**U.S.SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

ý  **QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the period ended March 31, 2003**

 

**o****  TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT**

 

#### **For the transition period from                   to                   **

 

**Commissionfile number 0-25366**

 

**AUSTINS STEAKS & SALOON, INC.**

(Exact name ofsmall business issuer as specified in its charter)

 

| **Delaware**                                                     |   | **86-0723400**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |
| **317  Kimball Avenue, N.E.  Roanoke, Virginia  24016**     |
| (Address of  principal executive offices)                        |
|                                                             |
| **(540)  345-3195**                                              |
| (Issuer’s  telephone number)                                |

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15 (d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.  Yes ý   No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

Yes o   No ý

 

As of May 15, 2003, therewere 12,150,099 shares of Common stock outstanding.

 

 

----

 

**AUSTINS STEAKS & SALOON, INC.**

**Form 10-Q Index**

**Three Months Ended March 31, 2003**

 
| **PART I.**                 | **FINANCIAL INFORMATION** |
|-----------------------------|---------------------------|
|                        |                      |
|                        | **Item 1.**               | **Financial Statements  (Unaudited)** |
|                        |                      |   |
|                        |                      | Consolidated Balance Sheets  – March 31, 2003 and December 31, 2002 |
|                        |                      |   |
|                        |                      | Consolidated  Statements of Income - Three Months Ended March 31, 2003 and 2002 |
|                        |                      |   |
|                        |                      | Consolidated Statement  of Changes in Stockholders’ Equity - Three Months Ended March 31, 2003 |
|                        |                      |   |
|                        |                      | Consolidated  Statements of Cash Flows - Three Months Ended March 31, 2003 and 2002 |
|                        |                      |   |
|                        |                      | Notes to  Consolidated Financial Statements |
|                        |                      |
|                        | **Item 2.**               | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** |
|                        |                      |   |
|                        | **Item 3.**               | **Quantitative  and Qualitative Disclosure about Market Risk** |
|                        |                      |   |
|                        | **Item 4.**               | **Controls and  Procedures** |
|                        |                      |   |
| **PART II.**                | **OTHER INFORMATION**     |
|                        |                      |
|                        | **Item 1.**               | **Legal  Proceedings** |
|                        |                      |   |
|                        | **Item 2.**               | **Change in Securities and Use  of Proceeds** |
|                        |                      |   |
|                        | **Item 3.**               | **Defaults  Upon Senior Securities** |
|                        |                      |   |
|                        | **Item 4.**               | **Submission of Matters to a  Vote of Security Holders** |
|                        |                      |   |
|                        | **Item 5.**               | **Other Information** |
|                        |                      |   |
|                        | **Item 6.**               | **Exhibits and Reports on  Form 8-K** |
|                        |                      |
| **Signatures**              |
|                        |
| **Officers Certifications** |

 

----

 

**PART I. FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

**AUSTINS STEAKS & SALOON, INC.**

Consolidated Balance Sheets

March 31, 2003 and December 31, 2002

 
|                                                                                                                         |   | **March 31,  2003** |       | **December 31,  2002** |       |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|------------------------|------------|
|                                                                                                                         |   | **(unaudited)**     |       |                   |       |
| **Assets**                                                                                                                   |   |                | ** ** |                   | ** ** |
| Current assets:                                                                                                              |   |                |       |                   |       |
| Cash and cash equivalents                                                                                                    |   | $                   | 213,857    |                   | $          | 131,631 |   |
| Trade accounts receivable, less allowance for doubtful  accounts of $409,887 in 2003 and $379,887 in 2002                    |   | 1,199,498           |       | 1,086,180              |       |
| Current installments of notes receivable                                                                                     |   | 199,650             |       | 203,821                |       |
| Other receivables                                                                                                            |   | 86,655              |       | 95,527                 |       |
| Inventories                                                                                                                  |   | 99,657              |       | 95,457                 |       |
| Prepaid expenses                                                                                                             |   | 367,407             |       | 328,321                |       |
| Income taxes refundable                                                                                                      |   | 23,832              |       | 47,198                 |       |
| Deferred income taxes                                                                                                        |   | 274,026             |       | 274,026                |       |
| Total current assets                                                                                                         |   | 2,464,582           |       | 2,262,161              |       |
| Notes receivable, less allowance for doubtful accounts  of $47,595 in  2003 and 2002,  excluding current installments   |   | 1,261,866           |       | 1,286,906              |       |
| Property and equipment, net                                                                                                  |   | 3,308,530           |       | 3,443,380              |       |
| Franchise royalty contracts, net of accumulated  amortization of $5,830,232 in 2003 and $5,672,658 in 2002                   |   | 3,624,199           |       | 3,781,773              |       |
| Goodwill, net of accumulated amortization of  $2,513,602 in 2003 and 2002                                                    |   | 4,310,200           |       | 4,310,200              |       |
| Financing costs, net of accumulated amortization of  $83,503 in 2003 and $72,020 in 2002                                     |   | 106,800             |       | 118,283                |       |
| Deferred income taxes                                                                                                        |   | 1,480,174           |       | 1,480,174              |       |
| Assets held for sale                                                                                                         |   | 1,200,000           |       | 1,200,000              |       |
| Other assets, net                                                                                                            |   | 159,605             |       | 156,548                |       |
|                                                                                                                         |   | $                   | 17,915,956 |                   | $          | 18,039,425 |   |
| **Liabilities and Stockholders’ Equity**                                                                                |   |                |       |                   |       |
| Current liabilities:                                                                                                         |   |                |       |                   |       |
| Bank overdraft                                                                                                               |   | $                   | 14,303     |                   | $          | 346,351 |   |
| Credit line note payable to bank                                                                                             |   | 228,211             |       | 363,180                |       |
| Note payable to bank                                                                                                         |   | 450,000             |       | —                 |       |
| Current installments of long-term debt                                                                                       |   | 497,298             |       | 507,590                |       |
| Accounts payable                                                                                                             |   | 1,347,518           |       | 1,328,813              |       |
| Accrued expenses and other                                                                                                   |   | 807,617             |       | 896,497                |       |
| Total current liabilities                                                                                                    |   | 3,344,947           |       | 3,442,431              |       |
| Long-term debt, excluding current installments                                                                               |   | 3,962,231           |       | 4,074,589              |       |
| Total liabilities                                                                                                            |   | 7,307,178           |       | 7,517,020              |       |
| Stockholders’ equity:                                                                                                   |   |                |       |                   |       |
| Common stock, $.01 par value.  Authorized 20,000,000 shares; issued and  outstanding 12,150,099 shares in 2003 and 2002 |   | 121,501             |       | 121,501                |       |
| Additional paid-in capital                                                                                                   |   | 8,674,846           |       | 8,674,846              |       |
| Retained earnings                                                                                                            |   | 1,812,431           |       | 1,726,058              |       |
| Total stockholders’ equity                                                                                              |   | 10,608,778          |       | 10,522,405             |       |
| Commitments and contingencies                                                                                                |   |                |       |                   |       |
|                                                                                                                         |   | $                   | 17,915,956 |                   | $          | 18,039,425 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

2

----

 

**AUSTINS STEAKS & SALOON, INC.**

Consolidated Statements of Income

(Unaudited)

 
|                                 |   | **Three Months  Ended March 31,** |   |
|--------------------------------------|--------|-----------------------------------|--------|
|                                 |   | **2003**                          |   | **2002** |   |
| Revenues:                            |   |                              |   |   |   |
| Company-operated restaurants         |   | $3,635,870                        |   | $6,452,377 |   |
| Franchise operations                 |   | 1,163,403                         |   | 1,361,818 |   |
| Other                                |   | 107,161                           |   | 115,026 |   |
|                                 |   |                              |   |   |   |
| Total revenues                       |   | 4,906,434                         |   | 7,929,221 |   |
| Costs and expenses:                  |   |                              |   |   |   |
| Cost of company-operated restaurants |   | 2,578,225                         |   | 4,453,564 |   |
| Cost of franchise operations         |   | 330,855                           |   | 519,332 |   |
| Other cost of operations             |   | 83,386                            |   | 88,403 |   |
| Restaurant operating expenses        |   | 857,926                           |   | 1,521,971 |   |
| General and administrative           |   | 518,432                           |   | 405,529 |   |
| Depreciation and amortization        |   | 311,798                           |   | 444,080 |   |
|                                 |   |                              |   |   |   |
| Total costs and expenses             |   | 4,680,622                         |   | 7,432,879 |   |
|                                 |   |                              |   |   |   |
| Income from operations               |   | 225,812                           |   | 496,342 |   |
|                                 |   |                              |   |   |   |
| Other income (expense):              |   |                              |   |   |   |
| Interest expense                     |   | (119,299                          | )      | (133,884 | ) |
| Interest income                      |   | 23,565                            |   | 7,144 |   |
| Other                                |   | 11,212                            |   | 18,462 |   |
|                                 |   |                              |   |   |   |
|                                 |   | (84,522                           | )      | (108,278 | ) |
|                                 |   |                              |   |   |   |
| Income before income tax expense     |   | 141,290                           |   | 388,064 |   |
|                                 |   |                              |   |   |   |
| Income tax expense                   |   | 54,917                            |   | 148,285 |   |
|                                 |   |                              |   |   |   |
| Net income                           |   | $86,373                           |   | $239,779 |   |
|                                 |   |                              |   |   |   |
| Earnings per share:                  |   |                              |   |   |   |
| Basic                                |   | .01                               |   | .02 |   |
| Diluted                              |   | .01                               |   | .02 |   |

 

Seeaccompanying notes to consolidated financial statements

 

3

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**AUSTINS STEAKS& SALOON, INC.**

 

Consolidated Statement of Changes inStockholders’ Equity

Three Months Ended March 31, 2003

(Unaudited)

 
|                        |       | **Common Stock** |        | **Additional  Paid-in  Capital** |    | **Retained  Earnings** |   | **Total** |   |
|-----------------------------|------------|------------------|-------------|----------------------------------|---------|------------------------|--------|-----------|--------|
|                        |       |             |        |                             |
|                        | **Shares** |             | **Dollars** |                             |    |                   |   |
|                        |       |             |        |                             |    |                   |   |      |   |   |   |
| Balances, December 31, 2002 |       | 12,150,099       |        | $                                | 121,501 |                   | $      | 8,674,846 |   | $ | 1,726,058 |   | $ | 10,522,405 |   |
| Net income                  |       | —           |        | —                           |    | —                 |   | 86,373    |   | 86,373 |   |
|                        |       |             |        |                             |    |                   |   |      |   |   |   |
| Balances, March 31, 2003    |       | 12,150,099       |        | $                                | 121,501 |                   | $      | 8,674,846 |   | $ | 1,812,431 |   | $ | 10,608,778 |   |

 

See accompanying notes to consolidated financial statements.

 

4

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**AUSTINS STEAKS & SALOON, INC.**

Consolidated Statements of CashFlows

(Unaudited)

 
|                                                                                         |   | **Three-Months Ended  March 31** |    |
|----------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                         |   | **2003**                         |    | **2002** |   |
| Cash flows from operating activities:                                                        |   |                             |    |   |   |
| Net income                                                                                   |   | $                                | 86,373  |   | $ | 239,779 |   |
| Adjustments to reconcile net income to net cash  provided by (used in) operating activities: |   |                             |    |   |   |
| Depreciation and amortization of property and  equipment                                     |   | 142,741                          |    | 271,211 |   |
| Amortization of franchise royalty contracts and  financing costs                             |   | 169,057                          |    | 172,869 |   |
| Provision for bad debts                                                                      |   | 30,000                           |    | 15,000 |   |
| (Increase) decrease in:                                                                      |   |                             |    |   |   |
| Trade accounts receivable                                                                    |   | (143,318                         | )       | 48,544 |   |
| Notes receivable                                                                             |   | 29,211                           |    | (37,831 | ) |
| Other receivables                                                                            |   | 8,872                            |    | 21,048 |   |
| Inventories                                                                                  |   | (4,200                           | )       | 21,525 |   |
| Prepaid expenses                                                                             |   | (39,086                          | )       | (68,095 | ) |
| Income taxes refundable                                                                      |   | 23,366                           |    | — |   |
| Other assets                                                                                 |   | (3,057                           | )       | 7,170 |   |
| Increase (decrease) in:                                                                      |   |                             |    |   |   |
| Accounts payable                                                                             |   | 18,705                           |    | (715,715 | ) |
| Accrued expenses                                                                             |   | (88,880                          | )       | (329,764 | ) |
| Income taxes payable                                                                         |   | —                           |    | 127,785 |   |
| Net cash provided by (used in) operating activities                                          |   | 229,784                          |    | (226,474 | ) |
| Cash flows from investing activities:                                                        |   |                             |    |   |   |
| Additions to property and equipment                                                          |   | (7,891                           | )       | (77,549 | ) |
| Net cash used in investing activities                                                        |   | (7,891                           | )       | (77,549 | ) |
| Cash flows from financing activities:                                                        |   |                             |    |   |   |
| Net decrease in bank overdraft                                                               |   | (332,048                         | )       | (323,268 | ) |
| Net increase (decrease) in credit line note payable                                          |   | (134,969                         | )       | 110,895 |   |
| Proceeds from note payable                                                                   |   | 450,000                          |    | 300,000 |   |
| Payments on long-term debt                                                                   |   | (122,650                         | )       | (146,402 | ) |
| Net cash used in financing activities                                                        |   | (139,667                         | )       | (58,775 | ) |
| Net increase (decrease) in cash and cash equivalents                                         |   | 82,226                           |    | (362,798 | ) |
| Cash and cash equivalents at beginning of period                                             |   | 131,631                          |    | 449,075 |   |
| Cash and cash equivalents at end of period                                                   |   | $                                | 213,857 |   | $ | 86,277 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

5

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**AUSTINSSTEAKS & SALOON, INC.**

 

Notes to ConsolidatedFinancial Statements

 

Three Months EndedMarch 31, 2003 and 2002

 

(Unaudited)

 

**(1)****                                 General**

 

The accompanyingunaudited consolidated financial statements of Austins Steaks & Saloon,Inc. (“Austins” or the “Company”) have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial reporting information and the instructions to Form 10-Q andArticle 10 of Regulation S-X.  Accordingly,they do not include all of the information and notes required by accountingprinciples generally accepted in the United States of America for completefinancial statements.  In the opinion ofmanagement, all material reclassifications and adjustments, consisting ofnormal recurring accruals, considered necessary for a fair presentation of theresults of operations, financial position and cash flows for each period shownhave been included.  Operating resultsfor interim periods are not necessarily indicative of the results for the fullyear because, among other things, the dining habits of the Company’s customerscannot be certain.  The unauditedconsolidated financial statements and notes are presented as permitted by Form10-Q and do not contain certain information included in the Company’s annualconsolidated financial statements and notes. For further information, refer to the consolidated financial statementsand notes thereto included in the Company’s annual report on Form 10-K for theyear ended December 31, 2002.

 

**(2)****                                 Goodwilland Other Intangible Assets**

 

The Company conforms tothe provisions of Statement of Financial Accounting Standards (SFAS) No. 142,“Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill and intangible assets deemed to have indefinitelives are reviewed for impairment and written down and charged to results ofoperations when their carrying amount exceeds their estimated fair value. TheCompany is required to perform impairment tests each year, or between yearlytests in certain circumstances, for goodwill. There can be no assurance thatfuture impairment tests will not result in a charge to earnings.

 

The changes in the netcarrying amount of goodwill, by reporting segment, for the three months endedMarch 31, 2003 are as follows:

 

| **Segment**                   |   | **Goodwill  at  January 1, 2003** |      | **Impairment  losses** |   | **Goodwill  at  March 31, 2003** |   |
|-------------------------------|--------|-----------------------------------|-----------|------------------------|--------|----------------------------------|--------|
| Company-operated  restaurants |   | $                                 | 4,310,200 |                   | — |                             | $      | 4,310,200 |   |
| Franchise  operations         |   | —                            |      | —                 |   | —                           |   |
| Total                         |   | $                                 | 4,310,200 |                   | — |                             | $      | 4,310,200 |   |

 

The changes in the netcarrying amount of goodwill, by reporting segment, for the three months endedMarch 31, 2002 are as follows:

 

| **Segment**                   |   | **Goodwill  at  January 1, 2002** |      | **Impairment  Losses** |   | **Goodwill  at  March 31, 2002** |   |
|-------------------------------|--------|-----------------------------------|-----------|------------------------|--------|----------------------------------|--------|
| Company-operated  restaurants |   | $                                 | 4,310,200 |                   | — |                             | $      | 4,310,200 |   |
| Franchise  operations         |   | —                            |      | —                 |   | —                           |   |
| Total                         |   | $                                 | 4,310,200 |                   | — |                             | $      | 4,310,200 |   |

 

6

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*Amortizing Intangible Assets*

 

Franchise royaltycontracts are amortized on a straight-line basis over fifteen years, theestimated average life of the franchise agreements.  The Company assesses the recoverability of this intangible assetby determining whether the amortization of the franchise royalty contractsbalance over their remaining life can be recovered through undiscounted futureoperating cash flows of the acquired operation.  The amount of impairment, if any, is measured based on projecteddiscounted future operating cash flows using a discount rate reflecting theCompany’s average cost of funds.

 
|                               |   |                        |      | **As of March 31,  2003**                  |      |                          |   |
|------------------------------------|--------|-----------------------------|-----------|--------------------------------------------|-----------|-------------------------------|--------|
|                               |   | **Gross  carrying  amount** |      | **Weighted average  Amortization  Period** |      | **Accumulated  Amortization** |   |
| **Amortizing  intangible assets:** |   |                        |      |                                       |      |                          |   |
| Franchise Royalty Contracts        |   | $                           | 9,454,431 |                                       | 15.0 yrs. |                          | $      | 5,830,232 |   |
|                                    |        |                             |           |                                            |           |                               |        |  |  |

 

Aggregate amortizationexpense for amortizing intangible assets for the three-month period ended March31, 2003 was $157,574.  Estimatedamortization expense is $630,295 per year.

 

**(3)****                                 EarningsPer Share and Stock Option Plan**

 

Basic earnings per shareexcludes dilution and is computed by dividing income available to commonstockholders by the weighted-average number of common shares outstanding forthe period.  Diluted earnings per sharereflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common stockor resulted in the issuance of common stock that then shared in the earnings ofthe Company.  Stock options

for shares of commonstock were not included in computing diluted earnings per share for the threemonth periods ended March 31, 2003 and 2002 because these effects areanti-dilutive.

 

The following is areconciliation of the numerators and denominators of the basic and dilutedearnings per share computations for the periods indicated:

 

|                                  |   | **Income  (Numerator)** |    | **Weighted  Average  Shares  (Denominator)** |       | **Earnings  Per Share  Amount** |   |
|---------------------------------------|--------|-------------------------|---------|----------------------------------------------|------------|---------------------------------|--------|
| **Three-months ended March 31, 2003** |   |                    |    |                                         |       |                            |   |
|                                  |   |                    |    |                                         |       |                            |   |
| Net income - basic and diluted        |   | $                       | 86,373  |                                         | 12,150,099 |                            | $      | 0.01 |   |
|                                  |   |                    |    |                                         |       |                            |   |
| **Three-months ended March 31, 2002** |   |                    |    |                                         |       |                            |   |
|                                  |   |                    |    |                                         |       |                            |   |
| Net income - basic and diluted        |   | $                       | 239,779 |                                         | 12,178,800 |                            | $      | 0.02 |   |

 

7

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The Company applies theintrinsic-value-based method of accounting prescribed by Accounting PrinciplesBoard (APB) Opinion No. 25, *Accounting for Stock Issued to Employees,*and related interpretations including Financial Accounting Standards Board(FASB) Interpretation No. 44,*Accounting for Certain Transactions involving StockCompensation, an interpretation of APB Opinion No. 25*, issued inMarch 2000, to account for its fixed-plan stock options. Under this method,compensation expense is recorded on the date of grant only if the currentmarket price of the underlying stock exceeded the exercise price.  SFAS No. 123, *Accounting for Stock-BasedCompensation,* established accounting and disclosure requirementsusing a fair-value-based method of accounting for stock-based employeecompensation plans.  As allowed by SFASNo. 123, the Company has elected to continue to apply the intrinsic-value-basedmethod of accounting described above, and had adopted only the disclosurerequirements of SFAS No. 123.  SFAS No.148, *Accountingfor Stock-Based Compensation — Transition and Disclosure, an amendment of SFASNo. 123,* amends the disclosure requirements of SFAS No.123 torequire prominent disclosures in both annual and interim financial statementsabout the method of accounting for stock-based compensation and the effect ofthe method on reported results.  TheCompany had no stock-based employee compensation expense using either theintrinsic-value method or the fair-value method for the three-months endedMarch 31, 2003 and 2002.

 

 

**(4)****                                 ReportableSegments**

 

The Company has definedtwo reportable segments: Company-operated restaurants and franchising andother.  The Company-operated restaurantsegment consists of the operations of all Company-operated restaurants andderives its revenues from restaurant operations.  The franchising and other segment consists primarily of franchisesales and support activities and derives its revenues from sales of franchiseand development rights and collection of royalties from franchisees.

 

Generally, the Companyevaluates performance and allocates resources based on income from operationsbefore income taxes. Administrative and capital costs are allocated to segmentsbased upon predetermined rates or actual or estimated resource usage.  The Company accounts for intercompany salesand transfers as if the sales or transfers were with third parties and eliminatesthe related profit in consolidation.

 

Reportable segments arebusiness units that provide different products or services.  Separate management of each segment isrequired because each business unit is subject to different operational issuesand strategies.  Through March 31, 2003,all revenues for each business segment were derived from business activitiesconducted with customers located in the United States.  No single external customer accounted for 10percent or more of the Company’s consolidated revenues.

 

8

----

 

The following tablesummarizes reportable segment information:

 
|                                     |   | **Three Months  Ended March 31,** |      |
|------------------------------------------|--------|-----------------------------------|-----------|
|                                     |   | **2003**                          |      | **2002** |   |
|                                     |   |                              |      |   |   |
| Revenues from reportable segments:       |   |                              |      |   |   |
| Restaurants                              |   | $                                 | 3,635,870 |   | 6,452,377 |   |
| Franchising and other                    |   | 1,270,564                         |      | 1,476,844 |   |
|                                     |   |                              |      |   |   |
| Total revenues                           |   | $                                 | 4,906,434 |   | 7,929,221 |   |
|                                     |   |                              |      |   |   |
| Depreciation and amortization:           |   |                              |      |   |   |
| Restaurants                              |   | 128,324                           |      | 258,606 |   |
| Franchising and other                    |   | 183,474                           |      | 185,474 |   |
|                                     |   |                              |      |   |   |
| Total depreciation and amortization      |   | $                                 | 311,798   |   | 444,080 |   |
|                                     |   |                              |      |   |   |
| Interest expense:                        |   |                              |      |   |   |
| Restaurants                              |   | 112,941                           |      | 124,031 |   |
| Franchising and other                    |   | 6,358                             |      | 9,853 |   |
|                                     |   |                              |      |   |   |
| Total interest expense                   |   | $                                 | 119,299   |   | 133,884 |   |
|                                     |   |                              |      |   |   |
| Interest income:                         |   |                              |      |   |   |
| Restaurants                              |   | 22,843                            |      | 6,581 |   |
| Franchising and other                    |   | 722                               |      | 563 |   |
|                                     |   |                              |      |   |   |
| Total interest income                    |   | $                                 | 23,565    |   | 7,144 |   |
|                                     |   |                              |      |   |   |
| Income (loss) before income tax expense: |   |                              |      |   |   |
| Restaurants                              |   | (145,348                          | )         | (45,770 | ) |
| Franchising and other                    |   | 286,638                           |      | 433,834 |   |
| Total income before income tax expense   |   | $                                 | 141,290   |   | 388,064 |   |

 
|                                |   | **March 31,  2003** |      | **March 31,  2002** |       |
|-------------------------------------|--------|---------------------|-----------|---------------------|------------|
| Gross fixed assets:                 |   |                |      |                |       |
| Restaurants                         |   | 6,531,194           |      | 12,150,784          |       |
| Franchising and other               |   | 1,448,915           |      | 1,552,735           |       |
|                                |   |                |      |                |       |
| Total gross fixed assets            |   | $                   | 7,980,109 |                | 13,703,519 |   |
|                                |   |                |      |                |       |
| Expenditures for fixed assets:      |   |                |      |                |       |
| Restaurants                         |   | 7,891               |      | 62,750              |       |
| Franchising and other               |   | —              |      | 14,799              |       |
|                                |   |                |      |                |       |
| Total expenditures for fixed assets |   | $                   | 7,891     |                | 77,549     |   |

 

9

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**(5)****                                 Contingencies**

 

The Company executed aseries of Master Lease Agreements (Agreements) relating to 25 franchisedproperties.  Paragraph 47 of each of theAgreements provides that no contractual rights exist between the Company andlessor until both parties have executed and delivered the Agreements.  The lessor has never delivered executedAgreements to the Company.  TheAgreements provide for rental payments from the Company to the Lessor, in thesame amount as the Company is entitled from the franchisees who have leased theproperties from the Company.  During2002, seven of these properties were closed and the franchisee discontinuedmaking lease payments to the Company. During the three month period ended March 31, 2003, two additionalproperties were closed and these franchisees also discontinued making leasepayments to the Company.  In turn, theCompany discontinued making lease payments for these nine properties to thelessor.  As of March 31, 2003, a totalof approximately $489,000 of lease payments had not been made by eitherparty.  The original lease paymentsremaining for these nine properties for the period from April 1, 2003 throughDecember 31, 2005 (the end of the lease term) approximates $2.1 million.

 

The Company is indiscussion with the lessor of the properties to resolve rental payments claimedby the lessor under the Agreements. While it is not possible at this time to determine the outcome of thesediscussions, the Company has claims against the lessor which it believes willat least offset any lease payments claimed by the lessor.  Accordingly, no amount has been accrued atMarch 31, 2003.

 

Of the remaining 16locations, 11 are currently making their lease payments to the Company and theCompany is in turn making payments to the lessor and 5 others are making theirpayments directly to the lessor.  Therecan be no assurance that these franchisees will continue to make their leasepayments in the future.

 

The Company is also aguarantor on three lease agreements for restaurants which the Companyoriginally operated, but which were sold in 2002.  The total monthly payments on these leases are $20,680 throughSeptember 30, 2012, and payments are due from the Company if the lessee isunable to fulfill its obligation to the lessor.  At March 31, 2003 it is not probable that the Company will be requiredto make payments under the guarantee. Thus, no liability has been accrued related to the Company’s obligationunder this agreement.

 

The Company filed anaction in the First Judicial District Court for the Parish of Caddo, Louisianain October, 2001, against Kenneth A. Greenway, and others as owners and lessorsof five restaurant locations requesting (1) lessors to allow a subleaseaccording to terms of the lease; (2) payment of lease revenues due to theCompany from Mr. Greenway for billboards located on three of the restaurantlocations; (3) to reimburse the Company for damages incurred as a result of

 

10

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lessors’ breach of awarranty within the lease that the equipment was in normal operating conditionwith no major repairs required; and (4) to make repairs required as a result ofhail damage for which lessor has collected insurance proceeds and cash paymentsfrom the Company.

 

Mr. Greenway filed acounterclaim against the Company, seeking to evict the Company from the fiverestaurant locations, from which the Company departed when the lease expired onSeptember 30, 2002.  Mr. Greenwayalleged that the Company failed to maintain the properties in first class condition.  Mr. Greenway won the lawsuit at the districtcourt level and won an appeal to the second Circuit of the Louisiana StateCourt of Appeals in June 2002.  TheCompany filed a writ with the Louisiana Supreme Court, which was rejected.

 

In January 2003, Mr.Greenway amended his counterclaim seeking damages for an alleged failure by theCompany to deliver the properties, at eviction, in the condition in which theproperties had been maintained at the inception of the lease.  Mr. Greenway has also alleged that theCompany removed numerous items from the leased premises and has refused toreturn these items.  Company managementbelieves the Company completed any necessary repairs before leaving the leasedpremises.

 

Management believes thatthe Company has meritorious claims against the lessors as a result of itslitigation and that even if the lessors were to prevail on their claimsregarding the condition and equipment of the premises, those costs would beapproximately offset by the Company’s claims against lessors.  Management does not anticipate a materialeffect upon its financial condition, results of operations or liquidity as aresult of this litigation.

 

The Company is involvedin various other claims and legal actions arising in the ordinary course ofbusiness.  In the opinion of the management,the ultimate disposition of these matters will not have a material adverseeffect on the Company’s financial condition, results of operations orliquidity.

 

11

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**Item 2.****           Management’sDiscussion****and Analysis of Financial Condition and Results ofOperations**

 

**Overview**

 

From time to time, theCompany may publish forward-looking statements relating to certain matters,including anticipated financial performance, business prospects, the futureopening of Company-operated and franchised restaurants, anticipated capitalexpenditures, and other matters.  Allstatements other than statements of historical fact contained in the Form 10-Qor in any other report of the Company are forward-looking statements.  The Private Securities Litigation Reform Actof 1995 provided a safe harbor for forward-looking statements.  In order to comply with the terms of thatsafe harbor, the Company notes that a variety of factors, individually or inthe aggregate, could cause the Company’s actual results and experience todiffer materially from the anticipated results or other expectations expressedin the Company’s forward-looking statements including, without limitation, thefollowing: the ability of the Company or its franchises to obtain suitablelocations for restaurant development; consumer spending trends and habits;competition in the restaurant segment with respect to price, service, location,food quality and personnel resources; weather conditions in the Company’soperating regions; laws and government regulations; general business andeconomic conditions; availability of capital; success of operating initiativesand marketing and promotional efforts; and changes in accounting policies.  In addition, the Company disclaims anyintent or obligation to update those forward-looking statements.

 

The Company operated andfranchised a total of 181 restaurants located in 22 states, including 7Company-owned and 174 franchise restaurants as of March 31, 2003.  The restaurants include a family steakhouseconcept, a steak and buffet concept, and the casual dining steakhouse concept.

 

###### **Results ofOperations**

 

Net income for thethree-month period ended March 31, 2003 was $86,373 compared to net income of$239,779 for the three-month period ended March 31, 2002.

 

The following table setsforth for the periods presented the percentage relationship to total revenuesof certain items included in the consolidated statements of income and certainrestaurant data for the periods presented:

 

|                                 |   | **Three-Months  Ended March 31,** |   |
|--------------------------------------|--------|-----------------------------------|--------|
|                                 |   | **2003**                          |   | **2002** |   |
| Revenues:                            |   |                              |   |   |   |
| Company-operated restaurants         |   | 74.1                              | %      | 81.4 | % |
| Franchise royalties and fees         |   | 23.7                              |   | 17.2 |   |
| Other sales                          |   | 2.2                               |   | 1.4 |   |
| Total revenues                       |   | 100.0                             |   | 100.0 |   |
|                                 |   |                              |   |   |   |
| Costs and expenses:                  |   |                              |   |   |   |
| Cost of company-operated restaurants |   | 52.5                              |   | 56.2 |   |
| Cost of franchise operations         |   | 6.7                               |   | 6.5 |   |
| Other cost of operations             |   | 1.7                               |   | 1.1 |   |
| Restaurant operating expenses        |   | 17.5                              |   | 19.2 |   |
| General and administrative           |   | 10.6                              |   | 5.1 |   |
| Depreciation and amortization        |   | 6.4                               |   | 5.6 |   |
| Total costs and expenses             |   | 95.4                              |   | 93.7 |   |
|                                 |   |                              |   |   |   |
| Income from operations               |   | 4.6                               |   | 6.3 |   |
|                                 |   |                              |   |   |   |
| Other income (expense)               |   | (1.7                              | )      | (1.4 | ) |
|                                 |   |                              |   |   |   |
| Income before income tax expense     |   | 2.9                               |   | 4.9 |   |
|                                 |   |                              |   |   |   |
| Income tax expense                   |   | 1.1                               |   | 1.9 |   |
| Net income                           |   | 1.8                               | %      | 3.0 | % |

 

12

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|                                    |   | **Three-Months  Ended March 31,** |   |
|-----------------------------------------|--------|-----------------------------------|--------|
|                                    |   | **2003**                          |   | **2002** |   |
| **Restaurant Data**                     |   |                              |   |   |   |
| Number of Company-Operated Restaurants: |   |                              |   |   |   |
| Beginning of period                     |   | 7                                 |   | 17 |   |
| Opened                                  |   | —                            |   | — |   |
| Closed                                  |   | —                            |   | — |   |
| Franchised                              |   | —                            |   | 3 |   |
| End of period                           |   | 7                                 |   | 14 |   |
|                                    |   |                              |   |   |   |
| Number of U.S. Franchised Restaurants:  |   |                              |   |   |   |
| Beginning of period                     |   | 186                               |   | 215 |   |
| Opened                                  |   | —                            |   | 4 |   |
| Closed                                  |   | 12                                |   | 7 |   |
| End of period                           |   | 174                               |   | 212 |   |

 

**Revenues**

 

Company-operatedrestaurant revenues decreased $2.8 million (43.7%) to $3.6 million for thethree-months ended March 31, 2003 as compared to $6.4 million for thecomparable three-month period ended March 31, 2002.  The decrease is primarily attributable to the closure of under-performingcompany restaurants during 2002, and the transfer of certain company-operatedrestaurants to franchise units during 2002, resulting in seven fewercompany-operated restaurants at March 31, 2003 as compared to March 31, 2002.

 

Franchiseand other revenues decreased 14.0% to $1.3 million for the three-months endedMarch 31, 2003 as compared to $1.5 million for the comparable three-monthperiod ended March 31, 2002.  Thedecrease is attributable to fewer franchised units in the system at March 31, 2003as compared to March 31, 2002.

 

###### **Costs and Expenses**

 

Costof company-operated restaurants, consisting primarily of food, beverage, andemployee costs decreased $1.9 million (42.1%) to $2.6 million for thethree-months ended March 31, 2003 from $4.5 million for the three-months endedMarch 31, 2002.  These costs decreasedas a percentage of total revenues from 56.2% in 2002 to 52.5% in 2003. Thedecrease is due to fewer company restaurants in 2003 due to the closing ofunder-performing company restaurants during 2002 and the franchising of threeunits during 2002.

 

Costof franchise operations and other cost of operations was $414,000 (8.4%) forthe three-months ended March 31, 2003 compared to $608,000 (7.6%) in 2002.The decrease is attributable to fewer franchised units in the system at March 31,2003 as compared to March 31, 2002.

 

Restaurantoperating expenses, which include utilities, insurance, maintenance, rent andother such costs of the company-operated restaurants, decreased $664,000(43.6%) for the three-month period ended March 31, 2003 versus the prior year’scomparable period. These expenses as

 

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a percentage of totalrevenues decreased to 17.5% in 2003 compared to 19.2% in 2002 for thecomparable period due to the closing of under performing company restaurants.

 

Forthe three months ended March 31, 2003 and 2002, general and administrativeexpenses were $518,000 and $406,000, respectively and as a percentage of totalrevenue were 10.6% and 5.1%, respectively. The increase is primarily due toinvestment banker consulting fees and also legal fees associated withlitigation matters during the first quarter of 2003.

 

Depreciationand amortization expense was $132,000 (29.8%) less for the three-months endedMarch 31, 2003 versus the three-month period ended March 31, 2002 due to theclosing or franchising of under-performing company-operated restaurants andretirement of their related long-lived assets.

 

**Other Income (Expense)**

 

Interestexpense decreased $15,000 for the three-months ended March 31, 2003 versus thethree-month period ended March 31, 2002 due to a lower average principaloutstanding balance as well as lower interest rates in 2003.  Interest income fluctuates according to thelevels of available cash balances.  TheCompany employs a cash management system whereby available balances areinvested on an overnight basis.

 

Incometax expense is directly affected by the levels of pretax income. The Company’seffective tax rate was 38.9% and 38.2% for the three-month periods ended March31, 2003 and 2002, respectively.

 

###### **Liquidity and Capital Resources**

 

As iscustomary in the restaurant industry, the Company has operated with negativeworking capital.  Historically, theCompany has leased the majority of its restaurants and through a strategy ofcontrolled growth has financed operations from operating cash flows, theutilization of the Company’s line of credit and long-term debt provided byvarious lenders.

 

Cashflows provided by operating activities was $230,000 in 2003 compared to cashused in operating activities of $226,000 in 2002. During 2002, cash flows usedby operations were primarily due to a $1.0 million decrease in accounts payableand accrued expenses offset by net income of $240,000 and depreciation andamortization of $444,000. Net cash used by investing activities of $8,000 in2003 and $78,000 in 2002, was for capital expenditures related to property andequipment.  Net cash used in financingactivities of $140,000 in 2003 was primarily for payments of the credit line notepayable and long-term debt offset by loan proceeds of $450,000. During 2002,the cash used in financing activities was primarily due to payments oflong-term debt offset by loan proceeds of $300,000 and draws on the credit linenote payable of $111,000.

 

TheCompany utilizes its existing line of credit to provide additional short-termfunding.  Management reviews availablefinancing alternatives to provide cash for future expansion, restructureexisting debt, and provide additional working capital; however, managementbelieves existing financing provides adequate funding.

 

# **CRITICALACCOUNTING POLICIES**

 

## **FranchiseRevenue**

 

Initial franchisefees are recognized when all material services have been substantiallyperformed by the Company and the restaurant has opened for business.  Franchise royalties, which are based on apercentage of monthly sales, are recognized as income on the accrualbasis.  Costs associated with franchiseoperations are recognized on the accrual basis.

 

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## **Accountsand Notes Receivable and Allowance for Doubtful Accounts**

 

Inconnection with franchise fees charged to our franchisees, we have accounts andnotes receivable outstanding from our franchisees at any given time.  We review outstanding accounts and notesreceivable monthly and record allowances for doubtful accounts as deemedappropriate for certain individual franchisees.  In determining the amount of allowance for doubtful accounts tobe recorded, we consider the age of the receivable, the financial stability ofthe franchisee, discussions that may have been had with the franchisee and ourjudgement as to the overall collectibility of the receivable from thatfranchisee.

 

**Franchise Royalty Contracts**

 

Franchise royaltycontracts are amortized on a straight-line basis over fifteen years, theestimated average life of the franchise agreements.  The Company assesses the recoverability of this intangible assetby determining whether the amortization of the franchise royalty contracts balanceover their remaining life can be recovered through undiscounted futureoperating cash flows of the acquired operation.  The amount of impairment, if any, is measured based on projecteddiscounted future operating cash flows using a discount rate reflecting theCompany’s average cost of funds.

 

**Goodwill**

 

Goodwillrepresents the excess of purchase price over fair value of net assets ofbusinesses acquired.  The Companyapplies the provisions of Statement of Financial Accounting Standards (SFAS)No. 142, *Goodwilland Other Intangible Assets*. Goodwill and intangible assets acquired in a purchase businesscombination and determined to have an indefinite useful life are not amortized,but instead tested for impairment at least annually in accordance with theprovisions of SFAS No. 142.

 

###### **Impact of Inflation**

 

Theimpact of inflation on the costs of food and beverage products, labor and realestate can affect the Company’s operations. Over the past few years, inflation has had a lesser impact on theCompany’s operations due to the lower rates of inflation in the nation’seconomy and economic conditions in the Company’s market areas.

 

Managementbelieves the Company has historically been able to pass on increased coststhrough certain selected menu price increases and has offset increased costs byincreased productivity and purchasing efficiencies, but there can be noassurance that the Company will be able to do so in the future.  Management anticipates that the average costof restaurant real estate leases and construction cost could increase in thefuture which could affect the Company’s ability to expand.  In addition, mandated health care oradditional increases in the federal or state minimum wages could significantlyincrease the Company’s costs of doing business.

#####  

##### **Impactof Recently Issued Accounting Standards**

 

InJuly 2002, the Financial Accounting Standards Board issued Statement ofFinancial Accounting Standards No. 146, *Accounting for Costs Associated with Exit or DisposalActivities*.  SFAS No. 146addresses financial accounting and reporting for costs associated with exit ordisposal activities.  It nullifies EITFIssue No. 94-3. “Liability Recognition for Certain Employee TerminationBenefits and Other Costs to Exit on Activity (including Certain Costs Incurredin a Restructuring).”  The principaldifference between SFAS No. 146 and Issue 94-3 relates to the recognition of aliability for a cost associated with an exit or disposal activity.  SFAS No. 146 requires that a liability berecognized for those costs only when the liability is incurred, that is, whenit meets the definition of a liability in the FASB’s conceptual framework.  In contrast, under Issue 94-3, a companyrecognized a liability for an exit cost when it committed to an exit plan.  SFAS No. 146 is effective for exit ordisposal activities that are initiated after December 31, 2002.

 

15

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The adoption of SFAS No.146 did not have any impact on the consolidated financial position, results ofoperations or cash flows of the Company.

 

InDecember 2002, the FASB issued SFAS No. 148 *Accounting for Stock-Based Compensation — Transitionand Disclosure, an amendment of FASB Statement No. 123*.  This Statement amends FASB Statement No. 123*Accountingfor Stock-Based Compensation,* to provide alternative methods oftransition of voluntary change to the fair value method of accounting forstock-based employee compensation.  Inaddition, this Statement amends the disclosure requirements of Statement No.123 to require prominent disclosures in both annual and interim financialsstatements about the method of accounting for stock-based employee compensationand the effect of the method on reported results.  The adoption of the disclosure provisions of SFAS No. 148 did nothave a material effect on the Company’s consolidated financial position,results of operations or cash flows of the Company.

 

InNovember 2002, the FASB issued Interpretation (FIN) No. 45 *Guarantor’s Accounting and DisclosureRequirements for Guarantees Including Indirect Guarantees of Indebtedness ofothers*, which elaborates on the disclosures to be made by aguarantor in its interim and annual financial statements about its obligationsunder certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at theinception of a guarantee, a liability for the fair value of the obligationundertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN No. 45are applicable on a prospective basis to guarantees issued or modified afterDecember 31, 2002, irrespective of the guarantor’s fiscal year end.  The adoption of FIN No. 45 did not have amaterial effect on the Company’s consolidated financial position, results ofoperations or cash flows of the Company.

 

InJanuary 2003, the FASB issued Interpretation No. 46 *Consolidation of Variable InterestEntities, an interpretation of ARB No. 51. *This Interpretation addresses the consolidation by businessenterprises of variable interest entities as defined in theInterpretation.  The Interpretationapplies immediately to variable interest entities created after January 31,2003, and to variable interests in variable interest entities obtained afterJanuary 31, 2003.  The application ofthis Interpretation did not have any impact on the Company’s consolidatedfinancial position, results of operations or cash flows of the Company.

 

As ofMarch 31, 2003, there are no other new accounting standards issued, but not yetadopted by the Company, which are expected to be applicable to the Company’sconsolidated financial position, operating results or financial statementdisclosures.

 

**Item3.****           Quantitative and****Qualitative Disclosure about Market Risk**

 

TheCompany does not engage in derivative financial instruments or derivativecommodity instruments.  As of March 31,2003, the Company’s financial instruments are not exposed to significant marketrisk due to foreign currency exchange risk or commodity price risk.  However, the Company is exposed to marketrisk related to interest rates.

 

Thetable below provides information about the Company’s debt obligations that aresensitive to changes in interest rates. The table presents principal cash flows and related weighted averageinterest rates by expected maturity dates.

 

Debtobligations held for other than trading purposes at March 31, 2003 (dollars inthousands):

####  

#### EXPECTED MATURITY DATE

 
|                      |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **2007** |   | **Thereafter** |   | **Total** |   | **Estimated  Fair Value** |   |
|---------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------------|--------|-----------|--------|---------------------------|--------|
| Credit  Line Note Payable |   |     |   |     |   |     |   |     |   |     |   |           |   |      |   |                      |   |
| Variable  Rate            |   | $        | 228    |     | — |     | — |     | — |     | — |           | — |      | $      | 228                       |   | $ | 228 |   |
| Average  Interest Rate    |   | 4.75     | %      | —   |   | —   |   | —   |   | —   |   | —         |   | 4.75      | %      |                      |   |
| Note  Payable to Bank     |   |     |   |     |   |     |   |     |   |     |   |           |   |      |   |                      |   |   |   |   |
| Variable  Rate            |   | $        | 450    |     | — |     | — |     | — |     | — |           | — |      | $      | 450                       |   | $ | 450 |   |
| Average  Interest Rate    |   | 4.75     | %      | —   |   | —   |   | —   |   | —   |   | —         |   | 4.75      | %      | —                    |   |
| Long-term  debt           |   |     |   |     |   |     |   |     |   |     |   |           |   |      |   |                      |   |
| Fixed  Rate               |   | $        | 497    |     | $      | 530      |   | $        | 505    |     | $      | 522            |   | $         | 361    |                      | $      | 2,045 |   | $ | 4,910 |   | $ | 5,264 |   |
| Average  Interest Rate    |   | 9.94     | %      | 9.93     | %      | 9.94     | %      | 9.94     | %      | 10.02    | %      | 10.07          | %      | 10.00     | %      |                      |   |
|                           |        |          |        |          |        |          |        |          |        |          |        |                |        |           |        |                           |        |  |  |  |  |  |  |  |  |  |

 

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**Item4.  Controls and Procedures**

 

Asrequired by Rule 13a-15 under the Securities Exchange Act of 1934, as amended(the “Exchange Act”), within the 90 days prior to the filing date of thisreport, the Company carried out an evaluation of the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures.  This evaluation was carried out under thesupervision and with the participation of the Company’s management, includingthe Company’s Chief Operating Officer who is also the Company’s Chief FinancialOfficer.  Based upon that evaluation,the Chief Operating Officer and Chief Financial Officer concluded that theCompany’s disclosure controls and procedures are effective.  There have been no significant changes inthe Company’s internal controls, or in other factors, which could significantlyaffect internal controls subsequent to the date the Company carried out itsevaluation.

 

Disclosurecontrols and procedures are controls and other procedures that are designed toensure that information required to be disclosed in Company reports filed orsubmitted under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the Securities and ExchangeCommission’s rules and forms. Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed in Company reports filed under the Exchange Act isaccumulated and communicated to management, including the Company’s Presidentand Chief Executive Officer and the Vice President and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure.

 

# **PART II. OTHERINFORMATION**

 

Item 1.             LegalProceedings

 

The Company filed an action in the First JudicialDistrict Court for the Parish of Caddo, Louisiana in October, 2001, againstKenneth A. Greenway, and others as owners and lessors of five restaurantlocations requesting (1) lessors to allow a sublease according to terms of thelease; (2) payment of lease revenues due to the Company from Mr. Greenway forbillboards located on three of the restaurant locations; (3) to reimburse theCompany for damages incurred as a result of lessors’ breach of a warrantywithin the lease that the equipment was in normal operating condition with nomajor repairs required; and (4) to make repairs required as a result of haildamage for which lessor has collected insurance proceeds and cash payments fromthe Company.

 

Mr. Greenway filed a counterclaim against the Company,seeking to evict the Company from the five restaurant locations, from which theCompany departed when the lease expired on September 30, 2002.  Mr. Greenway alleged that the Company failedto maintain the properties in first class condition.  Mr. Greenway won the lawsuit at the district court level and wonan appeal to the second Circuit of the Louisiana State Court of Appeals in June2002.  The Company filed a writ with theLouisiana Supreme Court, which was rejected.

 

In January 2003, Mr. Greenway amended his counterclaimseeking damages for an alleged failure by the Company to deliver theproperties, at eviction, in the condition in which the properties had beenmaintained at the inception of the lease. Mr. Greenway has also alleged that the Company removed numerous itemsfrom the leased premises and have refused to return these items.  Company management believes the Companycompleted any necessary repairs before leaving the leased premises.

 

Management believes that the Company has meritoriousclaims against the lessors as a results of its litigation and that even if thelessors were to prevail on their claims regarding the condition and equipmentof the premises, those costs would be approximately offset by the Company’sclaims against

 

17

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lessors.  Management does notanticipate a material effect upon its financial condition, results ofoperations or liquidity as a result of this litigation.

 

The Company is involved in various other claims andlegal actions arising in the ordinary course of business.  In the opinion of the management, theultimate disposition of these matters will not have a material adverse effecton the Company’s financial condition, results of operations or liquidity.

 

Item 2.             Changein Securities and Use of Proceeds – N/A

 

Item 3.             DefaultsUpon Senior Securities – N/A

 

Item 4.  Submissionof Matters to a Vote of Security Holders – N/A

 

Item 5.             OtherInformation  – N/A

 

Item 6.  Exhibitsand Reports on Form 8-K –

 

a)              Exhibits:

 

99.1Officer’s Certification pursuant to the Sarbanes-Oxley Act of 2002,Section 906.

 

b)             Reportson Form 8-K

 

None

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.

 
|                     | **Austins Steaks & Saloon, Inc.** |
|--------------------------|---------------------------------------|
|                     |                                  |
|                     |                                  |
| Date:  May 15, 2003 | By:                                   | /s/ Robyn  B. Mabe |   |
|                     |                                  |  Robyn B. Mabe |
|                     |                                  |  Chief Operating  Officer and Chief Financial Officer |

 

 

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**SECTION302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER**

 

I  Robyn B. Mabe, Chief Operating Officer(Principal Executive Officer) and Chief Financial Officer certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of Austins Steaks &Saloon, Inc.;

 

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

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Iam responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15b-14) for theregistrant and I have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to me by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

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

 

c)              presentedin this quarterly report my conclusion about the effectiveness of thedisclosure controls and procedures based on my evaluation as of the EvaluationDate;

 

5.                                       Ihave disclosed, based on my most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or persons performing the equivalentfunction):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

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

 

6.                                       Ihave indicated in this quarterly report whether there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of my most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

 
| Date:  May 15, 2003 |   |                                                 |
|--------------------------|--------|------------------------------------------------------|
|                     |   |                                                 |
|                     | By:    |   /s/ Robyn B. Mabe                             |   |
|                     |   | Robyn B. Mabe                                        |
|                     |   | Chief Operating Officer  and Chief Financial Officer |
|                          |        |                                                      |  |  |

 

 

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