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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 28, 2002

For the transition period from                      to _______

Commission file number 1-12104

BACK YARD BURGERS, INC.
(Exact name of registrant as specified in its charter)

1657 Shelby Oaks Dr. N. Ste. 105, Memphis, Tennessee 38134
(Address of principal executive offices)

(901) 367-0888
(Registrant’s telephone number)

Indicate by a check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class — Common stock, par value $.01 per share

Outstanding at October 31, 2002 – 4,742,349

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BACK YARD BURGERS, INC.

INDEX

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Back Yard Burgers, Inc.
Consolidated Balance Sheet (Unaudited)
(in thousands, except for share and per share amounts)

See accompanying notes to unaudiited financial statements.

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Back Yard Burgers, Inc.
Consolidated Statement of Income (Unaudited)
(in thousands, except per share amounts)

See accompanying notes to unaudiited financial statements.

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Back Yard Burgers, Inc.
Consolidated Statement of Cash Flows (Unaudited)
(in thousands)

See accompanying notes to unaudiited financial statements.

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BACK YARD BURGERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

Back Yard Burgers, Inc. owns and operates quick-service and fast-casual restaurants and is engaged in the sale of franchises and the collection of royalties based upon related franchise sales. The company grants franchise rights for the use of “Back Yard Burgers,” “BYB” or “BY Burgers” trade names and other associated trademarks, signs, emblems, logos, slogans and service marks which have been or may be developed.

         The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and notes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The statements do reflect all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position and results of operations and cash flows in conformity with generally accepted accounting principles. The statements should be read in conjunction with the Notes to Financial Statements for the year ended December 29, 2001 included in the company’s 2001 Annual Report.

         The financial statements include the accounts of Back Yard Burgers, Inc. and its wholly-owned subsidiaries, Little Rock Back Yard Burgers, Inc., Atlanta Burgers BYB Corporation and BYB Properties, Inc., as well as the Back Yard Burgers National Advertising Fund. All significant intercompany transactions have been eliminated.

         The results of operations for the current period are not necessarily indicative of the results to be expected for the full year.

         The company maintains its financial records on a 52-53 week fiscal year ending on the Saturday closest to December 31.

NOTE 2 — RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The company adopted SFAS No. 141 on December 30, 2001, with no material effect on the company’s consolidated financial position or results of operations.

         The company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and other Intangible Assets” (SFAS No. 142) effective January 1, 2002. SFAS No. 142 changed the accounting for goodwill and other indefinite-lived intangible assets from an amortization method to an impairment-only approach. No impairment to the recorded value of the Company’s indefinite-lived assets was found to exist as a result of the required testing. The Company ceased amortization of goodwill in 2002 under the provisions of this statement. Expenses for the thirteen-weeks ended September 29, 2001 included amortization of $38,000 and expenses for the thirty-nine weeks ended September 29, 2001 included amortization of $113,000. If SFAS No. 142 had been in effect during 2001 and amortization had not been recorded, net income for the third quarter of 2001 would have been approximately $22,000 (tax effected) greater than the reported total of $275,000 and diluted earnings per share would have remained unchanged at $0.06. If SFAS No. 142 had been in effect during 2001 and amortization had not been recorded, net income for the thirty-nine weeks ended September 29, 2001 would have been approximately $69,000 (tax effected) greater than the reported total of $796,000 and diluted earnings per share would have been $0.18 compared to the reported total of $0.17.

         In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets effective for years beginning after December 15, 2001. This Statement supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, but retains the fundamental provision of SFAS 121 for recognition and measurement of the impairment of long-lived assets to be held and used and measurement of long-lived assets to be held for sale. The statement requires that whenever events or changes in circumstances indicate that a long-lived asset’s carrying value may not be recoverable, the asset should be tested for recoverability. The statement also requires that a long-lived asset classified as held for sale should be carried at the lower of its carrying value or fair value, less cost to sell. The company adopted SFAS 144 on December 30, 2001, with no material impact on the

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company’s consolidated financial position or results of operations.

         In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS 145”). SFAS 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” requiring that gains and losses from the extinguishment of debt be classified as extraordinary items only if certain criteria are met. SFAS 145 also amends SFAS No. 13, “Accounting for Leases,” and the required accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for the Company on January 1, 2003. Upon adoption of SFAS 145, the Company will reclassify previously reported extraordinary items as a component of earnings before income taxes.

         In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized initially at fair value when the liability is incurred. SFAS 146 is effective for the Company on January 1, 2003 and will be applied on a prospective basis.

NOTE 3 — NET INCOME PER SHARE

The company calculates earnings per share in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share”, which requires the presentation of basic and diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

COMPUTATION OF INCOME PER SHARE
(in thousands, except per share amounts)
(unaudited)

The calculation of diluted income per share for the thirteen weeks ended September 28, 2002, and September 29, 2001 excluded 20,000 and 96,649 stock options, respectively, as their effect would be anti-dilutive. The calculation of diluted income per share for the thirty-nine weeks ended September 28, 2002 and September 29, 2001 excluded 13,055 and 208,730 stock options, respectively, as their effect would be anti-dilutive.

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NOTE 4 — DEFERRED FRANCHISE AND AREA DEVELOPMENT FEES

Amounts received for certain franchise and area development rights, net of commissions paid, have been deferred. Revenues on individual franchise fees are recognized when substantially all of the initial services required of the company have been performed, which generally coincides with the opening of the franchises. Under the terms of the franchise agreements, these fees are non-refundable, and may be recognized as income should the franchisee fail to perform as agreed. Area development fees are recognized on a pro-rata basis as each unit opens. At September 28, 2002, deferred fees include franchise and area development rights sold during the following years:

NOTE 5 – RELATED PARTY TRANSACTIONS

In July of 2002, the company entered into a financing transaction for a new restaurant site and building with certain officers and directors of the company. The total value of the transaction was $840,000. The company recorded $490,000 as a capital lease for the construction of the building and $350,000 as an operating lease for the land on which the building is located. The effective interest rate of the transaction was approximately 8.7%. The transaction was reviewed and approved by an independent board member.

NOTE 5 — COMMITMENTS AND CONTINGENCIES

The company is party to several pending legal proceedings and claims. Although the outcome of the proceedings and claims cannot be determined with certainty, management of the company is of the opinion that it is unlikely that these proceedings and claims will have a material adverse effect on the financial condition or results of operations of the company.

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Forward-Looking Information

         Certain information included herein may contain statements that are forward-looking, such as statements related to financial items and results, plans for future expansion and other business development activities, capital spending or financing sources, capital structure and the effects of regulation and competition. Forward-looking statements made by the company are based upon estimates, projections, beliefs and assumptions of management at the time of such statements and should not be viewed as guarantees of future performance. Such forward-looking information involves important risks and uncertainties that could significantly impact anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements by or on behalf of the company. These risks and uncertainties include, but are not limited to, increased competition within the industry for customers, the availability of qualified labor and desirable locations, increased costs for beef, chicken or other food products and the effectiveness of promotional efforts and management decisions related to restaurant growth, financing, franchising and new product development, as well as items described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

         As of September 28, 2002, the Back Yard Burgers system included 112 restaurants, of which 40 were company-operated and 72 were franchised. The company’s revenues are derived primarily from company-operated restaurant sales, franchise and area development fees and royalty fees. Certain expenses (cost of restaurant sales, restaurant operating expenses, depreciation and amortization and advertising) relate directly to company-operated restaurants, while general and administrative expenses relate to both company-operated restaurants and franchise operations. The company’s revenues and expenses are affected by the number and timing of the opening of additional restaurants. Sales for new restaurants in the period immediately following their opening tend to be high because of trial by public and promotional activities. As a result, the timing of openings can affect the average volume and other period-to-period comparisons.

Results of Operations

The following table sets forth the percentage relationship to total revenue, unless otherwise indicated, of certain items included in the company’s historical operations and operating data for the periods indicated.

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Comparison of the Company’s Results for the Thirteen Weeks Ended September 28, 2002 and September 29, 2001.

         Restaurant sales increased 11.1% to $7,823,000 during the thirteen weeks ended September 28, 2002, from $7,040,000 for the year-earlier period. This increase is primarily due to a net increase of four company-operated units since September 29, 2001.

         Franchise and area development fees increased to $81,000 for the thirteen weeks ended September 28, 2002, from $40,000 in the year-earlier period. Five new franchised stores opened during the thirteen weeks ended September 28, 2002 compared with two franchise openings in the year-earlier period.

         Royalty fees increased 6.5% to $541,000 during the thirteen week period ended September 28, 2002, compared to $508,000 during the same period in 2001. This is due to an increase in franchised restaurant sales upon which the fees are based. Franchised restaurant sales increased due to net unit growth of nine franchised stores since September 29, 2001.

         Advertising fees increased 10.1% to $142,000 during the thirteen week period ended September 28, 2002, compared to $129,000 during the same period in 2001. This is due to an increase in franchised restaurant sales, upon which a portion of the fees are based.

         Cost of restaurant sales, consisting of food and paper costs, totaled $2,390,000 for the thirteen weeks ended September 28, 2002, and $2,289,000 during the same period in 2001, decreasing as a percentage of restaurant sales to 30.6% from 32.5%. The decrease as a percentage of sales is attributable to the menu price increase taken by the company in mid-December 2001 as well as a 4.8% decline in the cost of beef during the thirteen weeks ended September 28, 2002.

         Restaurant operating expenses, consisting of labor, supplies, utilities, maintenance, rent and certain other unit level operating expenses, increased to $3,730,000 for the thirteen weeks ended September 28, 2002, from $3,312,000 in the same prior year period, increasing as a percentage of restaurant sales to 47.7%, from 47.0% for the year-earlier period. The change was due to increases in restaurant expenditures for insurance, utilities and property taxes. These increases were offset by a decrease in labor costs as a percentage of sales of 0.4%.

         General and administrative costs, which increased $102,000 to $1,047,000 for the thirteen weeks ended September 28, 2002 from $945,000 in the same year earlier period, remained flat as a percentage of total revenue at 11.9%. The increased spending was personnel related, including increased spending on recruiting, training and benefit costs.

         Advertising expense, which increased by $46,000 to $499,000 for the thirteen weeks ended September 28, 2002, from $453,000 in the year-earlier period, remained flat as a percentage of total revenue at 5.7%.

         Interest expense was $133,000 for the thirteen weeks ended September 28, 2002, compared with $130,000 in the year-earlier period. Since September 29, 2001, debt increased by $1,131,000, or 22.8%, to $6,085,000 as of September 28, 2002; however, $740,000 of the debt increase was incurred during the thirteen weeks ended September 28, 2002. Based on the timing of these debt transactions and the refinancing of some existing debt at lower interest rates since September 29, 2001, interest expense remained relatively flat with the prior year.

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Comparison of the Company’s Results for the Thirty-Nine Weeks Ended September 28, 2002 and September 29, 2001.

         Restaurant sales increased 12.8% to $23,413,000 during the thirty-nine weeks ended September 28, 2002 from $20,758,000 in the year-earlier period. This increase is primarily due to a net increase of four company-operated units since September 29, 2001.

         Franchise and area development fees were $125,000 for the thirty-nine weeks ended September 28, 2002, compared with $181,000 during the comparable period in 2001. Ten franchised locations have opened during the thirty-nine weeks ended September 28, 2002 compared with nine franchised openings during the thirty-nine weeks ended September 29, 2001; however, four of the ten openings during 2002 were co-branded restaurants opened under the company’s Multi-Brand Development Agreement with YUM! Brands, Inc. and the franchise fee for the co-branded restaurants under the Agreement is less than the company’s standard franchise fee.

         Royalty fees increased 10.3% to $1,623,000 during the thirty-nine week period ended September 28, 2002 from $1,472,000 during the year-earlier period. This is due to an increase in franchised restaurant sales upon which the fees are based. Franchised restaurant sales increased due to net unit growth of nine franchised stores since September 29, 2001.

         Cost of restaurant sales, consisting of food and paper costs, totaled $7,269,000 for the thirty-nine weeks ended September 28, 2002, and $6,677,000 during the same period in 2001, decreasing as a percentage of restaurant sales to 31.0% from 32.2%. The decrease as a percentage of sales is primarily due to the menu price increase taken by the company in mid-December 2001.

         Restaurant operating expenses, consisting of labor, supplies, utilities, maintenance, rent and certain other unit level operating expenses, increased to $10,946,000 for the thirty-nine weeks ended September 28, 2002, from $9,814,000 in the same prior year period, decreasing as a percentage of restaurant sales to 46.8%, from 47.3% for the year-earlier period. This change is primarily the result of a decrease in labor costs as a percentage of sales of 0.8% offset by increases in restaurant expenditures for insurance, utilities and property taxes.

         General and administrative costs increased by $414,000 to $3,153,000 for the thirty-nine weeks ended September 28, 2002 from $2,739,000 in the same year earlier period. $155,000 of the increase was personnel related, including increased spending on recruiting, training and benefit costs. The remainder of the increase is related to increased spending for professional services, travel for franchisee support and recruiting, public relations, insurance and other miscellaneous costs.

         Advertising expense, which increased by $73,000 to $1,484,000 for the thirty-nine weeks ended September 28, 2002, from $1,411,000 in the same period in 2001, decreased as a percentage of total revenues to 5.7% from 6.0%. The company currently spends approximately 5.0% of restaurant sales on local advertising. The remainder of the advertising expenditures are costs related to system-wide promotions.

         Interest expense decreased by $22,000 to $382,000 for the thirty-nine weeks ended September 28, 2002, from $404,000 in the year-earlier period. Since September 29, 2001, debt increased by $1,131,000, or 22.8%, to $6,085,000 as of September 28, 2002; however, $740,000 of the debt increase was incurred during the thirteen weeks ended September 28, 2002. Based on the timing of these debt transactions and the refinancing of some existing debt at lower interest rates since September 29, 2001, interest expense remained relatively flat with the prior year.

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         Other, net expense was $80,000 for the thirty-nine weeks ended September 28, 2002, compared with a net $55,000 expense in the prior year. The increase is due to a net $17,000 loss on the disposal of assets compared with a $1,000 loss in the prior year as well as $23,000 in loan closing costs incurred by the company during the thirty-nine weeks ended September 28, 2002. Also included in this category is other miscellaneous income and expenses, including franchise tax expense and these income and expense categories were relatively consistent during thirty-nine weeks ended September 28, 2002, and the year-earlier period.

Impairment of Long-Lived Assets

         The company reviews the carrying value of its long-lived and intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. A new cost basis is established for impaired assets based on the fair value of these assets as of the date the assets are determined to be impaired.

         In the past, the company incurred non-cash charges for the effect of company-operated restaurant closings and impaired assets at company-operated restaurants. Also, related accruals for future lease payments of closed stores, net of estimated sub-lease income, were previously recorded. During the thirty-nine weeks ended September 28, 2002, $16,000 of lease obligation payments were incurred for closed stores and charged against this reserve. The company also sub-leased a closed property and reduced the reserve previously recorded for that store by $17,000 based on revised estimated sub-lease income. As of September 28, 2002, the company’s remaining accrual for all future lease obligations discussed above was $67,000 for the remaining lease payments due, net of estimated sub-lease income.

Liquidity and Capital Resources

         Capital expenditures totaled $3,334,000 for the thirty-nine weeks ended September 28, 2002 and $930,000 for the year-earlier period. Generally, the company constructs its restaurant buildings on leased properties for its company-operated restaurants. The average monthly lease cost for the 14 company-operated restaurants on leased sites at September 28, 2002 is approximately $3,430 per month. For the 16 restaurants where the company leases the building as well as the site, the average monthly lease cost is approximately $5,550.

         Cash provided by operations for the company is primarily affected by net earnings adjusted for deferred franchise fees and non-cash expenses which consist primarily of depreciation and amortization. Depreciation and amortization totaled $1,033,000 for the thirty-nine weeks ended September 28, 2002 and $1,013,000 for the year-earlier period.

         Cash provided by operations for the thirty-nine weeks period ended September 28, 2002, was $2,607,000 compared with $1,931,000 in the year-earlier period. In recent history, cash from operations and debt have been used for the addition of new restaurants and equipment as well as the re-imaging of existing restaurants to reflect the company’s new logo and related color scheme.

         As of September 28, 2002, the company had total long-term debt of $6,085,000 and unused lines of credit and loan commitments of potential additional borrowings of $1,626,000. During the third quarter of 2002, the company secured a capital lease agreement with an effective interest rate of 7.9% to finance the acquisition of $250,000 of restaurant equipment. The company also secured a capital lease with an effective interest rate of approximately 8.7% to finance $490,000 in construction costs for a new company restaurant during the third quarter of 2002. No additional debt commitments were made by the company during the thirty-nine weeks ended September 28, 2002.

         On January 2, 2001, the company’s board of directors adopted a stock repurchase plan that allows the company to repurchase up to 500,000 shares of its outstanding common stock. As of September 28, 2002, the company had repurchased 25,000 shares of common stock under the plan. Based on market conditions and other factors, additional repurchases may be made from time to time in the open market or through privately negotiated transactions, at the discretion of the company.

         The company has budgeted capital expenditures of approximately $4.0 million in fiscal year 2002, excluding potential acquisitions. These capital expenditures primarily relate to the development of additional company-operated restaurants, store equipment upgrades, new logo conversions and enhancements to existing financial and operating information systems. As of September 28, 2002, the company had spent $3,334,000 of these budgeted capital expenditures. The company expects to fund these capital expenditures through cash flow from operations and borrowings under its existing line of credit. These capital expenditures may also require additional debt or equity financing, which the company has not secured at this time.

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Seasonality and Inflation

         While the company does not believe that seasonality affects its operations in a materially adverse manner, first quarter results are generally lower than other quarters due to seasonal climate conditions in the locations of many of its restaurants. Management does not believe that inflation has had a material effect on income during the thirty-nine weeks ended September 28, 2002. Increases in food, labor or other operating costs could adversely affect the company’s operations. In the past, however, the company generally has been able to increase menu prices or modify its operating procedures to substantially offset increases in its operating costs.

Conversion of Preferred Stock

         In accordance with the provisions of the company’s Certificate of Incorporation regarding preferred stock, as a result of the company’s having attained after tax net income in excess of $600,000 during 1994, each share of preferred stock is convertible into one share of common stock, at the option of the holder. The company notified preferred stockholders of their right to convert preferred stock to common stock, and anticipates that all shares of preferred stock will eventually be converted. Such conversion began on April 5, 1995, at which time there were 1,199,979 shares of preferred stock outstanding. As of September 28, 2002, only 19,617 shares have yet to be converted.

Known Trends and Uncertainties

         Labor will continue to be a critical factor for the company in the foreseeable future. In most areas where the company operates restaurants, there is a shortage of suitable labor. This, in itself, could result in higher wages as the competition for employees intensifies, not only in the restaurant industry, but in practically all retail and service industries. It is crucial for the company to develop and maintain programs to attract and retain quality employees.

         During the thirty-nine weeks ended September 28, 2002, the cost of beef and chicken was relatively stable; however, management of the company expects these costs to rise at some point in the future, and that it will be difficult to raise menu prices to fully cover these anticipated increases due to the competitive state of the quick-service restaurant industry. Additional margin improvements would have to be made through operational improvements, equipment advances and increased volumes to help offset these potential increases.

         Due to the competitive nature of the restaurant industry, site selection continues to be challenging as the number of businesses vying for locations with similar characteristics increases. This will likely result in higher occupancy costs for prime locations.

         Company-operated same-store sales increased 1.2% during the thirty-nine weeks ended September 28, 2002. The same-store sales growth is primarily attributable to a menu price increase of approximately 4.0% implemented by the company in mid-December 2001. The company’s marketing strategy and product development efforts are focused on increasing guest awareness and increasing the frequency of guest visits; however, there are no assurances that the increases in same-store sales will continue.

         On January 2, 2002, the company entered the Development Agreement with YUM! Brands, Inc. Based upon multi-brand testing to date, the company and YUM! have concluded that the Back Yard Burgers brand is better suited for YUM!’s QSR environment rather than their casual dining. Therefore, based on the QSR positioning of Taco Bell and the casual dining positioning of Pizza Hut, the company expects that its future development efforts and testing with YUM! will occur with Taco Bell rather than Pizza Hut. The company also anticipates that the Back Yard Burgers brand at two existing co-branded restaurants with Pizza Hut will be removed. There has been no determination of whether there will be co-branded outlets with KFC at this time.

         The future success of the company will be determined, to a great extent, by its ability to positively address these issues.

Recently Issued Accounting Standards

         In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The company adopted SFAS No. 141 on December 30, 2001, with no material effect on the company’s consolidated financial position or results of operations.

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         The company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and other Intangible Assets” (SFAS No. 142) effective January 1, 2002. SFAS No. 142 changed the accounting for goodwill and other indefinite-lived intangible assets from an amortization method to an impairment-only approach. No impairment to the recorded value of the Company’s indefinite-lived assets was found to exist as a result of the required testing. The Company ceased amortization of goodwill in 2002 under the provisions of this statement. Expenses for the thirteen-weeks ended September 29, 2001 included amortization of $38,000 and expenses for the thirty-nine weeks ended September 29, 2001 included amortization of $113,000. If SFAS No. 142 had been in effect during 2001 and amortization had not been recorded, net income for the third quarter of 2001 would have been approximately $22,000 (tax effected) greater than the reported total of $275,000 and diluted earnings per share would have remained unchanged at $0.06. If SFAS No. 142 had been in effect during 2001 and amortization had not been recorded, net income for the thirty-nine weeks ended September 29, 2001 would have been approximately $69,000 (tax effected) greater than the reported total of $796,000 and diluted earnings per share would have been $0.18 compared to the reported total of $0.17.

         In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets effective for years beginning after December 15, 2001. This Statement supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, but retains the fundamental provision of SFAS 121 for recognition and measurement of the impairment of long-lived assets to be held and used and measurement of long-lived assets to be held for sale. The statement requires that whenever events or changes in circumstances indicate that a long-lived asset’s carrying value may not be recoverable, the asset should be tested for recoverability. The statement also requires that a long-lived asset classified as held for sale should be carried at the lower of its carrying value or fair value, less cost to sell. The company adopted SFAS 144 on December 30, 2001, with no material impact on the company’s consolidated financial position or results of operations.

         In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS 145”). SFAS 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” requiring that gains and losses from the extinguishment of debt be classified as extraordinary items only if certain criteria are met. SFAS 145 also amends SFAS No. 13, “Accounting for Leases,” and the required accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 is effective for the Company on January 1, 2003. Upon adoption of SFAS 145, the Company will reclassify previously reported extraordinary items as a component of earnings before income taxes.

         In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized initially at fair value when the liability is incurred. SFAS 146 is effective for the Company on January 1, 2003 and will be applied on a prospective basis.

Item 3 Quantitative and Qualitative Disclosures About Market Risk

         The company is exposed to certain financial market risks, the most predominant being fluctuations in interest rates on variable rate debt and the repricing of fixed rate debt at maturity. Management monitors interest rate fluctuations as an integral part of the company’s overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potential adverse effect of our results. The effect of interest rate fluctuations historically has been small relative to other factors affecting operating results, such as food, labor and occupancy costs.

         Less than 25% of the company’s debt portfolio as of September 28, 2002, had variable rates or had maturity dates prior to the end of 2003. With every 25 basis point increase in interest rates, the company could be subject to additional interest expense of approximately $4,000 annually, depending on the timing of the rate changes and debt maturities.

         The company has considered the use of hedging instruments to minimize interest rate fluctuation risk, but based on the debt portfolio structure described above, no hedging tool has been deemed necessary for the company at this time.

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Item 4. Controls and Procedures

         A review and evaluation was performed by the company’s management, including the company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of a date within 90 days prior to the filing of this quarterly report. Based on that review and evaluation, the CEO and CFO have concluded that the company’s current disclosure controls and procedures, as designed and implemented, are effective to ensure that information required to be disclosed by the company in the report filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by the company in such reports is accumulated and communicated to its management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. There have been no significant changes in the company’s internal controls or in other factors that could significantly affect the company’s internal controls subsequent to the date of their evaluation. There were no significant material weaknesses identified in the course of such review and evaluation and, therefore, no corrective measures were taken by the company.

Part II                      OTHER INFORMATION

Item 1 Legal Proceedings

         The company is involved in litigation incidental to its business, including, but not necessarily limited to, claims alleging violations of the Civil Rights Act of 1964 and/or discrimination. Aside from the cost of defense, such litigation is not presently considered by management to be material to the financial condition or results of operations of the company.

Item 2 Changes in Securities and Use of Proceeds

         None

Item 3 Defaults Upon Senior Securities

         Not Applicable

Item 4 Submission of Matters to a Vote of Security Holders

         None

Item 5 Other Information

         None

Item 6 Exhibits and Reports on Form 8-K

         Exhibits

	None

         Reports on Form 8-K

	None

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SIGNATURES

         In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

BACK YARD BURGERS, INC.

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Certification of Chief Executive Officer

Of Back Yard Burgers, Inc.

                           This certification is provided pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended September 28, 2002 of Back Yard Burgers, Inc.

         I, Lattimore M. Michael, certify that:

         1.     I have reviewed this quarterly report on Form 10-Q of Back Yard Burgers, Inc.;

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

         3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

         4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

         b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

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

         5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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

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

         6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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Certification of Chief Financial Officer

Of Back Yard Burgers, Inc.

                           This certification is provided pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended September 28, 2002 of Back Yard Burgers, Inc.

         I, Michael G. Webb, certify that:

         1.     I have reviewed this quarterly report on Form 10-Q of Back Yard Burgers, Inc.;

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

         3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

         4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

         b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

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

         5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

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

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

         6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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