<PAGE>



                                     FORM 10-Q
                                          
                         SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C.  20549



(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


For the Quarterly Period Ended October 25, 1998

                                         OR


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


For the transition period from _______________  to ______________

Commission file number 0-12145


                           AMARILLO MESQUITE GRILL, INC.  
              (Exact name of registrant as specified in its charter)

            Kansas                                          48-0936946
  (State or other jurisdiction                          (I.R.S. Employer
of incorporation or organization)                       Identification No.)


                                     Suite 200
                                302 North Rock Road
                               Wichita, Kansas  67206
                      (Address of principal executive offices)
                                     (Zip Code)


                                   (316) 685-7286
                (Registrant's telephone number, including area code)




     Indicate by check mark whether the registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X    No     .
   ----     ----

     As of October 25, 1998, 7,645,895 shares of common stock $.01 par value
were outstanding.                  

                                      
<PAGE>

                            PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements

                           AMARILLO MESQUITE GRILL, INC.  
                             CONSOLIDATED BALANCE SHEETS
                                     (Unaudited)
<TABLE>
<CAPTION>

                                                                           October 25      January 25
        ASSETS                                                                1998            1998
                                                                          -----------       ---------
<S>                                                                      <C>                <C>
Current assets:
   Cash                                                                   $   370,445         563,836
   Accounts receivable                                                         38,227          49,472
   Inventories                                                                168,734         167,848
   Prepaid expenses and other current assets                                  234,661         184,179
                                                                          -----------       ---------
      Total current assets                                                    812,067         965,335
                                                                          -----------       ---------
Property and equipment:
   Buildings                                                                1,107,429       1,105,229
   Leasehold improvements                                                   2,531,768       2,258,368
   Equipment and fixtures                                                   4,698,832       4,228,270
   Leased property under capital lease                                      1,234,626       1,234,626
                                                                          -----------       ---------
                                                                            9,572,655       8,826,493
   Less: accumulated depreciation and amortization                          1,966,302       1,383,895
                                                                          -----------       ---------
                                                                            7,606,353       7,442,598
                                                                          -----------       ---------
Other assets:
   Cost in excess of net tangible assets of purchased
    business, net of amortization of
    $169,952 and $115,337                                                     777,059         831,674
   License fees, net of amortization                                            7,417           7,867
   Deposits and other                                                          39,187          33,867
                                                                          -----------       ---------
                                                                              823,663         873,408
                                                                          -----------       ---------
                                                                          $ 9,242,083     $ 9,281,341
                                                                          -----------       ---------
                                                                          -----------       ---------


                          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Notes Payable                                                          $   628,048            --
   Current portion of long term debt                                          732,804     $   871,936
   Current portion of obligation under capital lease                           36,336          36,336
   Accounts payable                                                         1,128,974         985,093
   Construction costs payable                                                 257,148         552,944
   Accrued payroll                                                            186,787         197,053
   Other accrued liabilities                                                  544,342         555,598
                                                                          -----------       ---------
      Total current liabilities                                             3,514,439       3,198,960
                                                                          -----------       ---------
Long-term debt, less current portion                                        5,476,444       5,618,279
Obligation under capital lease, less current portion                        1,019,138       1,046,525

Stockholders' equity (deficit):
   Preferred stock, $.01 par value, authorized 10,000,000
      shares, none issued                                                        --              --
   Common stock, $.01 par value, authorized 20,000,000 shares,
      issued 7,705,895 shares at October 25, 1998 and
      7,183,895 at January 25, 1998                                            77,059          71,839
   Additional paid-in capital                                               6,773,754       6,666,574
   Accumulated deficit                                                     (7,348,751)     (7,050,836)
   Treasury stock, 60,000 shares of common stock at cost                     (270,000)      ( 270,000)
                                                                          -----------       ---------
      Total stockholders' equity (deficit)                                   (767,938)       (582,423)
                                                                          -----------       ---------
                                                                          $ 9,242,083     $ 9,281,341
                                                                          -----------       ---------
                                                                          -----------       ---------
</TABLE>

See accompanying notes to consolidated financial statements.

                                          2

<PAGE>






                           AMARILLO MESQUITE GRILL, INC.  
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)

<TABLE>
<CAPTION>

                                                            
                                          Thirteen Weeks Ended          Thirty-Nine Weeks Ended
                                       October 25      October 26     October 25        October 26
                                      ------------    ------------   -------------     ------------
                                          1998            1997            1998              1997
                                      ------------    ------------   -------------     ------------
<S>                                  <C>             <C>             <C>               <C>
Net sales                            $  5,048,622     $  3,953,526     $ 15,559,780     $ 11,405,950
                                      ------------    ------------   -------------     ------------
Costs and expenses:
   Cost of goods sold                   1,871,514        1,493,842        5,920,546        4,241,173
   Operating expenses                   2,524,031        2,074,935        7,528,677        6,093,802
   Depreciation and amortization          221,263          171,713          637,472          456,937
   General and administrative             379,089          361,828        1,193,116        1,280,837
                                      ------------    ------------   -------------     ------------
                                        4,995,897        4,102,318       15,279,811       12,072,749
                                      ------------    ------------   -------------     ------------
Operating income (loss)                    52,725         (148,792)         279,969         (666,799)
                                      ------------    ------------   -------------     ------------
Other income (expense)
   Interest expense                      (171,902)        (141,910)        (504,504)        (351,775)
   Noncash expense from issuance
     of stock options pursuant to
     debt guarantees                      (24,460)         (24,460)         (73,380)         (73,380)
   Gain on sale of assets                    --                443             --            254,771
                                      ------------    ------------   -------------     ------------
                                         (196,362)        (165,927)        (577,884)        (170,384)
                                      ------------    ------------   -------------     ------------

Loss before income taxes                 (143,637)        (314,719)        (297,915)        (837,183)
Provision for income tax                     --               --               --               --   
                                      ------------    ------------   -------------     ------------
Net Loss                             $   (143,637)    $   (314,719)    $   (297,915)    $   (837,183)
                                      ------------    ------------   -------------     ------------
                                      ------------    ------------   -------------     ------------

Net loss per common share-
   Basic and diluted                 $       (.02)    $       (.04)    $       (.04)    $       (.12)
                                      ------------    ------------   -------------     ------------
                                      ------------    ------------   -------------     ------------

Average shares outstanding-
   Basic and diluted                    7,682,728        7,113,345        7,613,571        7,113,345
                                      ------------    ------------   -------------     ------------
                                      ------------    ------------   -------------     ------------
</TABLE>

            See accompanying notes to consolidated financial statements.
                                         3

                                     
<PAGE>


                          AMARILLO MESQUITE GRILL, INC.   
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)

<TABLE>
<CAPTION>

                                                                  Thirty-Nine Weeks Ended
                                                                October 25      October 26  
                                                               -------------   ------------
                                                                   1998            1997     
                                                               -------------   ------------
<S>                                                            <C>             <C>
Cash flows from operating activities:
   Net loss                                                    $  (297,915)    $  (837,183)
   Adjustments to reconcile net loss
      to net cash provided by operating activities:
      Depreciation and amortization                                637,472         456,937
      Changes in assets and liabilities
        (Increase) decrease in accounts receivable                  11,245         (14,869)
        (Increase) decrease in inventories                            (886)        (12,713)
        (Increase) decrease in prepaid expenses and
           other current assets                                    (50,482)        (56,355)
         Increase (decrease) in accounts payable                   143,881         (39,279)
         Increase (decrease) in accrued expenses                   (21,522)        (94,174)
      Gain on sale of assets                                          --          (254,771)
      Noncash expense from issuance of stock
        options pursuant to debt guarantees                         73,380          73,380
      Other net                                                    ( 5,320)        ( 9,100)
                                                               -------------   ------------
            Cash provided by (used in) operating activities        489,853        (788,127)
                                                               -------------   ------------
Cash flows from investing activities:
   Purchase of property and equipment                           (1,041,958)     (2,530,183)
   Proceeds from sale of assets                                       --           435,000
                                                               -------------   ------------
            Cash used in investing activities                   (1,041,958)     (2,095,183)
                                                               -------------   ------------
Cash flows from financing activities:
   Sale of common stock                                             39,020          45,070
   Short-term borrowings                                           628,048            --
   Long-term borrowings                                               --         3,230,000
   Repayment of long-term borrowings
      and capital lease obligations                               (308,354)       (240,552)
                                                               -------------   ------------
            Cash provided by financing activities                  358,714       3,034,518
                                                               -------------   ------------
Increase (decrease) in cash                                       (193,391)        151,208
Cash at beginning of period                                        563,836         328,285
                                                               -------------   ------------
Cash at the end of period                                      $   370,445     $   479,493
                                                               -------------   ------------
                                                               -------------   ------------
Supplemental disclosure of cash flow information:
   Cash paid for interest                                      $   504,504     $   209,865
   Cash paid for income taxes                                  $      --              --
</TABLE>


            See accompanying notes to consolidated financial statements.

                                         4

<PAGE>


                           AMARILLO MESQUITE GRILL, INC.  
                     Notes to Consolidated Financial Statements  
                                     (Unaudited)


                                  October 25, 1998 


(1)  BASIS OF PRESENTATION 
     The accompanying unaudited consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles for
      interim financial information and with the instructions to Form 10-Q and
      Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
      information and footnotes required by generally accepted accounting
      principles for complete financial statements.  In the opinion of
      management, all adjustments (consisting of normal recurring accruals)
      considered necessary for a fair presentation have been included. 
      Operating results for the three month period ended October 25, 1998 are
      not necessarily indicative of the results that may be expected for the
      year ended January 31, 1999.  For further information, refer to the
      consolidated financial statements and footnotes thereto included in the
      Company's 10-K and Annual Report to Stockholders as filed on April 23,
      1998.

(2) NET EARNINGS PER SHARE
    In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
      Earnings Per Share (Statement 128) which replaces the prior accounting
      standard regarding computation and presentation of earnings per share. 
      Statement 128 requires a dual presentation of basic earnings per share
      (based on the weighted average number of common shares outstanding) and
      diluted earnings per share which reflects the potential dilution that
      could occur if contracts to issue securities (such as stock options) were
      exercised.  The Company adopted Statement 128 as of January 25, 1998 and,
      accordingly, earnings per share data for all periods presented has been
      computed in accordance with Statement 128.  The adoption of Statement 128
      had no impact on the Company's previously reported loss per share data.

    Options to purchase common stock were not included in the computation of
      diluted earnings (loss) per common share because the Company had a net
      loss available to common stockholders and the inclusion of such options
      would be antidilutive.  As of October 25, 1998, there are 1,281,328
      options outstanding at a weighted average exercise price of $2.51 which
      may become dilutive in the future.

(3) ACQUISITION OF INTEREST IN COMMON CONTROLLED SUBSIDIARY
    Effective February 23, 1998, the Company purchased the remaining shares of
      AMG, Inc., a   common controlled subsidiary, by issuing 450,000 shares of
      the Company's common stock   in a transaction accounted for as a
      combination of entities under common control.

    The interest in AMG, Inc. acquired by the Company had no book value. 
      Accordingly, the fair value of the Company's common stock of $1,327,500
      was recorded, and a corresponding deemed dividend was recognized as a
      reduction to stockholders' equity (deficit).  The pro forma effects of
      such transaction was not significant.

(4) LIQUIDITY
    At October 25, 1998, the Company had current liabilities in excess of
      current assets of $2,702,372 and a stockholders' deficit of $767,938. 
      The Company reported a loss of $297,915 and cash flow from operations of
      $489,853 for the nine month period ended October 25, 1998.


                                      5
<PAGE>


(4) LIQUIDITY CONTINUED
    Management believes the Amarillo Grill restaurants opened in fiscal 1998
      and two additional Amarillo Grill restaurants opened in fiscal 1999 will
      generate sufficiently increased cash flow from operations which, together
      with continuing trade payable financing at current levels, will enable
      the company to meet its financial obligations in fiscal 1999 as they come
      due.  The Company has no additional borrowing capacity under its existing
      loan agreements.  In the event operating cash flow, including a
      continuation of the current level of trade payable financing, is not
      sufficient to enable the Company to meet its financial obligations in
      fiscal 1999, an individual who is a major stockholder and director of the
      Company has committed to provide up to $1,000,000 of additional capital
      or guarantees of additional indebtedness on behalf of the Company.





                                      6
<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operation. 

GENERAL

    Over the past two years the Company has taken major steps toward
reorganizing and changing the direction  of the Company in terms of moving away
from fast food restaurants and towards full service restaurants which generate
higher sales with a lower gross margin and operating expenses.  Due to
differences in volume and the nature of the business the operating results,
expressed as percentage of sales, can be substantially different for fast food
restaurants as compared to a full service restaurant.

    During the quarter ended July 26, 1998, the Company closed one Amarillo
Mesquite Grill in Overland Park, Kansas and one Cotton Patch Cafe in
Bartlesville, Oklahoma.  The Cotton Patch Cafe has been converted to an Amarillo
Mesquite Grill which opened on the first day of the third quarter.  The Amarillo
Grill was an older restaurant with a short-term lease.  Management did not feel
that the location was good enough to justify the expense of a major remodel.
    
RESULTS OF OPERATIONS

Three Months Ended October 25, 1998 Compared to Three Months Ended October 26,
1997.

    For the three months ended October 25, 1998, sales increased 27.7% to
$5,048,622 as compared to sales of $3,953,526 for the third quarter of the prior
year.  As of October 25, 1998, the Company operated twelve Amarillo Mesquite
Grills and one Cotton Patch Cafe as compared to nine Amarillo Mesquite Grills
and two Cotton Patch Cafes as of October 26, 1997.

    Cost of sales, as a percentage of total sales, was 37.1% and 37.8% for 
the 1998 and 1997 periods respectively.  The Company introduced a new menu in 
all stores during the quarter.  The menu was introduced in a couple of stores 
at a time with the last three stores being completed the last week of the 
quarter.  With the new menu in effect for a full period the Company expects 
cost of sales to be in the 34% to 36% range.

     Operating expenses, as a percentage of total sales, were 50.0% and 52.5%
for the 1998 and 1997 periods respectively.  The decrease in operating expense,
as a percentage of total sales, is the result of operating more Amarillo Grills
which have higher sales volume and lower operating costs than the other
restaurant concept operated by the Company which have been sold or converted.

                                                  
    General and administrative expenses, as a percentage of sales, was 7.9% for
the quarter ended October 25, 1998, as compared to 13.1% for the second quarter
of the prior year.  The decrease in general and administrative, as a percentage
of total sales, is the result of substantially increasing sales without
substantially increasing the dollar amount of general and administrative
expenses.
                                          
     Depreciation and amortization is directly related to the acquisition and
disposition of fixed assets.  The increase in depreciation and amortization from
1997 to 1998 is the result of operating more restaurants with a greater
investment.

    Interest expense was $171,902 for the quarter ended October 25, 1998 as
compared to $141,910 for the same period a year ago.  The increase in the dollar
amount of interest expense from third quarter 1997 to third quarter 1998 is the
result of an increase in long-term debt relating to new store development.

                                      7
<PAGE>

   The Company incurred noncash expenses of $24,460 for the 1998 and 1997
periods respectively, relating to the issuance of stock options pursuant to debt
guarantees.
    
     
NINE MONTHS ENDED OCTOBER 25, 1998 COMPARED TO NINE MONTHS ENDED OCTOBER 26,
1997.

     For the nine months ended October 25, 1998, sales increased 36.4% to
$15,559,780 as compared to sales of $11,405,950 for the nine months ended
October 26, 1997.  As of October 25, 1998, the Company operated twelve Amarillo
Mesquite Grills and one Cotton Patch Cafe as compared to nine Amarillo Grills
and two Cotton Patch Cafes as of October 26, 1997.

     Cost of sales, as a percentage of total sales, was 38.1% and 37.2% for 
the 1998 and 1997 periods respectively.  The Company introduced a new menu in 
all stores during the quarter.  The menu was introduced in a couple of stores 
at a time with the last three stores being completed the last week of the 
quarter.  With the new menu in effect for a full period the Company expects 
cost of sales to be in the 34% to 36% range.

     Operating expenses, as a percentage of total sales was 48.4% and 53.4% for
the 1998 and 1997 periods respectively.  The decrease in operating expense, as a
percentage of total sales, is the result of operating more Amarillo Grills which
have higher sales volume and lower operating costs than the other restaurant
concept operated by the Company which have been sold or converted.

     General and administrative expenses, as a percentage of total sales, was
7.7% and 11.2% for the 1998 and 1997 periods respectively. The decrease in
general and administrative, as a percentage of total sales, is the result of
substantially increasing sales without substantially increasing the dollar
amount of general and administrative expenses.   

     Interest Expense was $504,504 for the nine months ended October 25, 1998 as
compared to $351,775 for the same period a year ago.  The increase in the dollar
amount from 1997 to 1998 is the result of an increase in the bank debt relating
to new store development.

     The Company incurred noncash expenses of $73,380 for the 1998 and 1997
periods respectively related to the issuance of stock options pursuant to debt
guarantees.

     The Company has determined that it is in its best interest to focus its
efforts and financial resources on the Amarillo Grill concept.  Therefore,
effective March 24, 1997, the Company sold to Red Apple Corporation all of the
assets of the eight Grandy's restaurants owned and operated by the Company.  Red
Apple Corporation is owned by five individuals, four of which are officers and
directors of the Company.  The consideration received for these assets consisted
of $435,000 in cash.  Red Apple Corporation also assumed the lease obligations
associated with these restaurants.  The Company recognized a gain of
approximately $254,000 on this disposition.  The sales price was computed as
three times last year's store level cash flow before overhead or administrative
expenses.


                                      8
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funding to finance its business have been
its cash flow from operations, and proceeds principally from long term debt.  On
October 25, 1998 and January 25, 1998, the Company had an excess of current
liabilities over current assets of $2,702,372 and $2,233,624, respectively. 
Management anticipates being able to sustain the current level of trade payable
financing and higher cash flow from operations in fiscal 1999 and that such
higher operating cash flow will enable the Company to meet its financial
obligations in fiscal 1999 as they come due.  The Company has no remaining
available borrowing capacity under its existing loan agreements.  Cash flow from
operations was $489,853 in the first nine months of fiscal 1999 compared to cash
used of $788,127 in the first nine months of fiscal 1998.  In the event
operating  cash flow is not sufficient to  enable the Company to  meet its 
financial  obligations in fiscal  1999, an individual who is a major stockholder
and director of the Company has committed to provide up to $1,000,000 of
additional capital or guarantees of additional indebtedness on behalf of the
Company.

     Substantially, all of the Company's revenues are derived from cash sales. 
The Company does not maintain significant receivables and inventories;
therefore, working capital requirements for operations are not significant.
                                          
     Additions to property and equipment represent the single largest use of
funds by the Company.   The expenditures are primarily made for the purchase and
development of new restaurants.  Cash expended for capital expenditures was
$1,041,958 for the nine months ended October 25, 1998, compared to $2,530,183
for the nine months ended October 26, 1997.  These expenditures were funded
primarily with cash flow from operations and proceeds from long-term debt.
     
     The Company plans to continue expansion of the Amarillo Mesquite Grill
concept in fiscal 1999.  The Company intends to lease existing restaurant
properties which are suitable for conversion to the Amarillo Mesquite Grill
concept.  It is expected that each conversion will require approximately
$300,000 to $600,000 for equipment and remodel costs.  A ground-up proto-type
restaurant will cost approximately $1.5 million for the land, building and
equipment.  The Company is holding discussions with an investment banking firm
regarding a private placement of convertible securities which would enable the
Company to open approximately eight to ten new Amarillo Grill restaurants.  The
company has no commitments for financing at this time.  In order for the Company
to meet its expansion goals for fiscal 1999, it will need to raise additional
funds through debt or equity instruments, the availability and terms of which
will depend upon market and other conditions.  There can be no assurance that
such additional financing will be available on terms acceptable to the Company.

     This report contains certain forward-looking statements, including those
relating to the opening of additional restaurants and planned capital
expenditures.  Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, actual results could
differ materially from such forward-looking statements.  In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company that objectives and plans of the Company will be
achieved.

YEAR 2000

The Company maintains an outsourcing agreement for its accounting software and
has been advised that its outsourcer is capable of processing in the year 2000. 
Three of the Company's restaurants operate on a different point of sale system
that has not been assessed, while the restaurants point of sale system for all
the remaining restaurants is believed to be year 2000 compliant.  Other various
restaurant equipment has not been assessed to determine if it is date sensitive
and possibly out of compliance.  Any computer system that is not year 2000
compliant could potentially be disruptive to the Company's operations, but
actual impact has not been determined.

                                         9

<PAGE>

                            PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          Not applicable.

Item 2.   Changes in Securities and Use of Proceeds.

          Not Applicable.
          
Item 3.   Defaults Upon Senior Securities.

          Not applicable.

Item 4.   Submission of Matters to a Vote of Security Holders.

          Not applicable.

Item 5.   Other Information.

          Not applicable.

Item 6.   Exhibits and Reports on Form 8-K

          (a) Exhibits.

          Not Applicable.

          (b) Reports on Form 8-K.

          Not Applicable.




                                      10
<PAGE>


                                  SIGNATURES


     Pursuant to 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 thereunto duly authorized.



                                        AMARILLO MESQUITE GRILL INC.
                                               (Registrant)




Date  December 8, 1998                /s/LINN F. HOHL
    -----------------------           -------------------------------
                                       Linn F. Hohl - Vice President
                                                       of Finance,
                                                       Secretary and
                                                       Treasurer

                                      11