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

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

For the Transition period from_________________to________________

                          Commission File Number 0-8513
                                                 ------

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

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

       62 Broadway, P.O. Box 1332
     PT. PLEASANT BEACH, NEW JERSEY                                08742
----------------------------------------                  ----------------------
[Address of principal executive offices]                        [Zip Code]

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

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

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

                          COMMON STOCK, $.01 PAR VALUE
                          ----------------------------
                                (Title of Class)

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

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

The issuer's revenues for the year ended January 28, 2001 totaled $20,156,890.

On March 30, 2001, the aggregate  market value of the voting stock of the issuer
(consisting  of  Common  Stock,  $.01  par  value)  held by  non-affiliates  was
approximately $1,435,000 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 4,245,515  shares of the issuer's Common Stock issued and
outstanding.

<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

     (A)  BUSINESS  DEVELOPMENT  - Chefs  International,  Inc.  ("Chefs"  or the
"Company") was organized  under the laws of the State of Delaware in March 1975.
The Company currently  operates 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 Mexican  theme  restaurant  operated  under the name
"Garcia's",  located  in a  shopping  mall in New  Jersey  and one of which is a
free-standing restaurant in Freehold, New Jersey, which the Company commenced to
operate in February 2000 under the name "Moore's Tavern and Restaurant".  Six of
the seafood  restaurants  are operated  under the name "Lobster  Shanty" and one
under the name  "Baker's  Wharfside".  The  Company  opened  its  first  seafood
restaurant  in November  1978 and opened its Garcia's  restaurant in April 1996.
(As used herein,  the term the "Company" may also at times include Chefs and its
various subsidiaries.)

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

DEVELOPMENTS SINCE THE BEGINNING OF THE LAST FISCAL YEAR

RESTAURANT OPENING

     In  February  2000,  the  Company  executed  a lease  with  Moore's  Realty
Associates,  a New Jersey  partnership  ("Moore's  Realty")  whose  partners are
members of the Lombardi  Group and other  members of the Lombardi  family.  (The
Lombardi  Group,  consisting of various members of the Lombardi Family and their
affiliates,  purchased a substantial  number of shares of Chefs' Common Stock in
May 1999  resulting  in their  ownership  in May 1999 of in excess of 50% of the
issued  and  outstanding  shares of Chefs'  Common  Stock,  and as a result,  in
ownership of voting  control of the  Company.) The lease was of premises on West
Main Street (Route 537) in Freehold,  New Jersey where an entity affiliated with
Moore's  Realty,  Moore's Inn, Inc. was operating a restaurant  and tavern under
the  name  "Moore's  Inn".  The  Company  provided  consulting  services  to the
operators of Moore's Inn for a weekly  consulting  fee of $1,800 from January 3,
2000  until  February  23,  2000 when it  executed  the  lease and the  purchase
agreements hereinafter described.

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     The Company  commenced  to operate  the  facility  under the name  "Moore's
Tavern  and  Restaurant"  on  February  23,  2000 at which  time the  consulting
agreement was terminated. The lease is 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 "net 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 period from
the  opening of the  restaurant  through  January  28,  2001,  the gross  rental
aggregated  $114,497.  Moore's  Realty has the right to terminate the lease upon
twelve months' prior written notice if, for the preceding year, the gross annual
rental did not exceed the minimum annual rental for that year.

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

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

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good working  condition,  reasonable wear and tear excepted..." upon termination
of the lease.

     The lease of the Moore's Inn and the purchase of the liquor license and the
furniture,  fixtures and equipment cannot be deemed "arm's length"  transactions
due to the  interest of the  Lombardi  Group and other  members of the  Lombardi
family.  The transactions were negotiated for the Company by Anthony C. Papalia,
its president and chief executive officer. In negotiating the transactions,  Mr.
Papalia took into  account his  experience  in similar  restaurant  leases,  the
prices at which liquor  licenses were sold in  neighboring  areas  (finding such
prices  to be  comparable  to the  liquor  license  purchase  price  paid by the
Company) and the condition of the furniture, fixtures and equipment. The bulk of
the  furniture,  fixtures and equipment had been  purchased by the Seller during
the twelve  months ended June 30, 1999 at a price of $621,893.  Mr.  Papalia and
the  non-interested  directors  concluded that the terms of the transaction were
fair and in the best interests of the Company.

     At the time of execution of the lease, Moore's Realty agreed not to sell or
lease a building  ("Building  B")  adjacent to the Moore's Inn or the nearby pad
site for a proposed building  ("Building C") for a period of one year. If during
the first  year,  the Company  entered  into an  agreement  to purchase or lease
Building B,  Moore's  Realty  agreed not to sell or lease the pad site to anyone
other than the Company for an additional one-year period. The Company has agreed
in principle with Moore's  Realty to lease  Building B and currently  expects to
open a Mexican theme type restaurant on the site in the last quarter of calendar
2001  utilizing  the  same  liquor  license  used  by  Moore's  Inn  Tavern  and
Restaurant.  As a result, Moore's Realty has extended its agreements not to sell
or lease  Building B or Building C to third parties for an additional  year. The
proposed  lease has not been  finalized  and no assurance  can be given that the
Company will be able to open a restaurant  in Building B within the  anticipated
time  period.  If the  Company  fails to lease or purchase  Building B,  Moore's
Realty is permitted to lease Building B to a restaurant  that offers a menu line
significantly different from that of Moore's Tavern and Restaurant and that does
not serve alcoholic beverages.

SALE OF BALANCE OF MISTER COOKIE FACE

     On February  20,  1997,  the Company sold 95% of the common stock of Mister
Cookie Face ("MCF"),  its ice cream production segment, to a former director for
an aggregate purchase price of $1,600,000, consisting of a $500,000 cash payment
and three notes  totaling  $1,100,000.  The first note (Note A) for $100,000 was
due on or

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before  March 24, 1997 and was paid in full on a timely  basis.  The second note
(Note B) for $500,000  was due in  installments  through  July 1, 2000,  and the
third note (Note C) for  $500,000 was due on or before  February 20, 2004,  with
mandatory  prepayments  based on MCF's  cash flow.  The notes were  secured by a
first lien on all of MCF's assets.  However,  the Company  agreed to subordinate
the notes to up to  $1,750,000 of  additional  financing  for MCF.  Based on the
estimated  present  value  of the  payments,  management  recorded  a  valuation
allowance of $601,050  against the second and third notes. The 5% of MCF capital
stock  retained by the Company was valued at $35,000.  During  fiscal 1999,  MCF
requested a restructuring of the terms of the second and third notes. During the
quarter ended October 31, 1999,  the Company's  Board of Directors (the "Board")
was advised by MCF that MCF had achieved a positive  cash flow during its second
quarter  and  pursuant  to  the   requirements  of  Note  C,  owed  the  Company
approximately $41,800 in interest. The Board agreed to allow MCF to make monthly
payments of the said Note C interest  amount with the final  payment due June 1,
2000.  Additionally,  the Company's  Board of Directors (the "Board")  agreed to
allow MCF to  continue  making  monthly  partial  payments on Note B. During the
quarter  ended July 30,  2000,  the Note C  interest  was paid as per the agreed
payment schedule.

     In May 2000,  the Board  authorized  management to negotiate and execute an
agreement to settle and satisfy the debt owed by MCF to the Company. On June 30,
2000,  the  Company  sold both Notes B and C and its 5%  holding of MCF  capital
stock to MCF for a cash payment of $379,836 and the return of 233,334  shares of
Chefs'  Common Stock owned by the  president  of MCF.  The Company  subsequently
cancelled  these  shares.  The Company has  recognized a gain from  discontinued
operations of  approximately  $322,000 in its financial  statements for the year
ended January 28, 2001. The gain represents  partial recoveries of the valuation
allowance provided for against Notes B and C.

CHANGE IN CERTIFYING ACCOUNTANT

     As  reported  in the  Company's  current  report on Form 8-K for October 6,
2000,  its  certifying  accountant  for fiscal  1999 and 2000,  Edward  Isaacs &
Company LLP, had merged with McGladrey & Pullen, LLP and McGladrey & Pullen, LLP
had been  appointed as the  Company's  auditor.  The Company  stated (and Edward
Isaacs & Company LLP concurred) that the auditor's  reports from Edward Isaacs &
Company LLP for the  Company's  past two fiscal years (fiscal 1999 and 2000) did
not  contain  an  adverse  opinion  or a  disclaimer  of  opinion,  and were not
qualified or modified as to uncertainty,  audit scope, or accounting principles,
and  that  during  said two  fiscal  years  and the  subsequent  interim  period
preceding the change

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of  accountants,  there were no  disagreements  between  the  Company and Edward
Isaacs &  Company  LLP on any  matter of  accounting  principles  or  practices,
financial statement disclosure, or auditing scope or procedure.

SHARE REPURCHASE PROGRAM

     On June 8, 2000, the Company announced that it had decided to repurchase up
to 400,000  shares of Chefs' Common Stock over the  following 24 months.  In its
press  release,  the Company  stated that the Board  believed that Chefs' Common
Stock was  undervalued and that the Repurchase  Program,  if effected at current
prices,  could  constitute  an  appropriate  investment  to the  benefit  of the
Company's  stockholders.  Through April 6, 2001, the Company has  repurchased an
aggregate 16,050 shares of Chefs' Common Stock in the over-the-counter market at
prices ranging from $.73 to $.97 per share. To date, an aggregate 11,250 of such
repurchased shares have been cancelled.

BANK LOANS

     At January 31, 2000,  the Company's  principal  bank financing was provided
pursuant to two term loans,  one  originally in the amount of $1,000,000  ("Term
Loan A") and the other,  originally  in the amount of  $525,000  ("Term Loan B")
from First Union National Bank ("First  Union") as well as a $500,000  revolving
line of credit  ("L/C  line")  from First  Union.  At said  date,  approximately
$200,000 was outstanding under Term Loan A, payable in installments of principal
with interest at an annual rate of 7.51% through  November  2000;  approximately
$315,000 was  outstanding  under Term Loan B payable in monthly  installments of
principal with interest at an annual rate of 9 1/4% through December 2002 and no
amounts were  outstanding  under the L/C line. Term Loan A and the L/C line were
secured by first mortgages on the Company's two Point Pleasant Beach, New Jersey
seafood  restaurants and Term Loan B was secured by a first mortgage on the Toms
River, New Jersey seafood restaurant.

     During fiscal 2001,  the Company  retired the entire balance of Term Loan A
and reduced the outstanding  principal  balance of Term Loan B to  approximately
$204,000. At June 23, 2000, the L/C line was renewed for the seventh consecutive
time for an additional  two year term  repayable with interest at LIBOR plus 2%.
There were no outstanding borrowings under the L/C line at January 28, 2001.

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

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installments  of principal  with  interest at LIBOR plus 2 1/4% through May 2003
and is  secured by a first  mortgage  on the  property.  At  January  28,  2001,
approximately $58,000 was outstanding under this loan.

     In October 1998, the Company borrowed $880,000 from First Union to fund the
$1,100,000 purchase of its Vero Beach, Florida seafood restaurant.  This loan is
repayable in monthly  installments of $8,319 comprised of principal and interest
at an annual  rate of 7.82%  through  November  2008 and is  secured  by a first
mortgage on the Vero Beach property. At January 28, 2001, approximately $810,000
was outstanding under this loan (which provides for a $431,429 "balloon" payment
in November 2008).

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

Pursuant  to its  principal  Loan  Agreements,  the  Company  has  made  certain
affirmative and negative  covenants to First Union.  The covenants  contained in
the prior loan agreements were superseded by the covenants contained in the Vero
Beach Loan  Agreement.  Included in the Vero Beach Loan  Agreement are covenants
not to pay  dividends,  effect  stock  redemptions,  sell or issue shares of its
stock,  make a material  change of ownership that changes control of the Company
or its management  structure,  create certain liens or encumbrances,  enter into
sale-leaseback transactions, sell assets not in the ordinary course of business,
merge with or acquire another entity,  or enter into certain other  transactions
without First Union's written consent,  and to maintain on a consolidated basis,
tangible  net  worth of at  least  $11,650,000  increasing  by  $50,000  at each
subsequent  fiscal year-end  commencing with fiscal 1999; a debt to Tangible Net
Worth  ratio  of no  greater  than  .50:1.00;  a net  income,  depreciation  and
amortization   less   Maintenance   Capital   Expenditures   (defined  as  those
expenditures  required  on an  annual  basis  to  maintain  existing  restaurant
locations) to the current  portion of long term debt and capital leases ratio of
not less than 1.20:1.0; and cash and cash equivalents of not less than $750,000.
A failure by the Company to satisfy any such covenant would  constitute an event
of default under the Loan Agreement  enabling First Union to accelerate  payment
of all outstanding indebtedness. In May 2000, the Company received a waiver from
First Union  permitting  it to effect the Stock  Repurchase  Program  previously
described. The Company was in compliance with all applicable covenants under its
Loan Agreements at January 31, 2000 and at January 28, 2001.

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     (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 is principally  engaged in the operation of 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 Mexican theme  restaurant
operated under the name "Garcia's", located in a shopping mall in New Jersey and
one of which is a free-standing  restaurant in Freehold,  New Jersey,  which the
Company commenced to operate in February 2000 under the name "Moore's Tavern and
Restaurant". Six of the seafood restaurants are operated under the name "Lobster
Shanty" and one under the name "Baker's Wharfside". The Company opened its first
seafood  restaurant in November 1978 and opened its sole Garcia's  restaurant in
April 1996. 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

LOBSTER SHANTY

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

BAKER'S WHARFSIDE

Pt. Pleasant Beach, New Jersey                October 1980

GARCIA'S RESTAURANT

Monmouth Mall, Eatontown,
  New Jersey                                  April 1996

MOORE'S TAVERN AND RESTAURANT

Freehold, New Jersey                          February 2000

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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.

     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 Gourmet Associates  ("Gourmet") owned by the Company's then principal
stockholder.  During fiscal 1998, the Company constructed an outdoor deck with a
bar  and  dining  facilities  at  this  restaurant  at a cost  of  approximately
$125,000.  At  August  31,  1998,  the  Company  was  continuing  to lease  this
restaurant on a  month-to-month  "net" basis at a monthly rental of $10,000 with
the Company also paying  personal  property taxes and insurance  thereunder.  On
that date,  the United  States  Bankruptcy  Court for the District of New Jersey
ordered the  acceptance  of the Company's bid of $1,100,000 to purchase the Vero
Beach  restaurant  property  from  Gourmet.  On October  30,  1998,  the Company
completed the purchase of the property for $1,100,000. To fund the purchase, the
Company  obtained an $880,000  first  mortgage loan from its  principal  lending
bank, First Union National Bank, and paid the balance of the purchase price from
working  capital.  The Company's  successful  bid was based upon an  independent
appraisal of the property and was equal to the appraised value. See "Bank Loans"
herein as to the repayment terms of this loan.

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

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

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

     In May 1998, the Company spent $166,000 to purchase a lot and building with
a waterfront  location  adjacent to the Toms River Lobster  Shanty.  The Company
partially funded the purchase price with the bank loan previously described. The
Company has obtained the variances  necessary for it to develop an outdoor patio
dining  area  with  seating  for 125 on this site but has  delayed  construction
pending resolution of a lawsuit initiated by a neighboring  landowner attempting
to prevent  construction.  If it is  successful in resolving  this lawsuit,  the
Company   estimates  the  total  costs  of   construction   and   outfitting  at
approximately $350,000 for an opening anticipated in fiscal 2003.

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

     COCOA BEACH,  FLORIDA - This approximately 240 seat restaurant,  consisting
of  approximately  9,600 square feet, is located in a free standing  building on
Highway  A1A in Cocoa  Beach and has  parking  for

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

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

BAKER'S WHARFSIDE RESTAURANT

     PT.  PLEASANT  BEACH,   NEW  JERSEY  -  This   restaurant,   consisting  of
approximately  7,500 square feet, is free standing with a waterfront location on
Channel Drive in Pt. Pleasant Beach, New Jersey and seats  approximately 500. It
shares  parking with the Lobster  Shanty  restaurant in Pt.  Pleasant Beach with
space for approximately  250 automobiles.  The Company purchased this restaurant
and three others  (including the land,  buildings,  improvements  and businesses
including  personal  property  and  fixtures,  liquor  licenses  and  all of the
outstanding stock of the four corporations operating these restaurants) from its
then  principal  stockholder,  and from  three  partnerships  owned  by him,  in
October,  1980 for an aggregate $7,750,000 less a subsequent $250,000 prepayment
discount.

                                       11
<PAGE>


GARCIA'S RESTAURANT

     In November 1995, the Company  entered into an agreement (the  "Agreement")
with  Garcimex of New Jersey,  Inc.  ("Garcimex"),  the  exclusive  owner of the
"Garcia's"  trademark,  service  mark and trade name along with the goodwill and
recipes of a Mexican restaurant business associated with the marks.  Pursuant to
the Agreement, the Company was granted the exclusive right to establish and open
Mexican  restaurants  using the marks,  goodwill  and  recipes in six New Jersey
counties,  Hunterdon,  Mercer,  Middlesex,  Monmouth,  Ocean and  Somerset  (the
"Territory"). The Company was granted the right but not the obligation to open a
restaurant  utilizing  the marks and goodwill in each of the first five 12-month
periods,  in the Territory,  with a six-month  grace period with respect to each
such 12-month period. If the Company did not open a Garcia's  restaurant in each
of the first five 12-month periods  (including the grace period),  the Agreement
provided that the Company would lose the right to develop additional restaurants
within the Territory. The Company did not open an additional Garcia's restaurant
within the  prescribed  time period  after the April 1996 opening of its initial
Garcia's  restaurant.  The  Company  retains  the right to  utilize  the  marks,
goodwill and recipes at its Garcia's  restaurant  and Garcimex has agreed not to
open another Mexican restaurant within an 18-mile radius of any Company operated
Garcia's restaurant.

     The Agreement is for an initial term of 20 years with additional  automatic
ten-year  renewal  periods unless the Company elects not to renew the Agreement.
During the period that the  Agreement  is in effect,  the Company is required to
pay a  royalty  equal  to 3% of  the  gross  annual  sales  from  each  Garcia's
restaurant which it operates in the Territory, to Garcimex on a quarterly basis.
Garcimex  agreed with the Company to reduce this percentage to 1.5% with respect
to the twelve-month  period commencing February 1, 2000, after which it reverted
back to 3%. The Company  has also been  accorded a right of first  refusal  with
respect to offers  received by  Garcimex  from third  parties  seeking to obtain
rights in the marks,  goodwill and recipes for  restaurants to be opened outside
of the  Territory.  Furthermore,  the  Agreement  also provides the Company with
certain rights to open Mexican  restaurants in New Jersey outside the Territory.
To date,  the Company has opened one  Garcia's  restaurant  which  opened at the
Monmouth Mall on April 29, 1996.

     The Company is currently in  negotiations  with Garcimex and has reached an
agreement  in  principle  to  amend  the  Agreement.  Pursuant  to the  proposed
amendment, the Company would purchase the exclusive right to the use of the name
"Garcia's"  for the State of New Jersey

                                       12
<PAGE>


as well as the exclusive right to open Garcia's  restaurants  within New Jersey.
In  addition,  the  3%  royalty  would  be  eliminated.   If  the  amendment  is
effectuated,  the Company  intends to open a Garcia's  restaurant  in Building B
adjacent to its Moore's Tavern and Restaurant in Freehold, New Jersey during the
fourth  quarter of calendar  2001.  (If the  amendment is not  effectuated,  the
Mexican  theme  restaurant  expected to be opened in Building B will be operated
under another name still to be determined.)

     MONMOUTH  MALL,  EATONTOWN,  MONMOUTH  COUNTY,  NEW JERSEY - The  Company's
Garcia's restaurant at the Monmouth Mall consists of 4,371 square feet of leased
space and is decorated in a bright,  multi-color  Mexican motif.  The restaurant
has a bar and tables and booths which can accommodate approximately 130 patrons.
The  Company  has a  liquor  license  permitting  the  consumption  of wine  and
alcoholic beverages on the premises. The restaurant is open for lunch and dinner
seven days per week.

     The 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's lease for this restaurant is for a twelve-year term providing
for a minimum annual rental of $109,275  during each of the first five years and
a minimum  annual  rental of $118,017 per annum  thereafter.  The Mall  Landlord
agreed to reduce the  minimum  annual  rental to  $102,675  with  respect to the
twelve-month  period  ending  January 31, 2001,  after which the minimum  annual
rental reverted to the annual rentals provided for in the lease. The Company was
granted a $24,000  per year  Construction  Allowance  for the  five-year  period
commencing  January  1,  1997  which  is being  applied  on a  monthly  basis in
reduction of the said minimum annual rental  through  December 2001. The Company
is also required to pay additional rent equal to 5% of the  restaurant's  annual
gross  revenues in excess of  $2,185,000  in each of the first five years and in
excess of $2,360,340 in each  subsequent  year.  The Company is also required to
pay a proportionate  share of the Mall's real estate taxes,  utility charges and
the Landlord's operating costs as well as certain other charges.

     The  restaurant is on the site of the Company's La Crepe  restaurant  which
closed in  December  1995.  The  Company  has spent  approximately  $720,000  to
construct its Garcia's restaurant on this site.

                                       13
<PAGE>


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

MOORE'S TAVERN AND RESTAURANT

     This  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 and proposed Building C). The tavern portion
of this restaurant is of an historic nature having been initially constructed in
the late 18th  century  and owned by an  officer in the  American  Revolutionary
Army. The entire  restaurant is decorated in a revolutionary  period decor.  See
"Developments  Since the  Beginning  of the Last Fiscal  Year"  herein as to the
Company's  lease of this  restaurant  and  purchase  of the liquor  license  and
furniture,  fixtures and equipment to be used in its operation of the restaurant
from affiliates of the Lombardi Group.

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

SOURCES OF FOOD PRODUCTS

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

SEASONAL ASPECTS

     To date, the Company's New Jersey seafood  restaurants  have  experienced a
significant  portion  of their  sales from May  through  September  whereas  its
Florida  seafood  restaurants  have  experienced a significant  portion of their
sales from  January  through  April.  During the first year of  operation by the
Company,  Moore's Tavern and Restaurant experienced a seasonality factor similar
to but not as dramatic as the  seasonality  factor of the  Company's  New Jersey
seafood restaurants. The Company's Garcia's restaurant has


                                       14
<PAGE>


experienced its greatest sales volume during the Thanksgiving  through Christmas
period.

TRADEMARKS

     The Company has no patents, trademarks, licenses, franchises or concessions
which it regards as material to its  restaurant  business  with the exception of
the service mark "Jack Baker's Lobster Shanty"R" registered for a 20 year period
with the U.S.  Patent  and  Trademark  Office  in  February,  1989,  the  rights
purchased  from  Garcimex as described  above to use of the trade mark,  service
mark and trade name  "Garcia's" and its rights to use of the names "Moore's Inn"
and "Moore's Tavern" as described above.

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 mall and in the  vicinity of the mall where
the  Company  is now  operating  a  Garcia's  restaurant,  all of  which  supply
competition to the Company's Garcia's unit.  Although there are no Mexican style
restaurants in the mall, there are other Mexican style  restaurants in the area.
Typical "chain" competitors, all of which are affiliated with better established
and more  prominent  national  chains,  are the Friendly  Ice Cream chain,  Ruby
Tuesdays and TGI Fridays.  The Moore's Tavern and Restaurant  faces  competition
from local restaurants as well as from national chains including TGI Fridays and
Chili's  restaurants  in the area.  There can be no assurance that the Company's
units will be able to successfully compete with any of such other restaurants.

GOVERNMENT REGULATION

     The Company is subject to various  Federal,  state and local laws affecting
the operation of its restaurants,  including licensing and regulation by health,
sanitation,   safety  and  fire  departments  and  alcoholic   beverage  control
authorities.  The Company is also subject to the Fair Labor Standards Act, which
governs such matters as minimum  wages,  overtime and other working  conditions.

                                       15
<PAGE>


While such regulations have not had a material  negative impact on the Company's
operations  to date,  difficulties  in obtaining  necessary  licenses or permits
could result in delays or  cancellations  in the opening of new  restaurants and
increases in the minimum wage could increase the Company's labor cost.

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

EMPLOYEES

     The Company maintains its administrative employees at its executive offices
including its principal officers (see "Item 9 - Directors,  Executive  Officers,
Promoters  and Control  Persons;  Compliance  with Section 16(a) of the Exchange
Act"),  secretarial and  bookkeeping  personnel.  Each of the Company's  seafood
restaurant units employs a general manager,  two assistant  managers and between
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 Garcia's restaurant employs approximately 40 employees and
its Moore's Tavern and Restaurant  employs  approximately 60 employees,  in each
case serving similar  functions.  The Company also presently  employs three area
supervisors,   each  responsible  for  certain  of  the  Company's  restaurants.
Managerial candidates are recruited for the Company's restaurants from hotel and
restaurant   management  schools,   restaurant   recruiting  agencies,   through
advertising in restaurant  management magazines and by promotion from within the
Company's own  organization.  At January 28, 2001, the Company had approximately
430 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.

                                       16
<PAGE>


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 28, 2001.

                                       17
<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                     PART II


ITEM 5.   MARKET FOR COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS


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

                                                Bid Prices
         Quarter                           ---------------------
          Ended                             High           Low
          -----                            -------        ------

          April 30, 1999                   $ .9375        $.5625
          July 30, 1999                     1.5625         .875
          October 29, 1999                  1.07           .6875
          January 30, 2000                   .80           .75

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

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

     At March 30,  2001,  the number of record  holders of the Common  Stock was
6,689.   Such  number  of  record  owners  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 28, 2001.  Pursuant to the Company's Term Loan Agreement with
First Union National Bank, the Company is

                                       18
<PAGE>


restricted during the period any loans are outstanding under such agreement from
paying dividends on any of its outstanding stock.

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,  the impact of
competition to the Company's restaurants,  pricing,  acceptance of the Company's
food products and the Company's ability to amend its agreement with Garcimex.

OVERVIEW

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

     At January  28,  2001 the  Company  was  operating  nine  restaurants  on a
year-round basis. Seven of the restaurants are free-standing seafood restaurants
in New Jersey and Florida and are operated under the names  "Lobster  Shanty" or
"Baker's Wharfside." The Company also operates a Mexican theme restaurant in New
Jersey  under  the  name  "Garcia's."  The  Company  opened  its  first  seafood
restaurant in November 1978 and opened its Garcia's restaurant in Apri1 1996. In
February  2000,  the Company  commenced the  operation of the ninth  restaurant,
Moore's  Tavern  and  Restaurant  ("Moore's"),  a  free-standing  restaurant  in
Freehold, New Jersey serving an eclectic American food type menu.

                                       19
<PAGE>


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

     The Company  operated eight  restaurants  during the year ended January 30,
2000.

     The statements of operations are comprised of a 52-week period for both the
year ended January 28, 2001 ("fiscal  2001") and the year ended January 30, 2000
("fiscal 2000").

RESULTS OF OPERATIONS

SALES

     Sales for the year ended January 28, 2001 were $20,156,900,  an increase of
$2,160,300  or 12%, as compared to  $17,996,600  for the year ended  January 30,
2000.  The increase  includes sales of $1,908,300 at Moore's which opened during
the first quarter of fiscal 2001. Sales for the eight  restaurants that operated
during  both years  increased  $252,000  or 1.4%  despite a decrease of $107,100
during the fourth quarter due to the severe winter weather in the Northeast. The
number of customers served during fiscal 2001 in the eight restaurants  operated
in both fiscal 2001 and fiscal 2000  decreased by 2.1% in fiscal 2001 versus the
prior year while the average check paid per customer increased by 3.5%.

GROSS PROFIT; GROSS MARGIN.

     Gross  profit was 67.8% of sales for fiscal  2001 as  compared  to 67.6% of
sales for fiscal  2000.  Moore's had a lower gross  profit for the year than the
other eight restaurants but showed steady  improvement since opening in February
2000. The overall improvement in fiscal 2001 can be attributed  primarily to new
menus inserted in the New Jersey  restaurants,  including  Moore's,  in May 2000
which included price increases and continued to highlight lower cost menu items,
as well as lower liquor costs in the Florida  restaurants  due to a reduction in
state liquor taxes.

                                       20
<PAGE>


OPERATING EXPENSES.

     Total  operating  expenses  increased by 12.4% from  $11,608,500 for fiscal
2000 to $13,053,500 for fiscal 2001.  Payroll and related expenses were 29.8% of
gross sales for fiscal  2001  compared  to 29.5% of sales for fiscal  2000.  The
primary  reasons for the increase  were higher  health  insurance  costs and the
overall  higher payroll costs at Moore's.  Historically,  new  restaurants  have
higher operating expenses during the first few months of operation.  The payroll
cost  percentage  for the eight  stores  that  operated  during  both  years was
slightly lower in fiscal 2001.  Other operating  expenses  increased to 20.5% of
sales for fiscal 2001 versus 19.7% in 2000. Higher operating expenses at Moore's
account for the increase.

     Depreciation and amortization  expenses  increased by $90,800 during fiscal
2001 versus the prior year. The increase is comprised of $51,500 in depreciation
and amortization  costs associated with the February 2000 purchase of the liquor
license  and  furniture,  fixtures  and  equipment  of  Moore's  and  $39,300 in
increased  depreciation  costs resulting from capital  expenditures at the other
eight restaurants.

     General and  administrative  expenses  were  $31,100  higher in fiscal 2001
versus 2000. The major  components of the increase  included  higher salaries of
$79,900 due to the  Company's  Executive  Incentive  Bonus Plan (see  "Notes" to
Consolidated  Financial Statements - Note 9), an increase of $24,500 in employee
and customer relations costs and additional computer service expenses of $17,500
which were partially offset by a $48,400  reduction in legal fees,  $20,100 less
in training and recruiting costs, and a reduction of $16,500 in director fees.

     The $2,100 gain on  disposal  of assets in fiscal 2001 was  realized on the
disposal of a Company  vehicle.  The primary  component of fiscal 2000's gain on
disposal  resulted  from the sale of a liquor  license  of a  restaurant  closed
during fiscal 1999.

OTHER INCOME AND EXPENSE.

     Interest  expense  was  $34,600  lower  in  fiscal  2001  because  of  debt
reduction. Investment income increased by approximately $41,700 due primarily to
dividend income received on investments (see Notes 1 and 7).

                                       21
<PAGE>


NET INCOME.

     For the year ended January 28, 2001, income from continuing  operations was
$632,600  or $.15 per share and net income was  $954,800 or $.22 per share which
included a gain of $322,200 realized on the disposal of a discontinued  business
(see Note 12). Net income was $502,600 or $.11 per share for fiscal 2000.

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 2.15:1 at
January 28, 2001,  compared to 1.74:1 at January 30, 2000.  Working  capital was
$2,109,000  at the end of fiscal  2001,  an increase of $747,300  over the prior
year. During fiscal 2001, net cash decreased by $154,700. Net cash provided from
operating  activities  was  $1,697,000.   The  primary  changes  in  assets  and
liabilities  included an increase in inventories of $165,100 due to the addition
of Moore's and corporate  bulk seafood  purchases  incurred to take advantage of
market  prices,  and an increase in accrued  expenses and other  liabilities  of
$268,100  resulting  primarily  from an increase  of $98,200 in accrued  payroll
expenses,  including the incentive bonus plan charge, additional rent of $30,200
due to the percentage rent  requirements of the Moore's lease (see Note 10), and
an  increase of $27,200 in accrued  liabilities  associated  with the  Company's
health insurance plan.

     Investing  activities  during fiscal 2001 resulted in a net cash outflow of
$1,304,600.  Capital  expenditures  were  $949,300  with  the  major  components
including $339,500 for the acquisition of furniture,  fixtures and equipment and
improvements  at  Moore's  (see  Note  2),  $106,600  for  significant   Florida
improvements  including a  restaurant  point of sale  system  ("POS") and septic
system and kitchen upgrades, $93,100 for kitchen and dining room improvements at
the  Hightstown,  New Jersey  restaurant and $40,500 for Company  vehicles.  The
balance of $369,600 was spent on routine restaurant improvements.  Additionally,
Moore's liquor license was purchased for $357,900.  Other  investing  activities
included  payments of $570,300  received from MCF on notes  receivable (see Note
12) and the  purchase  of various  investments  totaling  $947,900  (see Note 1)
offset by  $459,500  for the sale of  investments  and  proceeds  from  maturing
certificates of deposit.

                                       22
<PAGE>


     Financing  activities  in fiscal  2001  resulted  in a net cash  outflow of
$547,100 and included debt repayment of $370,100, the purchase of 233,334 shares
of Chefs'  Common Stock from the president of MCF for $168,000 (see Note 12) and
approximately  $9,000 paid by the Company to repurchase  10,275 shares of Chefs'
outstanding  stock  pursuant  to a  Stock  Repurchase  Plan  authorized  by  the
Company's  Board of  Directors  in May,  2000 (see Note 11).  During  the second
quarter of fiscal 2001,  the Company's  $500,000 bank line of credit was renewed
for two years at a variable  rate,  equal to the monthly LIBOR Market Index Rate
plus 2.00%. At the year ended January 28, 2001 the entire $500,000 was available
for use.

     During fiscal 2000, net cash increased by $442,300.  Net cash provided from
operating  activities  was  $1,603,800.   The  primary  changes  in  assets  and
liabilities  were a reduction in accounts  payable of $58,300 and an increase of
$77,600 in accrued expenses associated with the Company's health insurance plan.
Investing  activities  during fiscal 2000 resulted in a net outflow of $575,200.
Capital  expenditures were $510,900 with the major components  including $78,800
for "Year 2000" (Y2K) computer  software and hardware system  upgrades,  $42,000
for a restaurant POS and $34,600 for Y2K phone system  upgrades at the corporate
office  and the  restaurants.  The  balance  of  $355,500  was spent on  routine
restaurant improvements.  Investing inflows included $149,500 from the sale of a
liquor  license and  payments of $66,400 by MCF on notes  receivable.  Financing
activities  in fiscal 2000  resulted in a net cash  outflow of $586,300 for debt
repayment.

     At the end of fiscal 2001,  the Company was in  compliance  with all of the
covenants  under its Loan  Agreements  with its primary bank,  First Union.  The
Company was also in full compliance at the year ended January 30, 2000.

     Subsequent  to the year ended  January 28, 2001,  the Company  purchased an
additional  5,775 shares of Chefs' Common Stock pursuant to the Stock Repurchase
Plan and to date, has cancelled a total of 11,250 of the repurchased shares.

     Management  anticipates  that  funds from  operations  and the bank line of
credit  will be  sufficient  to  meet  obligations  in  fiscal  2002,  including
projected capital expenditures of approximately  $529,300 for routine restaurant
improvements.  A majority  of the  capital  expenditures  are  expected to occur
during the first and second quarters of fiscal 2002.

                                       23
<PAGE>


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.  The price of
food is extremely  volatile and  projections as to its performance in the future
vary and are dependent upon a complex set of factors. There is a proposal before
Congress  to  raise  the  minimum  wage by $1.00 to  $6.15  per  hour.  However,
management  believes  that any such  increase  would  have a  minimal  impact on
payroll costs because the proposed  increase  would not change the cash wages of
the  Company's  tipped  employees  and a majority  of the  non-tipped  employees
already receive in excess of $6.15 per hour.

ITEM 7.   FINANCIAL STATEMENTS

     Attached.

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

     See Item 1,  "Developments  Since the Beginning of the Last Fiscal Year" as
to the  replacement  of Edward  Isaacs & Company LLP  ("Isaacs")  as the Company
independent accountants for the audit of its financial statements for the fiscal
year  ended  January  28,  2001 with the  certified  public  accounting  firm of
McGladrey & Pullen, LLP ("M&P") due to the merger of Isaacs into M&P.

                                       24
<PAGE>


                            CHEFS INTERNATIONAL, INC.

                                                      PART III


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

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

                                                  Date First
Name                      Age      Position       Elected a Director
----                      ---      --------       ------------------

                                  Chairman of
Robert M. Lombardi(a)      49       the Board        May 1999
Nicholas B. Boxter         53     Director           December 1999
Kenneth Cubelli            47     Director           December 1999
Raymond L. Dademo          43     Director           December 1999
Anthony M. Lombardi(a)     45     Director           July 1999
Joseph S. Lombardi(a)      50     Director           July 1999
Michael F. Lombardi(a)     52     Director           July 1999
Stephen F. Lombardi(a)     44     Director           July 1999

----------

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

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

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

Anthony C. Papalia         43       President, Treasurer, Chief
                                    Executive Officer, Chief Financial
                                    Officer and Director

Martin W. Fletcher         48       Secretary

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

                                       25
<PAGE>


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   orthopaedic   surgeon  with  the
Edison-Metuchen  Orthopaedic  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.  See "Developments  Since the
Beginning of the Last Fiscal Year."

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

     Kenneth  Cubelli,  M.D.  is, and for more than the past five years has been
principally  engaged as a  physician  and  orthopaedic  surgeon  with the Morris
County Orthopaedic 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   orthopaedic   surgeon  with  the
Edison-Metuchen  Orthopaedic 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


                                       26
<PAGE>


a senior officer of Lombardi & Lombardi,  P.A., an Edison,  New Jersey law firm.
He is also an officer of Moore's Inn, Inc. and a partner in Moore's Realty.

     EXECUTIVE OFFICERS

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

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

COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

     Based solely upon a review of Forms 3 and 4, the Company believes that with
respect to fiscal 2001, all Section 16(a) filing requirements  applicable to its
officers,  directors  and  beneficial  owners  of more  than  10% of its  equity
securities were timely complied with except for a corrective  filing to his July
1999  Form  4 and a  filing  made  in  February  2001  regarding  December  2000
transactions by Michael F. Lombardi and a late filing made by Joseph S. Lombardi
regarding his December 2000 purchase of 2,300 shares.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth  information  concerning the compensation paid or
accrued by the Company  during the three fiscal years ended  January 28, 2001 to
its Chief  Executive  Officer as well as to any other  executive  officer of the
Company or a subsidiary who earned at least $100,000 during fiscal 2001.  During
the  three-year  period ended  January 28,  2001,  the Company did not grant any
restricted  stock awards or have any  long-term  incentive  plan in

                                       27
<PAGE>


effect.  The Company  maintains a non-qualified  Supplemental  Employee  Benefit
Program  for  its  officers,  supervisors,  restaurant  managers  and  assistant
managers paying annual contributions ranging from $1,000 to approximately $3,000
per individual.  The Program provides life insurance death benefits,  disability
income benefits and retirement  income benefits.  A former officer and director,
James  Fletcher 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.

                           SUMMARY COMPENSATION TABLE

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

Anthony Papilia            2001   $164,557   $14,000             $2,088
 President and             2000   $159,975       $-0-            $2,088
 Chief Executive           1999   $150,000       $-0-            $2,088

Martin Fletcher            2001   $95,398    $10,910             $2,902
 Controller and            2000   $92,674        $-0-            $2,902
 Secretary                 1999   $86,925        $-0-            $2,902


----------

(a)  In May  2000,  the  Company's  Board  of  Directors  adopted  an  executive
incentive  bonus plan  providing  for an annual cash bonus to be paid to Company
employees  performing  executive type functions with respect to each fiscal year
(commencing with fiscal 2001) in which the Company  achieved  certain  specified
levels of earnings before  deducting  interest,  income taxes,  depreciation and
amortization.  Extraordinary terms are excluded for purposes of the computation.
The bonus pool for fiscal 2001  aggregated  $79,910 and was distributed to seven
employees including Anthony Papalia who received $14,000 and Martin Fletcher who
received $10,910.

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

EMPLOYMENT AGREEMENTS

     At the annual  meeting of the Company's  stockholders  held on December 19,
1995, stockholders ratified employment contracts between the Company and Anthony
Papalia as chief executive  officer

                                       28
<PAGE>


and chief  financial  officer and  between  the  Company and Martin  Fletcher as
controller. Each contract expired at the conclusion of the Company's 1999 fiscal
year  and was  automatically  renewed  on a year by  year  basis  for up to five
consecutive  additional  one-year  terms  unless  either party gave at least six
months'  prior  notice  that he or it did not desire  such  renewal.  As no such
notice was given  during  fiscal  1999,  each  contract was extended for a first
renewal year.  Mr.  Papalia's  annual salary under the contract was $150,000 and
Mr.   Fletcher's   annual  salary  under  the  contract  was  $87,000  but  each
individual's  salary was made subject to automatic increase in each Renewal Year
based on increases in the Consumer Price Index. As a result, during fiscal 2001,
Mr. Papalia's annual salary was increased to $164,557 and Mr.  Fletcher's annual
salary was  increased to $95,398.  If the  employment  of either  individual  is
terminated other than for cause, he will become entitled to a Severance  Payment
equal to the amount of his  compensation  over the balance of the contract term.
Each  individual  is also  entitled to terminate  his  employment  and receive a
Severance  Payment  equal to six  months'  salary in the  event of a "change  of
control" of the Company.  An amendment to each employment  contract  executed in
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.

STOCK OPTIONS

     At January  30,  2000 and at  January  28,  2001 there were no  outstanding
employee or non-employee stock options  exercisable to purchase shares of Chefs'
Common Stock.

DIRECTORS' COMPENSATION

     During  fiscal  2001,  no  compensation  was  paid to any of the  Company's
directors for serving in such capacity.  Furthermore,  no method of compensation
has been established at this date for the current directors.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN
          BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth  information  as of March 30,  2001 with
respect to their ownership of Chefs' Common Stock by (i)

                                       29
<PAGE>


each person known by the Company to be the  beneficial  owner of more than 5% of
Chefs' outstanding  Common Stock, (ii) each director of the Company,  (iii) each
executive officer of the Company,  and (iv) all directors and executive officers
as a group.


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

DIRECTORS*

Robert M. Lombardi             1,301,256(1)                  31%
Nicholas B. Boxter                    --                     --
Kenneth Cubelli                       --                     --
Raymond L. Dademo                  1,000                     --
Anthony Lombardi                 113,001                      3%
Joseph S. Lombardi               670,633                     16%
Michael F. Lombardi              282,393(1)(2)(3)             7%
Stephen F. Lombardi               34,500(1)(2)               --

EXECUTIVE OFFICER*

Anthony C. Papalia                 5,000                     --

All executive officers and
 directors as a group
 (ten persons)                 2,407,783(1)(2)(3)            57%

----------

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

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

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

     (3)  Includes 111,668 shares owned by the Lombardi & Lombardi, P.A. Defined
Benefit Pension Plan.  Michael F. Lombardi has voting and dispositive power with
respect to these shares.

                                       30
<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See Item 1 herein,  "Developments  Since the  Beginning  of the Last Fiscal
Year" as to the leasing by the Company of a restaurant  in Freehold,  New Jersey
and the purchase by it of a liquor license and furniture, fixtures and equipment
from affiliates of the Lombardi Group.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS

3.1       Restated Certificate of Incorporation of the Company(A)

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

4.1       Specimen Common Stock Certificate(C)

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

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

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

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

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

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

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

                                       31
<PAGE>


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

10.9      Chefs International Executive Incentive Bonus Plan

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

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

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

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

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

Chefs International             Florida                Lobster Shantys
  Palm Beach, Inc.                                       Vero Beach and Jensen
                                                         Beach, Florida

Robbins Parkway                 New Jersey             Lobster Shanty
  Realty Co., Inc.                                       Toms River,New Jersey

Hightstown REB, Inc.            New Jersey             Lobster Shantys
                                                         Pt. Pleasant Beach and
                                                         Hightstown, New Jersey


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

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

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

                                       32
<PAGE>


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

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

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


     (b)  REPORTS ON FORM 8-K

     The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended January 28, 2001.

                                       33
<PAGE>


                                   SIGNATURES

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

(Registrant)                                CHEFS INTERNATIONAL, INC.



                                            By       s/ ANTHONY C. PAPALIA
                                              ----------------------------------
                                              Anthony C. Papalia, President,
                                                Principal Executive, Financial
                                                and accounting officer


                                                Date: April     27       , 2001
                                                           --------------

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the date indicated.



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


  Date: April     27       , 2001             Date: April     27       , 2001
             --------------                              --------------



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


  Date: April     27       , 2001             Date: April     27       , 2001
             --------------                              --------------



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


  Date: April     27       , 2001
             --------------


                                       34
<PAGE>


                   CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

                                FINANCIAL REPORT

                                JANUARY 28, 2001

<PAGE>


                                    CONTENTS


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

FINANCIAL STATEMENTS:

   Consolidated Balance Sheet                                              F-2-3

   Consolidated Statements of Income                                         F-4

   Consolidated Statements of Stockholders' Equity                           F-5

   Consolidated Statements of Cash Flows                                     F-6

   Notes to Consolidated Financial Statements                             F-7-17

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

<PAGE>


                          INDEPENDENT AUDITOR'S REPORT



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


We  have  audited  the   accompanying   consolidated   balance  sheet  of  Chefs
International,  Inc. and  subsidiaries  as of January 28, 2001,  and the related
consolidated statements of income,  stockholders' equity, and cash flows for the
year then  ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements  based on our audit.  The  financial  statements  of Chefs
International,  Inc. as of and for the year ended  January 30, 2000 were audited
by Edward Isaacs & Company LLP, independent  accountants,  the majority of whose
partners merged with McGladrey & Pullen, LLP on October 2, 2000. Edward Isaacs &
Company LLP's report dated March 27, 2000  expressed an  unqualified  opinion on
those statements.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Chefs International,  Inc. and
subsidiaries  as of January 28, 2001,  and the results of their  operations  and
their cash flows for the year then ended in conformity  with generally  accepted
accounting principles.


                                          /S/ McGLADREY & PULLEN, LLP



New York, New York
March 27, 2001

                                       F-1
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JANUARY 28, 2001


ASSETS
--------------------------------------------------------------------------------

Current Assets:
    Cash and cash equivalents                                        $ 1,159,580
    Investments                                                          385,711
    Available-for-sale securities                                        978,652
    Miscellaneous receivables                                            109,492
    Inventories                                                        1,129,260
    Prepaid expenses                                                     176,187
                                                                     -----------

          TOTAL CURRENT ASSETS                                         3,938,882
                                                                     -----------

Property, Plant and Equipment, at cost                                20,045,070
    Less: Accumulated depreciation                                     8,182,351
                                                                     -----------

          PROPERTY, PLANT AND EQUIPMENT, NET                          11,862,719
                                                                     -----------

Other Assets:
    Investments                                                          301,000
    Goodwill - net                                                       454,462
    Liquor licenses - net                                                851,472
    Equity in life insurance policies                                    545,115
    Other                                                                 72,949
                                                                     -----------

          TOTAL OTHER ASSETS                                           2,224,998
                                                                     -----------

                                                                     $18,026,599
                                                                     ===========

See notes to consolidated financial statements.

                                      F-2
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (CONTINUED)
JANUARY 28, 2001


LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

Current Liabilities:
    Notes and mortgages payable                                     $   166,707
    Accounts payable                                                    582,276
    Accrued payroll                                                     186,687
    Accrued expenses                                                    477,825
    Gift certificates                                                   416,430
                                                                    -----------

          TOTAL CURRENT LIABILITIES                                   1,829,925
                                                                    -----------

Notes and Mortgages Payable                                             905,675
                                                                    -----------

Other Liabilities                                                       534,234
                                                                    -----------

Stockholders' Equity:
    Capital stock - common $.01 par value,
       Authorized 15,000,000 shares,
       Issued 4,257,085                                                  42,571
    Additional paid-in capital                                       32,138,798
    Accumulated deficit                                             (17,466,667)
    Accumulated other comprehensive income                               51,043
    Treasury stock                                                       (8,980)
                                                                    -----------

          TOTAL STOCKHOLDERS' EQUITY                                 14,756,765
                                                                    -----------

                                                                    $18,026,599
                                                                    ===========

See notes to consolidated financial statements.

                                      F-3
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000


                                                       2001            2000
--------------------------------------------------------------------------------

Sales                                              $ 20,156,890    $ 17,996,559

Cost of Goods Sold                                    6,487,675       5,830,757
                                                   ------------    ------------

     GROSS PROFIT                                    13,669,215      12,165,802
                                                   ------------    ------------

Operating Expenses:
  Payroll and related expenses                        6,016,792       5,302,533
  Other operating expenses                            4,142,225       3,541,566
  Depreciation and amortization                       1,104,254       1,013,416
  General and administrative expenses                 1,792,320       1,761,244
  (Gain) on disposal of assets                           (2,089)        (10,284)
                                                   ------------    ------------

     TOTAL OPERATING EXPENSES                        13,053,502      11,608,475
                                                   ------------    ------------

     INCOME FROM OPERATIONS                             615,713         557,327
                                                   ------------    ------------

Other Income (Expense):
  Interest expense                                     (105,958)       (140,552)
  Investment income                                     208,097         166,424
                                                   ------------    ------------

     OTHER INCOME, NET                                  102,139          25,872
                                                   ------------    ------------

     INCOME FROM CONTINUING OPERATIONS BEFORE
        INCOME TAXES                                    717,852         583,199

Provision for Income Taxes                               85,243          80,635
                                                   ------------    ------------

     Income from continuing operations                  632,609         502,564

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

     NET INCOME                                    $    954,821    $    502,564
                                                   ============    ============

Income Per Common Share From
  Continuing Operations                            $       0.15    $       0.11
                                                   ============    ============

Basic Income Per Common Share                      $       0.22    $       0.11
                                                   ============    ============

See notes to consolidated financial statements.

                                      F-4
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000


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

<S>                                   <C>         <C>           <C>           <C>            <C>          <C>           <C>
Balance at January 31, 1999           4,488,369   $    44,884   $32,304,485   $(18,924,052)  $        --  $        --   $13,425,317

Comprehensive Income:
  Net income                                 --            --            --        502,564            --           --       502,564

Fractional shares conversion               (207)           (2)            2             --            --           --            --
                                      ---------   -----------   -----------   ------------   -----------  -----------   -----------

Balance at January 30, 2000           4,488,162        44,882    32,304,487    (18,421,488)           --           --    13,927,881
                                                                                                                        -----------

Comprehensive Income:
  Net income                                 --            --            --        954,821            --           --       954,821

  Net Unrealized Gains on
    available-for-sale securities            --            --            --             --        51,043           --        51,043
                                                                                                                        -----------

      TOTAL COMPREHENSIVE INCOME             --            --            --             --            --           --     1,005,864
                                                                                                                        -----------

Repurchase and Retirement of
  Common Stock                         (233,334)       (2,333)     (165,667)            --            --           --      (168,000)
                                                                                                                        -----------

Stock Repurchase Program                     --            --            --             --            --       (8,980)       (8,980)
                                                                                                                        -----------

Fractional Shares Conversion              2,257            22           (22)            --            --           --            --
                                      ---------   -----------   -----------   ------------   -----------  -----------   -----------

Balance at January 28, 2001           4,257,085   $    42,571   $32,138,798   $(17,466,667)  $    51,043  $    (8,980)  $14,756,765
                                      =========   ===========   ===========   ============   ===========  ===========   ===========
</TABLE>


See notes to consolidated financial statements.

                                      F-5
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 28, 2001 AND JANUARY 30, 2000

                                                         2001          2000
--------------------------------------------------------------------------------

Cash Flows From Operating Activities:
  Net income                                          $   954,821   $   502,564
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                     1,104,254     1,013,416
      Gain on sale of assets                               (2,089)      (10,284)
      Gain on disposal of discontinued business          (322,212)           --
                                                      -----------   -----------

        CASH PROVIDED BY OPERATIONS                     1,734,774     1,505,696

      Increase (decrease) in cash attributable
        to changes in assets and liabilities:
          Miscellaneous receivables                       (46,455)        8,241
          Inventories                                    (165,126)       31,513
          Prepaid expenses                                (23,171)        4,456
          Accounts payable                                (16,826)      (58,261)
          Accrued expenses and other liabilities          268,082        77,551
          Income taxes payable                            (54,300)       34,600
                                                      -----------   -----------

        NET CASH PROVIDED BY OPERATING ACTIVITIES       1,696,978     1,603,796
                                                      -----------   -----------

Cash Flows (Used In) Investing Activities:
  Capital expenditures                                   (949,340)     (510,948)
  Liquor license purchase                                (357,873)           --
  Net proceeds from sale of assets                          2,089       149,497
  Sale or redemption of investments                       459,500       481,400
  Purchase of investments                                (947,920)     (708,300)
  Due on sale of discontinued operations - payments       570,330        66,386
  Equity in life insurance policies                       (39,511)       (8,529)
  Other assets                                            (41,853)      (44,662)
                                                      -----------   -----------

        NET CASH (USED IN) INVESTING ACTIVITIES        (1,304,578)     (575,156)
                                                      -----------   -----------

Cash Flows (Used In) Financing Activities:
  Repayment of debt                                      (370,087)     (586,343)
  Purchase of common stock                               (168,000)           --
  Purchase of treasury stock                               (8,980)           --
                                                      -----------   -----------

        NET CASH (USED IN) FINANCING ACTIVITIES          (547,067)     (586,343)
                                                      -----------   -----------

        NET INCREASE (DECREASE) IN CASH
          AND CASH EQUIVALENTS                           (154,667)      442,297

Cash and Cash Equivalents:
  Beginning                                             1,314,247       871,950
                                                      -----------   -----------

  Ending                                              $ 1,159,580   $ 1,314,247
                                                      ===========   ===========

Supplemental Disclosure of Cash Flow Information:
  Cash payment for:
    Interest                                          $   107,522   $   144,164
                                                      ===========   ===========

    Income taxes                                      $   136,826   $    46,166
                                                      ===========   ===========

Noncash Transactions:
  Increase in fair value of securities
    available for sale                                $    51,043   $        --
                                                      ===========   ===========

See notes to consolidated financial statements.

                                      F-6
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business:

     Chefs  International,  Inc. and its  subsidiaries  (the "Company")  operate
     seven  seafood  restaurants,  located in New Jersey and Florida,  generally
     under the trade name, "Lobster Shanty". The Company also operates Garcia's,
     a franchised  Mexican  restaurant,  and Moore's Tavern and  Restaurant,  an
     eclectic American restaurant.  Garcia's and Moore's Tavern are both located
     in New  Jersey.  Segment  information  is not  presented  since  all of the
     Company's revenue is attributable to a single reportable segment.

     Principles of Consolidation:

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

     Concentrations of Credit Risk:

     The Company  maintains cash balances at several  financial  institutions in
     New Jersey and Florida.  The  balances  are insured by the Federal  Deposit
     Insurance  Corporation  up  to  $100,000  at  each  financial  institution.
     Uninsured cash balances totaled approximately $973,000.

     Cash and Cash Equivalents:

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

     Investments:

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

     Available-for-Sale Securities:

     At January 28, 2001,  available-for-sale  securities consist of convertible
     bonds, mutual funds, and equity securities.  Available-for-sale  securities
     are  carried at fair value with  unrealized  gains or losses  reported in a
     separate  component of stockholders'  equity.  Realized gains or losses are
     determined based on the specific identification method.

                                      F-7
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

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

     Available-for-Sale Securities (Continued):

     Details as to  available-for-sale  securities  at January  28,  2001 are as
     follows:

                                                                   Unrealized
                                   Gross Cost      Fair Value         Gain
                                   ----------      ----------      ----------

     Debt securities                $ 17,250        $ 23,250        $ 6,000
     Mutual funds                    574,013         577,792          3,779
     Equity securities               336,346         377,610         41,264
                                    --------        --------        -------

                                    $927,609        $978,652        $51,043
                                    ========        ========        =======



     Inventories:

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

     Property, Plant and Equipment and Depreciation:

     Property, plant and equipment are carried at cost. Depreciation is computed
     over the  estimated  useful  lives of the  assets  using the  straight-line
     method ranging from 3 to 40 years.

     Goodwill:

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

     Impairment:

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

     Management  also  re-evaluates  annually  the  periods of  amortization  to
     determine  whether  subsequent  events and  circumstances  warrant  revised
     estimates of useful lives. As of January 28, 2001, management expects these
     assets to be fully recoverable.


                                      F-8
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

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

     Liquor Licenses:

     Liquor licenses are amortized over 40 years under the straight-line method.

     Use of Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  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.

     Income Taxes:

     The Company uses the asset and liability  method in  accounting  for income
     taxes.  Under  this  method,   deferred  tax  assets  and  liabilities  are
     determined based on differences  between financial  reporting and tax bases
     of assets and  liabilities and are measured using the enacted tax rates and
     laws that will be in effect when the differences are expected to reverse.

     Advertising:

     The Company expenses  advertising costs as incurred.  Advertising costs for
     fiscal 2001 and 2000 were $500,932 and $494,002, respectively.

2.   ACQUISITION

     On February 23, 2000, the Company acquired for  approximately  $634,000 the
     furniture,  fixtures,  equipment and a liquor license  associated  with the
     operations of Moore's Inn, a restaurant and tavern,  owned by the principal
     stockholders of the Company. The assets have been recorded at the principal
     stockholders  carryover  basis.  Additionally,  the Company  entered into a
     five-year lease for the restaurant property with a partnership owned by the
     principal shareholders of the Company.

3.   INVENTORIES

     Inventories consist of the following:

          Food                                              $  597,161
          Beverages                                            127,820
          Supplies                                             404,279
                                                            ----------

               Totals                                       $1,129,260
                                                            ==========

                                      F-9
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

4.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following:

          Land                                                  $ 3,262,159
          Buildings and improvements, including leaseholds       14,537,709
          Furniture and equipment                                 2,038,919
          Construction in progress                                  103,448
          China, glassware and utensils (a)                         102,835
                                                                -----------

                                                                $20,045,070
                                                                ===========

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

     Depreciation  expense was $1,050,495 and $968,423 for fiscal 2001 and 2000,
     respectively.

5.   INTANGIBLE ASSETS

     Intangible assets consist of:

                                                              Liquor
                                              Goodwill       Licenses
                                              --------      ----------

          Cost                                $949,820      $1,195,180
          Less: Accumulated amortization       495,358         343,708
                                              --------      ----------

                                              $454,462      $  851,472
                                              ========      ==========

     Amortization  expense  was  $53,759  and  $44,993 for fiscal 2001 and 2000,
     respectively.

6.   NOTES AND MORTGAGES PAYABLE

     Mortgage payable in monthly installments of $8,319,
     inclusive of interest at 7.82%, through November 2008,
     collateralized by real estate located in Vero Beach, Florida     $  810,516

     Mortgage payable in various monthly installments to amortize
     the mortgage at the rate of $105,000 annually, through
     December 2002 with interest at 9.25%, collateralized by real
     estate located in Toms River, New Jersey                            204,000

     Mortgage payable in monthly installments of $2,067 through
     May 2003, plus interest at LIBOR plus 2.25%, collateralized
     by real estate located in Toms River, New Jersey                     57,866
                                                                      ----------

                                                                       1,072,382
     Less: Current maturities                                            166,707
                                                                      ----------

                                                                      $  905,675
                                                                      ==========

                                      F-10
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

6.   NOTES AND MORTGAGES PAYABLE (Continued)

     Annual maturities for fiscal years 2003 through 2006 are $163,746, $51,492,
     $46,346 and $50,770, respectively.

     At January 28,  2001,  the Company has a $500,000  line of credit  which is
     collateralized  by real estate located in Point Pleasant Beach, New Jersey.
     The line is due June 30, 2002 and bears  interest  at LIBOR plus 2.00%.  At
     January 28, 2001, there were no amounts used under the line of credit.

     At January 28, 2001, LIBOR was 5.90%.

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

7.   INVESTMENT INCOME

     The components of investment income are summarized as follows:


                                                        2001         2000
                                                      --------     --------

     Interest income                                  $160,624     $166,424
     Dividends                                          45,214           --
     Realized gain on sales of investments               2,259           --
                                                      --------     --------

                                                      $208,097     $166,424
                                                      ========     ========

8.   RETIREMENT PROGRAMS

     The Company  has a  non-qualified  supplemental  retirement  program  which
     provides life insurance to certain eligible  employees.  The Company is the
     owner of all cash  values  of the  policies.  The death  benefit  is split,
     reimbursing  the Company  for  premiums  paid with the balance  paid to the
     beneficiary designated by the employee. Employees vest in the program after
     ten years,  with the option to take ownership of the policy at that time or
     let the Company  continue to fund the policy for an additional 5 years. The
     Company has  recorded,  as a long-term  asset in the  accompanying  balance
     sheet, its equity in life insurance for premiums  advanced and has included
     in other long-term  liabilities the Company's  estimated  liability for the
     amount of the equity in life  insurance  which the Company will be required
     to turn over to employees.

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

     The Company's  expense for these plans was $42,840 and $44,638,  for fiscal
     2001 and 2000, respectively.

                                      F-11
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

9.   EXECUTIVE INCENTIVE BONUS PLAN

     In Fiscal  2001,  the Board of Directors  approved an  executive  incentive
     bonus plan which  provides  eligible  employees an annual cash bonus if the
     Company  achieves  certain   financial  goals.  The  charge  to  operations
     applicable to the incentive plan for fiscal 2001 was $79,910.

10.  TRANSACTIONS WITH RELATED PARTIES

     In December  1999,  the Company  entered into an  agreement  with a company
     controlled  by the  principal  shareholders  of the Company.  The agreement
     called for the Company to provide  consulting to the officers and employees
     of the company  concerning  all  matters  relating  to the  operation  of a
     restaurant and tavern known as Moore's Inn. The agreement  provided for the
     Company to receive  fees of $1,800 per week.  Consulting  income for fiscal
     2001  and  2000,  pursuant  to  this  agreement,  was  $6,093  and  $7,200,
     respectively.  The  agreement  terminated  on February 23,  2000,  when the
     Company acquired the assets of Moore's Inn (see Note 2).

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

     Rent  expense  paid  pursuant to this lease for fiscal  2001 was  $114,497,
     which included percentage rent of $30,187.

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

11.  COMMITMENTS AND CONTINGENCIES

     Leases:

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

     Minimum future rental payments under  noncancelable  operating leases as of
     January 21, 2001, are as follows:

                         2002                   $  228,529
                         2003                      235,888
                         2004                      216,577
                         2005                      217,647
                         2006                      134,477
                     Thereafter                    264,719
                                                ----------

                                                $1,297,837
                                                ==========

     Total rent expense,  including rent paid to related  parties,  was $296,926
     and $203,490, for fiscal 2001 and 2000, respectively.

                                      F-12
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

11.  COMMITMENTS AND CONTINGENCIES (Continued)

     Employment Agreements:

     The  Company  has  employment  agreements  terminating  March 2001 with two
     employees  for  annual  amounts  ranging  from  $95,200  to  $164,100.  The
     agreements  are renewed  annually.  These  agreements  provide for lump sum
     payments in the event of the termination of the employees  without cause or
     a change in  control  of the  Company,  as  defined,  for a portion  of the
     unexpired term of the contracts.

     Stock Repurchase Plan:

     On May 24, 2000 the Board of Directors authorized the Company to repurchase
     over a two-year  period up to 400,000  shares of its  outstanding  stock at
     market price. At January 28, 2001 the Company had repurchased 10,275 shares
     for $8,980.

12.  GAIN ON DISPOSAL OF DISCONTINUED ICE CREAM BUSINESS

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

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

                                      F-13
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

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

     Cash  received  for Notes B and C prior to June 30,  2000 were  applied  to
     principal  and interest  based on the  discounted  note payment  schedules,
     which resulted in an additional $5,848 and $26,548 of interest income being
     recognized  in  fiscal  2001 and 2000,  respectively,  and was  applied  as
     follows:

                                                     2001           2000
                                                  ----------     ----------

     Interest income                              $   44,698     $   63,613
                                                  ==========     ==========

     Average recorded investment in loans         $   93,565     $  243,970
                                                  ==========     ==========

     Cash basis interest income                   $   46,667     $   65,559
                                                  ==========     ==========

     Valuation allowance                          $       --     $  534,502
                                                  ==========     ==========

13.  EARNINGS PER SHARE

     The weighted  average  number of shares  outstanding  used to compute basic
     earnings per share for fiscal 2001 and 2000 was  4,350,799  and  4,488,162,
     respectively.

14.  STOCK OPTIONS

     Under its 1982  Incentive  Stock Option Plan,  the Company was permitted to
     grant key executives  stock options  through June 1992.  Under the plan, an
     aggregate  of 55,556  shares of common stock were  reserved  for  issuance.
     Options vested  immediately and were  exercisable  over a period of five or
     ten years.  On November 1999,  36,559 options  outstanding  under this plan
     expired.

     In October 1994 and 1995,  the Company's  stockholders  approved  grants of
     216,667 and 300,000  non-qualified options to directors of the Company. The
     exercise  prices  for the  1994 and  1995  grants  were  $3.75  and  $3.00,
     respectively. The options granted in both years vested immediately and were
     exercisable  over five years.  During fiscal 2000,  162,501 options expired
     and 50,000 options were canceled.

                                      F-14
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

14.  STOCK OPTIONS (Continued)

         Summary of stock option activity is as follows:

                                                                  2000
                                                         ----------------------
                                                                       Weighted
                                                                       Average
                                                                       Exercise
                                                          Shares         Price
                                                         --------      --------

     Outstanding - beginning of year                      249,060      $   3.19
     Canceled during the year                             (50,000)        (3.00)
     Expired during the year                             (199,060)        (3.24)
                                                         --------      --------

         Outstanding - end of year                             --      $     --
                                                         ========      ========

         Exercisable - end of year                             --      $     --
                                                         ========      ========


15.  INCOME TAXES

     The  significant  components of deferred tax assets and  liabilities  as of
     January 28, 2001 are as follows:

     Deferred Tax Assets:
       Tax loss carryforwards                                    $2,818,000
       Capital loss carryforwards                                   192,000
       Other                                                         60,000
                                                                 ----------

         Totals                                                   3,070,000
                                                                 ----------

     Deferred Tax Liabilities:
       Depreciation                                                  89,000
       Other                                                          9,000
                                                                 ----------

         Totals                                                      98,000
                                                                 ----------

         Net Deferred Tax Assets                                  2,972,000
         Less: Valuation allowance                                2,972,000
                                                                 ----------

                                                                 $       --
                                                                 ==========

                                      F-15
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

15.  INCOME TAXES (Continued)

     As of January 28, 2001,  the valuation  allowance  reduces the net deferred
     tax asset to zero. The net change in the valuation allowance was a $169,000
     reduction for fiscal year 2001. The change in fiscal 2001 was primarily due
     to the utilization and expiration of tax loss carryfowards.

     The Company used  approximately  $1,030,000  and $984,000 of operating loss
     carryforwards in fiscal 2001 and 2000, respectively.  The tax effect was as
     follows:

                                                  2001             2000
                                                ---------        ---------

     Federal:
       Income tax expense                       $ 356,000        $ 335,000
       Operating loss carryforward               (337,000)        (323,000)
                                                ---------        ---------

          Total                                 $  19,000        $  12,000
                                                =========        =========

     State:
       Income tax expense                       $  87,243        $  78,235
       Operating loss carryforward                (21,000)          (9,600)
                                                ---------        ---------

          Total                                 $  66,243        $  68,635
                                                =========        =========

     The Company has available at January 28, 2001, operating loss carryforwards
     as follows:

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

                 2002                                          $ 1,509,463
                 2003                                            2,072,345
                 2004                                            2,942,316
                 2005                                              472,062
                 2006                                              220,595
                 2007                                              215,047
                 2008                                              196,704
                 2009                                              155,075
                 2010                                              103,553
                 2011                                              144,559
                 2012                                               88,405
                                                               ------------

                  Total                                        $ 8,120,124
                                                               ============

                                      F-16
<PAGE>


CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES

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

15.  INCOME TAXES (Continued)

     The  difference  between the tax provision at the statutory  Federal income
     tax rate and the tax  provision  attributable  to  income  from  continuing
     operations  before  income tax for the years  ended  January  28,  2001 and
     January 30, 2000 are as follows:

                                                     2001           2000
                                                    ------         ------

     Federal statutory rate                           34.0%          34.0%
     State taxes net of Federal benefit                5.0            5.0
     Valuation allowance change                       23.5           31.8
     Operating loss carryforwards                    (50.7)         (57.0)
                                                    ------         ------

         Effective Rate                               11.8%          13.8%
                                                    ======         ======


16.  52-53 WEEK PERIOD

     The  Company's  year end is the last Sunday in January.  The  statements of
     operations are comprised of a 52-week period both for fiscal 2001 and 2000.

                                      F-17