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 30, 2005
                          ----------------

            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 Exchange Act: NONE
                                                                     ----

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

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

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

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

The issuer's revenues for the year ended January 30, 2005 totaled $21,563,608.

On April 1, 2005,  the aggregate  market value of the voting stock of the issuer
(consisting  of  Common  Stock,  $.01  par  value)  held by  non-affiliates  was
approximately $3,775,000 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 3,925,384  shares of the issuer's Common Stock issued and
outstanding.

Transitional Small Business Disclosure Format (check one)

         Yes        No X
            ---       ---

<PAGE>

                            CHEFS INTERNATIONAL, INC.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         (a) BUSINESS  DEVELOPMENT - Chefs  International,  Inc. ("Chefs" or the
"Company") was organized  under the laws of the State of Delaware in March 1975.
The Company currently  operates nine restaurants on a year-round basis, seven of
which are  free-standing  seafood  restaurants  in New Jersey (four) and Florida
(three);  one of which is a free-standing  Mexican theme  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. Five
of the seafood  restaurants  are operated  under the name "Jack Baker's  Lobster
Shanty,"  one under  the name  "Baker's  Wharfside"  and one under the name "Mr.
Manatee's  Casual  Grille." The Mexican theme  restaurant is 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 Mexican  theme  restaurant in
January 2002 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

"GOING PRIVATE" TRANSACTION

         On April 18, 2005, the Company  announced that at a Special  Meeting of
its Stockholders  held on that date, an Agreement and Plan of Merger between the
Company  and  Lombardi   Restaurant   Group,  Inc.  (at  times  referred  to  as
"Acquisition  Co.") pursuant to which  Acquisition  Co. would be merged into the
Company and each share of Chefs common stock  (other than the  2,606,446  shares
owned by  Acquisition  Co.) would be canceled  and  converted  into the right to
receive  a  cash  payment  of  $3.12,  had  been  approved  and  adopted  by the
affirmative  vote of a majority of the shares of Chefs common stock  outstanding
on the  February 25, 2005 Record Date for the  meeting.  The proposed  Merger is
designed  to  convert  Chefs  from  a  publicly  owned  to  a  privately   owned
corporation.  It is  contemplated  that the Merger will be effected in May 2005.
Although the required stockholder vote has been obtained, the Merger will not be
completed unless all of the remaining closing  conditions are satisfied so there
can be no assurance that the Merger will occur.

         If the Merger does occur;

              o   The Company will no longer be publicly owned;

              o   Chefs   common   stock   will   no   longer   trade   in   the
                  over-the-counter  market  or be  quoted  on the  OTC  Bulletin
                  Board(R);

              o   The   stockholders  of  Acquisition  Co.,  namely  Anthony  M.
                  Lombardi,  Joseph S. Lombardi,  Michael F. Lombardi, Robert M.
                  Lombardi,  Stephen F. Lombardi (the five "Lombardi Brothers"),
                  the Lombardi & Lombardi P.A. law firm. the Lombardi & Lombardi
                  P.A. Defined Benefit Pension Plan (the Lombardi Brothers,  the
                  law firm and the  Pension  Plan at  times  referred  to as the
                  "Lombardi  Group"),  Lee Maschler and Matthew  Maschler,  (the
                  "Maschler  Brothers"),  (the  Lombardi  Group and the Maschler
                  Brothers  collectively referred to at times as the

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<PAGE>

                  "Continuing  Stockholders"),  will  own  all of the  Company's
                  outstanding common stock; and

              o   The Company's  "Public  Stockholders"  which term excludes the
                  Continuing   Stockholders   and   stockholders   who  properly
                  exercised  dissenters' rights of  appraisal,  will have  their
                  shares of common stock  canceled and converted  into the right
                  to  receive  a  cash  payment  of  $3.12  per  share,  without
                  interest, and without deduction of any commission, and will no
                  longer have any interest in the Company's assets or its future
                  earnings or growth, if any.

RESTAURANT CLOSING

         In the first quarter of calendar year 2004,  management decided to sell
the Company's Jensen Beach,  Florida Lobster Shanty  restaurant due to declining
sales and a lack of profitability.  The Company executed a contract to sell this
restaurant  for  $900,000.  The closing  took place on May 3, 2004.  The Company
recognized  a gain of  $415,473  from  this  sale.  See  Note 8 of  Notes to the
Consolidated Financial Statements.

RESIGNATION OF PRESIDENT, TREASURER, PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL
OFFICER

         In April 2004, Anthony C. Papalia, the Company's  president,  principal
executive, principal financial and principal accounting officer requested of the
Company's  board of directors that he be released from his  employment  contract
(due to expire in March  2005)  effective  at the close of  business on June 28,
2004 "...in order to pursue personal  interests...." The board agreed to release
Mr.  Papalia  from his  employment  contract at said date and he agreed to a one
year  non-competition  agreement  with  the  Company.  Robert  M.  Lombardi  was
appointed to succeed Mr. Papalia as president and principal  executive  officer.
Martin W.  Fletcher,  the  Company's  controller,  was  appointed to succeed Mr.
Papalia as the Company's  principal  financial and principal  accounting officer
and was elected a vice president of the Company.

RESTAURANT CLOSINGS DUE TO HURRICANE DAMAGE

         In  September  2004,  Florida  hurricanes  caused the  closings  of the
Company's three Florida  restaurants for  approximately  ten days in the case of
the Cocoa  Beach  restaurant,  approximately  two months in the case of the Vero
Beach Lobster Shanty restaurant and approximately two and one-half months in the
case of the Vero Beach Mr.  Manatee's  Casual  Grill  restaurant.  To date,  the
Company has  received  insurance  advances  against its claims of  approximately
$1,060,000 and anticipates a final settlement of its claims will occur in fiscal
2006.  The Company  realized a gain of $202,399 in the fourth  quarter of fiscal
2005 related to partial settlement of its hurricane damage claims.

BANK LOANS

         At January  26,  2004,  the Company  had a $500,000  revolving  line of
credit  ("L/C  line") from First Union Bank  (subsequently  acquired by Wachovia
Bank),  expiring on June 30,  2005 and  secured by a first  mortgage on its Toms
River,  New Jersey  Lobster  Shanty  restaurant.  All  subsequent  references to
Wachovia  Bank shall refer to Wachovia Bank as well as to First Union Bank prior
to its  acquisition  by  Wachovia  Bank.  In  November  2004,  the L/C  line was
increased to  $1,000,000  and the Company  borrowed  $500,000 for repairs to its
Florida

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restaurants due to the hurricane  damage.  As a result, at January 30, 2005, the
outstanding  indebtedness under the L/C line was $500,000. In February 2005, the
Company  borrowed  an  additional  $300,000  for  repairs,  bringing  the  total
outstanding indebtedness under the line to $800,000. In April, 2005, the Company
reduced the outstanding  indebtedness  under the line to $400,000 using $400,000
of  insurance  proceeds to pay down the loan.  Interest on the unpaid  principal
balance under this L/C line is at the LIBOR Market Index Rate plus 2%.

         The Company is indebted  to  Wachovia  Bank under a $500,000  Term Loan
made in May 2002,  the  proceeds of which were  applied to the  repayment of the
balance under an outstanding  L/C line.  Principal  payments under the Term Loan
are due in amounts varying from $5,000 to $25,000 in the months of March through
November through 2007 together with interest at the LIBOR Market Index Rate plus
2%.  Indebtedness  under the Term Loan is secured by a mortgage on the Company's
Toms River,  New Jersey  Lobster  Shanty  restaurant.  At January 30, 2005,  the
outstanding principal balance under this Term Loan was approximately $210,000.

         In September  2001,  the Company  borrowed  $600,000 from Wachovia Bank
secured  by a first  mortgage  on its  Baker's  Wharfside  restaurant  in  Point
Pleasant  Beach,  New Jersey and borrowed an  additional  $600,000 from the Bank
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 30, 2005, the outstanding  principal  balance of each of these loans was
approximately $417,500.

         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 October 1998,  the Company  borrowed  $880,000 from Wachovia Bank to
fund the $1,100,000  purchase of its Vero Beach,  Florida Lobster Shanty 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 30, 2005,
approximately  $644,100 was  outstanding  under this loan (which  provides for a
$431,429 "balloon" payment in November 2008).

         In March 2005, the Company obtained a $1,500,000  non-revolving Line of
Credit from Wachovia Bank to partially  fund  renovations  to the Lobster Shanty
restaurant in Point Pleasant Beach,  New Jersey.  Borrowings  under this line of
credit  convert into a ten year term loan  commencing  July 31,  2005.  In April
2005, the Company borrowed $750,000 under this line.  Borrowings under this line
are  collaterized  by a mortgage  on the Point  Pleasant  Beach  Lobster  Shanty
property.  Interest on  borrowings  under this line is at the LIBOR Market Index
Rate plus 2%.

         Repayment of the Company's term loans and of borrowings under its lines
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 Wachovia
Bank'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

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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 2005 year end of not less than $12,650,000 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 (without receiving a waiver from the Bank.) The Company
received  a waiver  from  Wachovia  Bank of any claim that the  resignation  and
departure  of Anthony C.  Papalia at June 28,  2004 as the  Company's  principal
executive  and  principal  financial  officer might be deemed a violation of the
covenant  regarding  a  material  change  in  management.  The  Company  was  in
compliance with all material  covenants under the Loan Agreements at January 30,
2005.

         (b)  BUSINESS OF ISSUER - The Company is engaged in one  business;  the
operation of nine restaurants in New Jersey and Florida on a year-round basis.

                              RESTAURANT OPERATIONS

         The Company currently  operates nine restaurants on a year-round basis,
seven of which are  free-standing  seafood  restaurants in New Jersey (four) and
Florida  (three);  one of  which is a  free-standing  Mexican  theme  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.
Five of the  seafood  restaurants  are  operated  under the name  "Jack  Baker's
Lobster  Shanty," one under the name "Baker's  Wharfside" and one under the name
"Mr.  Manatee's  Casual Grille." The Mexican theme  restaurant is 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 Mexican theme  restaurant in
January 2002 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:

                                            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
Cocoa Beach, Florida                        September 1981
Hightstown, New Jersey                      December 1981

Baker's Wharfside
-----------------

Pt. Pleasant Beach, New Jersey              October 1980

Mr. Manatee's Casual Grille Restaurant
--------------------------------------

Vero Beach, Florida                         April 2002

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

ESCONDIDO'S MEXICAN RESTAURANT
------------------------------

Freehold, New Jersey                        January 2002

MOORE'S TAVERN AND RESTAURANT
-----------------------------

Freehold, New Jersey                        February 2000

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,  Florida on the  intracoastal
waterway, and seats approximately 200. It opened in December, 1979 pursuant to a
lease from a partnership,  the principal partner of which was the Company's then
principal  stockholder.  During fiscal 1998, the Company  constructed an outdoor
deck  with  a bar  and  dining  facilities  at  this  restaurant  at a  cost  of
approximately  $125,000. At August 31, 1998, the Company was continuing to lease
this restaurant on a  month-to-month  "net" basis at a monthly rental of $10,000
with the Company also paying personal  property taxes and insurance  thereunder.
On that date, the United States  Bankruptcy Court for the District of New Jersey
ordered the  acceptance  of the Company's bid of $1,100,000 to purchase the Vero
Beach restaurant property from the partnership. On October 30, 1998, the Company
completed the purchase of the property for $1,100,000. To fund the purchase, the
Company  obtained an $880,000  first  mortgage loan from its  principal  lending
bank,  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 has enhanced
its restaurant business at those locations.

         The  Company  was  forced  to  close  this  restaurant  for 53  days in
September  and  October  2004 due to  damage  from the  September  2004  Florida
hurricanes.  To date,  the Company has spent  approximately  $625,000 in capital
expenditures  and  repairs  on  this  restaurant  and  anticipates  spending  an
additional $30,000 to $50,000 to complete the work.

         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

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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.

         The Company has commenced major  renovations to this  restaurant  which
will take place in fiscal 2005 and 2006 at an anticipated  cost of approximately
$2,200,000.  The Company expects to finance approximately $1,500,000 of the cost
with bank loans and the balance from working capital.

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

         In May 1998,  the Company spent $166,000 to purchase a lot and building
with a  waterfront  location  adjacent  to the Toms River  Lobster  Shanty.  The
Company  partially  funded  the  purchase  price  with the bank loan  previously
described.  The Company has obtained the permits and variances  necessary for it
to develop an outdoor  patio  dining area with  seating for 125 on this site but
delayed  construction pending resolution of a lawsuit initiated by a neighboring
landowner  attempting to prevent  construction.  The landowner's  time to appeal
from the  granting  of the  permits and  variances  to the Company has  expired.
Management  assumes  there  will  be  no  further  objection  to  the  Company's
construction  of the planned  patio dining area.  As a result of the delay,  the
board of  directors  has  deferred  its  decision on whether to proceed with the
construction  of the  patio.  If the board  determines  to  proceed  in the next
several  months,  the  Company  estimates  the total  cost of  construction  and
outfitting  at  approximately  $350,000 for an opening which could take place in
fiscal 2007.

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

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using the net proceeds from the sale in June 1993 of another Florida  restaurant
property.

         The  Company  was forced to close this  restaurant  for twelve  days in
September 2004 due to damage from the September 2004 Florida hurricanes.

         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 CASUAL GRILLE RESTAURANT

         VERO BEACH,  FLORIDA - This  restaurant,  consisting  of  approximately
4,000  square feet,  is free  standing at 30 Royal Palm Pointe in Vero Beach and
seats  approximately  165. It has parking for  approximately  40 automobiles but
there are additional  municipal parking spaces available at the contiguous Royal
Palm Pointe municipal park. Pursuant to a January 2002 asset purchase agreement,
the Company purchased the furnishings,  fixtures and equipment,  liquor license,
goodwill,  right  to the  name  and  the  business  of  Mr.  Manatee's  from  an
unaffiliated third party for $800,000. The Company paid $300,000 of the purchase
price from its available cash reserves and borrowed the $500,000  balance (which
it repaid in fiscal 2003) 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.

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

         The  Company  was  forced  to  close  this  restaurant  for 76  days in
September  through  November 2004 due to damage from the September  2004 Florida
hurricanes.  To date,  the Company has spent  approximately  $335,000 in capital
expenditures  and

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repairs and  anticipates  spending an additional  $30,000 to $50,000 to complete
the work.

MEXICAN THEME RESTAURANT

         At January  30,  2005,  the  Company was  operating  one Mexican  theme
restaurant;  its free-standing "Escondido's Mexican Restaurant" in Freehold, New
Jersey.

         The  Company's  Mexican  theme  restaurant   features  Mexican  cuisine
including  fajitas,  tortillas,  burritos  and  enchiladas  with  cheese,  beef,
chicken, pork and seafood fillings. The menu also includes 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.

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

         The Company  leased the facility  ("Building  B") from  Moore's  Realty
(whose partners are members of the 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  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  30,  2005,  the gross  rental
aggregated  $99,656.  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 Wachovia Bank aggregating  $1,200,000.  See "Developments  Since
the  Beginning  of the Last Fiscal Year - Bank Loans" in this Item 1. During the
renovation of this restaurant, the Company paid an aggregate $15,000 in rents to

                                       9
<PAGE>

Moore's  Realty with respect to Building B. The Company had no  additional  cost
for the liquor  license for these  premises,  the license being  permitted as an
expansion of the license on the adjoining "Moore's Tavern and Restaurant."

         See "Moore's Tavern and Restaurant" herein as to the Company's lease of
the Building C pad site to provide  additional  parking for both this restaurant
and Moore's Tavern and Restaurant.

MOORE'S TAVERN AND RESTAURANT

         In February  2000,  the Company  executed a lease with  Moore's  Realty
(whose partners are members of the Lombardi  family).  The lease was of premises
on West Main Street (Route 537) in Freehold,  New Jersey  (Building A), 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  30,  2005,  the gross  rental  aggregated  $152,545.
Moore's  Realty has the right to terminate  the lease upon twelve  months' prior
written notice if, for the preceding lease year, the gross annual rental did not
exceed the minimum annual rental for that year.

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

         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.

                                       10
<PAGE>

         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   therein  of  the  Lombardi  family.   The
transactions  were  negotiated  for the Company by Anthony C. Papalia,  its then
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  Restaurant"  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 with any businesses operated from Building B (now operated by the Company
as an Escondido's  Mexican  Restaurant),  and proposed Building C. See "Building
Pad C Parking  Lot" as to the  Company's  leasing of the  Building C pad site to
provide  additional  parking  for  patrons  of  its  two  Freehold,  New  Jersey
restaurants.  The tavern  portion of this  restaurant  is of an historic  nature
having  been  initially  constructed  in the late 18th  century  and owned by an
officer in the American  Revolutionary  Army. The entire restaurant is decorated
in a revolutionary period decor.

         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.

BUILDING PAD C PARKING LOT

         In connection  with the February 2000 execution of the lease of Moore's
Inn to the  Company,  Moore's  Realty  agreed  not to sell or  lease a  building
("Building  B")  adjacent  to Moore's  Inn or the nearby pad site for a proposed
building  ("Building  C") to a third  party for a period  of one  year.  Moore's
Realty  also  agreed that if during the  initial  one-year  period,  the Company
entered into an agreement to purchase or lease  Building B, it would not sell or
lease the Building C pad site to anyone other than the Company for an additional
one-year

                                       11
<PAGE>

period.  In October 2001, the Company leased  Building B from Moore's Realty and
in January  2002,  opened its Mexican  theme  restaurant in Building B under the
name "Escondido's Mexican Restaurant."

         In  September  2002,  the Company  leased the  Building C pad site from
Moore's  Realty for use as a parking lot for its  Freehold,  New Jersey  Moore's
Tavern and Restaurant and its Escondido's Mexican Restaurant. The lease is for a
five-year  term  through   January  2007  and  contains   provisions  for  three
consecutive  five-year  renewals at the Company's  option.  Either party has the
right to  terminate  the lease upon  twelve  (12) months  written  notice  after
conclusion  of the  initial  five (5) year term  provided  that if the  Landlord
elects to  terminate  the lease,  it must offer the Tenant the right to lease an
adjoining paved parking area sufficient to park at least fifty (50)  automobiles
on terms and conditions  similar to those contained in the lease. The lease also
provides that if the Company is leasing  either  Building A (Moore's  Tavern and
Restaurant)  or  Building  B  (Escondido's  Mexican  Restaurant)  at the time of
termination by Moore's Realty, Moore's Realty will not permit a restaurant to be
developed on the Building C pad site.

         The lease is a  "triple-net"  lease  pursuant to which the Company pays
real  estate  taxes,  insurance,  electricity  charges,  snow  and ice  removal,
cleaning  and  maintenance.  The lease  provides for a minimum rent at an annual
rate of $40,000 during each year of the initial  five-year term,  $44,000 during
each year of the first five-year renewal period; $50,000 during each year of the
second  five-year  renewal  period  and  $55,000  during  each year of the third
five-year renewal period. In addition to the minimum annual rent, the Company is
required to pay an amount to Moore's  Realty  equal to (i) 1% of the total gross
sales of the food and beverages etc. at the Moore's Tavern and Restaurant and at
the Escondido's Mexican restaurant in each year (excluding taxes and gratuities)
(the "gross  annual  rent"),  less (ii) the  minimum  annual rent for such year.
During fiscal 2003, the Company installed curbing, paving and other improvements
to the site at a cost of approximately  $134,000.  The site now provides parking
for  approximately  65 automobiles for patrons of the two Freehold  restaurants.
Moore's  Realty has agreed to reimburse the Company's  costs.  Moore's  Realty's
reimbursement  obligation is being applied as a credit  against the minimum rent
and the gross annual rent, if any, due under the lease. As a result, the Company
did not pay any rent to Moore's  Realty in fiscal 2005 with  respect to this pad
site and still has approximately $36,000 of credits remaining.

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

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
Restaurant are readily  available from a variety of sources  including  national
distributors and local sources on an order basis when needed.

SEASONAL ASPECTS

         The Company's New Jersey seafood  restaurants  experience a significant
portion of their sales from May through  September  whereas its Florida  seafood
restaurants experience a significant portion of their sales from January through

                                       12
<PAGE>

April.  Moore's  Tavern and  Restaurant  and the  Freehold  Escondido's  Mexican
Restaurant have experienced a seasonality  factor similar to but not as dramatic
as the seasonality factor of the Company's New Jersey seafood  restaurants.  Mr.
Manatee's Casual Grille follows the seasonality pattern of the Company's Florida
restaurants.

TRADEMARKS

         The  Company  has  no  patents,  trademarks,  licenses,  franchises  or
concessions  which it regards as material to its  restaurant  business  with the
exception of the service mark "Jack Baker's Lobster Shanty"  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 applied
to the United States  Commissioner  of Trademarks and effective  September 2002,
obtained registration of the service mark "Escondido's Mexican Restaurant."

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 location where the Company is
now  operating  its  Escondido's  Mexican   Restaurant,   all  of  which  supply
competition to the Company's  Mexican theme restaurant.  In addition,  there are
other  Mexican  style  restaurants  including  an outlet of Chevy's,  a national
chain,  in the area. 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.  Typical  "chain"  competitors  to all of the
Company's  restaurants,  which are affiliated  with better  established and more
prominent  national chains,  are Ruby Tuesdays and TGI Fridays.  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 will 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.

                                       13
<PAGE>

EMPLOYEES

         The Company  maintains  its  administrative  employees at its executive
offices  including  its principal  officers (see "Item 9 - Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act"),  secretarial and  bookkeeping  personnel.  Each of the Company's
seafood  restaurant units employs a general manager,  two assistant managers and
between 40 and 130 other  employees to serve as  waitresses,  waiters,  busboys,
bartenders, cooks, dishwashers,  kitchen help, hostesses and cashiers (some on a
part-time basis). The Company's Escondido's Mexican Restaurant in Freehold,  New
Jersey employs between 30 and 60 employees and its Moore's Tavern and Restaurant
employs approximately 60 employees, in each case serving similar functions.  The
Company  also  presently  employs two 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 30,  2005,  the  Company  had  approximately  500  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 30, 2005.

         A Special Meeting of the Company's  stockholders  was held on April 18,
2005. At the Special Meeting,  a total of 2,873,469 votes were cast in favor of,
a total of 8,944 votes were cast against and 2,084 shares  abstained from voting
with  respect to the  proposal  to approve and adopt the  Agreement  and Plan of
Merger dated as of December 22, 2004 between Acquisition Co. and the Company and
the Merger  pursuant to which  Acquisition Co. would be merged with and into the
Company  and each  share of Chefs  common  stock  (other  than  shares  owned by
Acquisition  Co. and shares owned by  stockholders  who have properly  exercised
dissenters'  rights of appraisal)  will be canceled and converted into the right
to receive a cash payment of $3.12 without  interest,  and without  deduction of
any  commission,  so that the  Agreement  and Plan of Merger and the Merger have
been approved and adopted by the affirmative vote of a majority of the shares of
Chefs  common  stock  outstanding  on the  February 25, 2005 Record Date for the
meeting.

                                       14
<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.

                  Fiscal 2004                  Bid Prices
                  Quarter              --------------------------
                  Ended                     High         Low
                  -----                     ----         ---

                  April 27, 2003            1.42         1.35
                  July 27, 2003             1.38         1.35
                  October 26, 2003          1.40         1.38
                  January 25, 2004          1.85(a)      1.40(a)

                  Fiscal 2005
                  Quarter
                  Ended
                  -----

                  April 25, 2004            2.76(b)      1.55(b)
                  July 25, 2004             3.05(c)      2.76(c)
                  October 24, 2004          3.05         3.03
                  January 30, 2005          3.05         2.90

         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.

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

(a) During the quarter (on November 21, 2003),  the Company  publicly  announced
its receipt of a Merger offer from the Lombardi  Group  offering to purchase the
outstanding  Common Stock owned by the Public  Stockholders  for a cash purchase
price of $1.75 per share.

(b)  During  the  quarter,  after  publicly  announcing  on March 8,  2004,  the
rejection of the $1.75 per share offered purchase price,  the Company,  on March
15, 2004, publicly announced the increased offer by the Lombardi Group of a cash
purchase price of $2.50 per share. After publicly  announcing on April 19, 2004,
the rejection of the $2.50 per share offered  purchase  price,  the Company,  on
April 21, 2004,  publicly announced the increased offer by the Lombardi Group of
a cash purchase price of $3.00 per share.

(c) During the quarter (on June 1, 2004),  the Company  publicly  announced that
the Special  Committee  appointed by the Board of Directors to review and make a
recommendation  to the Board regarding the fairness of the proposed Merger offer
to the Public  Stockholders,  had  advised  the Board of  Directors  that in the
Committee's  judgment,  the proposed increased purchase price of $3.12 per share

                                       15
<PAGE>

(increased  after  discussions  between  counsel for the Special  Committee  and
counsel for the Lombardi Group), was fair to the Company's Public  Stockholders,
and had determined to recommend that the Board accept the proposal.

         At February 25, 2005,  the number of record holders of the Common Stock
was 6,296.  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 30, 2005.

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

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

         Certain  statements  regarding future performance in this Annual Report
on  Form  10-KSB  constitute   forward-looking   statements  under  the  Private
Securities  Litigation  Reform Act of 1995.  No assurance  can be given that the
future results covered by the forward-looking  statements will be achieved.  The
Company cautions readers that important  factors may affect the Company's actual
results  and  could  cause  those   results  to  differ   materially   from  the
forward-looking  statements.  Such  factors  include,  but are not  limited  to,
changing  market  conditions,  weather,  the state of the  economy,  substantial
increases  in  insurance  costs,  the  impact of  competition  to the  Company's
restaurants, pricing and acceptance of the Company's food products. In addition,
the Company's  performance  may be adversely  affected if it is unable to find a
satisfactory successor to its president and principal executive officer, Anthony
C. Papalia, who left the Company's employ at the end of June 2004.

FINANCIAL REPORTING

         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 definite life intangible assets using  straight-line
methods  over the  estimated  useful  lives  of the  assets.  Intangible  assets
(including  liquor  licenses)  deemed to have  indefinite  useful  lives are not
amortized  but are  subject  to  impairment  tests  at least  annually,  or more
frequently if  circumstances  occur that indicate  impairment may have occurred.
The Company tested for impairment of its definite and indefinite life intangible
assets and no  impairment  charges were  necessary  during fiscal 2004 or fiscal
2005. See Note 6 of Notes to the Consolidated Financial Statements.

         Income Taxes:  The Company accounts for income taxes in accordance with
statement of Financial  Accounting  Standards ("SFAS") No. 109,  "Accounting for
Income  Taxes."  Under SFAS No. 109,  deferred  tax assets and  liabilities  are
determined based on the difference  between book and tax assets and liabilities,
using  enacted  tax rates in effect  for the year in which the  differences  are

                                       16
<PAGE>

expected to reverse.  The  recognition  of the  deferred  tax assets is based on
management's  best  assumptions  and  estimates  of future  income.  A valuation
allowance is recorded when management determines that it is more likely than not
that some  portion  of the  deferred  tax  assets  will not be  realized.  These
assumptions  and  estimates  will  be  periodically  reviewed  and,  if  needed,
adjustments will be made as required. During fiscal 2005, the Company determined
that sales of certain of its  tangible  and  intangible  assets  will  result in
sufficient taxable income so that a valuation allowance against the deferred tax
assets is no longer warranted.

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

OVERVIEW

         The Company's principal source of revenue is from the operations of its
restaurants.  The  Company's  cost of goods sold 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.

         The Company currently  operates nine restaurants on a year-round basis.
See Item 1, "Developments Since the Beginning of the Last Fiscal Year" as to the
Company's sale of its Lobster Shanty Restaurant in Jensen Beach,  Florida during
the second  quarter of  calendar  2004.  The  Company  opened its first  seafood
restaurant  in  November  1978  and  currently  has  six  free-standing  seafood
restaurants  in New Jersey and Florida  operating  under the names "Jack Baker's
Lobster Shanty" or "Baker's  Wharfside." In February 2000, the Company commenced
the operation of 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 Escondido's Mexican
Restaurant  ("Freehold"),  a Mexican theme restaurant  located in Freehold,  New
Jersey,  adjacent  to  Moore's.  On April 1,  2002,  the  Company  acquired  the
operations  of  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.  The closing of the
Company's Escondido's  restaurant in the Monmouth Mall in Eatontown,  New Jersey
("Monmouth")  in June 2003 and its sale of its  Jensen  Beach,  Florida  Lobster
Shanty restaurant in May 2004 reduced the number of restaurants  operated by the
Company to nine.

         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.  Moore's  experiences a seasonality factor similar to but
not as dramatic as the seasonality factor of the New Jersey seafood restaurants.
The Company's Freehold  Escondido's  experiences a seasonality factor similar to
Moore's.  Manatee's  follows  the  seasonality  pattern  of  the  other  Florida
restaurants.

                                       17
<PAGE>

         The Company operated eleven  restaurants  during the year ended January
25, 2004.

      The  statements  of operations  are comprised of a 53-week  period for the
year ended  January 30, 2005 ("fiscal  2005") and a 52-week  period for the year
ended January 25, 2004 ("fiscal 2004").

RESULTS OF OPERATIONS

                  Sales for the year ended January 30, 2005 totaled $21,563,600,
a decrease of $719,600 or 3.2%,  as compared to total sales of  $22,283,200  for
the year ended January 25, 2004, despite an additional week of sales included in
the fiscal 2005 results.  Fiscal 2004's sales included  $311,800 in sales at the
Monmouth  Escondido's  ("Monmouth") which was closed in June 2003 and $1,210,300
in sales at the Jensen Beach, Florida Lobster Shanty, ("Jensen Beach") which was
sold in May 2004,  compared  to  $526,900  for Jensen  Beach in fiscal  2005,  a
decrease  of  $683,400  at Jensen  Beach.  Sales for the nine  restaurants  that
operated during the comparable  periods increased by $275,600 or 1.3%. The three
Florida  restaurants  that  operated  during  the  comparable  periods  realized
decreased  sales of  $228,500  or 3.4% due to  closure of the  restaurants  as a
result of the devastation caused by the September 2004 hurricanes.  The closures
ranged from twelve  days at the Cocoa  Beach  restaurant  to 76 days at the Vero
Beach Mr. Manatee's restaurant. Some weather observers believe that this was the
worst  Florida  storm season ever  recorded and clearly the effect of the damage
has impacted the 2004-2005  Florida  tourist season by the continued  closure of
several major hotels/motels.  All three Florida restaurants reported lower sales
for the current  (2004-2005) tourist season. The six New Jersey restaurants that
operated during the comparable  periods realized  increased sales of $504,100 or
3.6% versus  last year due to a mild  2003-2004  winter and despite  lower sales
during a  lack-luster  rainy 2004 summer  tourist  season.  Sales in both states
continue to be under  pressure due to concerns  about  terrorism  and the record
high cost of gasoline.  The number of customers  served in the nine  restaurants
that operated during the comparable  periods decreased by 3.8% while the average
check increased by 5.3% versus the prior year.

GROSS PROFIT

         Gross profit was $14,678,200 or 68.1% of sales for fiscal 2005 compared
to  $15,248,300  or 68.4% for fiscal 2004.  The primary  reasons for the decline
were continued increases in commodity costs,  particularly poultry,  beef, dairy
and produce, the addition of fuel surcharges by suppliers due to the increase in
the price of oil, and the closing of the Monmouth restaurant with its lower cost
Mexican fare. The Florida storms and Midwest droughts have dramatically impacted
commodity  costs  and  will  continue  to  do so  for  the  foreseeable  future.
Management  raised  some menu  prices  and  introduced  lower cost  specials  to
compensate for the higher costs.

OPERATING EXPENSES.

         Total operating  expenses  decreased by 8% from  $15,318,500 for fiscal
2004 to $14,090,800 for fiscal 2005.  Payroll and related expenses were 30.5% of
sales for fiscal 2005  compared to 31.1% of sales for fiscal  2004.  The primary
reasons for the  improvement  were the closure of the  Monmouth and Jensen Beach
restaurants  which  operated  with higher  payroll  costs,  and lower health and
worker's  compensation  insurance  costs at the other  nine  restaurants.  Other
operating  expenses  were 21.7% of sales for fiscal  2005  compared  to 22.2% of
sales for fiscal 2004  primarily  attributable  to the  closures of Monmouth and
Jensen Beach,

                                       18
<PAGE>

which offset  increased  utility costs at the other  restaurants  related to the
substantial increase in oil prices.

         Depreciation  and  amortization  expenses  in fiscal 2005 were lower by
approximately  $65,700  versus  fiscal  2004 due  primarily  to the  closings of
Monmouth and Jensen Beach and the write off of property and equipment  destroyed
or damaged by the hurricanes.  Depreciation expenses will increase in the future
as the replacement assets purchased in fiscal 2005 are depreciated.

         General  and  administrative  expenses  for  fiscal  2005 were lower by
approximately  $130,000 versus the prior fiscal year due primarily to reductions
in salaries and payroll taxes of approximately $78,200 and lower insurance costs
of approximately  $54,200.  Salaries for fiscal 2005 included $71,500 attributed
to the Company's  Executive  Incentive Bonus Plan ("Bonus Plan") (see Note 12 to
the Consolidated Financial Statements), while salaries in fiscal 2004 attributed
to the Bonus Plan were $51,000.

         During the second  quarter  ended July 25,  2004,  the Company sold the
restaurant and property located in Jensen Beach, Florida for $900,000 in cash to
an unrelated third party resulting in a gain of approximately  $415,000. In June
2003, the Company closed the Monmouth Mall Mexican theme restaurant and recorded
a loss of approximately  $410,000 which included an early lease  termination fee
of $180,000.  As part of a Surrender Agreement,  the Mall was given an option to
purchase the Company's  liquor license for a specified  price.  However,  during
fiscal  2005,  the Mall  declined to purchase  the  license  and  management  is
currently in the process of marketing the license to interested parties.

         During the third quarter ended October 24, 2004, the Company recorded a
loss of $320,400  for costs  associated  with the Florida  hurricanes.  The loss
included lost inventory,  clean-up expenditures and an estimate for the carrying
value for the property and equipment destroyed or damaged.

         During  the  fourth  quarter  of  fiscal  2005,  the  Company  spent an
additional  $35,200 on hurricane  costs and received net  insurance  advances of
approximately  $558,000  from its  insurance  carriers  resulting  in a net gain
related to the hurricanes of  approximately  $202,400 for the year ended January
30, 2005.

OTHER INCOME AND EXPENSE.

         Interest expense was $9,400 lower in fiscal 2005 due to debt reduction.
During the fourth  quarter of fiscal  2005,  the  Company's  primary bank lender
agreed to increase the Company's  bank line of credit  ("line") from $500,000 to
$1,000,000 with all other terms remaining  unchanged including the maturity date
of June 30, 2005 and a variable  interest rate equal to the monthly LIBOR Market
Index Rate plus 2%. The Company intends to use the line to cover short-term cash
needs  related to the hurricane  losses.  At the year end, the Company had drawn
$500,000  on the line.  Investment  income was  $114,700  higher in fiscal  2005
primarily due to an increase of $60,700 in capital gains realized on the sale of
investments (see Note 10 to the Consolidated Financial Statements).

NET INCOME.

         For the year ended January 30, 2005, the Company realized net income of
$783,500  or $.20 per share  compared  to $39,000 or $.01 per share for the year
ended  January  25,  2004.  Net income for the current  year  includes a gain of
approximately  $415,000 recognized on the sale of Jensen Beach and a net gain of

                                       19
<PAGE>

approximately  $202,400 related to the Florida hurricanes.  The prior year's net
income  included  a charge of  $410,000  for the loss on  closing  the  Monmouth
restaurant and a credit of $57,000 for income taxes.

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 2.12:1
at January 30, 2005, compared to 2.56:1 at January 25, 2004. Working capital was
$3,355,700  at the end of fiscal 2005,  a decrease of $331,200  versus the prior
year.  During fiscal 2005,  there was an increase in cash of $831,300.  Net cash
provided from operating  activities was $2,090,700.  The primary components were
net income,  after adjustment for depreciation,  deferred income taxes, the gain
on the sale of Jensen  Beach,  and the net gain  related  to the  hurricanes  of
$1,999,200;  a decrease in inventories of $86,000  primarily related to the sale
of Jensen  Beach;  a decrease in  pre-paid  expenses of $90,400 as a result of a
change in the financing of the Company's annual property and casualty  insurance
program;   an  increase  of  $131,800  in  accounts  payable  primarily  due  to
construction  costs associated with restaurant  renovations and hurricane costs;
and a decrease of $210,000 in accrued expenses  primarily due to a final payment
of $120,000 paid as per the Surrender  Agreement  associated with the closing of
Monmouth (see Note 8 to the Consolidated Financial Statements).

         Investing  activities during fiscal 2005 resulted in a net cash outflow
of approximately  $1,222,600.  Capital  expenditures were $2,165,200,  including
$984,600 for hurricane related furniture,  fixtures and equipment,  $655,200 for
in-progress  renovations  at the  Lobster  Shanty  restaurants  in Cocoa  Beach,
Florida and Point Pleasant Beach,  New Jersey,  and the balance of approximately
$525,400  for routine  restaurant  improvements  and the purchase of two Company
vehicles.  Other investing activities included $842,200 in net proceeds from the
sale of Jensen Beach.  Investment purchases of $1,295,400 for available-for-sale
securities were offset by $1,291,300 from the sale of investments which resulted
in a gain of  $129,800.  At January 30,  2005,  the fair value of the  Company's
holdings  available-for-sale  securities  resulted  in net  unrealized  gains of
$109,100 (see Note 3 to the Consolidated  Financial  Statements).  The resulting
gains are recorded in stockholder's  equity as a component of accumulated  other
comprehensive income.

         Financing  activities for fiscal 2005 resulted in a net cash outflow of
$36,700 and included debt repayment of $271,300;  bank loan proceeds of $500,000
which were drawn on the bank line to  partially  finance the cost of  rebuilding
the Florida  restaurants  pursuant to damages incurred by the hurricanes,  and a
change in other assets primarily due to approximately  $226,500 in costs related
to the proposal by the principal  shareholders of the Company to purchase all of
the remaining outstanding shares of common stock (see Note 2 to the Consolidated
Financial Statements).

         During fiscal 2004, net cash  increased by $341,000.  Net cash provided
from  operating  activities  was  $1,342,000.  The primary  components  were net
income, after adjustment for depreciation,  deferred income taxes, and a loss on
closing of the Monmouth restaurant, of $1,442,300; an increase in inventories of
$111,000  primarily  related to bulk purchases of shrimp; an increase in prepaid
expenses of $90,000 primarily related to the revised financing agreement for the
Company's property and casualty insurance  premiums;  an increase in the current
portion of the  Company's  deferred  tax assets,  and an increase of $120,400 in
accounts

                                       20
<PAGE>

payable due to increased sales and the inventory purchases. Investing activities
for fiscal 2004 resulted in a net cash outflow of $568,600. Capital expenditures
were $449,100,  including  $31,400 to renovate the Freehold  Escondido's bar and
$417,700  for  routine  restaurant  improvements.   Other  investing  activities
included  the  purchase  of  various  investments  totaling  $534,300  offset by
$453,100 realized from the proceeds of maturing  certificates of deposit and the
sale of investments which resulted in a gain of $69,200. Financing activities in
fiscal  2004  resulted  in a net cash  outflow of  $432,400  and  included  debt
repayment of $271,500;  treasury stock purchases of $59,200 to repurchase 40,000
shares of the Company's outstanding common stock, and approximately  $110,000 in
costs related to the Merger proposal (see Note 2 to the  Consolidated  Financial
Statements).

         At the end of fiscal 2005,  the Company was in  compliance  with all of
the  financial  covenants  under  its loan  agreements  with its  primary  bank,
Wachovia Bank, National Association.  The Company was also in full compliance at
the year ended January 25, 2004.

RECENT DEVELOPMENTS

         In January 2005,  the Company  began a major  renovation of the Lobster
Shanty  located in Point  Pleasant  Beach,  New Jersey,  at a projected  cost of
approximately $2,200,000.  Management expects that the renovated restaurant will
be fully  operational in May,  2005. In order to partially  finance the project,
the Company  entered  into an  agreement  to borrow up to  $1,500,000  through a
Non-Revolving  Line of Credit with  Wachovia  Bank  ("Construction  Line") which
expires on July 31,  2005 at a monthly  interest  rate of  one-month  LIBOR plus
2.00%.  At July 31,  2005  the  balance  due on the  construction  line  will be
converted to a term loan based on a 15-year payout with a ten year balloon at an
interest rate to be determined  prior to the  conversion.  At April 21, 2005 the
Company had borrowed $750,000 on the construction line.

         In February  2005, the Company  borrowed an additional  $300,000 on its
$1,000,000 bank line for repair costs associated with the Florida hurricanes.

         In April 2005, the Company received  additional net insurance  advances
of $502,600 which brings the total advances received to date to $1,060,600. Upon
receipt of the recent  advances,  the Company paid $400,000  against the balance
due on the $1,000,000 bank line of credit, leaving a total of $600,000 available
for future borrowings.

         In April 2005,  management  negotiated  the annual  renewals  for group
health ("health") and property and casualty  ("property")  insurance  coverages.
The health plan was renewed at a decrease of approximately 3.7% versus the prior
year.  The property  plan  coverage was renewed at an increase of  approximately
10.5%,  a  majority  of which can be  attributed  to the  impact of last  year's
hurricanes on Florida insurance companies.

         Management  anticipates that funds from operations and the construction
line will be  sufficient  to meet the  Company's  obligations  in  fiscal  2006,
including  projected  capital  expenditures  for improvements and renovations of
approximately $3,000,000.

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

                                       21
<PAGE>

majority of the  inflationary  effects of increasing costs with the exception of
the  substantial  increase in insurance costs that the Company has had to absorb
over the last several years.

ITEM 7.  FINANCIAL STATEMENTS

         Attached.

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

         NONE

ITEM 8A  CONTROLS AND PROCEDURES

                  (a) EXPLANATION OF DISCLOSURE CONTROLS AND PROCEDURES.  Robert
M. Lombardi,  the Company's  principal executive officer and Martin W. Fletcher,
the  Company's  principal  financial  and principal  accounting  officer,  after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules  13a-15(e) and  15d-15(e)) as of a date within
90 days of the filing date of this Annual  Report (the  "Evaluation  Date") have
each concluded that as of the Evaluation Date, the Company's disclosure controls
and procedures  were adequate and effective to ensure that material  information
relating to the Company and its consolidated subsidiaries would be made known to
him by others  within those  entities,  particularly  during the period in which
this Annual Report was being prepared.

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

ITEM 8B  OTHER INFORMATION

         NONE

                            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
----                       ---     --------                   ------------------
                                   Chairman of
Robert M. Lombardi(a)      53      the Board, President,      May 1999
                                   Principal Executive
                                   Officer
Nicholas B. Boxter(b)      57      Director                   December 1999
Kenneth Cubelli(b)         51      Director                   December 1999
Raymond L. Dademo(b)       47      Director                   December 1999

                                       22
<PAGE>
Anthony M. Lombardi(a)     49      Director                   July 1999
Joseph S. Lombardi(a)      54      Director                   July 1999
Michael F. Lombardi(a)     56      Director                   July 1999
Stephen F. Lombardi(a)     49      Director                   July 1999

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

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

(b) Messrs. Boxter, Cubelli and Dademo were the members of the Special Committee
appointed by the Board of Directors to review and make a  recommendation  to the
Board  regarding the fairness of the proposed  Merger  transaction to the Public
Stockholders. If the Merger is consummated, they will resign from the Board.

         The other  executive  officer of the Company (in  addition to Robert M.
Lombardi) is:

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

Martin W. Fletcher         52      Vice President,
                                   Principal Financial and
                                   Principal Accounting Officer

         The Company  does not have an Executive  Committee or a separate  Audit
Committee.  The  entire  Board  of  Directors  serves  as  the  Company's  Audit
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.

CODE OF ETHICS

         The  Board of  Directors  adopted a code of  ethics  applicable  to the
Company's  principal  executive,  principal  financial and principal  accounting
officer  during the second  quarter of fiscal  2005.  The Company will provide a
copy of the code of ethics  without  charge,  to any person  requesting  same in
writing  addressed to the  Company's  chief  financial  officer at the Company's
executive offices at 62 Broadway, Point Pleasant Beach, NJ 08742.

DIRECTORS AND EXECUTIVE OFFICERS

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

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.  He was elected president and
principal  executive  officer of the Company in June 2004 to succeed  Anthony C.
Papalia.

         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.

                                       23
<PAGE>

         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 OFFICER

         The other  executive  officer of the  Company in  addition to Robert M.
Lombardi is Martin W. Fletcher who 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.
Mr. Fletcher was elected principal financial and principal accounting officer of
the Company in June 2004 to succeed Anthony C. Papalia. At the same time, he was
elected a vice  president  of the Company.  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  2005,  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.

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 30,
2005 to its  Principal  Executive  Officer  as well  as to any  other  executive
officer of the  Company or a  subsidiary  who  earned at least  $100,000  during
fiscal 2005.  During the  three-year  period ended January 30, 2005, 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

                                       24
<PAGE>

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 an eight year
period pursuant to this agreement.

                           SUMMARY COMPENSATION TABLE

                               Annual Compensation

Name and                   Fiscal                                Other Annual
Principal Position         Year         Salary       Bonus(d)    Compensation(e)
------------------         ------       ------       -----       ------------
Robert M. Lombardi         2005(a)       -0-          -0-         -0-
President and
Principal Executive
Officer
Anthony C. Papalia         2005(b)      $77,833       -0-        $1,044
President and              2004        $179,162      $7,500      $2,088
Principal Executive        2003        $174,630      $4,500      $2,088
Officer
Martin W. Fletcher         2005(c)     $124,603     $17,000      $2,902
Principal Financial        2004        $103,915      $9,100      $2,902
Officer and Controller     2003        $101,255      $5,367      $2,902

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

(a) Dr. Lombardi was elected  president and principal  executive  officer of the
Company to succeed Anthony C. Papalia in June 2004.

(b) Mr.  Papalia  resigned  as  president,  principal  executive  and  principal
accounting officer of the Company effective in June 2004.

(c) Mr.  Fletcher  was elected  principal  financial  and  principal  accounting
officer of the Company in June 2004 to succeed Mr. Papalia.

(d) 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  2005  aggregated  $71,500  and was  distributed  to five  employees
including Martin Fletcher who received $17,000.

(e) 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 principal  executive officer and principal  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

                                       25
<PAGE>

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 was terminated  other than for cause,  he would
become entitled to a Severance  Payment equal to the amount of his  compensation
over the balance of the contract  term.  Each  individual  was also  entitled to
terminate his  employment  and receive a Severance  Payment equal to six months'
salary in the event of a "change of control" of the Company.  Amendments to each
employment  contract  executed in June 1999 and August 1999  extended  the first
renewal year through March 31, 2000,  renewed each contract for a second renewal
year  through  March 31, 2001 and recast each  renewal year so as to commence on
April 1 of each year and to expire on March 31 of the following year.  Notice of
intention not to renew must now be given no later than  September 30 of the year
preceding the year in which the renewal term  commences.  In November 2001, each
employment  contract  was further  amended to renew the term  through  March 31,
2005. The amendments  retained the automatic salary increase  provision based on
increases  in the Consumer  Price Index and  provided for an automatic  one year
renewal in the absence of prior notice not to renew. As a result,  during fiscal
2005, Mr. Papalia's  annual salary was increased to $186,702 and Mr.  Fletcher's
annual salary was increased to $133,208.

         See Item 1 - "Developments Since the Beginning of the Last Fiscal Year"
herein  as to  the  release  of Mr.  Papalia  from  his  obligations  under  his
employment  contract effective at the close of business on June 28, 2004 and his
resignation,  effective at such date, as president,  principal executive officer
and principal financial and principal accounting officer of the Company.

STOCK OPTIONS

         At January 30,  2005 and at January 30, 2005 there were no  outstanding
employee or non-employee stock options  exercisable to purchase shares of Chefs'
common stock.

DIRECTORS' COMPENSATION

         During  fiscal 2005, no  compensation  was paid to any of the Company's
directors for serving in such capacity.  Furthermore,  no method of compensation
has been established for the directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT

                  The  following  table sets forth  information  as of April 15,
2005 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.

                                       26
<PAGE>

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

Robert M. Lombardi                       1,335,826(1)                     34%
(also president)
Nicholas B. Boxter                              --                        --
Kenneth Cubelli                            100,000                         3%
Raymond L. Dademo                            2,000                        --
Anthony M. Lombardi                        111,001(1)                      3%
Joseph S. Lombardi                         599,633(1)                     15%
Michael F. Lombardi                        332,047                         8%
Stephen F. Lombardi                        191,669(1)(2)(3)                5%

All executive officers and
directors as a group
(eight persons)                          2,511,508(1)(2)(3)               64%

Other 5% Stockholders
---------------------
Maschler Group(4)                          196,938(4)                      5%

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

* 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 M. 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." See Item 1 - "Developments Since the Beginning of the Last
Fiscal  Year" as to the  proposal  by the  Lombardi  Group to acquire all of the
outstanding shares of Chefs common stock not owned by the Lombardi Group and the
two Maschler Brothers in connection with a Merger  transaction  designed to take
the Company "private". The proposed Merger Agreement and the Plan of Merger were
duly adopted by the Company's  stockholders  at a special  meeting held on April
18, 2005.

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

(3)  Includes  49,000  shares  owned by  Lombardi &  Lombardi,  P.A.  Michael F.
Lombardi  and  Stephen  Lombardi  each have  voting and  dispositive  power with
respect to all 49,000 of such shares.

(4) The  Maschler  Group  includes  two  brothers,  Lee  Maschler and Matthew H.
Maschler who each own 98,469 shares of Common Stock. See Item 1 as to the Merger
Agreement and the Plan of Merger designed to take the Company "private."

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         See Item 1 -  "Restaurant  Operations  -  Mexican  Theme  Restaurant  -
Moore's Tavern and  Restaurant" as to rentals paid in fiscal 2005 by the Company
with respect to its two Freehold, New Jersey restaurants and the "Building Pad C
Parking Lot" to Moore's Realty (whose partners are members of the Lombardi Group
and other members of the Lombardi family).

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

    (a)  EXHIBITS

2.1      Agreement  and  Plan  of  Merger   between  the  Company  and  Lombardi
         Restaurant Group, Inc. dated as of December 22, 2004.(A)

                                       27
<PAGE>

3.1      Restated Certificate of Incorporation of the Company(B)

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

4.1      Specimen Common Stock Certificate(D)

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

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

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(B)

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

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(C)

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)(H).

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

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

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(C)

10.9     Chefs International Executive Incentive Bonus Plan(H)

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.(H)

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.(I)

21       Subsidiaries

31.1     Certifications of Principal Executive and Principal Financial Officers

31.2     Certifications of Principal Executive and Principal Financial Officers

                                       28
<PAGE>

32.1     Certifications of Principal  Executive and Principal Financial Officers
         of the Company pursuant to 18 United States Code Section 1350.

32.2     Certifications of Principal  Executive and Principal Financial Officers
         of the Company pursuant to 18 United States Code Section 1350.

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

(A)   Incorporated  by  reference  to  Appendix  to  the  Company's  Rule  13e-3
Transaction  Statement on Schedule  13E-3 filed with the Securities and Exchange
Commission on December 23, 2004.

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

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

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

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

(F)  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.

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

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

(I)  Incorporated by reference to exhibit filed with the Company's annual report
on Form 10-KSB for the fiscal year ended January 26, 2003.

(J)  Incorporated by reference to exhibit filed with the Company's annual report
on Form 10-KSB for the fiscal year ended January 25, 2004.

         (b)  REPORTS ON FORM 8-K

         During the last quarter of its fiscal year ended January 30, 2005,  the
Company  filed one current  report on Form 8-K.  This  report,  for December 22,
2004, in Item 1.01 reported the execution on that date of the Agreement and Plan
of Merger by the Company with the Lombardi  Restaurant  Group, Inc. On April 18,
2005,  the Company filed a current report on Form 8-K for that date reporting in
Item 8.01 that at the Special  Meeting of  Stockholders  held on April 18, 2005,
the  Agreement  and Plan of Merger  between the Company and Lombardi  Restaurant
Group,  Inc. had been approved and adopted by the affirmative vote of a majority
of the shares of the Company's  common stock  outstanding on the Record Date for
the Meeting.

ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The firm of McGladrey & Pullen,  LLP  ("McGladrey  Pullen"),  certified
public  accountants,   audited  the  accounts  of  Chefs  and  its  subsidiaries
(collectively  the  "Company")  for the fiscal years ended  January 30, 2005 and
January 25, 2004.

                                       29
<PAGE>

         (1) AUDIT FEES.  McGladrey  Pullen  billed  the  Company  approximately
$71,500 for professional services rendered for the audit of the Company's annual
consolidated  financial  statements  for its 2005  fiscal year and to review the
financial statements included in its quarterly reports on Form 10-QSB filed with
respect to  quarterly  periods in such fiscal year as compared to  approximately
$70,000 for such services with respect to the Company's 2004 fiscal year.

         (2) AUDIT-RELATED FEES. None.

         (3) TAX FEES. McGladrey Pullen billed the Company approximately $12,000
for tax services for fiscal 2005 and approximately  $10,000 for tax services for
fiscal 2004. The fees were billed for tax return preparation.

         (4) ALL OTHER  FEES.  Approximately  $10,000 in fees were billed to the
Company by McGladrey  Pullen with respect to fiscal 2005 and no fees were billed
by said  firm to the  Company  with  respect  to fiscal  2004 for  miscellaneous
professional services.

         (5) PRE-APPROVAL AND PROCEDURES.  The engagement of McGladrey Pullen to
render the above services was approved by the Company's Board of Directors.

                                       30
<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/ Robert M. Lombardi
                                              ----------------------------------
                                              Robert M. Lombardi, President,
                                                 Principal Executive Officer


                                                 Date: April 29, 2005



                                            By   s/ Martin W. Fletcher
                                              ----------------------------------
                                              Martin W. Fletcher, Vice President
                                                 Principal Financial and
                                                 Accounting Officer


                                                 Date: April 29, 2005


         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 dates 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 29, 2005                        Date: April 29, 2005



By   s/ Anthony Lombardi                    By   s/ Stephen F. Lombardi
  ---------------------------------           ---------------------------------
  Anthony Lombardi, Director                  Stephen F. Lombardi,
                                                 Director


     Date: April 29, 2005                        Date: April 29, 2005



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


     Date: April 29, 2005

                                       31
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

Financial Report

January 30, 2005

<PAGE>

CONTENTS



--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                      F-1
--------------------------------------------------------------------------------

Financial Statements:

   Consolidated Balance Sheet                                              F-2-3

   Consolidated Statements of Operations                                     F-4

   Consolidated Statements of Stockholders' Equity                           F-5

   Consolidated Statements of Cash Flows                                     F-6

   Notes to Consolidated Financial Statements                             F-7-20
--------------------------------------------------------------------------------

<PAGE>

McGladrey & Pullen
Certified Public Accountants





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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


We  have  audited  the   accompanying   consolidated   balance  sheet  of  Chefs
International,  Inc. and  subsidiaries  as of January 30, 2005,  and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the two  fiscal  years in the  period  ended  January  30,  2005.  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 the standards of the Public  Company
Accounting Oversight Board (United States). 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  30,  2005,  and the  results  of  their
operations  and their cash flows for each of the two fiscal  years in the period
ended January 30, 2005, in conformity with U.S.  generally  accepted  accounting
principles.



                                                     /s/ McGLADREY & PULLEN, LLP



New York, New York
April 1, 2005, except for Note 2, as to which the date is April 20, 2005








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

                                      F-1
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JANUARY 30, 2005

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

ASSETS

Current Assets:
    Cash and cash equivalents                                       $  2,242,184
    Available-for-sale securities                                      2,494,277
    Miscellaneous receivables                                             62,007
    Receivable - related party                                            36,489
    Inventories                                                        1,154,026
    Deferred income taxes                                                244,000
    Prepaid expenses and other                                           107,554
                                                                    ------------

          TOTAL CURRENT ASSETS                                         6,340,537
                                                                    ------------

Property and Equipment, at cost                                       20,353,272
    Less: Accumulated depreciation                                     8,377,549
                                                                    ------------

          PROPERTY AND EQUIPMENT, NET                                 11,975,723
                                                                    ------------

Other Assets:
    Asset held for sale                                                   50,181
    Intangibles                                                          867,087
    Equity in life insurance policies                                    536,596
    Deferred income taxes                                                293,000
    Deferred going private costs                                         336,539
    Other                                                                 72,959
                                                                    ------------

          TOTAL OTHER ASSETS                                           2,156,362
                                                                    ------------

                                                                    $ 20,472,622
                                                                    ============


See notes to consolidated financial statements.

                                      F-2
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (CONTINUED)
JANUARY 30, 2005

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

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Line of credit                                                 $    500,000
    Current maturities of notes and mortgages payable                   270,770
    Accounts payable                                                    954,350
    Accrued payroll                                                     211,325
    Other accrued expenses                                              496,536
    Income taxes payable                                                 61,524
    Gift certificates                                                   490,363
                                                                   ------------

          TOTAL CURRENT LIABILITIES                                   2,984,868
                                                                   ------------

Notes and Mortgages Payable                                           1,418,322
                                                                   ------------

Other Liabilities:
    Accrued retirement benefits                                         462,773
    Interest rate swap agreements                                        86,494
                                                                   ------------

          OTHER LIABILITIES                                             549,267
                                                                   ------------

Stockholders' Equity:
    Capital stock - common $.01 par value,
       Authorized 15,000,000 shares,
       Issued and outstanding 3,925,384                                  39,254
    Additional paid-in capital                                       31,488,838
    Accumulated deficit                                             (16,031,543)
    Accumulated other comprehensive income                               23,616
                                                                   ------------

          TOTAL STOCKHOLDERS' EQUITY                                 15,520,165
                                                                   ------------

                                                                   $ 20,472,622
                                                                   ============


See notes to consolidated financial statements.

                                      F-3
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 30, 2005 AND JANUARY 25, 2004

<TABLE>
<CAPTION>
                                                                             2005            2004
------------------------------------------------------------------------------------------------------

<S>                                                                      <C>             <C>
Sales                                                                    $ 21,563,608    $ 22,283,169

Cost of Goods Sold                                                          6,885,461       7,034,878
                                                                         -------------   -------------

       GROSS PROFIT                                                        14,678,147      15,248,291
                                                                         -------------   -------------

Operating Expenses:
    Payroll and related expenses                                            6,579,630       6,924,219
    Other operating expenses                                                4,679,150       4,956,505
    Depreciation and amortization                                           1,050,592       1,116,291
    General and administrative expenses                                     1,781,472       1,911,472
    Loss on restaurant closings                                                    --         410,024
                                                                         -------------   -------------

                                                                           14,090,844      15,318,511
                                                                         -------------   -------------

       INCOME (LOSS) FROM OPERATIONS BEFORE OTHER OPERATING INCOME            587,303         (70,220)
                                                                         -------------   -------------

Other Operating Income:
    Gain on restaurant closings                                               415,473              --
    Gain related to settlement for hurricane damages                          202,399              --
                                                                         -------------   -------------

                                                                              617,872              --
                                                                         -------------   -------------

       OPERATING INCOME (LOSS)                                              1,205,175         (70,220)
                                                                         -------------   -------------

Other Income (Expense):
    Investment income                                                         325,930         211,259
    Interest expense                                                         (149,635)       (159,042)
                                                                         -------------   -------------

                                                                              176,295          52,217
                                                                         -------------   -------------

       INCOME (LOSS) BEFORE INCOME TAXES                                    1,381,470         (18,003)

Provision (Credit) for Income Taxes                                           598,000         (57,000)
                                                                         -------------   -------------

       NET INCOME                                                        $    783,470    $     38,997
                                                                         =============   =============

Basic and Diluted Income Per Common Share                                $       0.20    $       0.01
                                                                         =============   =============
</TABLE>


See notes to consolidated financial statements.

                                      F-4
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 30, 2005 AND JANUARY 25, 2004

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

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                              Capital      Additional                         Other                       Total
                                 Number        Stock         Paid-in      Accumulated     Comprehensive   Treasury     Stockholders'
                                of Shares    Par Value       Capital        Deficit       Income (Loss)     Stock         Equity
                                ---------    ---------    ------------    ------------    -------------   ---------    -------------

<S>                             <C>             <C>       <C>             <C>             <C>             <C>          <C>
BALANCE AT JANUARY 26, 2003     3,969,540       39,695    $ 31,549,492    $(16,854,010)   $   (379,272)   $  (3,885)   $ 14,352,020
                                                                                                                       ------------
Comprehensive Income:
  Net income                           --           --              --          38,997              --           --          38,997

    Net unrealized gains on
      available-for-sale
      securities arising
      during period, net of
      $109,000 of taxes                --           --              --              --         425,282           --         425,282

    Reclassification
      adjustment for gains
      realized on available-
      for-sale securities,
      net of $14,000 of taxes          --           --              --              --         (55,175)          --         (55,175)

    Change in fair value of
      derivatives accounted
      for as hedges, net of
      $8,000 of taxes                  --           --              --              --          29,376           --          29,376
                                                                                                                       ------------

  TOTAL COMPREHENSIVE INCOME           --           --              --              --              --           --         438,480
                                                                                                                       ------------

Stock repurchase program          (40,000)        (400)        (58,800)             --              --           --         (59,200)
                                                                                                                       ------------

Retirement of treasury stock       (3,550)         (36)         (3,849)             --              --        3,885              --
                                                                                                                       ------------

Fractional shares conversion
  and other                           126            2           1,988              --              --           --           1,990
                                ---------    ---------    ------------    ------------    ------------    ---------    ------------

BALANCE AT JANUARY 25, 2004     3,926,116       39,261      31,488,831     (16,815,013)         20,211           --      14,733,290
                                                                                                                       ------------

Comprehensive Income:
Net income                             --           --              --         783,470              --           --         783,470

    Net unrealized gains on
      available-for-sale
      securities arising
      during period, net of
      $27,000 of taxes                 --           --              --              --          25,102           --          25,102

    Reclassification
      adjustment for gains
      realized on available-
      for-sale securities,
      net of $66,000 of taxes          --           --              --              --         (60,805)          --         (60,805)

    Change in fair value of
      derivatives accounted
      for as hedges, net of
      $24,000 of taxes                 --           --              --              --          39,108           --          39,108
                                                                                                                       ------------
TOTAL COMPREHENSIVE INCOME             --           --              --              --              --           --         786,875
                                                                                                                       ------------
Fractional shares conversion         (732)          (7)              7              --              --           --              --
                                ---------    ---------    ------------    ------------    ------------    ---------    ------------
BALANCE AT JANUARY 30, 2005     3,925,384       39,254    $ 31,488,838    $(16,031,543)   $     23,616    $      --    $ 15,520,165
                                =========    =========    ============    ============    ============    =========    ============
</TABLE>


See notes to consolidated financial statements.

                                      F-5
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 30, 2005 AND JANUARY 25, 2004

<TABLE>
<CAPTION>
                                                                                          2005           2004
------------------------------------------------------------------------------------------------------------------------

<S>                                                                                    <C>            <C>
Cash Flows From Operating Activities:
    Net income                                                                         $   783,470    $    38,997
    Adjustments to reconcile net income to net
       cash provided by operating activities:
          Depreciation and amortization                                                  1,050,592      1,116,291
          Deferred income taxes                                                            502,000        (63,000)
          Gain on sale of investments                                                     (129,827)       (69,175)
          (Gain) loss on restaurant closings                                              (415,473)       350,024
          Other disposal losses                                                              2,486             --
          Hurricane damage settlements                                                      78,623             --
          Changes in assets and liabilities:
             (Increase) decrease in:
                Miscellaneous receivables                                                   59,103         22,137
                Inventories                                                                 86,028       (111,062)
                Prepaid expenses                                                            90,422        (89,988)
             Increase (decrease) in:
                Accounts payable                                                           131,760        120,357
                Accrued expenses and other liabilities                                    (210,046)        27,421
                Income taxes payable                                                        61,524             --
                                                                                       ------------   ------------
             NET CASH PROVIDED BY OPERATING ACTIVITIES                                   2,090,662      1,342,002
                                                                                       ------------   ------------
Cash Flows From Investing Activities:
    Purchase of property and equipment                                                  (2,165,194)      (449,129)
    Proceeds sale of restaurant                                                            842,193             --
    Sale and redemption of investments                                                   1,291,340        453,066
    Purchase of investments                                                             (1,295,402)      (534,343)
    Equity in life insurance policies                                                      104,428        (38,202)
                                                                                       ------------   ------------
             NET CASH (USED IN) INVESTING ACTIVITIES                                    (1,222,635)      (568,608)
                                                                                       ------------   ------------
Cash Flows From Financing Activities:
    Proceeds from line of credit                                                           500,000             --
    Repayment of debt                                                                     (271,346)      (271,490)
    Purchase and retirement of treasury stock                                                   --        (59,200)
    Other                                                                                 (265,396)      (101,662)
                                                                                       ------------   ------------
             NET CASH (USED IN) FINANCING ACTIVITIES                                       (36,742)      (432,352)
                                                                                       ------------   ------------
             NET INCREASE IN CASH AND CASH EQUIVALENTS                                     831,285        341,042

Cash and Cash Equivalents:
    Beginning                                                                            1,410,899      1,069,857
                                                                                       ------------   ------------
    Ending                                                                             $ 2,242,184    $ 1,410,899
                                                                                       ============   ============
Supplemental Disclosure of Cash Flow Information:
    Cash payment for:
       Interest                                                                        $   147,630    $   160,453
                                                                                       ============   ============
       Income taxes                                                                    $        --    $     4,000
                                                                                       ============   ============
Noncash Transactions:
    (Decrease) increase in fair value of securities available for sale                 $   (74,703)   $   465,107
                                                                                       ============   ============
    Change in fair value of derivatives accounted for as hedges                        $    63,108    $    29,576
                                                                                       ============   ============
</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
         nine  restaurants.  Six of these  restaurants are seafood  restaurants,
         located in New Jersey and Florida,  generally operating under the trade
         name,  "Jack  Bakers  Lobster   Shanty".   The  Company  also  operates
         Escondido's  Mexican  Restaurant,  Moore's  Tavern and  Restaurant,  an
         eclectic American restaurant, and Mr. Manatee's Casual Grille, a casual
         theme restaurant  primarily  featuring  seafood items.  Escondido's and
         Moore's Tavern are located in New Jersey;  Mr.  Manatee's is located in
         Florida.  Segment  information  is  not  presented  since  all  of  the
         Company's revenue is attributable to a single reportable segment.

         52-53 Week Period:

         The Company's year-end is the last Sunday in January. The statements of
         operations  are comprised of a 53 week period for fiscal 2005, and a 52
         week period for fiscal 2004.

         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.

         Cash and Cash Equivalents:

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

         The Company maintains cash balances at several  financial  institutions
         in New Jersey and  Florida.  The  balances  are  insured by the Federal
         Deposit  Insurance   Corporation  up  to  $100,000  at  each  financial
         institution.  Uninsured  cash  balances  at January  30,  2005  totaled
         approximately $2,005,000.

         Available-for-Sale Securities:

         At January 30, 2005,  available-for-sale  securities  consist of 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.

         Revenue Recognition:

         Sales from  restaurants  are  recognized as revenue at the point of the
         delivery  of meals  and  services.  Gift  certificates  are sold in the
         ordinary course of business.  Proceeds from gift certificate  sales are
         recorded as deferred revenue at the time a gift certificate is sold and
         are not recognized as revenue until a gift certificate is redeemed.

         Inventories:

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

                                      F-7
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

         Property and Equipment:

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

         Intangible Assets:

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

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

         The Company has determined  that the Company's  liquor licenses have an
         indefinite life and these assets are no longer being amortized.

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

         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.

                                      F-8
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

         Derivative Financial Instruments:

         The  Company's  interest  rate swap  agreements  are  recognized on the
         balance sheet at their fair value. On the date the derivative  contract
         is entered into, the Company  designates the derivative as a hedge of a
         forecasted  transaction  or of the  variability  of  cash  flows  to be
         received or paid related to a recognized asset or liability "cash flow"
         hedge.  Changes  in the  fair  value  of a  derivative  that is  highly
         effective  as (and that is  designated  and  qualifies  as) a cash-flow
         hedge are recorded in other  comprehensive  income,  until earnings are
         affected  by  the  variability  of  cash  flows  (e.g.,  when  periodic
         settlements  on a  variable-rate  asset or  liability  are  recorded in
         earnings).

         The  Company  formally  documents  all  relationships  between  hedging
         instruments and hedged items, as well as its risk-management  objective
         and strategy for undertaking various hedged transactions.  This process
         includes  linking all  derivatives  that are  designated  as  cash-flow
         hedges to  specific  assets and  liabilities  on the  balance  sheet or
         forecasted  transactions.  The Company also formally assesses,  both at
         the hedge's inception and on an ongoing basis,  whether the derivatives
         that  are  used  in  hedging   transactions  are  highly  effective  in
         offsetting changes in cash flows of hedged items. When it is determined
         that a  derivative  is not highly  effective  as a hedge or that it has
         ceased to be a highly effective hedge, the Company  discontinues  hedge
         accounting prospectively, as discussed below.

         The Company discontinues hedge accounting  prospectively when (1) it is
         determined  that the  derivative  is no longer  effective in offsetting
         changes  in the  cash  flows  of a hedged  item  (including  forecasted
         transactions);  (2) the derivative expires or is sold,  terminated,  or
         exercised;  (3) the  derivative is  designated  as a hedge  instrument,
         because it is unlikely that a forecasted transaction will occur; or (4)
         management  determines  that  designation  of the derivative as a hedge
         instrument is no longer appropriate.

         When hedge  accounting  is  discontinued  because it is probable that a
         forecasted  transaction will not occur, the derivative will continue to
         be carried on the balance sheet at its fair value, and gains and losses
         that were accumulated in other comprehensive  income will be recognized
         immediately  in  earnings.  In all  other  situations  in  which  hedge
         accounting is discontinued,  the derivative will be carried at its fair
         value on the balance sheet,  with subsequent  changes in its fair value
         recognized in current-period earnings.

         Advertising:

         The Company expenses  advertising costs as incurred.  Advertising costs
         for fiscal 2005 and 2004 were $421,500 and $516,700, 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.

                                      F-9
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

         Accounting for Consolidation of Variable Interest Entities:

         In January  2003,  the FASB issued FIN 46,  "Consolidation  of Variable
         Interest Entities, an interpretation of ARB No. 51." FIN 46 was subject
         to significant interpretation by the FASB, and was revised and reissued
         in December  2003 ("FIN  46R").  FIN 46R states that if an entity has a
         controlling  financial  interest  in a variable  interest  entity,  the
         assets,  the  liabilities  and results of  activities  of the  variable
         interest  entity  should  be  included  in the  consolidated  financial
         statements  to the  entity.  The  provisions  of FIN 46 and FIN 46R are
         applicable  for small  business  issuers  that have  variable  interest
         entities  (VIE) by the end of the first  reporting  period ending after
         December 15, 2004.  The adoption of FIN 46 and FIN 46R did not have any
         effect on the Company's consolidated financial statements.

         Earnings Per Share:

         The weighted average number of shares outstanding used to compute basic
         and diluted  earnings per share for fiscal 2005 and 2004 was  3,925,384
         and 3,926,116, respectively.

         Reclassifications:

         Certain   reclassifications  have  been  made  to  the  2004  financial
         statements to conform to the 2005 presentation.

2.       GOING PRIVATE TRANSACTION

         On November 21,  2003,  the Company  announced  that it had received an
         offer  from  the  principal   shareholders  of  the  Company,  who  own
         approximately  61%  of  the  Company's  outstanding  common  stock,  to
         purchase all of the remaining  outstanding shares of common stock for a
         cash purchase price of $1.75 per share,  subject to various conditions.
         The  Company's  Board  of  Directors  appointed  a  Special  Committee,
         consisting of the three non-principal  shareholder directors, to review
         and  analyze the  proposal.  The  initial  purchase  price of $1.75 was
         rejected by the Special  Committee,  which  concluded  that the offered
         price did not  adequately  reflect the  Company's  value.  A subsequent
         offer of $3.12 per share was deemed acceptable by the Special Committee
         and accepted by the Board.

         At a  special  meeting  of the  stockholders  on April  18,  2005,  the
         proposed  plan,  which  provides  for the  merger of the  Company  with
         Acquisition  Co.,  a company  formed  to merge  with the  Company,  was
         approved.  Acquisition  Co. is owned by nine  shareholders  (continuing
         shareholders)  of the  Company.  The  Company,  after the merger,  will
         acquire  approximately  1,320,000 shares of its common stock at a total
         purchase cost of  approximately  $4,120,000,  financed  through capital
         contributions  by  the  continuing  shareholders.   Costs  incurred  in
         connection  with this  transaction  were $336,539  through  January 30,
         2005,  and have been deferred  pending  completion of the  transaction.
         These costs will be added to the cost to acquire the shares and will be
         treated as a cost of treasury stock.

                                      F-10
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3.       AVAILABLE-FOR-SALE SECURITIES

         Details as to available-for-sale  securities at January 30, 2005 are as
         follows:

<TABLE>
<CAPTION>
                                                                              Fair Value
                                                                                  of
                                                                              Securities
                                    Gross           Gross                        with
                                  Unrealized     Unrealized                   Unrealized
                    Gross Cost      Gains         (Losses)      Fair Value     (Losses)
                    -----------   -----------    -----------    -----------   -----------

<S>                 <C>           <C>            <C>            <C>           <C>
Mutual funds        $ 1,862,193   $    76,114    $   (54,943)   $ 1,883,364   $   764,601
Equity securities       522,974       129,721        (41,782)       610,913        90,503
                    -----------   -----------    -----------    -----------   -----------

                    $ 2,385,167   $   205,835    $   (96,725)   $ 2,494,277   $   855,104
                    ===========   ===========    ===========    ===========   ===========
</TABLE>

         All of the investments with unrealized losses have been in a continuous
         unrealized  loss  position for more than one year.  The severity of the
         impairments  in  relation  to the  carrying  amounts of the  individual
         investments (fair value average is approximately 10% less than cost) is
         consistent with current market  conditions.  The Company  evaluated the
         near-term  prospects  of the issuers in relation  to the  severity  and
         duration of the impairment.  Based on that evaluation and the Company's
         ability and intent to hold these investments for a reasonable period of
         time  sufficient for a forecasted  recovery of fair value,  the Company
         does  not  consider  these  investments  to  be  other-than-temporarily
         impaired at January 30, 2005.

4.       INVENTORIES

         Inventories consist of the following at January 30, 2005:

              Food                                                   $   578,674
              Beverages                                                  142,010
              Supplies                                                   433,342
                                                                     -----------

                                                                     $ 1,154,026
                                                                     ===========

5.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following at January 30, 2005:

              Land                                                  $  3,168,630
              Buildings and improvements, including leaseholds        14,073,456
              Furniture and equipment                                  2,236,206
              Construction in progress                                   789,507
              China, glassware and utensils (a)                           85,473
                                                                     -----------

                                                                    $ 20,353,272
                                                                    ============

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

         Depreciation  expense was $1,037,000 and $1,103,000 for fiscal 2005 and
         2004, respectively.

                                      F-11
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

6.       INTANGIBLE ASSETS

         Intangible  assets  deemed  to have  indefinite  useful  lives  are not
         amortized but are subject to  impairment  tests at least  annually,  or
         more  frequently if  circumstances  occur that indicate  impairment may
         have  occurred.  Management has  determined  that the Company's  liquor
         licenses have an indefinite life. The Company's annual  impairment test
         of the liquor license intangible asset resulted in no impairment during
         the year ended January 30, 2005.

         Intangible assets at January 30, 2005 consist of:

                                                  Liquor           Covenant Not
                                                 Licenses         to Compete (a)
                                              ---------------    ---------------

         Cost                                   $ 1,175,998        $    63,126
         Accumulated amortization                  (336,266)           (35,771)
                                                -----------        -----------

                                                $   839,732        $    27,355
                                                ===========        ===========

         (a) Arising from the acquisition of Mr. Manatee's Casual Grille.

         Amortization expense was $12,625 for both fiscal 2005 and 2004.

         The aggregate  amortization expense for the covenant not to compete for
         each of the next three years is as follows:  $12,625  annually  for the
         fiscal years 2006 through 2007 and $2,105 for 2008.

                                      F-12
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7.       LINE OF CREDIT AND NOTES AND MORTGAGES PAYABLE

<TABLE>
<S>                                                                                                <C>
        Borrowing under $1,000,000 line of credit payable on demand and is which is
        collateralized by real estate located in Toms River, New Jersey.  The line expires
        June 30, 2005 and bears interest at LIBOR plus 2.00%.                                     $   500,000
                                                                                                  ===========

        Mortgages payable in various monthly installments to amortize the mortgage
        principal at the rate of $120,000 annually, through September 2011
        with interest at LIBOR plus 2.00%, collateralized by real estate located in
        Point Pleasant Beach, New Jersey                                                          $   835,000

        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                                                                644,092

        Mortgage payable in various monthly installments to amortize the mortgage
        principal at the rate of $100,000 annually, through May 2007, with interest at
        LIBOR plus 2.00%, collateralized by real estate located in Toms River,
        New Jersey                                                                                    210,000
                                                                                                  -----------

                                                                                                    1,689,092
        Less: Current maturities                                                                      270,770
                                                                                                  -----------

                                                                                                  $ 1,418,322
                                                                                                  ===========
</TABLE>


         Annual  maturities  for fiscal years 2007  through  2010 are  $274,909,
         $189,283, $599,130 and $120,000, respectively.

         LIBOR was 2.6% at January 30, 2005.

         The Company  maintains an interest rate  risk-management  strategy that
         uses  derivative  financial   instruments  to  minimize   unanticipated
         earnings fluctuations caused by interest rate volatility. The Company's
         specific  goal is to lower  (where  possible)  the cost of its borrowed
         funds.

         As of January 30, 2005,  the Company had interest rate swap  agreements
         relating to  approximately  $1,479,000 of the  Company's  variable rate
         debt.  Unrealized  net losses under the interest  rate swap  agreements
         totaled approximately $86,500 at January 30, 2005. These unrealized net
         losses are recorded in Accumulated  Other  Comprehensive  Income 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,  except for the
         amounts that will be realized when periodic settlements of the variable
         interest  liability  are  recorded  in  earnings.  No gain or loss  was
         recognized  in  earnings  during the year ended  January  30, 2005 as a
         result of hedge ineffectiveness.

                                      F-13
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7.       LINE OF CREDIT AND NOTES AND MORTGAGES PAYABLE (CONTINUED)

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

         During  February 2005, the Company  entered into an agreement to borrow
         up to $1,500,000 through a Non-Revolving Line of Credit with a bank, in
         order to partially  finance a major  renovation  of the Lobster  Shanty
         located in Point Pleasant Beach,  New Jersey.  The line expires on July
         31,  2005 and  carries a monthly  interest  rate of 1-month  LIBOR plus
         2.00%.  At July 31, 2005, the balance due on the line will be converted
         to a term loan based on a 15-year  payout with a 10-year  balloon  with
         the interest rate to be determined prior to the conversion. The Company
         has  borrowed  $750,000  on the line,  subsequent  to  year-end.  Also,
         subsequent to year-end,  the Company borrowed an additional $300,000 on
         its  $1,000,000  bank  line  for  costs  associated  with  the  Florida
         hurricanes, leaving a total of $200,000 available.

8.       RESTAURANT CLOSINGS

         In June 2003, the Company closed one of its Mexican theme  restaurants.
         In  connection  with the  closing,  the  Company  wrote  off  leasehold
         improvements  and  other  equipment  of  $230,024  and  entered  into a
         Surrender  Agreement with the restaurant's  landlord which required the
         Company to pay $180,000. An aggregate loss of $410,024 was recorded for
         the year ended  January 25, 2004. In  connection  with this  restaurant
         closing,  the Company is attempting to sell the liquor  license used in
         that location. The liquor license has been classified as an "Asset held
         for sale" in the accompanying balance sheet as of January 30, 2005.

         In May 2004, the Company sold its  restaurant  and property  located in
         Jensen Beach, Florida for $900,000, resulting in a gain of $415,473 for
         the year ended January 30, 2005.

9.       HURRICANE DAMAGES AND SETTLEMENTS

         In September 2004, the Company's three Florida restaurants were damaged
         as  a  result  of  Hurricanes  Frances  and  Jeanne.  The  Company  has
         recognized  a gain of  $202,399  related to the event.  The Company has
         received  interim  payments of  $600,000  (which it has  recognized  as
         income)  on its  insurance  claims  and  incurred  $397,601  of  costs,
         including lost inventory,  clean-up expenditures and an estimate of the
         carrying value for the property and equipment  destroyed or damaged. In
         addition,  the Company spent approximately  $985,000 in fiscal 2005 for
         capital  expenditures  related to the  hurricanes  and expects to spend
         substantial  additional amounts for additional capital  expenditures in
         the future.

         The  Company  is in  discussions  with its  insurers  as to  additional
         insurance  proceeds  that the Company  believes it is entitled  to. The
         insurer  has not yet  determined  its  obligation  for  payments of the
         claims. Should the insurer determine that its obligations are less than
         interim  payments  already  made  to the  Company,  the  Company  maybe
         required to  reimburse  the insurer for the excess.  Additionally,  the
         Company  may be eligible  for claims  under its  business  interruption
         policy.

         Total claims for damages  under  various  insurance  policies  that the
         Company has filed,  for which no settlements  or interim  payments have
         been received, approximate $1,200,000 as of March 31, 2005.

                                      F-14
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

10.      INVESTMENT INCOME

         The components of investment income are summarized as follows:

<TABLE>
<CAPTION>
                                                                                2005        2004
                                                                             ---------   ---------

         <S>                                                                 <C>         <C>
         Interest                                                            $  18,621   $  13,603
         Dividends                                                             177,482     128,481
         Realized gain on sales of available-for-sale securities               129,827      69,175
                                                                             ---------   ---------

                                                                             $ 325,930   $ 211,259
                                                                             =========   =========
</TABLE>

11.      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 accrued retirement  benefit.  The amount has been partially
         insured with a life insurance contract owned by the Company.

                                      F-15
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

11.      RETIREMENT PROGRAMS (CONTINUED)

         Reconciliation of changes in the accrued retirement benefits and funded
         status of the plan as of January 30, 2005 were:

<TABLE>
         <S>                                                           <C>          <C>
         Change in estimated benefit obligation:
            Benefit obligation at the beginning of year                            $ 589,720
            Change in cash surrender value for vested employees                       55,100
            Estimating obligation increase for non-vested employees                    6,233
            Employee withdrawals                                                    (169,835)
            Benefit payments                                                         (20,000)
            Dividends received                                                         2,697
            Other                                                                     (1,142)
                                                                                   ----------

         Benefit obligation at end of year                                         $ 462,773
                                                                                   ==========

         Components of retirement plan expense were:

                                                                        2005          2004
                                                                      ---------    ----------

         Policy premiums                                              $ 43,456     $  52,600
         (Increase) decrease in cash surrender value in excess of
            estimated change in obligation for nonvested employees      (6,233)        8,198
         Companies' portion of nonvested employee withdrawals           (2,159)      (11,970)
         Other                                                            (760)          857
                                                                      ---------    ----------

                                                                      $ 34,304     $  49,685
                                                                      =========    ==========
</TABLE>

         Although  the  Company  has  designated  the  equity in life  insurance
         policies to fund the benefit obligation for those retirement  benefits,
         the equity in these policies are not segregated  plan assets.  As such,
         the retirement obligation is considered non-funded at January 30, 2005.

12.      EXECUTIVE INCENTIVE BONUS PLAN

         The  Company  has 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 2005 and 2004 was $71,485 and $51,000, respectively.

                                      F-16
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13.      INCOME TAXES

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

                                                 2005           2004
                                              ---------      ---------

         Current  - Federal                   $  15,000      $      --
                  - State                        81,000          6,000
         Deferred                               502,000        (63,000)
                                              ---------      ---------

                                              $ 598,000      $ (57,000)
                                              =========      =========

         The significant components of deferred tax assets and liabilities as of
         January 30, 2005 are as follows:

         Deferred Tax Assets:
              Tax loss carryforwards                         $ 189,000
              Depreciation and amortization                    321,000
              Other comprehensive loss                           1,000
              Other                                             54,000
                                                             ---------

                  TOTAL DEFERRED TAX ASSETS                    565,000

         Deferred Tax Liability:
              Other                                             28,000
                                                             ---------

                  NET DEFERRED TAX ASSETS                    $ 537,000
                                                             =========

         For the fiscal years ended  January 30, 2005 and January 25,  2004,  no
         valuation  allowance  was  required.  The net  change in the  valuation
         allowance  for fiscal 2004 was a reduction of  $1,098,000,  principally
         due to the expiration of tax loss carryforwards.

                                      F-17
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13.      INCOME TAXES (CONTINUED)

         The  Company  has  available  at  January  30,  2005,   operating  loss
         carryforwards which expires as follows:

              Year of Expiration
              ------------------

                      2010                                   $  58,000
                      2011                                     145,000
                      2012                                      88,000
                      2024                                     166,000
                                                             ---------

                                                             $ 457,000
                                                             =========

         The  difference  between the tax  provision  at the  statutory  Federal
         income tax rate and the tax  provision  attributable  to income  before
         income tax for the years ended January 30, 2005 and January 25, 2004 is
         as follows:

<TABLE>
<CAPTION>
                                                               2005            2004
                                                           -----------     -----------

         <S>                                               <C>             <C>
         Federal statutory rate                            $   478,000     $    (6,100)
         State taxes net of Federal benefit                     70,500            (900)
         Expiration of operating loss carryforwards             91,500       1,090,000
         Valuation allowance change                                 --      (1,098,000)
         Non taxable income                                    (42,000)        (42,000)
                                                           -----------     -----------

         PROVISION (CREDIT) FOR INCOME TAXES               $   598,000     $   (57,000)
                                                           ===========     ===========
</TABLE>

14.      TRANSACTIONS WITH RELATED PARTIES

         The  Company  has a lease  through  January  2007 for its  Moore's  Inn
         ("Moore's")   restaurant   property  with  Moore's  Realty   Associates
         ("Moore's Realty"),  a partnership owned by the principal  shareholders
         of the Company.  The lease requires  minimum annual rentals of $90,000,
         plus percentage  rent of 6% of sales exceeding $1.5 million.  The lease
         contains three five-year renewal options.

         The Company  also has a five-year  lease for the  property  adjacent to
         Moore's for the Company's Escondido's Mexican Restaurant (Escondido's).
         The terms of this lease are the same as the lease for Moore's.

                                      F-18
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

14.      TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

         Additionally,  the  Company  has a lease  with  Moore's  Realty  for an
         additional parking lot for Moore's and Escondido's. The initial term of
         the lease expires January 25, 2007 and contains three five-year renewal
         options.  During the initial term of the lease,  minimum annual rentals
         are $40,000, plus percentage rent of 1% of the combined annual sales of
         Moore's and Escondido's exceeding $4million.  The lease also contains a
         provision  whereby  Moore's  Realty agreed to reimburse the Company for
         improvements  made to the parking  lot up to  $150,000.  During  fiscal
         2003, the Company made improvements of approximately $135,000, which is
         being reimbursed by an offset to the monthly rent payment.  Included in
         the  accompanying  balance  sheet  at  January  30,  2005 is a  current
         receivable of $36,489.

         Rent expense paid pursuant to these leases for fiscal 2005 and 2004 was
         $294,234 and $279,763,  respectively, which included percentage rent of
         $59,763 and $51,963, respectively.

         Moores Realty is not considered a variable  interest entity as there is
         sufficient  equity  investment  by the partners and the partners have a
         controlling financial interest in the partnership.  Additionally, as of
         January 30, 2005 there was no debt on the partnership.

         The Company has a retirement agreement with a former  director/employee
         (see Note 11).

15.      COMMITMENTS AND CONTINGENCIES

         Leases:

         The  Company  leases  restaurants,  parking  lots and  equipment  under
         operating leases  including  related party leases (Note 14) expiring at
         various times through fiscal 2008.

         Minimum future rental payments under noncancelable  operating leases as
         of January 30, 2005 are as follows:

                         2006                    $ 356,892
                         2007                      353,001
                         2008                       40,506
                                                 ---------

                                                 $ 750,399
                                                 =========

         Total  rent  expense,  including  rent  paid to  related  parties,  was
         $452,455 and $497,615 for fiscal 2005 and 2004, respectively.

         Employment Agreements:

         The  Company has  employment  agreements  through  June 2007 with three
         employees for annual  amounts  ranging from  $124,800 to $151,400.  The
         agreements  provide for annual adjustments based on the increase in the
         consumer  price  index.  These  agreements  also  provide  for lump sum
         payments in the event of the termination of the employees without cause
         or a change in control of the Company, as defined, for a portion of the
         unexpired term of the contracts.

                                      F-19
<PAGE>

CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

16.      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
         for  investments  are based  primarily  on quoted  prices  for those or
         similar  instruments.  The carrying value of cash and cash equivalents,
         receivables  and  notes  and  mortgages  payable  is  considered  to be
         representative  of their fair value because of their  relatively  short
         maturities or variable interest rates.

                                      F-20