles,  based primarily on medical inflation running
about 15% nationwide and medical claims paid on behalf of Chefs' employees.  The
property coverage was renewed at an overall increase of 26%. Factors influencing
the property  increases  included the 9/11 tragedy which had a tremendous impact
on all insurance  companies and the  investment  losses they  experienced in the
stock markets.  Consequently,  the insurance  companies have raised premiums and
reduced the amount and type of coverages  that they are willing to provide while
insisting on larger deductibles. Management expects that the insurance increases
will have a negative impact on Company operating results for fiscal 2003.

     Management  anticipates  that funds from  operations  will be sufficient to
meet obligations in fiscal 2003,  including  projected  capital  expenditures of
approximately  $475,000  for  routine  capital  expenditures.  A majority of the
capital  expenditures are expected to occur during the first and second quarters
of fiscal 2003.

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


                                       25
<PAGE>

insurance costs that the Company will have to absorb in fiscal 2003.

ITEM 7. FINANCIAL STATEMENTS

     Attached.

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

     NONE


                                       26
<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)      50      Chairman of
                                      the Board               May 1999
Nicholas B. Boxter         54      Director                   December 1999
Kenneth Cubelli            48      Director                   December 1999
Raymond L. Dademo          44      Director                   December 1999
Anthony M. Lombardi(a)     46      Director                   July 1999
Joseph S. Lombardi(a)      51      Director                   July 1999
Michael F. Lombardi(a)     53      Director                   July 1999
Stephen F. Lombardi(a)     46      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                 44        President, Treasurer, Chief
                                             Executive Officer, Chief Financial
                                             Officer and Director

Martin W. Fletcher                 49        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.


                                       27
<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.

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


                                       28
<PAGE>

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 2002, 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 June 2001
by Michael F. Lombardi  regarding  his May 2001  purchase of 2,000 shares,  late
filings made in June 2001 and July 2001 by Robert M. Lombardi  regarding his May
2001 and June 2001  purchases of 6,000 shares and 5,300 shares  respectively,  a
late filing  made in July 2001 by Stephen F.  Lombardi  regarding  his June 2001
purchase  of 4,000  shares,  and a late  filing made in April 2002 by Raymond L.
Dademo regarding his October 2001 purchase of 1,000 shares.

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 27, 2002
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 2002.  During
the  three-year  period ended  January 27,  2002,  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
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 five year
period pursuant to this agreement.


                                       29
<PAGE>

                           SUMMARY COMPENSATION TABLE

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

Anthony Papalia            2002    $169,497     $8,429            $2,008
 President and             2001    $164,557    $14,000            $2,088
 Chief Executive           2000    $159,975        $-0-           $2,088

Martin Fletcher            2002    $98,308      $8,500            $2,908
 Controller and            2001    $95,398     $10,910            $2,902
 Secretary                 2000    $92,674         $-0-           $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  2002  aggregated  $63,900  and was  distributed  to seven  employees
including  Anthony  Papalia who received $8,429 and Martin Fletcher who received
$8,500.

(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
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


                                       30
<PAGE>

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 2002, Mr. Papalia's annual salary was increased to $169,497
and Mr. Fletcher's annual salary was increased to $98,308.

STOCK OPTIONS

     At January  28,  2001 and at  January  27,  2002 there were no  outstanding
employee or non-employee stock options  exercisable to purchase shares of Chefs'
Common Stock.

DIRECTORS' COMPENSATION

     During  fiscal  2002,  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.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth  information  as of March 28,  2002 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              1,333,326(1)                        34%
Nicholas B. Boxter                   --                             --
Kenneth Cubelli                      --                             --
Raymond L. Dademo                   2,000                           --
Anthony Lombardi                  111,001                            3%
Joseph S. Lombardi                685,633                           17%
Michael F. Lombardi               246,010(1)(2)(3)                   6%
Stephen F. Lombardi               111,384(1)(2)(3)                   3%

EXECUTIVE OFFICER*
Anthony C. Papalia                  5,000                           --


                                       31
<PAGE>

All executive officers and
 directors as a group
 (ten persons)                  2,494,354(1)(2)(3)                  63%

----------
* 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."

     (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 55,883 shares comprising  one-half of the 111,666 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 111,666 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  Building  B in  Freehold,  New  Jersey  and  opening  by the  Company  of an
Escondido's Mexican Restaurant at the site.

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)


                                       32
<PAGE>

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)

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

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).

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)

10.8     Stock and Note Purchase/Sale Agreement as of June 29, 2000 by and among
         Chefs, Mister Cookie Face, Inc. and Frank Koenemund(G)

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,  tradename 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.

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.

16.1     Letter of the Company's  former  auditors,  Moore Stephens,  P.C. dated
         April 6, 1999 as required by Item 304(a)(3) of Regulation S-B(E)

16.2     Letter of the Company's  former  auditors,  Edward Isaacs & Company LLP
         dated  October 6, 2000 as  required  by Item 304 (a) (3) of  Regulation
         S-B(F)


                                       33
<PAGE>

16.3     Independent  auditor's  report of  Edwards  Isaacs & Company  LLP dated
         March 27, 2000 with respect to the  financial  statements  for the year
         ended January 30, 2000(G)

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

                             State  of
Name                         Incorporation            Restaurants
----                         -------------            -----------

Chefs International          Florida                  Jack Baker's
   Palm Beach, Inc.                                   Lobster Shantys
                                                         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



----------
     (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 28, 2001

     (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 27, 2002.


                                       34
<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, 2002

         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, 2002                 Date: April 25, 2002

By  /s/ ANTHONY LOMBARDI             By  /s/ STEPHEN F. LOMBARDI
  ----------------------------         ----------------------------
  Anthony Lombardi, Director           Stephen F. Lombardi,
                                          Director

     Date: April 25, 2002                  Date: April 25, 2002

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

     Date: April 25, 2002


                                       35

<PAGE>





                          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 27, 2002,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the two fiscal years in the period ended  January 27, 2002.  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 audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  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  27,  2002,  and the  results  of  their
operations  and their cash flows for each of the two fiscal  years in the period
ended  January 27,  2002 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

                                               /s/ McGladrey & Pullen, LLP
                                               ---------------------------



New York, New York
March 28, 2002


                                       F-1


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JANUARY 27, 2002
--------------------------------------------------------------------------------

ASSETS

Current Assets:
   Cash and cash equivalents                                        $  1,408,062
   Investments                                                           355,825
   Available-for-sale securities                                       1,720,802
   Miscellaneous receivables                                              62,468
   Inventories                                                         1,144,189
   Prepaid expenses                                                      181,459
                                                                    ------------

       TOTAL CURRENT ASSETS                                            4,872,805
                                                                    ------------
Property and Equipment, at cost                                       21,229,149
   Less: Accumulated depreciation                                      8,559,539
                                                                    ------------

       PROPERTY AND EQUIPMENT, NET                                    12,669,610
                                                                    ------------
Other Assets:
   Investments                                                           151,000
   Goodwill - net                                                        430,403
   Liquor licenses - net                                                 821,788
   Equity in life insurance policies                                     589,862
   Deferred income taxes                                               1,166,000
   Other                                                                  61,492
                                                                    ------------

       TOTAL OTHER ASSETS                                              3,220,545
                                                                    ------------

                                                                    $ 20,762,960
                                                                    ============


See notes to consolidated financial statements.


                                      F-2
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (CONTINUED)
JANUARY 27, 2002
--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Notes and mortgages payable                                   $    277,745
   Accounts payable                                                 1,172,442
   Accrued payroll                                                    196,675
   Accrued expenses                                                   462,806
   Gift certificates                                                  461,610
                                                                 ------------

       TOTAL CURRENT LIABILITIES                                    2,571,278
                                                                 ------------
Notes and Mortgages Payable                                         1,816,930
                                                                 ------------
Other Liabilities                                                     618,307
                                                                 ------------
Stockholders' Equity:
   Capital stock - common $.01 par value,
     Authorized 15,000,000 shares,
     Issued 3,969,508                                                  39,695
   Additional paid-in capital                                      31,549,492
   Accumulated deficit                                            (15,739,658)
   Accumulated other comprehensive (loss)                             (89,199)
   Treasury stock                                                      (3,885)
                                                                 ------------

       TOTAL STOCKHOLDERS' EQUITY                                  15,756,445
                                                                 ------------

                                                                 $ 20,762,960
                                                                 ============


See notes to consolidated financial statements.


                                      F-3

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 27, 2002 AND JANUARY 28, 2001
                                                        2002           2001
--------------------------------------------------------------------------------

Sales                                                 $20,798,333   $20,156,890
Cost of Goods Sold                                      6,570,094     6,487,675
                                                      -----------   -----------

    GROSS PROFIT                                       14,228,239    13,669,215
                                                      -----------   -----------
Operating Expenses:
  Payroll and related expenses                          6,253,547     6,016,792
  Other operating expenses                              4,367,445     4,142,225
  Depreciation and amortization                         1,108,482     1,104,254
  General and administrative expenses                   2,036,725     1,792,320
  (Gain) on disposal of assets                                 --        (2,089)
                                                      -----------   -----------

    TOTAL OPERATING EXPENSES                           13,766,199    13,053,502
                                                      -----------   -----------

    INCOME FROM OPERATIONS                                462,040       615,713
                                                      -----------   -----------
Other Income (Expense):
  Interest expense                                       (115,378)     (105,958)
  Investment income                                       256,054       208,097
                                                      -----------   -----------

    OTHER INCOME, NET                                     140,676       102,139
                                                      -----------   -----------

    INCOME FROM CONTINUING OPERATIONS BEFORE
      INCOME TAXES                                        602,716       717,852

Provision (Credit) for Income Taxes                    (1,124,293)       85,243
                                                      -----------   -----------

    INCOME FROM CONTINUING OPERATIONS                   1,727,009       632,609

Gain on Disposal of Discontinued Ice Cream
  Business                                                     --       322,212
                                                      -----------   -----------

    NET INCOME                                        $ 1,727,009   $   954,821
                                                      ===========   ===========
Income Per Common Share From Continuing Operations    $      0.42   $      0.15
                                                      ===========   ===========
Basic Income Per Common Share                         $      0.42   $      0.22
                                                      ===========   ===========


See notes to consolidated financial statements.


                                      F-4

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 27, 2002 AND JANUARY 28, 2001
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Accumulated
                                                                                                 Other
                                                    Capital     Additional                   Comprehensive                Total
                                       Number        Stock        Paid-in       Accumulated     Income     Treasury    Stockholders'
                                     of Shares     Par Value      Capital         Deficit       (Loss)       Stock        Equity
                                     ----------    ---------   ------------    ------------  ------------  --------    ------------
<S>                                   <C>          <C>         <C>             <C>             <C>          <C>        <C>
Balance at January 30, 2000           4,488,162    $ 44,882    $ 32,304,487    $(18,421,488)   $     --     $    --    $ 13,927,881
                                                                                                                       ------------
Comprehensive Income:
Net income                                   --          --              --         954,821          --          --         954,821
Net unrealized gains on
  available-for-sale securities              --          --              --              --      51,043          --          51,043
                                                                                                                       ------------
  TOTAL COMPREHENSIVE INCOME                 --          --              --              --          --          --       1,005,864
                                                                                                                       ------------
Repurchase and retirement of
  common stock                         (233,334)     (2,333)       (165,667)             --          --          --        (168,000)
                                                                                                                       ------------
Stock repurchase program                     --          --              --              --          --      (8,980)         (8,980)
                                                                                                                       ------------
Fractional shares conversion              2,257          22             (22)             --          --          --              --
                                     ----------    --------    ------------    ------------    --------     -------    ------------
Balance at January 28, 2001           4,257,085      42,571      32,138,798     (17,466,667)     51,043      (8,980)     14,756,765
                                                                                                                       ------------
Comprehensive Income:
Net income                                   --          --              --       1,727,009          --          --       1,727,009
Net unrealized (loss) on
  available-for-sale securities
  arising during period                      --          --              --              --     (52,703)         --         (52,703)
Reclassification adjustment for
  gains realized on available-for-
  sale securities                            --          --              --              --     (32,117)         --         (32,117)
Change in fair value of derivatives
   accounted for as hedges                   --          --              --              --     (55,422)         --         (55,422)
                                                                                                                       ------------
   TOTAL COMPREHENSIVE INCOME                --          --              --              --          --          --       1,586,767
                                                                                                                       ------------
Repurchase and retirement of
  common stock                         (262,603)     (2,626)       (567,270)             --          --          --        (569,896)
                                                                                                                       ------------
Stock repurchase program                (24,641)       (246)        (22,040)             --          --       5,095         (17,191)
                                                                                                                       ------------
Fractional shares conversion               (333)         (4)              4              --          --          --              --
                                     ----------    --------    ------------    ------------    --------     -------    ------------
Balance at January 27, 2002           3,969,508    $ 39,695    $ 31,549,492    $(15,739,658)   $(89,199)    $(3,885)   $ 15,756,445
                                     ==========    ========    ============    ============    ========     =======    ============
</TABLE>


See notes to consolidated financial statements.


                                      F-5

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 27, 2002 AND JANUARY 28, 2001

<TABLE>
<CAPTION>
                                                                         2002           2001
-----------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>
Cash Flows From Operating Activities:
  Net income                                                         $ 1,727,009    $   954,821
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                                    1,108,482      1,104,254
      Deferred income taxes                                           (1,166,000)            --
      Gain on sale of assets and investments                             (55,852)        (2,089)
      Gain on disposal of discontinued business                               --       (322,212)
      Changes in assets and liabilities:
        (Increase) decrease in:
          Miscellaneous receivables                                       47,024        (46,455)
          Inventories                                                    (14,929)      (165,126)
          Prepaid expenses                                                (5,272)       (23,171)
        Increase (decrease) in:
          Accounts payable                                               173,066        (16,826)
          Accrued expenses and other liabilities                          68,800        268,082
          Income taxes payable                                                --        (54,300)
                                                                     -----------    -----------
        NET CASH PROVIDED BY OPERATING ACTIVITIES                      1,882,328      1,696,978
                                                                     -----------    -----------

Cash Flows From Investing Activities:
  Purchase of property and equipment                                  (1,444,530)      (949,340)
  Liquor license purchase                                                     --       (357,873)
  Net proceeds from sale of assets                                            --          2,089
  Sale or redemption of investments                                      525,696        459,500
  Purchase of investments                                             (1,116,928)      (947,920)
  Due on sale of discontinued operations - payments                           --        570,330
  Equity in life insurance policies                                      (44,747)       (39,511)
  Other                                                                   11,457        (41,853)
                                                                     -----------    -----------
       NET CASH (USED IN) INVESTING ACTIVITIES                        (2,069,052)    (1,304,578)
                                                                     -----------    -----------

Cash Flows From Financing Activities:
  Proceeds from debt                                                   1,200,000             --
  Repayment of debt                                                     (177,707)      (370,087)
  Purchase of common stock                                              (569,896)      (168,000)
  Purchase of treasury stock                                             (17,191)        (8,980)
                                                                     -----------    -----------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES               435,206       (547,067)
                                                                     -----------    -----------
       NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              248,482       (154,667)

Cash and Cash Equivalents:
  Beginning                                                            1,159,580      1,314,247
                                                                     -----------    -----------
  Ending                                                             $ 1,408,062    $ 1,159,580
                                                                     ===========    ===========

Supplemental Disclosure of Cash Flow Information:
  Cash payment for:
     Interest                                                        $   111,629    $   107,522
                                                                     ===========    ===========
     Income taxes                                                    $    58,626    $   136,826
                                                                     ===========    ===========

Noncash Transactions:
  Increase (decrease) in fair value of securities available for sale $   (84,820)   $    51,043
                                                                     ===========    ===========
  Change in fair value of derivatives accounted for as hedges        $   (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
      seven seafood  restaurants,  located in New Jersey and Florida,  generally
      under  the  trade  name,  "Lobster  Shanty".  The  Company  also  operates
      Escondido's  Mexican  Restaurant  and Moore's  Tavern and  Restaurant,  an
      eclectic  American  restaurant.  Escondido's  and Moore's  Tavern are both
      located in New Jersey.  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 totaled approximately $1,172,200.

      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 27, 2002,  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  27, 2002 are as
      follows:

                                            Gross         Gross
                                Gross     Unrealized    Unrealized       Fair
                                Cost        Gains        (Losses)        Value
                             ----------   ---------    -----------    ----------
      Convertible bonds      $   33,450   $  11,235    $    (1,200)   $   43,485
      Mutual funds            1,251,534       9,941        (98,270)    1,163,205
      Equity securities         469,595      68,871        (24,354)      514,112
                             ----------   ---------    -----------    ----------
                             $1,754,579   $  90,047    $  (123,824)   $1,720,802
                             ==========   =========    ===========    ==========

      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
      ranging from 3 to 40 years.

      Goodwill and Liquor Licenses:

      Goodwill  represents cost in excess of fair value of businesses  acquired.
      Goodwill and liquor licenses are being amortized over an estimated  useful
      life of 40 years under the straight-line method.

      Impairment:

      Certain  long-term  assets  of the  Company,  including  goodwill,  liquor
      licenses  and  property and  equipment,  are  reviewed on a restaurant  by
      restaurant  basis at least annually as to whether their carrying value has
      become  impaired.  This evaluation is done by comparing the carrying value
      of the asset to the value of the projected  undiscounted  10 year estimate
      of net cash flow from related operations.  Impairment, if any, is measured
      by the amount that the carrying  value of the asset exceeds the fair value
      usually measured by projected undiscounted net cash flow.

      Management  also  re-evaluates  annually  the periods of  amortization  to
      determine  whether  subsequent  events and  circumstances  warrant revised
      estimates  of useful  lives.  As of January 27, 2002,  management  expects
      these assets to be fully recoverable.



                                       F-8


<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 2002 and 2001 were $471,172 and $500,932, 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.

      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 2002 and
      2001.

2.    NEW ACCOUNTING STANDARDS

      Effective  January 29, 2001,  the Company  adopted  Statement of Financial
      Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments
      and Hedging Activities," as amended.  Under this guidance,  all derivative
      instruments  are recognized as assets or  liabilities in the  consolidated
      balance sheet at fair value.

      The Company has entered into interest rate swap contracts  under which the
      Company  agrees  to  pay  fixed-rates  of  interest.   The  contracts  are
      considered  to be a hedge  against  changes in the  amount of future  cash
      flows  associated with the Company's  interest  payments on  variable-rate
      debt  obligations.  Accordingly,  the  interest  rate swap  contracts  are
      designated  as cash flow  hedges  and are  reflected  at fair value in the
      consolidated  balance  sheet  and the  related  gains or  losses  on these
      contracts  are  deferred  in  shareholders'  equity  (as  a  component  of
      accumulated other comprehensive  income (loss)). To the extent that any of
      these contracts are not considered to be perfectly effective in offsetting
      the change in the value of the interest payments being hedged, any changes
      in fair value relating to the  ineffective  portion of these contracts are
      immediately recognized in income. The net effect of this accounting on the
      Company's  operating  results is that  interest  expense on the portion of
      variable-rate  debt  being  hedged is  generally  recorded  based on fixed
      interest rates.


                                       F-9


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

2.    NEW ACCOUNTING STANDARDS (Continued)

      The  value  of the  swaps  upon  initial  application  of SFAS 133 was not
      material.

      During 2001,  the FASB issued SFAS No. 141,  "Business  Combinations"  and
      SFAS No. 142,  "Goodwill and Other Intangible  Assets."  Effective January
      28, 2002,  the Company  will no longer be required to amortize  indefinite
      life  goodwill  and  intangible  assets  (liquor  licenses) as a charge to
      earnings.  In addition,  the Company will be required to conduct an annual
      review of goodwill and other intangible  assets for potential  impairment.
      The Company  does not  currently  anticipate  having to record a charge to
      earnings  for the  potential  impairment  of goodwill or other  intangible
      assets as a result of adopting these new standards.

3.    INVENTORIES

      Inventories consist of the following:

         Food                                         $   564,547
         Beverages                                        149,735
         Supplies                                         429,907
                                                      -----------
                                                      $ 1,144,189
                                                      ===========

4.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

         Land                                         $ 3,270,041
         Buildings and improvements, including
           leaseholds                                  15,529,046
         Furniture and equipment                        2,224,453
         Construction in progress                         102,774
         China, glassware and utensils(a)                 102,835
                                                      -----------
                                                      $21,229,149
                                                      ===========

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

      Depreciation  expense was  $1,054,739  and  $1,050,495 for fiscal 2002 and
      2001, respectively.

5.    INTANGIBLE ASSETS

      Intangible assets consist of:
                                                                Liquor
                                                 Goodwill      Licenses
                                                ---------    -----------
         Cost                                   $ 949,820    $ 1,195,180
         Less: Accumulated amortization           519,417        373,392
                                                ---------    -----------

                                                $ 430,403    $   821,788
                                                =========    ===========

      Amortization  expense  was  $53,743  and $53,758 for fiscal 2002 and 2001,
      respectively.


                                      F-10


<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 Pt. Pleasant
      Beach, New Jersey                                             $1,195,000

      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                                                          773,609

      Mortgage payable in various monthly installments to
      amortize the mortgage at the rate of $105,000 annually,
      through December 2002 with interest at LIBOR plus 1.50%,
      collateralized by real estate located in Toms River, New
      Jersey                                                            93,000

      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                  33,066
                                                                    ----------
                                                                     2,094,675
      Less: Current maturities                                         277,745
                                                                    ----------
                                                                    $1,816,930
                                                                    ==========

      Annual  maturities  for  fiscal  years  2004  through  2007 are  $171,491,
      $166,346, $170,770 and $174,909, respectively.

      At January 27,  2002,  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
      27, 2002, there were no amounts used under the line of credit.

      LIBOR was 1.86% at January 27, 2002.

      As of January 27,  2002,  the Company had  interest  rate swap  agreements
      relating  to  substantially  all  of the  Company's  variable  rate  debt.
      Unrealized  net losses under the  interest  rate swap  agreements  totaled
      approximately $55,000 at January 27, 2002. 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  27,  2002 as a result of hedge
      ineffectiveness.

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



                                      F-11

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

7.    INVESTMENT INCOME

      The components of investment income are summarized as follows:

                                                  2002             2001
                                                --------         --------
      Interest income                           $ 68,718         $160,624
      Dividends                                  131,484           45,214
      Realized gain on sales of
        available-for-sale securities             55,852            2,259
                                                --------         --------
                                                $256,054         $208,097
                                                ========         ========

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 $44,521 and $42,840,  for fiscal
      2002 and 2001, 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 2002 and 2001 was $63,929 and
      $79,910, respectively.

10.   TRANSACTIONS WITH RELATED PARTIES

      In December  1999,  the Company  entered into an agreement  with a company
      controlled by the  principal  shareholders  of the Company.  The agreement
      called for the Company to provide consulting to the officers and employees
      of the company  concerning  all matters  relating  to the  operation  of a
      restaurant and tavern known as Moore's Inn. The agreement provided for the
      Company to receive fees of $1,800 per week.  Consulting  income for fiscal
      2001, pursuant to this agreement,  was $6,093. The agreement terminated on
      February 23, 2000, when the Company acquired the assets of Moore's Inn.


                                      F-12


<PAGE>




CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

10.   TRANSACTIONS WITH RELATED PARTIES (Continued)

      Upon  acquiring  the  assets of Moore's  Inn the  Company  entered  into a
      five-year  lease for the restaurant  property with 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  Inn for  the  Company's  new  restaurant,
      Escondido's  Mexican Restaurant (Note 16). The terms of this lease are the
      same as the lease for Moore's Inn.

      Rent  expense  paid  pursuant to these leases for fiscal 2002 and 2001 was
      $150,859 and $114,497,  respectively,  which included  percentage  rent of
      $45,859 and $30,187, 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 27, 2002 are as follows:

                   2003                   $   329,733
                   2004                       311,572
                   2005                       312,632
                   2006                       313,692
                   2007                       287,177
               Thereafter                     134,682
                                          -----------
                                          $ 1,689,488
                                          ===========

      Total rent expense,  including rent paid to related parties,  was $352,481
      and $296,926, for fiscal 2002 and 2001, respectively.



                                      F-13


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

11.   COMMITMENTS AND CONTINGENCIES (Continued)

      Employment Agreements:

      The  Company  has  employment  agreements  through  March  2005  with  two
      employees  for  annual  amounts  ranging  from  $99,100 to  $170,800.  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.

      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  January  27,  2002,  the  Company  had
      repurchased  28,191  shares for $26,171,  of which 24,641  shares had been
      retired.

      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.   GAIN ON DISPOSAL OF DISCONTINUED ICE CREAM BUSINESS

      On February 20,  1997,  the Company sold 95% of the common stock of Mister
      Cookie  Face  ("MCF"),  its ice  cream  production  segment,  to a  former
      director for an aggregate  purchase price of  $1,600,000,  consisting of a
      $500,000 cash payment and three notes totaling $1,100,000.  The first note
      for  $100,000  was due on or before  March 24,  1997,  the second note for
      $500,000, was due in installments through July 1, 2000, and the third note
      for  $500,000  was due on or before  February  20,  2004,  with  mandatory
      prepayments based on MCF's cash flow. Based on the estimated present value
      of the  payments,  management  recorded a valuation  allowance of $601,050
      against the second and third notes. The 5% of MCF common stock retained by
      the Company was valued at $35,000.

      On June 30,  2000,  the Company sold both Notes B and C and its 5% holding
      of MCF common  stock to MCF for a cash  payment of $367,163 and the return
      of 233,334 shares of the Company's  common stock owned by the president of
      MCF. These shares were subsequently  cancelled by the Company. The Company
      recognized a gain from discontinued  operations of approximately  $322,000
      in its financial  statements  for the year ended  January 28, 2001,  which
      represents  partial  recoveries  of  the  valuation  allowance  previously
      provided for against Notes B and C.




                                      F-14


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

12.   GAIN ON DISPOSAL OF DISCONTINUED ICE CREAM BUSINESS (Continued)

      Cash  received  for Notes B and C prior to June 30,  2000 were  applied to
      principal and interest  based on the  discounted  note payment  schedules,
      which resulted in an additional $5,848 of interest income being recognized
      in fiscal 2001 and was applied as follows:

      Interest income                              $ 44,698
                                                   ========
      Average recorded investment in loans         $ 93,565
                                                   ========
      Cash basis interest income                   $ 46,667
                                                   ========

13.   EARNINGS PER SHARE

      The weighted  average number of shares  outstanding  used to compute basic
      earnings per share for fiscal 2002 and 2001 was 4,129,205  and  4,350,799,
      respectively.

14.   INCOME TAXES

      Provision (credit) for income taxes consist of the following:

                                      2002           2001
                                  -----------      --------
      Current - Federal           $     3,338      $ 19,000
              - State                  38,369        66,243
      Deferred                     (1,166,000)           --
                                  -----------      --------
                                  $(1,124,293)     $ 85,243
                                  ===========      ========




                                      F-15


<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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


14.   INCOME TAXES (Continued)

      The  significant  components of deferred tax assets and  liabilities as of
      January 27, 2002 are as follows:

      Deferred Tax Assets:
        Tax loss carryforwards                           $ 2,276,000
        Alternative minimum tax credit carryforward           38,000
        Other                                                 94,000
                                                         -----------
      Gross deferred tax assets                            2,408,000
      Valuation allowance                                  1,230,000
                                                         -----------
          TOTAL DEFERRED TAX ASSETS                        1,178,000

      Deferred Tax Liability:
        Other                                                 12,000
                                                         -----------
          NET DEFERRED TAX ASSETS                        $ 1,166,000
                                                         ===========

      As of January 27,  2002,  a valuation  allowance  of  $1,230,000  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 2002 was a reduction of
      $1,742,000.  During  fiscal  2002,  the Company  recognized a deferred tax
      asset of $1,166,000 as management  determined  that it is more likely than
      not that future taxable income will be sufficient to partially utilize the
      net operating loss carryforwards.  The remaining part of the reduction for
      2002 was due to the utilization and expiration of tax loss carryforwards.

      The  Company  has   available   at  January  27,  2002,   operating   loss
      carryforwards as follows:

      Year of Expiration
      ------------------
             2003                                 $ 2,072,345
             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
                                                  -----------
                                                  $ 6,610,661
                                                  ===========



                                      F-16

<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

14.   INCOME TAXES (Continued)

      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  27, 2002 and
      January 28, 2001 are as follows:

                                               2001        2000
                                              ------      -----
      Federal statutory rate                    34.0%      34.0%
      State taxes net of Federal benefit         5.0        5.0
      Valuation allowance change                11.2       23.5
      Deferred tax asset recognized           (193.4)        --
      Operating loss carryforwards             (43.3)     (50.7)
                                              ------      -----
          EFFECTIVE RATE                      (186.5)%     11.8%
                                              ======      =====

15.   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.

16.   SUBSEQUENT EVENTS

      On January 29,  2002,  the Company  opened its tenth  restaurant,  another
      Escondido's Mexican Restaurant.  The Company had previously entered into a
      five-year  lease for the restaurant  property with a partnership  owned by
      the principal shareholders of the Company (see Note 10).

      On January 25, 2002, the Company  entered into an agreement to acquire for
      $800,000  the   furniture,   fixtures,   equipment,   liquor  license  and
      franchising  rights of a restaurant  business  located in Florida known as
      Mr. Manatee's Casual Grille. The Company  anticipates that the acquisition
      will be completed by April 2002. In connection with the  acquisition,  the
      Company 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  an option  for the  Company to
      purchase the property during the first term of the lease for $1,075,000.




                                      F-17