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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                FORM 10-KSB/A-2
                              FILED JULY 10, 1998
 
                ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1933
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                        COMMISSION FILE NUMBER: 0-22786
                            ------------------------
 
                         TIMBER LODGE STEAKHOUSE, INC.
          (NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                  MINNESOTA                                     41-1810126
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)
</TABLE>
 
           4021 VERNON AVENUE SOUTH, ST. LOUIS PARK, MINNESOTA 55416
                                 (612) 929-9353
         (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
 
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE
                                (TITLE OF CLASS)
 
Check 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 90
days. Yes  A   No ____
 
Check if disclosure of delinquent filers in response to item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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 its most recent fiscal year were $26,535,788.
 
On March 3, 1998, the Issuer had 3,634,417 shares of common stock, $.01 par
value, issued and outstanding, and the aggregate market value of the common
stock as of that date (based on the average of the closing bid and asked prices
as of that date as reported by the Nasdaq SmallCap Market), excluding
outstanding shares beneficially owned by directors and officers, was
approximately $19,377,000.
 
DOCUMENTS INCORPORATED BY REFERENCE: None
 
Transitional Small Business Disclosure Format (check one): Yes ____  No  A
 
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<PAGE>   2
 
                                     PART I
 
     This Form 10-KSB contains certain forward-looking statements. For this
purpose, any statement contained in this Form 10-KSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
or "continue" or the negative or other variation thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and the
actual results may differ materially depending on a variety of factors.
 
ITEM 1. DESCRIPTION OF BUSINESS
 
  General
 
     Timber Lodge Steakhouse, Inc. (the "Company") currently manages and
operates seventeen (17) Timber Lodge Steakhouse(TM) restaurants. Since the
Company's initial public offering of its Common Stock in December 1993, the
Company has expanded and continues to expand its steakhouse restaurant concept.
 
     On December 12, 1997, G B Foods Corporation (Nasdaq: "GBFC") of Anaheim,
California announced the execution of a letter of intent to acquire all the
outstanding capital stock of Timber Lodge Steakhouse, Inc. (Nasdaq: "TBRL").
 
     On January 16, 1998, G B Foods Corporation and Timber Lodge Steakhouse,
Inc. executed a Definitive Merger Agreement whereby G B Foods Corporation will
acquire all of the outstanding common stock of Timber Lodge Steakhouse, Inc. The
parties expect to close the transaction in July 1998. Under the terms of the
agreement, each share of Timber Lodge will be converted into the right to
receive .80 of a share of G B Foods Corporation common stock together with cash
in lieu of any fractional shares (the "Exchange Ratio"). In addition, the
agreement has established a collar for the Exchange Ratio of "GBFC" common stock
of $14.00 on the high end and $7.50 on the low end. If the average closing
common stock price for "GBFC" during the ten day trading period ending on the
second business day prior to the closing, ("Average Closing Stock Price"),
exceeds the limits of the collar, then the Exchange Ratio will be adjusted. If
the Average Closing Stock Price is more than $14.00, the Exchange Ratio shall be
reduced to a number (rounded to the nearest 1/10000) equal to the product of the
Exchange Ratio multiplied by a fraction, the numerator of which is $14.00 and
the denominator of which is the Average Closing Stock Price. If the Average
Closing Stock price is less than $7.50, G B Foods Corporation may elect to
increase the Exchange Ratio to the number (rounded to the nearest 1/10000)
determined by dividing $7.61 by the Average Closing Stock Price.
 
     The Merger is subject to certain customary conditions, including (i)
Fairness Opinions; (ii) approvals from the shareholders of the Company and GBFC;
and (iii) the parties obtaining all regulatory approvals, including the
Securities and Exchange Commission declaring effective a Registration Statement
covering the shares of GBFC's common stock to be issued in the Merger. The
Merger is also subject to the purchase by the Company from CKE Restaurants, Inc.
("CKE") (NYSE:CKR) or its affiliate of between twelve (12) and twenty (20) JB's
Restaurants for conversion to Timber Lodge Steakhouse restaurants. In this
regard, CKE has agreed under the Merger Agreement to negotiate in good faith
with the Company to consummate such purchase and sale. In addition, Fidelity
National Financial, Inc. (NYSE:FNF) has agreed under the Merger Agreement that,
subject to the approval of the Merger by the Company's shareholders, it will
exercise currently outstanding warrants to purchase shares of GBFC's common
stock for a cash purchase price aggregating not less than $5,000,000. G B Foods
Corporation plans to utilize such proceeds, in part, for the conversion of the
JB's Restaurants acquired by the Company into Timber Lodge Steakhouse
restaurants.
 
     The Company's full-service steakhouse restaurants offer dinners of generous
portions at moderate prices. Menu selections include steaks, which are selected,
aged and trimmed to the Company's customized specifications, prime rib,
barbecued ribs, fresh seafood, chicken, pork chops, pasta and specialty regional
dishes and appetizers. The Company's restaurants appeal to a broad range of
patrons by emphasizing casual dining, high quality food, limited menu selections
to ensure consistency in preparation and a well-trained staff for attentive and
quality service. This appeal is enhanced by the restaurants' "north woods"
atmosphere which
 
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features log-framed interiors, fireplaces, hardwood floors, wood tables, chairs
and booths, and memorabilia reflecting the history of northern tier states.
 
     Based upon the Company's current operations and experience, it believes
that its steakhouse restaurants can be expanded to markets across the northern
and western United States. Although competition in the restaurant industry is
intense, the Company believes its "north woods" steakhouse concept competes
favorably. Its growth strategy is to continue to develop a sufficient number of
Company-managed steakhouse restaurants in regional areas in order to provide
economies of scale in advertising, procurement and management, along with
greater exposure in each region. The Company believes it has accomplished this
in the Minnesota, South Dakota and Wisconsin region (thirteen restaurants).
 
     The Company operates one steakhouse in upstate New York (Niagara Falls)
that the Company continues to believe has long-term potential. During fiscal
year 1997 revenues increased 26% over fiscal year 1996 at the Niagara Falls
restaurant. Although the revenue increase helped the operating picture,
unit-level profitability and positive cash flow still has not been achieved at
the Niagara Falls site. The Company will continue to monitor its strategy and
marketing programs for this restaurant location, and will make the appropriate
business decision on long-term potential after the 1998 peak tourist season in
that market.
 
THE COMPANY'S STEAKHOUSE CONCEPT
 
     General. The Company believes that many restaurants expanded their menus in
an attempt to reach a broader market, but lost their distinctiveness and blurred
their market niche as a result. The Company's steakhouse restaurants offer a
limited number of menu selections allowing it to ensure consistent high-quality
dishes and, more importantly, to retain its focus as a steakhouse. Traditional
American meals at moderate prices and in generous portions are viewed by the
Company as attractive to a large segment of the population. In addition to
offering quality food for the money, the Company's "north woods," log cabin
design promotes a casual and comfortable atmosphere. The Company trains its
employees to provide excellent service, enhancing the distinctive dining
experience.
 
     All of the Company's restaurants' hours are limited to the service of
dinner. Such limited hours tend to reduce expenses associated with restaurant
management and employees, while still serving what is usually a restaurant's
most profitable meal. The Company expects most of its future restaurants will
similarly be limited to dinner.
 
     The Company selects and hires experienced general managers for its
restaurants, who are motivated to provide excellent service and efficient
management through a bonus compensation plan based on restaurant unit-level
profitability and improvement in sales performance. Purchasing decisions are
made by the Company's home office management to ensure uniformity of food
quality among all of the steakhouse restaurants at competitive prices. Each
restaurant also provides daily reports to the home office so that changes
regarding operation of any or all the restaurants can be made immediately.
 
     North Woods Atmosphere. Each restaurant incorporates a "north woods' theme
with its log-framed interior, fireplaces, hardwood floors and wood tables,
chairs and booths, all of which help to create a cozy feeling of dining in a
warm, comfortable north woods log cabin. Hunting, fishing, trapping, logging and
other memorabilia reflecting the history particular to northern tier states
adorn the walls, together with murals depicting regional folklore such as Paul
Bunyan. Oversized silverware, plates, and food portions are consistent with a
hunting lodge atmosphere. The casual atmosphere makes the restaurants
appropriate for a number of occasions.
 
     Menu. The menu is designed to appeal to a broad range of tastes, although
it contains a limited number of selections. The Company's menu provides
entertaining descriptions of the selections. Steaks, the restaurants' featured
entrees, are selected, aged and trimmed to the Company's customized
specifications. The menu also offers prime rib, barbecued ribs, fresh seafood,
chicken, pork chops and pasta. As part of the Company's commitment to quality,
it emphasizes fresh ingredients and uses beef that has never been frozen. The
Company offers daily specials, and regularly tests new menu selections which, if
well received, are added to the menu or replace less popular entrees.
Accompaniments such as Golden Wheat bread and specialty
 
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appetizers such as the "Paul Bunyan Onion," as well as desserts and full liquor
service, are also offered. Menu items range from $7.95 to $18.95 in price with
the average dining check per customer totaling approximately $17 to $18
(including beverages served with dinner, but excluding drinks served while
customers are awaiting seating). A children's menu with lower-priced selections
is also available.
 
     Advertising. The Company advertises through television, radio, newspapers
and billboards. In the Minneapolis/St. Paul market, the Company has recently
increased the use of television advertising. The Company currently has eight (8)
restaurants in the Twin Cities of Minneapolis / St. Paul, and the St. Cloud
restaurant is approximately 70 miles north west of Minneapolis and Twin City
television stations are carried into the St. Cloud market providing a total of
nine (9) restaurants that can be reached with Twin City television campaigns.
The Company currently has no billboard advertising in the Minneapolis / St. Paul
market, but may choose such advertising media in the future. The Company expects
to develop additional restaurants in the suburban Chicago and northern Illinois
market to make television advertising in that market place a viable option in
the near future. Billboard advertising is currently used in Duluth and St.
Cloud, Minnesota and Sioux Falls, South Dakota. During fiscal year 1997 the
Company spent approximately $893,000 in total for all forms of advertising, or
3.4% of net sales. The comparable number for fiscal year 1996 was approximately
$538,000, or 2.6% of net sales. The comparable number for fiscal 1995 was
approximately $420,000, or 2.5% of net sales.
 
     Target Market. The Company's target market is adults 25-65 with a primary
focus on the "early middle aged group" and moderate to moderately-high incomes.
The Company believes that its steakhouse restaurants, menu, pricing and
atmosphere appeal to this group and distinguishes them from other moderately
priced restaurants, as well as from other steakhouses. Because the restaurants'
patrons are likely to have children or grandchildren, the Company caters to
families as well with its children's menus, reasonable prices and casual
atmosphere. While each of the restaurants contains a bar, the Company believes
that its restaurants are generally selected for dining.
 
     Restaurant Site Development. The success of the Company's steakhouse
restaurants is highly dependent on suitable locations. The Company's management
focuses substantial effort and time on the investigation and evaluation of
potential restaurant sites. Site selection involves the analysis of area
demographics, population density and household income levels, as well as site
characteristics including visibility, accessibility and traffic volume. The
Company also considers the competition from existing restaurants, both
steakhouses and others, in the market of each proposed site.
 
     The Company's current and planned steakhouse restaurants range between
6,300 and 9,000 square feet, and seat an average of 230 persons, including
approximately 20 seats in the bar area. All of the Company's current restaurant
sites are leased. The Company's existing steakhouse restaurants are generally
located in suburban locations in strip centers or in free-standing buildings.
One steakhouse restaurant, located in Duluth, Minnesota, is located in a
renovated warehouse. The Company plans to develop additional steakhouses in
similar settings, with an emphasis on free-standing buildings and will consider,
when appropriate, end locations in strip centers.
 
     Based on past experience, the Company has generally been able to complete
preparations to open a restaurant in 17 to 21 weeks, as to existing buildings,
and 26 to 30 weeks when located in a building built to the Company's
specifications. These times can vary significantly depending on the time
required to obtain necessary permits and licenses, including liquor licenses,
from governmental authorities. The cost of developing four steakhouse
restaurants during fiscal 1997 (three of which were free-standing locations and
one was an end-cap in a new retail strip center) was approximately $1,565,000
per restaurant, including pre-opening expenses of approximately $134,000 per
restaurant. Such cost includes spending related to construction, furnishings,
equipment, permits and licenses, among others. As the Company has opened
additional steakhouse restaurants and gained more experience, the Company has
concluded that the cost of developing such restaurants can vary considerably
based upon various factors including: free-standing vs. located in strip
centers, new construction vs. conversion; and time of year during construction
activity.
 
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EXPANSION STRATEGY
 
     The Company anticipates it will open five or six steakhouse restaurants by
the end of fiscal 1998. The Company opened a Timber Lodge Steakhouse on January
15, 1998, in Arlington Heights, Illinois (suburban Chicago) and currently is
constructing a new Timber Lodge Steakhouse in Rochester, Minnesota. The
Rochester site is expected to open mid-year of fiscal 1998. The majority of the
anticipated expansion during fiscal 1998 and fiscal 1999 will involve the
purchase and conversion of approximately sixteen JB's restaurants into the
Timber Lodge Steakhouse concept. This strategy is part of the pending merger
with G B Foods Corporation mentioned elsewhere in this Form 10-KSB.
 
RESTAURANT OPERATIONS
 
     Management and Employees. The management staff of each restaurant consists
of a general manager, assistant manager, kitchen manager and assistant kitchen
manager. Each general manager is generally assigned one restaurant for a minimum
of four years, which the Company believes promotes stability and accountability.
The general managers are paid a base salary and a performance bonus based on
unit-profitability and improved sales performance of the restaurant which they
manage. The Company has traditionally hired general managers who have restaurant
management experience, and plans to do so for future restaurants.
 
     Each restaurant employs approximately 55 hourly employees, most of whom are
employed part-time. The Company limits the number of tables served by its wait
staff in order to maintain high customer service and satisfaction.
 
     Supervision and Training. The restaurants are closely supervised by the
general managers with guidance from the Company's home office management.
General managers are directly responsible for each restaurant's success.
Moreover, home office management visits each restaurant on a periodic basis to
oversee operations.
 
     The Company uses "secret diners," provided by an independent company, who
regularly visit and critique each restaurant three times per month. These
"secret diners" prepare a detailed report of their visit, including impressions
of the restaurant's service, food and cleanliness. The Company uses these
reports to monitor each restaurant's performance and to refine service policies
and procedures, food quality and preparation specifications, and the appearance
and appeal of all restaurants in general. The Company expects to continue to use
this practice in the future.
 
     The Company conducts a significant amount of training of its employees.
Although the Company generally hires general managers with restaurant
experience, each general manager spends up to ten weeks training in an
established Company restaurant before being assigned to a new restaurant.
Kitchen managers undergo similar training. Detailed policy and procedure manuals
provide a blueprint for restaurant operations for all levels of employees, from
greeting a customer to preparing a meal.
 
     Purchasing. The Company's home office management negotiates directly with
suppliers for most food and beverage products on behalf of the restaurants to
ensure uniformity of product quality at competitive prices. Restaurant managers
then place orders as needed from these pre-approved suppliers. Prices charged by
other suppliers for comparable products are monitored by the home office to
verify competitive pricing. Although the Company typically uses the same
suppliers, the Company has no long-term contracts with any of its food or
beverage suppliers. It believes alternative suppliers are available, if
necessary. The Company intends to use its existing suppliers as it continues to
expand, but if this practice becomes uneconomical, the Company will engage
suitable regional suppliers in the new areas.
 
     Meat is currently supplied primarily by one vendor (Westlunds's), which
delivers fresh supplies several times per week to the restaurants. The Company
has provided its meat supplier with customized specifications as to cut,
selection, trimming and aging in order to maintain the high quality and
consistency of its meat entrees. The Company believes alternative meat suppliers
are available which would be able to provide comparable cuts of meat at
competitive prices if the need arises. Timber Lodge Steakhouse, with the support
of its meat supplier, was awarded the 1996 Beef Backer Award from the Minnesota
Beef Council. The Beef
 
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Backer Award, established by the National Cattleman's Beef Association, honors
food service operations on a regional and national level that enthusiastically
promote beef.
 
     Restaurant Reporting. Each restaurant has a point-of-sale system that is
monitored by its restaurant managers. This allows daily cash and other reports
to be prepared regarding the total amount and comparison of sales. Weekly and
monthly profit and loss reports are also compiled by each restaurant for review
and analysis by the home office management, which compares such reports with its
own internally generated profit and loss analysis so as to respond to
inefficiencies and make necessary adjustments at each restaurant on a weekly
basis.
 
REGULATION
 
     The Company is subject to various federal, state and local laws affecting
its business. Each of the Company's restaurants is subject to licensing and
regulation by a number of government authorities, which may include alcoholic
beverage control, health and safety, and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining, or
failures to obtain, the required licenses or approvals could delay or prevent
the development of a new restaurant in a particular area.
 
     Approximately 15% of the Company's steakhouse revenues are attributable to
the sale of alcoholic beverages (including alcoholic beverages sold while
customers are awaiting seating). Alcoholic beverage control regulations require
each of the Company's restaurants to apply to a state authority and, in certain
locations, county or municipal authorities for a license or permit to sell
alcoholic beverages on the premises and to provide service for extended hours
and on Sundays. Typically, licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control regulations
relate to numerous aspects of the daily operation of the Company's restaurants,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, storage and dispensing of
alcoholic beverages. Failure of a restaurant to obtain or retain liquor or food
service licenses would adversely affect its operations.
 
     In certain states, including Minnesota, the Company may be subject to
"dram-shop" statutes, which generally provide that a person injured by an
intoxicated person has the right to recover damages from the establishment which
wrongfully served alcoholic beverages to the intoxicated person. The Company
carries liquor liability coverage as part of its existing comprehensive general
liability insurance and never has been named in a lawsuit involving a
"dram-shop" statute.
 
     The Company's restaurant operations are also subject to federal and state
minimum wage laws governing such matters as working conditions, overtime and tip
credits. Significant numbers of the Company's employees are paid at rates
related to the federal minimum wage and, accordingly, further increases in the
minimum wage could increase the Company's labor costs. Minnesota is one of the
few states that does not permit "tip credit" (the practice of employers paying
tipped employees below the minimum wage, with tips from customers making up the
balance of the minimum wage obligation). Currently ten of the Company's
seventeen restaurants are located in Minnesota, and further increases in the
minimum wage could significantly increase labor costs for the Company.
 
     The American with Disabilities Act (the "ADA") prohibits discrimination in
employment and public accommodations, such as restaurants, on the basis of
disability. Under the ADA, the Company is required to provide service to, or
make reasonable accommodations, for the employment and service of, disabled
persons. The Company believes its restaurants are in substantial compliance with
the ADA.
 
COMPETITION
 
     The restaurant industry is intensely competitive with respect to price,
service, location and food quality. There are several well-established
competitors with substantially greater financial and other resources than the
Company. In the Company's view, its principal competitors are not only other
steakhouses but also any other restaurants which offer a casual atmosphere and
moderately-priced meals.
 
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     Expansion of the steakhouse concept has increased in recent years. In
addition to traditional steakhouse restaurants, the Company expects to face
competition from new entries into the steakhouse market, such as national
steakhouse chains which have greater name recognition, are more well-established
and have significantly greater resources than the Company. Other competitors
include a large number of national and regional restaurant chains, many of which
have been in existence for a substantially longer period than the Company and
may be better established in the markets where the Company's restaurants are or
may be located. During the past year, Outback Steakhouse entered the
Minneapolis/St. Paul market and currently has three restaurants in operation in
that market.
 
     The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns, and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of experienced management and hourly-paid employees may adversely
affect the restaurant industry in general and the Company's restaurants in
particular.
 
TRADEMARKS
 
     The Company holds federal registrations from the United States Patent and
Trademark Office for "Timber Lodge Steakhouse(TM)" and "The Lodge in the Heart
of the City."
 
EMPLOYEES
 
     The Company currently employs approximately 940 employees, 298 of whom are
full-time and the balance of 642 are part-time persons. Of the full-time
employees, 68 are restaurant management personnel and 13 work in the
home/corporate office. None of the Company's employees are covered by a
collective bargaining agreement. The Company believes it maintains good
relations with its employees.
 
ITEM 2. DESCRIPTION OF PROPERTIES
 
  Properties/Restaurant Locations
 
     The Company's seventeen Timber Lodge Steakhouse restaurants are located in
the Minneapolis/St. Paul metropolitan area (Burnsville, Roseville, Eden Prairie,
West St. Paul, St. Louis Park, Spring Lake Park, Woodbury, and Crystal) of
Minnesota, with outstate Minnesota locations in Duluth and St. Cloud, Sioux
Falls, South Dakota, Niagara Falls, New York, Green Bay and Madison, Wisconsin
and the suburban Chicago area (Naperville, Vernon Hills and Arlington Heights).
All of these locations are occupied under leases which will expire between the
years 2001 and 2017, with renewal options of between three and ten years. The
leases for the Company's current restaurants provide for an average rent, as
measured over the term of each lease, of between $9 and $28 per square foot,
plus charges for real estate taxes and common area maintenance based on the
number of square feet leased. These long-term leases are non-cancelable.
Accordingly, if an existing or future restaurant is not profitable and the
decision is made to close the restaurant, the Company could be required to
perform its obligations under the lease. Such an event would likely have a
significant adverse impact on the Company's operations.
 
     The Company's corporate offices in St. Louis Park, Minnesota are leased
from a related party.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is not a party to any material litigation and is not aware of
any threatened litigation that would have a material adverse effect on its
business. Restaurant operators, such as the Company, are from time to time
involved in suits incidental to their business, which are generally covered by
insurance.
 
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     There were no matters which were submitted to a vote of security holders
during the fourth quarter of the fiscal year ended December 31, 1997. The
Company is currently in the process of preparing for a vote by security holders
for the pending merger with G B Foods Corporation of Anaheim, California.
 
                                    PART II
 
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Common Stock of the Company trades on the Nasdaq SmallCap Market under
the symbol "TBRL." The following table sets forth, for the calendar quarters
indicated, the high and low closing bid prices for the Company's Common Stock as
quoted by Nasdaq. These quotations reflect inter-dealer prices, without retail
markup, markdown or commissions, and may not reflect actual transactions.
 
<TABLE>
<CAPTION>
                                                              HIGH    LOW
                                                              ----   -----
<S>                                                           <C>    <C>
Fiscal year ended January 3, 1996
  First quarter.............................................  $5 1/4 $4 1/4
  Second quarter............................................  $4 7/8 $3 3/4
  Third quarter.............................................  $4 3/8 $   3
  Fourth quarter............................................  $3 1/4 $2 5/8
Fiscal year ended January 1, 1997
  First quarter.............................................  $4 1/4 $   3
  Second quarter............................................  $4 3/8 $3 3/8
  Third quarter.............................................  $4 5/8 $3 1/2
  Fourth quarter............................................  $4 1/2 $3 3/8
Fiscal year ended December 31, 1997
  First quarter.............................................  $5 1/8 $3 3/16
  Second quarter............................................  $4 1/4 $3 1/2
  Third quarter.............................................  $5 1/4 $3 3/8
  Fourth quarter............................................  $7 5/8 $4 1/4
</TABLE>
 
     As of March 3, 1998, the Company had 98 shareholders of record of its
Common Stock. The Company estimates its actual number of shareholders to be in
excess of 1,300.
 
     In connection with the Company's 401 (k) program, participants have the
option to purchase Timber Lodge common stock as an investment option. As of
December 31, 1997, 7,102 shares of Timber Lodge common stock were allocated to
the accounts of 47 participants.
 
     The Company has never paid or declared cash dividends on its Common Stock
and does not intend to pay cash dividends on its common stock in the foreseeable
future. The Company expects to retain its earnings to finance the development
and expansion of its business. The payment by the Company of cash dividends, if
any, on its Common Stock in the future is subject to the discretion of the Board
of Directors and will depend on the Company's earnings, financial condition,
capital requirements and other relevant factors.
 
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
  General
 
     As of December 31, 1997, the ending date of fiscal 1997, the Company
operated sixteen steakhouse restaurants. On January 15, 1998, the Company opened
its seventeenth restaurant in Arlington Heights, Illinois. The locations of the
other sixteen restaurants include eight in the Minneapolis-St. Paul metropolitan
area, and one each in Niagara Falls, New York, Duluth and St. Cloud, Minnesota,
Sioux Falls, South Dakota, Green Bay and Madison, Wisconsin, and Naperville and
Vernon Hills, Illinois. The Company uses a
 
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52/53 week fiscal year ending on the Wednesday nearest the end of the calendar
year. Both fiscal 1997 and fiscal 1996 consisted of 52 weeks of business and
fiscal 1995 consisted of 53 weeks of business.
 
     The Company capitalizes pre-opening costs and amortizes them over a
twelve-month period commencing with the restaurant opening. Pre-opening costs
consist of direct costs of hiring and training the initial work force and other
direct costs associated with opening a new restaurant. The Company's revenues
and expenses can be significantly affected by the number and timing of the
opening of additional restaurants. The timing of restaurant openings can also
affect net sales and other period-to-period comparisons.
 
RESULTS OF OPERATIONS
 
     The following table sets forth, for the periods indicated, the percentage
relationship to net sales of items in the Company's statements of operations.
 
<TABLE>
<CAPTION>
                                                                      FOR FISCAL YEARS ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 1,   JANUARY 3,
                                                                  1997          1997         1996
                                                              ------------   ----------   ----------
<S>                                                           <C>            <C>          <C>
Net sales...................................................    100.0%        100.0%       100.0%
Restaurant costs and expenses:
  Food and beverage costs...................................      37.5          37.6         38.8
  Labor and related benefit costs...........................      28.6          28.5         28.9
  Restaurant operating expenses.............................      10.0           8.7          8.6
  Occupancy costs...........................................      11.1          10.9         11.5
                                                                 -----         -----        -----
     Restaurant costs and expenses..........................      87.2          85.7         87.8
                                                                 -----         -----        -----
Restaurant operating income.................................      12.8          14.3         12.2
 
Operating expenses:
  General and administrative................................       6.1           7.0          9.1
  Amortization of pre-opening costs.........................       1.3           1.5          2.8
  Loss on sale and abandonment of restaurants, net..........        --            --          1.9
                                                                 -----         -----        -----
Operating income............................................       5.3           5.8         (1.6)
 
Interest expense............................................       0.3           0.2          0.1
Interest and other income...................................      (0.3)         (0.5)        (1.1)
                                                                 -----         -----        -----
Income before income taxes..................................       5.3           6.1         (0.6)
Income taxes................................................       1.6           1.3         (0.1)
                                                                 -----         -----        -----
Net income..................................................       3.7%          4.8%        (0.5)%
                                                                 =====         =====        =====
</TABLE>
 
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
 
     Net Sales. The Company achieved an increase in net sales of 28.6% to
$26,535,788 for fiscal 1997 compared with $20,636,760 for fiscal 1996. The sales
increase is the result, in part, of opening four new restaurants during fiscal
1997 and the full year impact of the three restaurants that opened during fiscal
1996. The balance of the sales increase is attributed to a 4.4% sales increase
in same store sales for the eleven restaurants that have been open for eighteen
months or more. The Company made selective price increases to its Minnesota menu
during September 1997 to offset the impact of the September 1, 1997, increase in
the federal minimum wage to $5.15 an hour. The wage increase represents an 8.4%
increase over the previous minimum wage of $4.75 an hour that became effective
October 1, 1996. Minnesota is one of the few states that does not permit "tip
credit" (the practice of employers paying tipped employees below the minimum
wage, with tips from customers making up the balance of the minimum wage
obligation). The Company estimates the effect of these selective price increases
to be in the range of 1.5% to 2.0% for its Minnesota operations.
 
     Costs and Expenses. Cost of restaurant sales, consisting of food and
beverage costs, decreased to 37.5% of net sales for fiscal 1997 compared to
37.6% for the same period last year. Increased business volume and the
 
                                        9
<PAGE>   10
 
related increase in purchase quantities of selected food items permitted the
Company to enjoy an improved volume pricing schedule and rebates from some of
its food suppliers during fiscal 1997.
 
     Labor and related employee benefit costs increased slightly to 28.6% of net
sales during fiscal 1997 compared to 28.5% for fiscal 1996. No single cost
category exhibited a significant relative change in labor and benefit costs
during fiscal 1997.
 
     Restaurant operating expenses include utilities, supplies, maintenance and
repairs, liquor licenses and the service fees and charges for credit card
transactions. In fiscal 1997 restaurant operating expenses increased to 10.0%
compared to 8.7% for fiscal 1996. The increase is attributable primarily to a
change in charging the service fees for credit card transactions to the
individual restaurants as part of restaurant operating expenses in fiscal 1997.
In the prior year these expenses were part of general and administrative
expenses, and in both periods, represent approximately 1.0% of net sales. The
Company also experienced a modest increase in maintenance expenses during fiscal
1997.
 
     Occupancy costs include rents, real estate taxes, common area maintenance,
building and contents insurance and depreciation on equipment and leasehold
improvements. Occupancy costs increased to 11.1% during fiscal 1997 compared to
10.9% for fiscal 1996. The increase is due to increased equipment rent expense
for the equipment operating leases used to help finance the five newest
restaurants
 
     General and Administrative Expenses. General and administrative expenses
decreased to 6.1% of net sales in 1997 compared to 7.0% for fiscal 1996. The
decrease is due principally to the expense classification change for the service
fees for credit card transactions previously described. Advertising is a
significant component of general and administrative expenses, and during fiscal
1997 the advertising expense was approximately $893,000 in total, or 3.4% of net
sales. The comparable advertising expense for fiscal 1996 was $538,000, or 2.6%
of net sales.
 
     Amortization of Pre-opening Costs. Amortization of pre-opening costs
decreased to 1.3% of net sales compared to 1.5% for the same period last year.
The modest change is driven by revenue growth in 1997.
 
     Interest Expense and Other Income. Interest expense was paid to the
Company's bank for short-term borrowings during fiscal 1997. The Company has a
$500,000 credit line facility with its bank, and interest is charged at prime
plus one percent, or 9.5% at December 31,1997. The Company's bank also provided
a construction loan in the amount of $1,375,000 for the new restaurant in St.
Cloud, Minnesota. Interest on the construction loan was at a rate of 10.25%. The
maximum borrowed from the Company's bank during fiscal 1997 for both the credit
line facility and construction loan was $1,829,987. All bank borrowings were
repaid by December 31, 1997. Total interest paid to the bank in fiscal 1997 was
$110,939, of which approximately $22,736 was capitalized during the construction
period. A minor amount of interest was also paid to the state of Minnesota on a
tax adjustment.
 
     Interest income was earned on the promissory note related to the Q. Cumbers
sale. The note earns interest at the prime rate, or 8.5% on December 31, 1997.
Interest income was also earned on money market accounts. During fiscal 1997 the
Company's cash balances were below the levels of the previous year, resulting in
less interest income.
 
     Provision for Income Taxes. The Company's effective tax rate is estimated
at 29.5% for fiscal 1997 compared to 22% for fiscal 1996.
 
     Net Income. The Company's net income for fiscal 1997 was $982,213 compared
to $982,981 for fiscal 1996. Basic earnings per share for fiscal 1997 was $.27,
compared to $.28 for fiscal 1996. Basic earnings per share have been calculated
for both fiscal 1997 and 1996 using the Financial Accounting Standards Board
Statement No. 128 (FASB 128). The lack of growth in net income for fiscal 1997
when compared to fiscal 1996 was principally affected because of the increase
during fiscal 1997 in four expense categories: the effective income tax rate of
29.5% versus 22%, increased interest expense from short-term borrowings, an
increase in monthly rent expenses for equipment operating leases for the five
newest restaurants and increased advertising expenses.
 
                                       10
<PAGE>   11
 
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
 
     Net Sales. The Company achieved an increase in net sales of 21% to
$20,636,760 for fiscal 1996 compared with $17,040,506 for fiscal 1995. The sales
increase is attributable in part to the full year impact of two new steakhouses
which opened in 1995 and to the opening of three new restaurants in 1996. Fiscal
1995 contained 53 fiscal weeks ending January 3, 1996. After adjusting for the
additional week in fiscal 1995, net sales grew 24% in 1996 on a comparable
basis. Same store sales for stores open at least 18 months were down 2.4%. The
Company believes that a reduction in sales is typical after an initial period of
high sales from a newly-opened restaurant. Two restaurants which opened toward
the end of 1994 experienced very high initial sales in 1995 and the Company may
report, in future periods, similar reductions in same store sales as long as it
continues to open new restaurants and stable sales patterns are established..
The Company increased menu prices less than 1% in 1996.
 
     Costs and Expenses. Cost of restaurant sales, consisting of food and
beverage costs, decreased to 37.6% of net sales for fiscal 1996 compared to
38.8% for fiscal 1995. This decrease is due in part to favorable prices of
produce along with the addition of temporary menu items that had a lower than
average food cost. These decreases more than offset the rise in meat and seafood
prices during the year.
 
     Labor and related benefit costs decreased as a percentage of sales by .4%
to 28.5% for 1996 compared to 28.9% for fiscal 1995. The decrease is due
primarily to the Company achieving improved hourly store productivity as new
restaurants mature and stabilize along with the benefit of a higher tip credit
from the two new restaurants that opened outside Minnesota. These savings offset
the increased cost of more employees entering the Company's health insurance
programs as eligibility requirements were met.
 
     Restaurant operating expenses and occupancy costs include rents, real
estate taxes, utilities, store supplies, smallwares, and other occupancy related
costs. Restaurant operating costs are semi-variable while most of the occupancy
expenses are fixed. In the aggregate for 1996, restaurant operating expenses and
occupancy costs decreased to 19.6% of net sales compared to 20.1% for fiscal
1995. The decrease is attributed to lower liability and building insurance
premiums compared to last year.
 
     General and Administrative Expenses. General and administrative expenses
decreased to 7.0% of net sales in 1996 compared to 9.1% for fiscal 1995. The
decrease is due, in part, to the Company changing the name of its restaurants to
"Timber Lodge Steakhouse" during 1995, resulting in one-time costs to execute
the change, including new signage, printing expenses, and advertising costs to
communicate the new identity. The Company increased its advertising in 1996 as a
result of adding two new markets to its store base.
 
     Amortization of Pre-Opening Costs. Amortization of pre-opening costs
decreased to 1.5% of net sales compared to 2.8% for fiscal 1995. The decrease is
due to fewer steakhouses opened during the period compared to the same period
last year. The Company amortizes pre-opening costs associated with new
restaurants over a twelve-month period commencing with the first full period
after the restaurant's opening.
 
     Loss on Sale and Abandonment of Restaurants. In June 1995, the Company sold
Q. Cumbers, an upscale salad bar restaurant that resulted in a pre-tax gain of
$278,120. In July 1995, the Company closed its Williamsville, New York
steakhouse which resulted in a loss of $607,164. No similar activity occurred in
1996.
 
     Interest and Other Income. Interest was earned on marketable securities
consisting of short-term government securities and a promissory note related to
the Q. Cumbers sale. Interest was paid on short term borrowing via a Line of
Credit the Company has with a local bank. Net interest income and other income
was $98,513 for fiscal 1996 compared with $179,902 for fiscal 1995. This
decrease is due to a reduction of marketable securities used to finance new
restaurant construction.
 
     Provision for Income Taxes. In 1996, the effective tax rate decreased due
to the reversal of cumulative, excess tax accruals provided for in prior years.
In the future, the Company expects its tax rate to approximate 30%.
 
     Net Income (Loss). The Company's net income for the year was $982,981
compared to net loss of ($88,231) for fiscal 1995. Basis earnings per share were
$.28 compared to ($.02) per share loss fiscal 1995.
                                       11
<PAGE>   12
 
Basic earnings per share have been calculated for both fiscal 1996 and 1995
using the Financial Accounting Standards Board Statement No. 128 (FASB 128). The
net loss for 1995 is attributable primarily to the one-time costs associated
with the name change conversion and the costs related to closing the
Williamsville, New York store.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Historically, the Company has leased its restaurant sites under
non-cancelable leases for periods of six to twenty years, with renewal options
of three and ten years. In fiscal 1997, the Company funded the development of
its new restaurants through a combination of internally generated cash from
operations, short-term bank borrowings, sale/leaseback financing and equipment
leasing.
 
     Cash provided by operating activities was $1,792,886 for fiscal 1997
compared to $3,052,701 for fiscal 1996 and $731,342 for fiscal 1995. The Company
had a net working capital deficit of ($1,034,045) at December 31, 1997, compared
to a net working capital deficit of ($337,912) at January 1, 1997. New
restaurant development has caused the reductions in working capital. The Company
continues to draw on its $500,000 bank line of credit to meet short-term cash
needs. At the end of fiscal 1997 this credit line did not have an outstanding
balance. Most of the Company's sales are paid in cash or credit card and the
Company generally receives 30 days credit from trade suppliers.
 
     Sale/leaseback financing with AEI Fund Management, Inc. of St. Paul,
Minnesota provided $1,575,000 for the November 1997 purchase of the St. Cloud,
Minnesota restaurant. The financing agreement between the Company and AEI Fund
Management, Inc. executed on September 23, 1997, provides for funding of up to
four restaurants/parcels. The Rochester, Minnesota site that is under
construction is being financed pursuant to that agreement between the Company
and AEI. This financing facility could fund two more new restaurants beyond the
St. Cloud and Rochester sites.
 
     The planned purchase and conversion of approximately sixteen (16) JB
restaurants into Timber Lodge Steakhouse restaurants has its own financing plan
as previously described for the pending Merger with G B Foods Corporation. If
for some reason, the pending Merger would not take place, the Company would slow
down its new restaurant growth strategy to match funding that would be provided
by internally generated cash, AEI sale/leaseback financing, and the use of
equipment leasing. The Company believes that these funding sources will fund
operations for at least the next twelve months.
 
IMPACT OF INFLATION
 
     Inflation has not significantly impacted the Company's operations during
fiscal 1997, 1996 and 1995. Substantial increases in either food costs,
particularly meat prices, or labor costs could negatively impact the Company in
the future. Because many of the Company's employees are paid at the federal
minimum wage levels, a continued trend in rising federal minimum wage levels
could have an adverse impact on future operating costs. In the event that
inflation increases future operating costs, there is no assurance that the
Company could fully recover such increases by raising menu prices.
 
YEAR 2000
 
     The year 2000 software issue is not expected to have a material impact on
the Company. Future developments may have a material adverse effect on the
Company.
 
                                       12
<PAGE>   13
 
ITEM 7. FINANCIAL STATEMENTS
 
     The following Financial Statements and Independent Auditor's Report thereon
are included herein (page numbers refer to pages in this Report on Form 10-KSB):
 
<TABLE>
<CAPTION>
                                                               PAGE
                                                              -------
<S>                                                           <C>
Report of Independent Auditors..............................       14
Balance Sheets as of December 31, 1997, and January 1,
  1997......................................................       15
Statements of Operations for the years ended December 31,
  1997, January 1, 1997, and January 3, 1996................       16
Statements of Changes in Shareholders' Equity for the years
  ended December 31, 1997, January 1, 1997, and January 3,
  1996......................................................       17
Statements of Cash Flows for the years ended December 31,
  1997, January 1, 1997, and January 3, 1996................       18
Notes to Financial Statements...............................  19 - 24
</TABLE>
 
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None
 
                                       13
<PAGE>   14
 
                         REPORT OF INDEPENDENT AUDITORS
 
Board of Directors and Shareholders
Timber Lodge Steakhouse, Inc.
 
     We have audited the accompanying balance sheets of Timber Lodge Steakhouse,
Inc. as of December 31, 1997, and January 1, 1997, and the related statements of
operations, changes in shareholders' equity and cash flows for the years ended
December 31, 1997, January 1, 1997, and January 3, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with 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 audits provide 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 Timber Lodge Steakhouse,
Inc. at December 31, 1997, and January 1, 1997, and the results of its
operations and its cash flows for the years ended December 31, 1997, January 1,
1997, and January 3, 1996, in conformity with generally accepted accounting
principles.
 
                                          /s/ ERNST & YOUNG LLP
                                              ---------------------
                                              ERNST & YOUNG LLP
 
Minneapolis, Minnesota
February 13, 1998
 
                                       14
<PAGE>   15
 
                         TIMBER LODGE STEAKHOUSE, INC.
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   JANUARY 1,
                                                                  1997          1997
                                                              ------------   -----------
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $   482,598    $ 1,178,373
  Accounts receivable.......................................      227,473        136,576
  Inventories...............................................      352,289        203,268
  Pre-opening costs, net....................................      450,510        168,933
  Deferred tax assets.......................................           --         64,300
  Prepaid expenses and other current assets.................      541,529        366,240
                                                              -----------    -----------
                                                                2,054,399      2,117,690
Property and equipment, net.................................   12,463,740     10,970,370
Deferred tax assets.........................................      132,400         23,200
Note receivable.............................................      346,000        396,000
Other assets................................................      221,639        190,182
                                                              -----------    -----------
          Total assets......................................  $15,218,178    $13,697,442
                                                              ===========    ===========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 1,512,713    $ 1,127,673
  Accrued salaries and wages................................      386,371        262,346
  Sales tax payable.........................................      187,153        136,327
  Deferred revenue -- gift certificates.....................      871,360        535,997
  Income taxes payable......................................           --        295,690
  Deferred tax liabilities..................................       59,000             --
  Accrued expenses and other liabilities....................       71,847         97,569
                                                              -----------    -----------
                                                                3,088,444      2,455,602
Deferred rent...............................................    1,063,429      1,248,224
                                                              -----------    -----------
          Total liabilities.................................    4,151,873      3,703,826
Shareholders' equity:
  Common stock, $.01 par value:
     Authorized shares -- 10,000,000
     Issued shares -- 3,566,833 at January 1, 1997 and
      3,625,750 at December 31, 1997........................       36,257         35,668
     Additional paid-in capital.............................    8,883,701      8,793,814
     Retained earnings......................................    2,146,347      1,164,134
                                                              -----------    -----------
          Total shareholders' equity........................   11,066,305      9,993,616
                                                              -----------    -----------
          Total liabilities and shareholders' equity........  $15,218,178    $13,697,442
                                                              ===========    ===========
</TABLE>
 
                            See accompanying notes.
                                       15
<PAGE>   16
 
                         TIMBER LODGE STEAKHOUSE, INC.
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                   FOR FISCAL YEARS ENDED
                                                          ----------------------------------------
                                                          DECEMBER 31,   JANUARY 1,    JANUARY 3,
                                                              1997          1997          1996
                                                          ------------   -----------   -----------
<S>                                                       <C>            <C>           <C>
Net sales...............................................  $26,535,788    $20,636,760   $17,040,506
Costs and expenses:
  Food and beverage costs...............................    9,944,401      7,767,907     6,613,278
  Labor and related benefit costs.......................    7,599,884      5,873,869     4,929,462
  Restaurant operating expenses.........................    2,648,596      1,805,317     1,466,891
  Occupancy costs.......................................    2,957,428      2,234,300     1,944,446
                                                          -----------    -----------   -----------
                                                           23,150,309     17,681,393    14,954,077
                                                          -----------    -----------   -----------
Restaurant operating income.............................    3,385,479      2,955,367     2,086,429
Operating expenses:
  General and administrative............................    1,617,984      1,445,313     1,556,485
  Amortization of pre-opening costs.....................      353,336        316,077       469,290
  Loss on sale and abandonment of restaurants, net......           --             --       329,044
                                                          -----------    -----------   -----------
Operating income........................................    1,414,159      1,193,977      (268,390)
Interest expense........................................       89,068         31,269         7,493
Interest and other income...............................      (68,828)       (98,513)     (179,902)
                                                          -----------    -----------   -----------
Income before income taxes..............................    1,393,919      1,261,221       (95,981)
Income taxes............................................      411,706        278,240        (7,750)
                                                          -----------    -----------   -----------
Net income..............................................  $   982,213    $   982,981   $   (88,231)
                                                          ===========    ===========   ===========
Basic earnings per share................................  $       .27    $       .28   $      (.02)
                                                          ===========    ===========   ===========
Diluted earnings per share..............................  $       .27    $       .27   $      (.02)
                                                          ===========    ===========   ===========
Basic weighted average shares...........................    3,604,791      3,571,167     3,607,123
                                                          ===========    ===========   ===========
Diluted weighted average shares.........................    3,675,857      3,659,782     3,607,123
                                                          ===========    ===========   ===========
</TABLE>
 
                            See accompanying notes.
                                       16
<PAGE>   17
 
                         TIMBER LODGE STEAKHOUSE, INC.
 
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                            COMMON STOCK       ADDITIONAL                    TOTAL
                                         -------------------    PAID-IN      RETAINED    SHAREHOLDERS'
                                          SHARES     AMOUNT     CAPITAL      EARNINGS       EQUITY
                                         ---------   -------   ----------   ----------   -------------
<S>                                      <C>         <C>       <C>          <C>          <C>
Balance at December 28, 1994...........  3,617,500   $36,175   $8,959,859   $  269,384    $ 9,265,418
  Purchase and retirement of common
     stock.............................    (42,000)     (420)    (134,844)          --       (135,264)
  Net loss.............................         --        --           --      (88,231)       (88,231)
                                         ---------   -------   ----------   ----------    -----------
Balance at January 3, 1996.............  3,575,500    35,755    8,825,015      181,153      9,041,923
  Purchase and retirement of common
     stock.............................    (10,000)     (100)     (34,687)          --        (34,787)
  Exercise of stock options............      1,333        13        3,486           --          3,499
  Net income...........................         --        --           --      982,981        982,981
                                         ---------   -------   ----------   ----------    -----------
Balance at January 1, 1997.............  3,566,833    35,668    8,793,814    1,164,134      9,993,616
  Purchase and retirement of common
     stock.............................     (2,000)      (20)      (7,293)          --         (7,313)
  Exercise of stock options............     60,917       609       97,180           --         97,789
  Net income...........................         --        --           --      982,213        982,213
                                         ---------   -------   ----------   ----------    -----------
Balance at December 31, 1997...........  3,625,750   $36,257   $8,883,701   $2,146,347    $11,066,305
                                         =========   =======   ==========   ==========    ===========
</TABLE>
 
                            See accompanying notes.
                                       17
<PAGE>   18
 
                         TIMBER LODGE STEAKHOUSE, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                       FOR FISCAL YEARS ENDED
                                                              ----------------------------------------
                                                              DECEMBER 31,   JANUARY 1,    JANUARY 3,
                                                                  1997          1997          1996
                                                              ------------   -----------   -----------
<S>                                                           <C>            <C>           <C>
OPERATING ACTIVITIES
Net income..................................................  $   982,213    $   982,981   $   (88,231)
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation..............................................    1,100,410        926,815       710,915
  Amortization..............................................      353,336        316,077       465,375
  Deferred rent.............................................     (184,795)       421,812       223,062
  Deferred taxes............................................       14,100        142,800      (124,200)
  Loss on sale and abandonment of assets, net...............           --             --       100,885
  Changes in operating assets and liabilities:
    Receivables.............................................      (90,897)       (48,860)       19,619
    Inventories.............................................     (149,021)       (37,266)        9,142
    Pre-opening costs.......................................     (631,013)      (328,466)     (240,923)
    Prepaid expenses and other current assets...............     (175,289)       (91,544)     (146,630)
    Accounts payable........................................      385,040        350,344      (252,045)
    Accrued salaries and wages..............................      124,025         75,433        (6,017)
    Sales taxes payable.....................................       50,826         19,995        30,467
    Deferred revenue -- gift certificates...................      335,363        106,671       167,867
    Income taxes payable....................................     (295,690)       281,093      (261,111)
    Accrued expenses and other liabilities..................      (25,722)       (65,184)      123,167
                                                              -----------    -----------   -----------
Net cash provided by operating activities...................    1,792,886      3,052,701       731,342
INVESTING ACTIVITIES
Purchases of property and equipment.........................   (4,168,780)    (3,924,964)   (3,047,925)
Sales of property and equipment.............................           --             --        65,546
Proceeds used in restaurant development.....................           --             --       943,893
Cash from sale of restaurant................................           --             --       125,000
Purchases of marketable securities..........................           --             --    (1,532,000)
Sales of marketable securities..............................           --             --     4,504,161
Other assets................................................      (35,357)        51,828       (15,300)
                                                              -----------    -----------   -----------
Net cash (used in) provided by investing activities.........   (4,204,137)    (3,873,136)    1,043,375
FINANCING ACTIVITIES
Proceeds from short-term borrowings.........................    1,829,987             --            --
Repayment of short-term borrowings..........................   (1,829,987)            --            --
Proceeds from sale/leaseback transaction....................    1,575,000             --            --
Exercise of stock options...................................       97,789          3,499            --
Principal collected on long-term note.......................       50,000         10,000            --
Common stock repurchased....................................       (7,313)       (34,787)     (135,264)
                                                              -----------    -----------   -----------
Net cash provided by (used in) financing activities.........    1,715,476        (21,288)     (135,264)
                                                              -----------    -----------   -----------
Net (decrease) increase in cash and cash equivalents........     (695,775)      (841,723)    1,639,453
Cash and cash equivalents at beginning of year..............    1,178,373      2,020,096       380,643
                                                              -----------    -----------   -----------
Cash and cash equivalents at end of year....................  $   482,598    $ 1,178,373   $ 2,020,096
                                                              ===========    ===========   ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid...........................................  $   806,697    $    15,324   $   364,159
Interest paid...............................................  $   110,939    $    31,269   $     7,493
</TABLE>
 
                            See accompanying notes.
                                       18
<PAGE>   19
 
                         TIMBER LODGE STEAKHOUSE, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1997
 
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
     ORGANIZATION AND DESCRIPTION OF BUSINESS -- The Company manages and
operates full-service steakhouse restaurants. The Company currently has
restaurants in Minnesota, Wisconsin, New York, South Dakota and Illinois.
 
     ACCOUNTING PERIOD -- The Company uses a 52/53 week fiscal year ending on
the Wednesday nearest to the end of the calendar year. Both fiscal 1997 and
fiscal 1996 included 52 weeks of business activity and fiscal 1995 included 53
weeks of business activity.
 
     CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. Cash equivalents are carried at amortized cost which approximates
market value and are considered available-for-sale.
 
     INVENTORIES -- Inventories consist principally of food, beverages and
supplies and are stated at the lower of cost (first-in, first-out) or market.
 
     PRE-OPENING COSTS -- Pre-opening costs consist of direct costs of hiring
and training the initial workforce, smallwares, printing, lodging, travel,
office supplies and other direct costs associated with opening a new restaurant.
Such costs are amortized over a twelve-month period commencing with the
restaurant opening.
 
     Accumulated amortization of pre-opening costs totaled $1,325,308 and
$975,872 at December 31, 1997, and January 1, 1997, respectively.
 
     ADVERTISING COSTS -- The Company capitalizes the production costs of
advertising and expenses those costs upon the first running of the ad. For the
years ended December 31, 1997, January 1, 1997, and January 3, 1996, the company
incurred advertising expenses of approximately $893,000, $538,000 and $420,000,
respectively.
 
     PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from five to ten years. Leasehold
improvements are amortized using the straight-line method over the shorter of
their estimated useful lives or the lease term, including option periods.
 
     EARNINGS PER SHARE -- Earnings per share has been calculated based on the
guidelines established by the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic
earnings per share was calculated by dividing income available to common
stockholders by the weighted average common shares outstanding. Diluted earnings
per share was calculated using the dilutive effect of stock options and warrants
using the treasury stock method. All earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to Statement 128
requirements.
 
     INCOME TAXES -- Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of assets and liabilities and their
respective tax bases.
 
     IMPAIRMENT OF LONG-LIVED ASSETS -- The Company will record impairment
losses on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount.
 
     STOCK BASED COMPENSATION -- The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," but applies Accounting Principles Board Opinion
No. 25 (APB 25) and related interpretations in accounting for its plans. Under
 
                                       19
<PAGE>   20
                         TIMBER LODGE STEAKHOUSE, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
APB 25, when the exercise price of employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
 
     USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from the
estimates.
 
2. PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   JANUARY 1,
                                                                  1997          1997
                                                              ------------   -----------
<S>                                                           <C>            <C>
Leasehold improvements......................................  $10,753,653    $ 8,432,010
Equipment...................................................    3,721,525      3,518,824
Furniture and fixtures......................................    1,131,202      1,073,938
Office equipment............................................      152,080        139,909
                                                              -----------    -----------
                                                               15,758,460     13,164,681
Less accumulated depreciation and amortization..............   (3,294,720)    (2,194,311)
                                                              -----------    -----------
                                                              $12,463,740    $10,970,370
                                                              ===========    ===========
</TABLE>
 
3. EARNINGS PER SHARE
 
     The following table sets forth the computation of basic and diluted
earnings per share:
 
<TABLE>
<CAPTION>
                                                            FOR FISCAL YEARS ENDED
                                                    --------------------------------------
                                                    DECEMBER 31,   JANUARY 1,   JANUARY 3,
                                                        1997          1997         1996
                                                    ------------   ----------   ----------
<S>                                                 <C>            <C>          <C>
Net income (loss).................................   $  982,213    $ $982,981   $  (88,231)
Denominator:
  Denominator for basic earnings per
     share -- weighted average shares.............    3,604,791     3,571,167    3,607,123
Effect of dilutive securities:
  Stock options...................................       71,066        88,615           --
                                                     ----------    ----------   ----------
Denominator for diluted earnings per
  share -- weighted average shares and assumed
  conversion......................................    3,675,857     3,659,782    3,607,123
                                                     ==========    ==========   ==========
Basic earnings (loss) per share...................   $      .27    $      .28   $     (.02)
                                                     ==========    ==========   ==========
Diluted earnings (loss) per share.................   $      .27    $      .27   $     (.02)
                                                     ==========    ==========   ==========
</TABLE>
 
4. STOCK OPTIONS AND WARRANTS
 
     Under the Company's stock option plan, the Company may grant either
incentive based or non-qualified options to employees, management and Directors.
Under the plan, options may be granted at prices not less than fair market value
of the Company's common stock at the grant date. Options become exercisable at
the rate of one-third of the granted shares after six, eighteen and thirty
months from the date of grant. The options are outstanding for ten years
following the date of grant.
 
                                       20
<PAGE>   21
                         TIMBER LODGE STEAKHOUSE, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4. STOCK OPTIONS AND WARRANTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                                         WEIGHTED AVERAGE
                                                        SHARES AVAILABLE     OPTIONS      EXERCISE PRICE
                                                           FOR GRANT       OUTSTANDING      PER SHARE
                                                        ----------------   -----------   ----------------
<S>                                                     <C>                <C>           <C>
Balance at December 28, 1994..........................      434,500          190,500          $2.74
  Granted.............................................      (47,500)          47,500           2.63
  Canceled............................................       25,500          (25,500)          2.63
                                                            -------          -------
Balance at January 3, 1996............................      412,500          212,500           2.73
  Granted.............................................      (59,500)          59,500           3.59
  Canceled............................................       50,500          (50,500)          3.06
  Exercised...........................................           --           (1,333)          2.63
                                                            -------          -------
Balance at January 1, 1997............................      403,500          220,167           2.88
  Granted.............................................      (68,500)          68,500           3.81
  Canceled............................................       14,500          (14,500)          2.88
  Exercised...........................................           --          (27,167)          2.68
                                                            -------          -------
Balance at December 31, 1997..........................      349,500          247,000          $3.21
                                                            =======          =======
</TABLE>
 
     In November 1992, the Company granted a non-qualified option to an officer
to purchase 33,750 shares at $.74 per share. This option was exercised in total
in February 1997.
 
     At December 31, 1997, January 1, 1997, and January 3, 1996, options of
189,166, 194,250 and 194,750, respectively, were exercisable at weighted average
prices of $3.04, $2.30 and $2.37, respectively.
 
     The weighted average fair value of options granted during the years ended
December 31, 1997, January 1, 1997, and January 3, 1996, was $1.53, $1.43 and
$1.13 per share, respectively.
 
PRO FORMA DISCLOSURES
 
     Pro forma information regarding net income and earnings per share is
required by Statement 123, and is determined as if the Company had accounted for
its employee stock options under the fair value method of the Statement. The
fair value for these options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for fiscal 1997, 1996 and 1995: risk free interest rate of 6%;
dividend yield of 0%; volatility factor of the expected market price of the
Company's stock of .461; and a weighted-average expected life of the option of 4
years.
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different than those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
                                       21
<PAGE>   22
                         TIMBER LODGE STEAKHOUSE, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4. STOCK OPTIONS AND WARRANTS (CONTINUED)
     For purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense, net of the related pro forma tax benefits, over
the options' vesting period. The Company's pro forma information follows:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,   JANUARY 1,   JANUARY 3,
                                                          1997          1997         1996
                                                      ------------   ----------   ----------
<S>                                                   <C>            <C>          <C>
Pro forma net income (loss).........................    $933,955      $957,821    $(100,916)
Pro forma earnings (loss) per share:
  Basic.............................................    $    .26      $    .27    $    (.03)
  Diluted...........................................    $    .25      $    .26    $    (.03)
</TABLE>
 
     Note: The pro forma effect on net income (loss) for fiscal 1997, 1996 and
1995 is not representative of the pro forma effects on net income (loss) in
future years because it does not take into consideration pro forma compensation
expense related to grants made prior to 1995.
 
WARRANTS
 
     In connection with the Company's initial public offering in December 1993,
the Company issued to the underwriter a warrant to purchase 120,000 shares of
common stock. The warrant became exercisable on December 9, 1994, and remains
outstanding until December 9, 1998. The warrant is exercisable at $7.20 per
share. The warrant contains antidilution provisions and is non-transferable.
 
5. LINE OF CREDIT
 
     The Company has a $500,000 line of credit facility with its bank. The line
of credit bears interest at the prime rate plus 1%, or 9.5% at December 31,
1997. The line of credit expires in June 1998. At December 31, 1997, there were
no borrowings outstanding against the line of credit.
 
6. INCOME TAXES
 
     The components of income tax expense for the years ended December 31, 1997,
January 1, 1997, and January 3, 1996, are as follows:
 
<TABLE>
<CAPTION>
                                                        FISCAL 1997   FISCAL 1996   FISCAL 1995
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Current:
  Federal.............................................   $311,589      $101,600      $  87,450
  State...............................................     86,017        33,840         29,000
 
Deferred:
  Federal.............................................     10,850       121,380       (103,100)
  State...............................................      3,250        21,420        (21,100)
                                                         --------      --------      ---------
                                                         $411,706      $278,240      $  (7,750)
                                                         ========      ========      =========
</TABLE>
 
                                       22
<PAGE>   23
                         TIMBER LODGE STEAKHOUSE, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
6. INCOME TAXES (CONTINUED)
     The tax effects of significant components of the Company's deferred tax
assets and liabilities are as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   JANUARY 1,
                                                                  1997          1997
                                                              ------------   ----------
<S>                                                           <C>            <C>
Deferred tax assets:
  Alternative minimum tax credit carryforwards..............    $90,700       $190,600
  General business credit carryforwards.....................    417,600        279,800
  Other.....................................................     18,800         20,400
                                                                -------       --------
          Total deferred tax assets.........................    527,100        490,800
Deferred tax liabilities:
  Depreciation..............................................    300,600        345,900
  Pre-opening costs.........................................    153,100         57,400
                                                                -------       --------
          Total deferred tax liabilities....................    453,700        403,300
                                                                -------       --------
Net deferred tax assets.....................................    $73,400       $ 87,500
                                                                =======       ========
</TABLE>
 
     At December 31, 1997, the Company had AMT credit carryforwards and the
general business credit carryforwards of $508,300. These credits expire at
various times through the year 2011.
 
     A reconciliation of statutory federal income taxes to the actual income tax
expense is as follows:
 
<TABLE>
<CAPTION>
                                                             FOR THE FISCAL YEARS ENDED
                                                       --------------------------------------
                                                       DECEMBER 31,   JANUARY 1,   JANUARY 3,
                                                           1997          1997         1996
                                                       ------------   ----------   ----------
<S>                                                    <C>            <C>          <C>
Income taxes at statutory rate.......................    $473,932      $428,815     $(32,635)
State income taxes, net of federal benefit...........      60,733        54,950       (5,068)
Alternative minimum tax..............................          --            --      116,450
Reduction of taxes previously provided for...........          --      (142,825)          --
Effects of Fica Tip Credit...........................     (91,000)      (62,700)          --
Other................................................     (31,959)           --      (86,497)
                                                         --------      --------     --------
                                                         $411,706      $278,240     $ (7,750)
                                                         ========      ========     ========
</TABLE>
 
7. RELATED PARTY TRANSACTIONS
 
     Two nephews of the Company's chief executive officer, Dermot F. Rowland,
own a construction company that managed the construction of some of the
Company's restaurants. Payments to this construction company totaled $1,056,011
in fiscal 1997. The accounts payable balance of the Company on December 31,
1997, included an amount of $432,634 that was payable to that construction
company.
 
     The Company rents office space for $3,660 per month in a building owned by
the Company's chief executive officer.
 
8. LEASE COMMITMENTS
 
     The Company leases restaurant facilities and equipment under noncancelable
operating leases that expire at various dates, including renewal options,
through 2017. In addition, certain leases contain escalation clauses based upon
a fixed percentage increase and provisions for contingent rentals based on a
percentage of gross revenues, as defined. The Company also pays real estate
taxes, insurance and common area maintenance expenses related to these leases.
 
                                       23
<PAGE>   24
                         TIMBER LODGE STEAKHOUSE, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
8. LEASE COMMITMENTS (CONTINUED)
     During 1997, the Company entered into a sale/leaseback in connection with
the development of the St. Cloud, Minnesota restaurant. The Company sold the
property, having a book value of $1,575,000, to a third party leasing company
for a selling price of $1,575,000. The Company then leased the property back
under lease terms similar to its other restaurants.
 
     Rental expense under these lease agreements was $1,346,101, $901,115 and
$745,768 for the years ended December 31, 1997, January 1, 1997, and January 3,
1996, respectfully.
 
     At December 31, 1997, future minimum lease payments under all noncancelable
lease agreements are as follows:
 
<TABLE>
<S>                                                           <C>
Period Ending:
   1998.....................................................  $ 1,860,009
   1999.....................................................    1,880,277
   2000.....................................................    1,914,721
   2001.....................................................    1,888,092
   2002.....................................................    1,635,044
   Thereafter...............................................   13,814,066
                                                              -----------
                                                              $22,992,209
                                                              ===========
</TABLE>
 
9. 401(K) PLAN
 
     In 1995, the Company adopted a defined contribution benefit plan that
covers virtually all full-time employees. Under the plan, eligible employees can
elect to contribute up to 15% of their annual compensation to the plan. The
Company is permitted, but not required, to make a matching contribution to the
plan up to a maximum of 6% of each participating employee's annual compensation.
The Company has not made a matching contribution since the plan's inception.
 
10. SALE AND ABANDONMENT OF RESTAURANTS
 
     The Company sold its Q. Cumbers unit to the existing store manager, who was
then a related party, on June 14, 1995. The Company retained the services of an
independent consultant to assess the fair market value of the business and
validate the Company's selling price. The store was sold for $531,000. The
Company received $125,000 in cash and a promissory note for $406,000. The sale
resulted in a pre-tax gain of $278,120. The promissory note bears interest at
the prime rate. Interest is payable monthly. The buyer is required to make
future principal payments of an annual amount of $50,000 from 1998-2002. In
2003, the remaining principal balance is due in full. The balance of the note
receivable at December 31, 1997, was $346,000.
 
     In May, 1995, the Company closed its Williamsville, NY restaurant. The
abandonment costs of $607,164 consist of the write-off of non-reusable assets
and related close down costs.
 
     The pre-tax gain of $278,120 on the sale of Q. Cumbers and the pre-tax loss
of $607,164 on the closing of the Williamsville, NY restaurant resulted in a net
loss on sale and abandonment of restaurants of $329,044 in fiscal 1995.
 
11. SUBSEQUENT EVENT
 
     On January 16, 1998, G B Foods Corporation and the Company executed a
Definitive Merger Agreement whereby G B Foods Corporation will acquire all of
the Company's outstanding common stock. The parties expect to close the
transaction in July 1998.
 
                                       24
<PAGE>   25
 
                                    PART III
 
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
 
(A) DIRECTORS, EXECUTIVE OFFICERS
 
<TABLE>
<CAPTION>
                                                                                       DIRECTOR
          NAME              AGE                        POSITION                         SINCE
          ----              ---                        --------                        --------
<S>                         <C>   <C>                                                  <C>
Dermot F. Rowland           60    Chairman of the Board, Chief Executive Officer,       1989
                                  Secretary and Director
Peter S. Bedzyk             46    President, Chief Operating Officer and Director       1996
William J. Birmingham       56    Chief Financial Officer                                --
Laurence F. LeJeune(1)      60    Director                                              1991
John P. Uphoff(1)           65    Director                                              1994
</TABLE>
 
---------------
(1) Member of the Audit Committee and the Compensation Committee
 
     DERMOT F. ROWLAND, a founder of the Company, has served as Chairman of the
Board, Chief Executive Officer, Secretary and as a Director of the Company since
1989. Prior to establishing the Company, Mr. Rowland was involved in the
formation and management of Homestyle Buffet, Inc., which subsequently changed
its name to Staceys Buffet Inc. ("Staceys"). Staceys, based in Largo, Florida,
develops and operates buffet restaurants. He co-founded Staceys in 1986 and
served as its President and Chief Executive Officer from 1986 to 1987. In 1987,
he became its Chairman of the Board and continued as a consultant and Director
until 1991.
 
     PETER S. BEDZYK has served the Company in several executive and management
positions since 1991. Mr. Bedzyk has been the Company's President and Chief
Operating Officer since February 1997 and a Director since May 1996. From June
1995 to February 1997 he served as Executive Vice President of Operations and
from 1991 to June 1995, Mr. Bedzyk served as the Company's Operations Manager as
well as General Manager of the Minnesota Steakhouse ( a predecessor of the
Company). From 1985 through 1990, Mr. Bedzyk was an Operating Partner of a
Bonanza Family Restaurant franchisee in St. Louis, Missouri. Mr. Bedzyk has
previously been employed by various restaurants, including Ponderosa Steakhouse
and Cracker Barrel Restaurants.
 
     WILLIAM J. BIRMINGHAM joined the Company in September 1997 as its Chief
Financial Officer. From July 1996 to May 1997 Mr. Birmingham served as Chief
Financial Officer of XOX Corporation, a St. Paul, Minnesota-based software
company that provides proprietary software for geometric computing. From January
1995 to March 1996, he served as Chief Financial Officer for B-Tree Verification
Systems, Inc., a Minneapolis-based company that provides test stations that
validate the software in devices containing embedded microprocessors. From
December 1992 through December 1994, he was Chief Financial Officer of Waters
Instruments, Inc., Rochester, Minnesota, a company that manufactures
electro-mechanical devices for the medical, computer, communications and
agriculture markets. Prior to this time, Mr. Birmingham was Chief Financial
Officer of a start-up medical device company in Minneapolis (f/k/a Cherne
Medical) and had an extended career with 3M Company, St. Paul, Minnesota
involving financial and marketing management positions. Mr. Birmingham left the
employ of the Company in April 1998.
 
     LAURENCE F. LEJEUNE has, since 1981, been the owner, and has served as
Chairman of the Board, of LeJeune Investment, Inc., a corporate holding company
which operates Carousel Automobiles and Maplewood Imports, both of which are
automobile dealerships located in the Minneapolis -- St. Paul metropolitan area.
He served as President and Chief Executive Officer of L.L. LeJeune Co., a
Minneapolis -- based structural steel fabricator, from 1967 to 1989. Mr. LeJeune
currently serves as a Director of Vaughn Communications, Inc. based in Edina,
Minnesota, which provides video duplication services and broadcast video
equipment rental.
 
                                       25
<PAGE>   26
 
     JOHN P. UPHOFF has served since 1993 as President and Chief Executive
Officer of Uphoff Capital Management, Inc., an investment firm. He also is
active as a private investor. Mr. Uphoff served as Senior Vice President and a
Director of Leisure Research for Raymond James & Associates, Inc. from 1984 to
1993. Prior to 1984, he served as President and Chief Executive Officer of
Uppy's Family Restaurants, Inc., a chain of multi-concept restaurants located in
Wisconsin and Florida. Mr. Uphoff currently serves as a Director of Monarch
Casino & Resort, Inc., a publicly-held gaming company based in Reno, Nevada.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     Audit Committee. The Board has an Audit Committee comprised of Mr. LeJeune
and Mr. Uphoff. The Audit Committee reviews the results and scope of the audit
and other services provided by the Company's independent auditors, as well as
the Company's accounting principles and its system of internal controls, and
reports the results of its review to the Board. The Audit Committee held three
meetings during the fiscal year ended December 31, 1997.
 
     Compensation Committee. The Board has a Compensation Committee comprised of
Mr. LeJeune and Mr. Uphoff who are responsible for setting the compensation of
the executive officers of the Company. The Compensation Committee met three
times during the fiscal year ended December 31, 1997.
 
(B) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and all persons who beneficially
own more than 10% of the outstanding shares of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Officers,
directors and persons owning more than 10 percent of the Company's outstanding
Common Stock are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms filed. Based solely
on a review of the copies of such reports and amendments thereto furnished to or
obtained by the Company or written representations that no other reports were
required, the Company believes that during the fiscal year ended December 31,
1997, the Company's directors, officers and beneficial owners of more than 10
percent of the Company's shares of Common Stock complied with all applicable
filing requirements, except that Mr. Rowland, Mr. Bedzyk, Mr. LeJeune and Mr.
Uphoff did not timely file one report each. All such reports have now been
filed.
 
ITEM 10. EXECUTIVE COMPENSATION
 
     The following table provides certain summary information for the past three
years ended December 31 concerning executive compensation paid or accrued by the
Company to the Company's Chief Executive Officer (the "Named Executive
Officer").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                    LONG TERM
                                                                               COMPENSATION AWARDS
                                                      ANNUAL COMPENSATION     ---------------------
                                                    -----------------------   SECURITIES UNDERLYING
           NAME AND PRINCIPAL POSITION              YEAR   SALARY     BONUS          OPTIONS
           ---------------------------              ----   ------     -----   ---------------------
<S>                                                 <C>    <C>        <C>     <C>
Dermot F. Rowland                                   1997   52,516(1)   --              10,000(2)
  (Chief Executive Officer)                         1996   84,808      --              15,000
                                                    1995   67,212      --              50,000(3)
</TABLE>
 
---------------
(1) Mr. Rowland was on disability for a portion of fiscal year 1997 and under
    terms of the Company's disability benefit program, received those benefit
    payments directly from the insurance company.
 
(2) In addition to the options for 10,000 shares granted in fiscal year 1997,
    Mr. Rowland was granted options for 10,000 shares at an exercise price of
    $5.91 per share on January 15, 1998.
 
                                       26
<PAGE>   27
 
(3) Represents 50,000 options previously granted to Mr. Rowland which were
    repriced from exercise prices of $5.55 and $4.95 per share to an amended
    exercise price of $2.89 per share.
 
                  STOCK OPTION GRANTS DURING FISCAL YEAR 1997
 
     The following table provides information regarding stock options granted
during fiscal year 1997 to the Named Executive Officer in the Summary
Compensation Table.
 
<TABLE>
<CAPTION>
                                   OPTIONS     % OF TOTAL OPTIONS     EXERCISE PRICE
              NAME                 GRANTED   GRANTED IN FISCAL YEAR     PER SHARE      EXPIRATION DATE
              ----                 -------   ----------------------   --------------   ---------------
<S>                                <C>       <C>                      <C>              <C>
Dermot F. Rowland................  10,000(1)         14.6%                $4.125        May 29, 2007
</TABLE>
 
---------------
(1) The date of grant of the stock option was May 30, 1997. Options become
    exercisable at the rate of one-third of the granted shares after six,
    eighteen and thirty months from the date of grant.
 
   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES
 
<TABLE>
<CAPTION>
                         NUMBER OF                   NUMBER OF UNEXERCISED         VALUE (1) OF UNEXERCISED
                          SHARES                  OPTIONS AT DECEMBER 31, 1997   OPTIONS AT DECEMBER 31, 1997
                         ACQUIRED     VALUE (1)   ----------------------------   ----------------------------
         NAME           ON EXERCISE   REALIZED    EXERCISABLE    UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE
         ----           -----------   ---------   -----------    -------------   -----------    -------------
<S>                     <C>           <C>         <C>            <C>             <C>            <C>
Dermot F. Rowland.....    33,750      $196,425      61,667          13,333        $215,472         $35,215
</TABLE>
 
---------------
(1) Value is the difference between the exercise price of the option and the
    closing price of the common stock on December 31, 1997 of $6.56 per share.
 
                             DIRECTOR COMPENSATION
 
     During the fiscal year ended December 31, 1997, the Company paid no fees or
compensation or expense reimbursement to each non-employee director. The Company
grants to its non-employee directors non-qualified stock options to purchase
shares of the Company's Common Stock at prices which are equal to the fair
market value on the date of grant. These non-qualified stock options are
exercisable at any time from the date of grant and have a ten-year life. During
the fiscal year ended December 31, 1997, the Company granted to each of its
non-employee directors, Laurence F. LeJeune and John P. Uphoff, options to
purchase 5,000 shares of Common Stock at exercise prices of $3.375 per share and
5,000 shares of Common Stock at an exercise price of $3.75, the respective
closing bid prices of the Company's Common Stock on the date of such grants. On
January 15, 1998, Mr. LeJeune and Mr. Uphoff were each granted non-qualified
options to purchase 10,000 shares of Common Stock at exercise prices of $5.375
per share, the closing bid price on January 15, 1998.
 
                                       27
<PAGE>   28
 
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth certain information as of the date of this
Form 10-KSB, the number of shares of the Company's Common Stock beneficially
owned by (i) each executive officer and director of the Company; (ii) each
person known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock; and (iii) all executive officers and directors as a
group.
 
<TABLE>
<CAPTION>
                                                          NUMBER OF SHARES
                                                          OF COMMON STOCK       PERCENTAGE OF OUTSTANDING
        NAME AND ADDRESS OF BENEFICIAL OWNER           BENEFICIALLY OWNED(1)        COMMON SHARES(9)
        ------------------------------------           ----------------------   -------------------------
<S>                                                    <C>                      <C>
Dermot F. Rowland....................................         595,119(2)                 16.1%
4021 Vernon Avenue South
Minneapolis, Minnesota 55416
Peter S. Bedzyk......................................          40,042(3)                  1.1%
4021 Vernon Avenue South
Minneapolis, Minnesota 55416
William J. Birmingham................................           1,667(4)                     *
4021 Vernon Avenue South
Minneapolis, Minnesota 55416
Laurence F. LeJeune..................................         161,500(5)                  4.4%
8989 Wayzata Boulevard
Minneapolis, Minnesota 55426
John P. Uphoff.......................................          35,000(6)                  1.0%
P.O. Box 6611
Incline Village, Nevada 89450
All executive officers and directors as a group (5
  persons)...........................................         833,328(7)                 21.8%
Heartland Advisors, Inc..............................         506,000(8)                 13.9%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
</TABLE>
 
---------------
 *  less than one percent
 
(1) Shares of Common Stock subject to options exercisable within 60 days after
    the date of this Form 10-KSB are deemed to be outstanding for purposes of
    computing the percentage of shares beneficially owned by the person holding
    such options but are not deemed to be outstanding for purposes of computing
    such percentage for any other person. Except as indicated by footnote, each
    person or group identified has sole voting and investment powers with
    respect to all shares of Common Stock shown as beneficially owned by them.
 
(2) Includes options to purchase up to 61,667 shares of Common Stock and 6,250
    shares of Common Stock owned by Mr. Rowland's spouse.
 
(3) Includes options to purchase up to 36,667 shares of Common Stock.
 
(4) Represents options to purchase up to 1,667 shares of Common Stock. Mr.
    Birmingham left the employ of the Company in April 1998.
 
(5) Includes options to purchase up to 50,000 shares of Common Stock.
 
(6) Includes options to purchase up to 30,000 shares of Common Stock.
 
(7) Includes options to purchase up to 180,001 shares of Common Stock.
 
(8) Based on information supplied on Schedule 13G, filed with the Securities and
    Exchange Commission on January 8, 1998.
 
(9) The percentage of outstanding shares of Common Stock shown in the table
    above is calculated based on 3,634,417 shares outstanding as of the date of
    this Form 10-KSB and assumes that in each case the person or group exercised
    his or its outstanding options which have vested or will vest within 60 days
    of this Form 10-KSB.
 
                                       28
<PAGE>   29
 
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Two nephews of the Company's Chairman and Chief Executive Officer, Dermot
F. Rowland, own a construction company that managed the construction of some of
the Company's restaurants. Payments to this construction company totaled
$1,056,011 in fiscal 1997. The accounts payable balance of the Company on
December 31, 1997, included an amount of $432,634 that was payable to that
construction company.
 
     The Company rents office space for $3,660 per month in a building owned by
the Company's Chairman and Chief Executive Officer, Dermot F. Rowland.
 
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
 
(a) Exhibits:
 
<TABLE>
  <S>   <C>
   3.1  Articles of Incorporation of Timber Lodge Steakhouse, Inc.
        (1)
   3.2  Bylaws (2)
  10.4  Agreement and Plan of Merger dated as of January 16, 1998
        among GB Foods Corporation TLS Acquisition Corp. and Timber
        Lodge Steakhouse, Inc. (5)
  23.1  Consent of Independent Auditors (4)
  24.1  Power of Attorney (3)
  27.1  Financial Data Schedule (5)
</TABLE>
 
---------------
(1) Incorporated by reference to the specific exhibit included in the Company's
    Quarterly Report on Form 10-QSB for the quarter ended June 14, 1995.
 
(2) Incorporated by reference to the specific exhibit included in the Company's
    Registration Statement on Form SB-2, SEC File No. 33-71176-C.
 
(3) Previously filed.
 
(4) Filed herewith electronically.
 
(5) Previously filed.
 
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during the
    fourth quarter of fiscal 1997.
 
                                       29
<PAGE>   30
 
                                   SIGNATURES
 
     In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
Dated: July 10, 1998                      Timber Lodge Steakhouse, Inc.
 
                                          By      /s/ DERMOT F. ROWLAND
                                            ------------------------------------
                                            Dermot F. Rowland
                                            Chief Executive Officer
 
     In accordance with the requirements of the Exchange Act, this Report has
been signed below by the following persons on behalf of the Company and in the
capacities indicated on July 10, 1998.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                           POSITION
                      ---------                                           --------
<C>                                                    <S>
 
                /s/ DERMOT F. ROWLAND                  Director, Chairman of the Board, Chief
-----------------------------------------------------    Executive Officer and Secretary
                  Dermot F. Rowland
 
                 /s/ PETER S. BEDZYK                   Director, President and Chief Operating
-----------------------------------------------------    Officer
                   Peter S. Bedzyk
 
                          *                            Director
-----------------------------------------------------
                 Laurence F. LeJeune
 
                          *                            Director
-----------------------------------------------------
                   John P. Uphoff
 
                  /s/ JAMES KELZER                     Chief Accounting Officer
-----------------------------------------------------
                    James Kelzer
 
            * Signed by Dermot F. Rowland
               pursuant to a power of
                  attorney on file
</TABLE>
 
                                       30
<PAGE>   31
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
  EXHIBIT
    NO.                            DESCRIPTION
  -------                          -----------
  <S>      <C>
   3.1     Articles of Incorporation of Timber Lodge Steakhouse, Inc.
           (1)
   3.2     Bylaws (2)
  10.4     Agreement and Plan of Merger dated as of January 16, 1998
           among GB Foods Corporation TLS Acquisition Corp. and Timber
           Lodge Steakhouse, Inc. (5)
  23.1     Consent of Independent Auditors (4)
  24.1     Power of Attorney (3)
  27.1     Financial Data Schedule (5)
</TABLE>
 
---------------
(1) Incorporated by reference to the specific exhibit included in the Company's
    Quarterly Report on Form 10-QSB for the quarter ended June 14, 1995.
 
(2) Incorporated by reference to the specific exhibit included in the Company's
    Registration Statement on Form SB-2, SEC File No. 33-71176-C.
 
(3) Previously filed.
 
(4) Filed herewith electronically.
 
(5) Previously filed.