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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended July 1, 2002

or

|o | 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 1-9684

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ANGELO AND MAXIE'S, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
Incorporation or organization)

33-0147725(I.R.S. Employer
Identification No.)


640 North LaSalle, Suite 295, Chicago, Illinois, 60610(Address of principal executive offices, including zip code)

(312) 266-1100(registrant's telephone number, including area code)

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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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of August 15, 2002: Common Stock ($.01 par value) 1,984,161

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ANGELO AND MAXIE'S, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (In thousands)

|                                          |                                               | July 1,
2002 |        | December 31,
2001
|----------------------------------------- | --------------------------------------------- | ------------ | ------ | -----------------
|
|ASSETS                                    |                                               |              |        |                  
|Current assets:                           |                                               |              |        |                  
|                                          | Cash                                          |              | $      | 40               
|                                          | Accounts receivable, net                      |              |        | 253              
|                                          | Inventories                                   |              |        | 456              
|                                          | Prepaid expenses and other current assets     |              |        | 540              
|                                          | Assets held for sale (including cash of $176) |              |        | 57,046           
|                                          |                                               |              |        |                  
|Total current assets                      |                                               |              | 58,335 |                  
|                                          |                                               |              |        |                  
|Equipment and improvements, net           |                                               |              | 15,085 |                  
|Leased property under capital leases, net |                                               |              | 1,681  |                  
|                                          |                                               |              |        |                  
|Intangible assets, net                    |                                               |              | 3,790  |                  
|Other assets                              |                                               |              | 757    |                  
|                                          |                                               |              |        |                  
|Total other assets, net                   |                                               |              | 4,547  |                  
|                                          |                                               |              |        |                  
|Total assets                              |                                               | $            | 79,648 |                  
|                                          |                                               |              |        |                  

The
accompanying notes are an integral part of these consolidated financial statements.

1

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ANGELO AND MAXIE'S, INC. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (In thousands, except share data)

|                                                                                                                                                                          |                                          | July 1,
2002 |         | December 31,
2001 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------------ | ------- | ----------------- | -
|
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                      |                                          |              |         |                   |  
|Current liabilities:                                                                                                                                                      |                                          |              |         |                   |  
|                                                                                                                                                                          | Current portion of long-term obligations |              | $       | 24,790            |  
|                                                                                                                                                                          | Debt to related parties                  |              |         | 6,479             |  
|                                                                                                                                                                          | Accounts payable                         |              |         | 899               |  
|                                                                                                                                                                          | Accrued liabilities                      |              |         | 9,503             |  
|                                                                                                                                                                          | Liabilities of discontinued operations   |              |         | 13,007            |  
|                                                                                                                                                                          |                                          |              |         |                   |  
|Total current liabilities                                                                                                                                                 |                                          |              | 54,678  |                   |  
|                                                                                                                                                                          |                                          |              |         |                   |  
|Long-term obligations under capital leases (excluding current portion)                                                                                                    |                                          |              | 2,712   |                   |  
|                                                                                                                                                                          |                                          |              |         |                   |  
|Stockholders' equity:                                                                                                                                                     |                                          |              |         |                   |  
|Preferred stock, $1.00 par value, 10,000,000 shares authorized; 4,169,103 and 3,970,550 shares issued and outstanding at July 1, 2002 and December 31, 2001, respectively |                                          |              | 4,169   |                   |  
|Common stock, $0.01 par value, 30,000,000 shares authorized; 1,980,589 and 1,975,766 shares issued and outstanding at July 1, 2002 and December 31, 2001, respectively    |                                          |              | 20      |                   |  
|Additional paid-in capital                                                                                                                                                |                                          |              | 65,442  |                   |  
|Retained deficit                                                                                                                                                          |                                          |              | (47,373 | )                 |  
|                                                                                                                                                                          |                                          |              |         |                   |  
|Total stockholders' equity                                                                                                                                                |                                          |              | 22,258  |                   |  
|                                                                                                                                                                          |                                          |              |         |                   |  
|Total liabilities and stockholders' equity                                                                                                                                |                                          | $            | 79,648  |                   | $
|                                                                                                                                                                          |                                          |              |         |                   |  

The
accompanying notes are an integral part of these consolidated financial statements.

2

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ANGELO AND MAXIE'S, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per share data)  (Unaudited)

|                                                    |                                                | Thirteen
weeks ended
July 1, 2002    |         | Reclassified
Thirteen
weeks ended
June 25, 2001 |        | Twenty-six
weeks ended
July 1, 2002 |       | Reclassified
Twenty-six
weeks ended
June 25, 2001 |        
|--------------------------------------------------- | ---------------------------------------------- | ------------------------------------ | ------- | ----------------------------------------------- | ------ | ----------------------------------- | ----- | ------------------------------------------------- | -------
|
|Revenues                                            |                                                | $                                    | 6,729   |                                                 | $      | 7,846                               |       | $                                                 | 14,056 
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Operating costs and expenses:                       |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    | Cost of sales                                  |                                      |         | 2,353                                           |        |                                     | 2,904 |                                                   |        
|                                                    | Restaurant labor                               |                                      |         | 1,628                                           |        |                                     | 2,254 |                                                   |        
|                                                    | Other operating costs                          |                                      |         | 1,307                                           |        |                                     | 1,458 |                                                   |        
|                                                    | Rent                                           |                                      |         | 483                                             |        |                                     | 711   |                                                   |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    |                                                | Total restaurant costs               |         |                                                 | 5,771  |                                     |       | 7,327                                             |        
|                                                    | Selling, general and administrative expenses   |                                      |         | 121                                             |        |                                     | 294   |                                                   |        
|                                                    | Depreciation and amortization                  |                                      |         | 430                                             |        |                                     | 634   |                                                   |        
|                                                    | Pre-opening costs                              |                                      |         |                                                |        |                                     | 233   |                                                   |        
|                                                    | Impairment of assets and restructuring charges |                                      |         | 7,061                                           |        |                                     |      |                                                   |        
|                                                    | Loss on disposal of assets                     |                                      |         |                                                |        |                                     | 198   |                                                   |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    |                                                | Total restaurant and operating costs |         |                                                 | 13,383 |                                     |       | 8,686                                             |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Loss from operations                                |                                                |                                      | (6,654  | )                                               |        | (840                                | )     |                                                   | (6,299 
|                                                    | Interest expense, net                          |                                      |         | 1,151                                           |        |                                     | 1,369 |                                                   |        
|                                                    | Other income                                   |                                      |         |                                                |        |                                     |      |                                                   |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Loss from continuing operations before income taxes |                                                |                                      | (7,805  | )                                               |        | (2,209                              | )     |                                                   | (8,336 
|Provision for income taxes                          |                                                |                                      |        |                                                 |        |                                    |       |                                                   |       
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Loss from continuing operations                     |                                                |                                      | (7,805  | )                                               |        | (2,209                              | )     |                                                   | (8,336 
|Discontinued operations:                            |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    | Income (loss) from operations                  |                                      |         | 1,381                                           |        |                                     | (158  | )                                                 |        
|                                                    | Provision for estimated loss on sale           |                                      |         | (3,681                                          | )      |                                     |      |                                                   |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Loss from discontinued operations                   |                                                |                                      | (2,300  | )                                               |        | (158                                | )     |                                                   | (2,730 
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Net loss                                            |                                                | $                                    | (10,105 | )                                               | $      | (2,367                              | )     | $                                                 | (11,066
|Preferred dividends                                 |                                                |                                      | 225     |                                                 |        |                                    |       |                                                   | 447    
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Net loss available to common shares                 |                                                | $                                    | (10,330 | )                                               | $      | (2,367                              | )     | $                                                 | (11,513
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Net loss per common shareBasic and diluted:        |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    | Continuing operations                          |                                      | $       | (4.06                                           | )      | $                                   | (1.12 | )                                                 | $      
|                                                    | Discontinued operations                        |                                      |         | (1.16                                           | )      |                                     | (0.08 | )                                                 |        
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|                                                    |                                                | $                                    | (5.22   | )                                               | $      | (1.20                               | )     | $                                                 | (5.82  
|                                                    |                                                |                                      |         |                                                 |        |                                     |       |                                                   |        
|Weighted-average shares outstanding                 |                                                |                                      | 1,979   |                                                 |        | 1,968                               |       |                                                   | 1,978  

The
accompanying notes are an integral part of these consolidated financial statements.

3

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ANGELO AND MAXIE'S, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands, unaudited)

|                                                                                 |                                                                   | Twenty-six
weeks ended
July 1, 2002 |         | Reclassified
Twenty-six
weeks ended
June 25, 2001 |  
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------- | ------- | ------------------------------------------------- | -
|
|Cash flows from operating activities:                                            |                                                                   |                                     |         |                                                   |  
|Net loss                                                                         |                                                                   | $                                   | (11,066 | )                                                 | $
|Adjustments to reconcile net loss to cash flow provided by operating activities: |                                                                   |                                     |         |                                                   |  
|                                                                                 | Depreciation and amortization                                     |                                     |         | 881                                               |  
|                                                                                 | Amortization of debt issuance costs, included in interest expense |                                     |         | 273                                               |  
|                                                                                 | Common Stock issued in lieu of compensation                       |                                     |         | 70                                                |  
|                                                                                 | Loss on disposal of assets                                        |                                     |         | 2                                                 |  
|                                                                                 | Loss provision for impairment of assets and restructuring charges |                                     |         | 7,061                                             |  
|                                                                                 | Decrease in accounts receivable                                   |                                     |         | 82                                                |  
|                                                                                 | Decrease (increase) in inventories                                |                                     |         | 169                                               |  
|                                                                                 | (Increase) decrease in prepaid expenses and other current assets  |                                     |         | (242                                              | )
|                                                                                 | Decrease in other assets                                          |                                     |         | 26                                                |  
|                                                                                 | Increase in accounts payable                                      |                                     |         | 56                                                |  
|                                                                                 | Increase in accrued liabilities                                   |                                     |         | 759                                               |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|                                                                                 | Cash used in continuing operating activities                      |                                     |         | (1,929                                            | )
|Discontinued operations:                                                         |                                                                   |                                     |         |                                                   |  
|                                                                                 | Depreciation and amortization                                     |                                     |         | 2,047                                             |  
|                                                                                 | Provision for estimated loss on disposal                          |                                     |         | 3,681                                             |  
|                                                                                 | Decrease in assets held for disposal                              |                                     |         | 37                                                |  
|                                                                                 | Decrease in liabilities of discontinued operations                |                                     |         | (2,639                                            | )
|                                                                                 |                                                                   |                                     |         |                                                   |  
|                                                                                 | Cash provided by discontinued operating activities                |                                     |         | 3,126                                             |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash provided by operating activities                                            |                                                                   |                                     | 1,197   |                                                   |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash flows from investing activities:                                            |                                                                   |                                     |         |                                                   |  
|                                                                                 | Expenditures for equipment and improvements                       |                                     |         | (121                                              | )
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash used in investing activities                                                |                                                                   |                                     | (121    | )                                                 |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash flows from financing activities:                                            |                                                                   |                                     |         |                                                   |  
|                                                                                 | Debt/equity issuance costs                                        |                                     |         | (400                                              | )
|                                                                                 | Principal payments on obligations under capital leases            |                                     |         | (120                                              | )
|                                                                                 | Payments under deferred acquisition agreement                     |                                     |         |                                                  |  
|                                                                                 | Net payments under revolving credit agreement                     |                                     |         | (200                                              | )
|                                                                                 | Payments of long-term debt                                        |                                     |         | (400                                              | )
|                                                                                 | Proceeds of long-term debt from related parties                   |                                     |         |                                                  |  
|                                                                                 | Proceeds from issuance of preferred stock                         |                                     |         |                                                  |  
|                                                                                 | Proceeds from issuance of common stock                            |                                     |         |                                                  |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash (used in) provided by financing activities                                  |                                                                   |                                     | (1,120  | )                                                 |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Decrease in cash                                                                 |                                                                   |                                     | (44     | )                                                 |  
|Cash, beginning of period                                                        |                                                                   |                                     | 260     |                                                   |  
|                                                                                 |                                                                   |                                     |         |                                                   |  
|Cash, end of period                                                              |                                                                   | $                                   | 216     |                                                   | $
|                                                                                 |                                                                   |                                     |         |                                                   |  

The
accompanying notes are an integral part of these consolidated financial statements.

4

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ANGELO AND MAXIE'S, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  July 1, 2002  (Unaudited)

(1)  BASIS OF PRESENTATION

The accompanying consolidated financial statements of Angelo and Maxie's, Inc. (formerly known as Chart House Enterprises, Inc.) and its
wholly-owned subsidiaries (the "Company") for the quarterly periods ended July 1, 2002 and June 25, 2001, have been prepared in accordance with generally accepted accounting principles,
and with the instructions to Form 10-Q. These financial statements have not been audited by independent public accountants, but include all adjustments (consisting of a normal and
recurring nature) that are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for such periods. However, these results
are not necessarily indicative of results for any other interim period or for the full fiscal year.

The
Company consummated the sale of 38 Chart House restaurants and one Peohe's restaurant (the "Chart House Business") to a third party as of July 30, 2002. See Note 8
"Subsequent Events." The operations for these restaurants have been presented as discontinued, and the Company has reclassified its Consolidated Statements of Operations and Consolidated Statements of
Cash Flows for the thirteen and twenty-six weeks ended June 25, 2001, as a result of implementing Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" to reflect discontinued operations of the assets held for sale as of July 1, 2002.

On
February 22, 2002, the Company effected a reverse stock split ("Reverse Stock Split") of its common stock, par value $0.01 per share ("Common Stock"), pursuant to which each
six shares of Common Stock issued and outstanding on such date were reclassified as and converted into one share of Common Stock immediately following the Reverse Stock Split. The Reverse Stock Split
has been reflected in the accompanying financial statements as if it had occurred at the beginning of fiscal 2001.

The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Certain
information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to
requirements of the Securities and Exchange Commission. Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate, but should be
read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Certain
prior period balances have been reclassified to conform to the current period presentation.

(2)  GOING CONCERN

The consolidated financial statements of the Company have been prepared on the basis of the Company's continuing as a going concern. The Company has experienced
net losses in the two most recent fiscal quarters and each of the last three fiscal years ended December 31, 2001. These results, in conjunction with an extensive restaurant renovation and
expansion program, severely strained the Company's capital resources. At July 1, 2002, the Company had $24.6 million of senior, secured debt that was scheduled to mature on
August 30, 2002. See Note 5 "Debt." The debt maturity issue raised substantial doubt about the Company's ability to continue as a going concern. Since December 2001,

5

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the Company had been conducting a review of strategic alternatives with a principal focus on identifying appropriate sources of capital to address the debt maturity matter. The Company completed a
transaction as of July 30, 2002, whereby the Chart House Business was sold to a third party. The proceeds from the sale provided sufficient funds to retire all of the senior, secured debt on
August 1, 2002. See Note 8 "Subsequent Events."

(3)  DISCONTINUED OPERATIONS

As of July 1, 2002, the Company had 38 Chart House and one Peohe's restaurants held for sale that were included in discontinued operations. No interest
expense has been allocated to discontinued operations and depreciation and amortization related to discontinued operations ceased in June 2002. Condensed financial information for the results
of operations for the assets held for sale is as follows (in thousands):

|                                             |  | Thirteen
Weeks Ended
July 1,
2002 |        | Thirteen
Weeks Ended
June 25,
2001 |   | Twenty-Six
Weeks Ended
July 1,
2002 |   | Twenty-Six
Weeks Ended
June 25,
2001 |       
|-------------------------------------------- |  | --------------------------------- | ------ | ---------------------------------- | - | ----------------------------------- | - | ------------------------------------ | ------
|Revenues                                     |  | $                                 | 31,318 |                                    | $ | 32,142                              |   | $                                    | 59,183
|Total restaurant costs                       |  |                                   | 27,127 |                                    |   | 28,209                              |   |                                      | 51,798
|Selling, general and administrative expenses |  |                                   | 2,008  |                                    |   | 2,743                               |   |                                      | 4,387 
|Depreciation and amortization                |  |                                   | 802    |                                    |   | 1,348                               |   |                                      | 2,047 
|                                             |  |                                   |        |                                    |   |                                     |   |                                      |       
|Income (loss) from discontinued operations   |  | $                                 | 1,381  |                                    | $ | (158                                | ) | $                                    | 951   
|                                             |  |                                   |        |                                    |   |                                     |   |                                      |       

Condensed
financial information for the assets held for sale is as follows (in thousands):

July 1, 2002Cash

$
176Accounts receivable, net


1,790Inventories


1,686Prepaid expenses and other current assets


328Equipment and improvements, net


50,084Other assets, including intangible assets, net


2,982Assets held for sale

$
57,046


Condensed
financial information for the liabilities of discontinued operations is as follows (in thousands):

July 1, 2002Accounts payable

$
6,687Accrued liabilities


6,320Liabilities of discontinued operations

$
13,007


(4)  IMPAIRMENT OF ASSETS AND RESTRUCTURING CHARGES

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Accounting for Goodwill and Other Intangible Assets"
("SFAS 142"), which requires, among other things, that effective January 1, 2002, goodwill and other certain intangible assets resulting from a business combination accounted for as a
purchase no longer be amortized, but be subject to ongoing
impairment review. In connection with the transitional goodwill and certain other intangible assets impairment evaluation, SFAS 142 required the Company to perform an assessment of whether
there

6

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was an indication that goodwill and certain other intangible assets were impaired as of the date of adoption. To accomplish this evaluation, the Company determined the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing goodwill and certain other intangible assets, to those reporting units as of the date of adoption. During the second
quarter 2002, the Company completed its required review by comparing its carrying value for the Angelo and Maxie's restaurant business to fair market value. In determining the fair market value of its
assets, management considers several factors requiring the exercise of business judgment. Such judgments include developing valuation multiples such as the ratio of total capitalized value to
restaurant earnings before interest, taxes, depreciation, and amortization for an industry peer group of publicly traded companies and applying those ratios to the Company's historical and projected
operating performance. Such evaluation indicated that the recorded value of goodwill and trade name of Angelo and Maxie's was impaired by $5.4 million. During the thirteen and twenty-six weeks
ended June 25, 2001, the Company recognized $0.1 million and $0.3 million, respectively, of amortization expense related to these intangible assets.

The
Company also recorded a $1.7 million charge for severance due to the corporate work force reduction associated with the sale of the Chart House Business. The
$1.7 million payable for severance is presented in the July 1, 2002 balance sheet in accrued liabilities.

(5)  DEBT

The Company had a Revolving Credit and Term Loan Agreement ("Credit Agreement") with a group of three banks. At July 1, 2002, the Company had
$24.6 million outstanding under the Credit Agreement, which accrued interest at the prime interest rate, plus 2.75% (7.5% at July 1, 2002). The balance outstanding under the Credit
Agreement included $1.5 million funded by EGI-Fund (01) Investors, L.L.C. ("EGI-Fund (01)"), a related party, which accrued interest at LIBOR plus 14.0% (15.84%
at July 1, 2002) due to the subordinate nature of the related party's participation in the Credit Agreement. Cash paid for interest, net of amounts capitalized, was $1.6 million and
$1.2 million for the second quarters of 2002 and 2001, respectively. On August 1, 2002, all outstanding amounts, including principal of $24.1 million and accrued interest of
$0.2 million, were paid in full with proceeds from the sale of the Chart House Business. See Note 8 "Subsequent Events."

During
2001, the Credit Agreement was amended to provide for, among other things, deferral of principal and interest payments and an acceleration of the maturity date to April 30,
2002. Accordingly, the total amount due under the Credit Agreement is reflected as a current liability in the accompanying financial statements. The Credit Agreement was further amended on
May 1, 2002, to provide for, among other things, an extension of the maturity date to August 30, 2002. Additionally, in connection with the most recent amendment, the Company paid
previously deferred interest totaling $1.0 million plus fees of $0.4 million. The Company made scheduled principal payments on the term loan portion of the Credit Agreement of
$0.4 million and $0.5 million on June 28, 2002 and July 31, 2002, respectively.

During
the period from November 2000 to January 2001, related parties made available to the Company an aggregate $11.0 million pursuant to unsecured notes. Amounts
outstanding under the notes were subordinated to amounts owing under the Credit Agreement. The proceeds were used to fund working capital requirements as well as scheduled principal payments on the
term loan. The terms of the notes were amended and restated in February 2001, increasing the availability of borrowing to $13.0 million. During June 2001, one note was repaid and
availability under the second note agreement was reduced to $5.0 million in conjunction with the Company raising equity financing through the issuance of Series A preferred stock. The
remaining note, owed to EGI-Fund (01), accrued interest at the applicable Eurodollar rate plus 16.0% (17.84% at July 1, 2002) and had a scheduled maturity of March 31, 2005.
A fee of 12.0% per annum was charged on the unused portion of the availability of the borrowings under the note through June 2001. On August 1, 2002, all outstanding amounts, including
principal of $5.0 million, accrued interest of $1.2 million, and $0.3 million of accrued

7

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consulting fees, were paid in full with proceeds from the sale of the Chart House Business. Accordingly, the total amount of debt due to related parties is reflected as a current liability in the
accompanying financial statements. See Note 8 "Subsequent Events."

(6)  SALE OF GROUND LEASE

During the first quarter 2001, the Company sold the rights to a ground lease for one restaurant that had been closed for major remodeling. The Company received
proceeds of $0.9 million, which is recorded as "other income" in the accompanying Consolidated Statements of Operations.

(7)  RELATED PARTY TRANSACTIONS

Payments to related parties totaled $0.2 million in the second quarter of 2002, primarily related to property leasing, and payments to related parties
totaled $0.1 million in the second quarter of 2001, primarily related to consulting fees. In addition, the Company was party to a marketing agreement with iDine Rewards Network, Inc.
("iDine"), a related party and owner of the iDine frequent diner program. In connection with the advance sale of discounted food and beverage credits, the Company received advertising in iDine
publications and through the relationships iDine had established with major airlines to feature the Company's restaurants as preferred dining choices. iDine provided web and print promotional services
that were designed to create incentives for members to dine at the Company's restaurants, especially during the Company's restaurants' non-peak days. No amounts were received from iDine
during the second quarter of 2002 or 2001 related to this agreement. Pursuant to the agreement, the Company has paid $1.2 and $0.9 million to iDine towards its advances and for its marketing
services during the second quarters of 2002 and 2001, respectively. This agreement was terminated as of July 29, 2002, in conjunction with the sale of the Chart House Business. See
Note 8 "Subsequent Events." The Company has no further obligations under this agreement.

Interest
accrued on related party notes totaled $0.3 million and $0.2 million during the second quarters of 2002 and 2001, respectively. See also Note 5, "Debt."

The
relationships stem from one or more Company stockholders and/or members of the Company's Board of Directors maintaining ownership interest in and influential management positions at
or with these organizations.

(8)  SUBSEQUENT EVENTS

In May 2002, the Board of Directors of the Company authorized the sale of the Chart House Business to a third party. The sale was completed as of July 30,
2002, for consideration of approximately $55.3 million, consisting of cash and the assumption of certain current liabilities. $2.5 million of the sale proceeds were deposited in escrow
pending receipt of certain landlord consents.

The
sale received the approval of the Company's stockholders at a special meeting of stockholders held on July 30, 2002. At the special meeting, the Company's stockholders also
approved the change of the Company's name from Chart House Enterprises, Inc. to Angelo and Maxie's, Inc. The purchase agreement provides for, among other things, post-closing
adjustments to the consideration received to account for any differences between actual and estimated purchased current assets, assumed current liabilities, and certain prorated expenses. Any such
post-closing adjustments will be treated, when made, as adjustments to the cash consideration received by the Company and will change the provision for estimated loss on sale at that time.

The
Company recorded a provision for estimated loss on sale of discontinued operations of $3.7 million in the fiscal quarter ended July 1, 2002. See Note 1 "Basis of
Presentation."

The
Company used a portion of the proceeds from the sale of the Chart House Business to repay all amounts outstanding under the Credit Agreement and the subordinated note owed to
EGI-Fund (01). As a result, long-term obligations following repayments of amounts outstanding under the Credit Agreement and the subordinated note consist solely of capital
leases related to restaurants previously operated by the Company and currently subleased to third parties.

8

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This Quarterly Report on Form 10-Q contains forward-looking statements that have been made pursuant to provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements represent the Company's expectations or beliefs concerning future events, including any statements regarding: future sales and operating
income percentages, the continuation of historical trends, the sufficiency of the Company's cash balances, and cash generated from operating, financing and/or investing activities for the Company's
future liquidity and capital resource needs. Without limiting the foregoing, the words "believes," "intends," "projects," "plans," "expects," "anticipates," and similar expressions are intended to
identify forward-looking statements. The Company cautions that these statements are qualified by important economic and competitive factors that could cause actual results to differ materially from
those in the forward-looking statements. These factors include, without limitation, risks of the restaurant industry, an industry with many well-established competitors with greater
financial and other resources than the Company, and the impact of changes in consumer trends, employee availability, and cost increases. In addition, the Company's ability to expand is dependent upon
various factors, such as the availability of attractive sites for new restaurants, the ability to negotiate suitable lease terms, the ability to generate or borrow funds to develop new restaurants,
the ability to obtain various government permits and licenses, and the recruitment and training of skilled management and restaurant employees. Accordingly, such forward-looking statements do not
purport to be predictions of future events or circumstances and may not be realized.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

The following is a comparative analysis of the results of operations of Angelo and Maxie's, Inc. (formerly known as Chart House Enterprises, Inc.)
(the "Company") for the thirteen and twenty-six week periods ended July 1, 2002 and June 25, 2001. The results of operations for the thirteen and twenty-six week
periods ended July 1, 2002, are not necessarily indicative of the results to be expected for any future periods, including the fiscal year ending December 30, 2002. At July 1,
2002, the Company operated 38 Chart House restaurants, six Angelo and Maxie's Steakhouses, and one Peohe's restaurant. At June 25, 2001, the Company operated 40 Chart House restaurants, seven
Angelo and Maxie's Steakhouses, and one Peohe's restaurant. In May 2002, the Board of Directors of the Company authorized the sale of the 38 Chart House restaurants and the one Peohe's
restaurant (the "Chart House Business") to a third party. Accordingly, the results of operations for the Chart House Business are presented as discontinued operations as of July 1, 2002. The
sale of the Chart House Business was
completed as of July 30, 2002. In addition, one of the continuing restaurants has been designated for closure in 2002.

9

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The
following dollar amounts are in thousands.

|                                                    |                                                | Thirteen
Weeks Ended
July 1,
2002 |        |        |        | Reclassified
Thirteen
Weeks Ended
June 25,
2001 |      |        |       | Twenty-Six
Weeks Ended
July 1,
2002 |       |      |        | Reclassified
Twenty-Six
Weeks Ended
June 25,
2001 |        |       |     
|--------------------------------------------------- | ---------------------------------------------- | --------------------------------- | ------ | ------ | ------ | ----------------------------------------------- | ---- | ------ | ----- | ----------------------------------- | ----- | ---- | ------ | ------------------------------------------------- | ------ | ----- | ----
|
|Revenues                                            |                                                | $                                 | 6,729  |        | 100.0  |                                                 | $    | 7,846  |       | 100.00                              |       | $    | 14,056 |                                                   | 100.0  |       | $   
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|Operating costs and expenses:                       |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|                                                    | Cost of sales                                  |                                   |        | 2,353  |        | 35.0                                            |      |        | 2,904 |                                     | 37.0  |      |        | 5,003                                             |        | 35.6  |     
|                                                    | Restaurant labor                               |                                   |        | 1,628  |        | 24.2                                            |      |        | 2,254 |                                     | 28.7  |      |        | 3,360                                             |        | 23.9  |     
|                                                    | Other operating costs                          |                                   |        | 1,307  |        | 19.4                                            |      |        | 1,458 |                                     | 18.6  |      |        | 2,774                                             |        | 19.7  |     
|                                                    | Rent                                           |                                   |        | 483    |        | 7.2                                             |      |        | 711   |                                     | 9.1   |      |        | 956                                               |        | 6.8   |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|                                                    |                                                | Total restaurant costs            |        |        | 5,771  |                                                 | 85.8 |        |       | 7,327                               |       | 93.4 |        |                                                   | 12,093 |       | 86.0
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|Restaurant operating income                         |                                                |                                   | 958    |        | 14.2   |                                                 |      | 519    |       | 6.6                                 |       |      | 1,963  |                                                   | 14.0   |       |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|                                                    | Selling, general and administrative expenses   |                                   |        | 121    |        | 1.8                                             |      |        | 294   |                                     | 3.7   |      |        | 318                                               |        | 2.3   |     
|                                                    | Depreciation and amortization                  |                                   |        | 430    |        | 6.4                                             |      |        | 634   |                                     | 8.1   |      |        | 881                                               |        | 6.3   |     
|                                                    | Pre-opening costs                              |                                   |        |       |        |                                                |      |        | 233   |                                     | 3.0   |      |        |                                                  |        |      |     
|                                                    | Impairment of assets and restructuring charges |                                   |        | 7,061  |        | 104.9                                           |      |        |      |                                     |      |      |        | 7,061                                             |        | 50.2  |     
|                                                    | Loss on disposal of assets                     |                                   |        |       |        |                                                |      |        | 198   |                                     | 2.5   |      |        | 2                                                 |        |      |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|                                                    | Total restaurant and operating costs           |                                   |        | 13,383 |        | 198.9                                           |      |        | 8,686 |                                     | 110.7 |      |        | 20,355                                            |        | 144.8 |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|Loss from operations                                |                                                |                                   | (6,654 | )      | (98.9  | )                                               |      | (840   | )     | (10.7                               | )     |      | (6,299 | )                                                 | (44.8  | )     |     
|                                                    | Interest expense, net                          |                                   |        | 1,151  |        | 17.1                                            |      |        | 1,369 |                                     | 17.4  |      |        | 2,037                                             |        | 14.5  |     
|                                                    | Other income                                   |                                   |        |       |        |                                                |      |        |      |                                     |      |      |        |                                                  |        |      |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|Loss from continuing operations before income taxes |                                                |                                   | (7,805 | )      | (116.0 | )                                               |      | (2,209 | )     | (28.2                               | )     |      | (8,336 | )                                                 | (59.3  | )     |     
|Provision for income taxes                          |                                                |                                   |       |        |       |                                                 |      |       |       |                                    |       |      |       |                                                   |       |       |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     
|Loss from continuing operations                     |                                                |                                   | (7,805 | )      | (116.0 | )                                               |      | (2,209 | )     | (28.2                               | )     |      | (8,336 | )                                                 | (59.3  | )     |     
|                                                    |                                                |                                   |        |        |        |                                                 |      |        |       |                                     |       |      |        |                                                   |        |       |     

CONTINUING OPERATIONS

Revenues decreased $1.1 million, or 14.2%, to $6.7 million in the second quarter of 2002, compared to $7.8 million in the first quarter of
2001. The decrease in revenues is primarily due to the Company's disposal of three restaurants in 2001, which had a $1.5 million impact, partially offset by $0.3 million in additional
revenues resulting from additional weeks of operations for the restaurant that the Company opened in the second quarter of 2001. Comparable sales for the quarter were up 0.3%.

Revenues
decreased $0.9 million, or 6.3%, to $14.1 million for the twenty-six weeks ended July 1, 2002, compared to $15.0 million for the
twenty-six weeks ended June 25, 2001. The decrease in revenues is primarily due to the Company's disposal of three restaurants in 2001, which had a $3.2 million impact,
partially offset by $2.3 million in additional revenues resulting from additional weeks of operations for the two restaurants that the Company opened in March and May of 2001.

10

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Comparable sales for the twenty-six weeks ended July 1, 2002 were flat. The Company believes that the negative impact from the events of September 11, 2001 is no longer a
material factor in the revenue performance of its restaurants.

Cost
of sales as a percentage of revenues decreased by 2.0 percentage points in the second quarter of 2002, compared with the second quarter of 2001. This improvement was
primarily the result of the Angelo and Maxie's Steakhouses opened during 2001 and 2000 gaining operational efficiencies,
favorable beef prices, and the closure of underperforming restaurants during 2001. For the twenty-six weeks ended July 1, 2002, cost of sales as a percentage of revenues decreased
by 1.5 percentage points driven by the same factors that positively impacted the second quarter 2002.

Restaurant
labor as a percentage of revenues decreased by 4.5 percentage points in the second quarter of 2002, compared with the first quarter of 2001. This improvement was
primarily the result of the closure of underperforming restaurants during 2001, the Angelo and Maxie's Steakhouses opened during 2001 and 2000 gaining operational efficiencies, and the reduction in
size of the restaurant's management teams in October 2001. For the twenty-six weeks ended July 1, 2002, restaurant labor as a percentage of revenues decreased by
4.6 percentage points driven by the same factors that positively impacted the second quarter 2002.

Other
operating costs as a percentage of restaurant revenues increased by 0.8 percentage points in the second quarter of 2002, compared with the second quarter of 2001, and
increased 2.1 percentage points in the twenty-six weeks ended July 1, 2002, compared with the twenty-six weeks ended June 25, 2001, primarily due to
increased insurance costs.

Rent
as a percentage of revenues decreased by 1.9 percentage points in the second quarter of 2002, compared with the first quarter of 2001, and decreased 2.5 percentage
points for the twenty-six weeks ended July 1, 2002, compared with the twenty-six weeks ended June 25, 2001, primarily as the result of the closure of
underperforming restaurants during 2001 which had higher rent structures than the remainder of the Company's restaurants. In addition, the Angelo and Maxie's Steakhouses opened during 2001 and 2000
gained sales volume, whereas the rent dollars remained fixed, thereby causing the ratio of rent to sales for those restaurants to decrease.

Selling,
general and administrative expenses decreased $0.2 million in the second quarter of 2002, and decreased $0.5 million for the twenty-six weeks ended
July 1, 2002, primarily as the result of several reductions in work force and tight control of discretionary spending, particularly salaries and wages, consulting, and legal fees. The Company
expects selling, general, and administrative expenses to increase in the third and fourth quarters of 2002 as the result of the fixed general overhead costs being allocated to six operating
restaurants versus forty-five operating restaurants as a result of the sale of the Chart House Business.

Depreciation
and amortization decreased $0.2 million to $0.4 million in the second quarter of 2002, compared to $0.6 million in the second quarter of 2001, primarily
as the result of the cessation of amortization of goodwill and trade name intangibles as set forth in Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"). In addition, the number of operating restaurants in the second quarter of 2002 decreased from the second quarter of 2001. Those same two factors caused a $0.3 million
decrease in depreciation and amortization for the twenty-six weeks ended July 1, 2002, as compared to the twenty-six weeks ended June 25, 2001.

As
the Company is not opening any new restaurants in the near future, there were no pre-opening costs during the first or second quarters of 2002. Pre-opening
expenses during the first and second quarters of 2001 primarily reflect salaries, benefits, and training costs for new employees for the two Angelo and Maxie's Steakhouses opened during the first and
second quarters of 2001.

On
January 1, 2002, the Company adopted SFAS 142, which requires, among other things, that effective January 1, 2002, goodwill and certain other intangible assets
resulting from a business

11

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combination accounted for as a purchase no longer be amortized, but be subject to ongoing impairment review. In connection with the transitional goodwill and certain other intangible assets
impairment evaluation, SFAS 142 required the Company to perform an assessment of whether there was an indication that goodwill and certain other intangible assets were impaired as of the date
of adoption. To accomplish this evaluation, the Company determined the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and certain other
intangible assets, to those reporting units as of the date of adoption. During the second quarter 2002, the Company completed its required review by comparing its carrying value for the Angelo and
Maxie's restaurant business to fair market value. In determining the fair market value of its assets, management considers several factors requiring the exercise of business judgment. Such judgments
include developing valuation multiples such as the ratio of total capitalized value to restaurant earnings before interest, taxes, depreciation, and amortization for an industry peer group of publicly
traded companies and applying those ratios to the Company's historical and projected operating performance. Such evaluation indicated that the recorded value of goodwill and trade name of Angelo and
Maxie's was impaired by $5.4 million. During the thirteen and twenty-six weeks ended June 25, 2001, the Company recognized $0.1 million and $0.3 million, respectively, of
amortization expense related to these intangible assets. The Company also recorded a $1.7 million charge for severance due to the corporate work force reduction associated with the sale of the
Chart House Business.

There
were no material asset disposals during the first and second quarters of 2002. Several asset disposals resulted in a $0.2 million loss during the second quarter of 2001, and
$1.0 million loss during the twenty-six weeks ended June 25, 2001, primarily related to restaurants that the Company ceased to operate or transferred to a third party.

Interest
expense decreased $0.2 million, or 15.9%, to $1.2 million in the second quarter of 2002, and decreased $0.6 million for the twenty-six weeks
ended July 1, 2002. The decrease is primarily the result of more favorable interest rates in 2002 and the elimination of fees charged the Company for unused portions of available borrowings
under the related party debt in 2001.

The
Company recognized $0.9 million of other income during the twenty-six weeks ended June 25, 2001, related to proceeds received from the sale of rights to a
ground lease for one restaurant that had been closed.

The
Company issued Series A convertible preferred stock (the "Preferred Stock") during June 2001. The Preferred Stock is entitled to dividends at the rate of 10.0% per
annum, based on the original price of $2.25 per share. Dividends are payable semiannually on June 1 and December 1. Dividends paid through June 1, 2002 were in the form of
additional shares of Preferred Stock, in part, because the Company's credit agreement prohibited the payment of cash dividends. Future dividends are expected to be paid in cash.

DISCONTINUED OPERATIONS

In May 2002, the Board of Directors of the Company authorized the sale of the Chart House Business to a third party and the Company consummated the sale as
of July 30, 2002. The operations for the restaurants comprising the Chart House Business have been presented as discontinued for all periods presented to reflect that the assets of the Chart
House Business were being held for sale as of July 1, 2002. Total consideration received by the Company was $55.3 million consisting of cash and the assumption by the purchaser of
certain current liabilities. The Company recorded a provision for

12

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estimated loss on sale of discontinued operations of $3.7 million in the fiscal quarter ended July 1, 2002.

|(in thousands)                               |  | Thirteen
Weeks Ended
July 1, 2002 |        | % |       | Thirteen
Weeks Ended
June 25, 2001 |   | %      |   | Twenty-Six
Weeks Ended
July 1, 2002 |   | % |        | Twenty-Six
Weeks Ended
June 25, 2001 |       | % |  
|-------------------------------------------- |  | --------------------------------- | ------ | - | ----- | ---------------------------------- | - | ------ | - | ----------------------------------- | - | - | ------ | ------------------------------------ | ----- | - | -
|Revenues                                     |  | $                                 | 31,318 |   | 100.0 |                                    | $ | 32,142 |   | 100.0                               |   | $ | 59,183 |                                      | 100.0 |   | $
|Total restaurant costs                       |  |                                   | 27,127 |   | 86.6  |                                    |   | 28,209 |   | 87.8                                |   |   | 51,798 |                                      | 87.5  |   |  
|Selling, general and administrative expenses |  |                                   | 2,008  |   | 6.4   |                                    |   | 2,743  |   | 8.5                                 |   |   | 4,387  |                                      | 7.4   |   |  
|Depreciation and amortization                |  |                                   | 802    |   | 2.6   |                                    |   | 1,348  |   | 4.2                                 |   |   | 2,047  |                                      | 3.5   |   |  
|                                             |  |                                   |        |   |       |                                    |   |        |   |                                     |   |   |        |                                      |       |   |  
|Income (loss) from discontinued operations   |  | $                                 | 1,381  |   | 4.4   |                                    | $ | (158   | ) | (0.5                                | ) | $ | 951    |                                      | 1.6   |   | $
|                                             |  |                                   |        |   |       |                                    |   |        |   |                                     |   |   |        |                                      |       |   |  

Revenues decreased $0.8 million, or 2.6%, to $31.3 million in the second quarter of 2002, compared to $32.1 million in the
first quarter of 2001. The decrease in revenues is primarily due to lower revenues in the western half of the United States, which was substantially depressed by weak economic conditions in
California. Revenues decreased $2.1 million, or 3.4%, to $59.2 million for the twenty-six weeks ended July 1, 2002, compared to $61.3 million for the
twenty-six weeks ended June 25, 2001. The decrease in revenues is also due to the economic slowdown since September 11, 2001, coupled with the overall negative impact of the
timing of the New Years Eve holiday relative to the Company's fiscal years. Specifically, the first half of 2002 did not include New Years Eve while the first half of 2001 did.

Restaurant
costs as a percentage of revenues decreased by 1.2 percentage points in the second quarter 2002 compared to the second quarter 2001 primarily due to lower insurance
costs, which were partially offset by increased marketing costs resulting from the growth in a frequent diner program implemented by the Company during the first quarter of 2001 with iDine Rewards
Network, Inc. ("iDine"), a related party and owner of the iDine frequent diner program, for the advance sale of discounted food and beverage credits.

Selling,
general and administrative expenses decreased $0.7 million in the second quarter of 2002 and $0.8 million for the twenty-six weeks ended July 1,
2002, primarily as the result of several reductions in work force and tight control of discretionary spending, particularly salaries and wages, consulting, and legal fees.

Depreciation
and amortization decreased $0.5 million to $0.8 million in the second quarter of 2002, compared to $1.3 million in the second quarter of 2001 and
decreased $0.7 to $2.0 million for the twenty-six weeks ended July 1, 2002, compared to $2.7 million for the twenty-six weeks ended June 25, 2001, primarily as
the result of the cessation of depreciation and amortization in June 2002 in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."

The
Company recognized a $3.7 million provision for estimated loss on the sale of the Chart House Business. The loss is comprised of $1.9 million in transaction costs,
consisting primarily of

13

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investment banking and legal fees, and a $1.8 million difference between the net book value of assets disposed and the consideration received. In addition, $1.7 million of severance
costs were recognized in continuing operations related to the sale. See "Continuing Operations." The purchase agreement related to the sale of the Chart House Business provides, among other things,
for post-closing adjustments to the consideration received to account for any differences between actual and estimated purchased current assets, assumed current liabilities, and certain
prorated expenses. Any such post-closing adjustments will be treated, when made, as adjustments to the cash consideration received by the Company and will change the provision for
estimated loss on sale at that time.

LIQUIDITY AND CAPITAL RESOURCES

|                                                |  | Twenty-six
weeks ended
July 1, 2002 |      | Reclassified
Twenty-six
weeks ended
June 25, 2001 |  
|----------------------------------------------- |  | ----------------------------------- | ---- | ------------------------------------------------- | -
|
|Cash used in continuing operating activities    |  | $                                   | (1.9 | )                                                 | $
|Cash provided by discontinued operations        |  |                                     | 3.1  |                                                   |  
|Expenditures for equipment and improvements     |  |                                     | (0.1 | )                                                 |  
|Cash (used in) provided by financing activities |  |                                     | (1.1 | )                                                 |  
|                                                |  |                                     |      |                                                   |  
|Net (decrease) increase in cash                 |  | $                                   |     |                                                   | $
|                                                |  |                                     |      |                                                   |  

The
Company consummated the sale of the Chart House Business as of July 30, 2002. The total cash consideration received from this transaction on August 1, 2002 was
approximately $52.0 million, of which $36.0 million was used on August 1, 2002 as follows:

|Retire the senior, secured debt under the Credit Agreement and accrued interest |                                          | $ | 24.3 million
|------------------------------------------------------------------------------- | ---------------------------------------- | - | ------------
|Retire the subordinated debt and accrued interest                               |                                          | $ | 6.5 million 
|Establish escrow for leases pending assignment                                  |                                          | $ | 2.5 million 
|Establish collateral for outstanding letters of credit                          |                                          | $ | 2.7 million 
|                                                                                |                                          |  
|                                                                                | Total uses of proceeds on August 1, 2002 |   | $           
|                                                                                |                                          |  

In connection with the sale of the Chart House Business, the parties agreed to establish a $2.5 million escrow, the proceeds of which will be released to
the Company upon the delivery of consents to assignments of certain restaurant leases from the landlords.

In
connection with the termination of the Credit Agreement, the Company was required to establish a cash collateral account equal to 100% of its obligations under existing letters of
credit, which totaled $2.7 million.

The
Company expects to use the remaining $16.0 million of proceeds from the sale of the Chart House Business to settle $3.5 million in costs associated with the transaction
and for general corporate purposes including, but not limited to, the settlement of short term liabilities. The Company believes that its remaining sale proceeds, together with net cash provided by
operating activities, will be sufficient to fund its operating expenses and capital needs for at least the next twelve months.

Historically,
the Company required significant capital principally for the construction and opening expenses for new restaurants and for the remodeling and refurbishing of existing
restaurants. The Company has funded its capital requirements through debt financing, both with third party banks and related parties, equity financing, and cash flows from operations. The Company does
not intend to open any new restaurants or incur any major remodeling or refurbishing costs during fiscal 2002, and anticipates capital expenditures to total approximately $0.3 million for the
remainder of fiscal year 2002.

14

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Cash
used in continuing operating activities was $1.9 million in 2002, compared to $1.0 million of cash used in 2001. Cash provided by discontinued operating activities was
$3.1 million in 2002, compared to $1.6 million in 2001. In 2001, the Company received $0.9 million in proceeds upon the sale of a ground lease from a previously operated
restaurant.

Cash
used in investing activities in 2002 consisted of restaurant capital expenditures of $0.1 million primarily for refurbishing activities. Cash used in investing activities in
2001 consisted of $3.4 million of capital expenditures primarily related to the opening of two new Angelo and Maxie's Steakhouses.

Cash
used for financing activities was $1.1 million in 2002, compared to cash provided by financing activities of $2.6 million in 2001. The current period uses includes a
net $0.6 million to pay amounts owed under the Credit Agreement, including $0.4 million in principal payments, and a $0.4 million fee owed under the Credit Agreement. In 2001, the
Company decreased its borrowings on the revolving line of credit by a net $4.9 million from funds received in conjunction with the sale of Preferred Stock and increased its borrowings from a
related party by $3.0 million primarily to fund capital expenditures. In 2001, the Company also made scheduled principal payments under the Credit Agreement of $2.3 million.

The
Company issued approximately 3.8 million shares of Preferred Stock through a rights offering during the second quarter 2001. Net proceeds upon closing of the issuance were
approximately $7.1 million. The proceeds of the Preferred Stock were used to pay borrowings under the subordinated notes owed to related parties and other expenses. The remaining proceeds were
used in the third quarter and fourth quarter 2001 to pay outstanding liabilities to construction vendors of the Angelo and Maxie's Steakhouses. The Preferred Stock is entitled to dividends at the rate
of 10.0% per annum, based on the original price of $2.25 per share. Dividends are payable semiannually on June 1 and December 1. Dividends paid through June 1, 2002 were in the
form of additional shares of Preferred Stock, in part, because the Company's Credit Agreement prohibited the payment of cash dividends. Future dividends are expected to be paid in cash.

At
July 1, 2002, the Company had approximately $3.5 million available for future borrowings under the Credit Agreement, including $0.5 million from a related party.
Amounts outstanding under the Credit Agreement at July 1, 2002 totaled $24.6 million and accrued interest at the prime rate, plus 2.75% (7.5% at July 1, 2002). The balance
outstanding under the Credit Agreement at July 1, 2002 includes $1.5 million funded by the related party, which accrues interest at LIBOR plus 14% (15.84% at July 1, 2002) to give
effect to the subordinate nature of the related party's participation in the Credit Agreement.

The
Credit Agreement was amended on May 1, 2002, providing for an extension of the maturity date to August 30, 2002. In connection with the amendment, the Company paid
previously deferred interest totaling $1.0 million, plus fees of $0.4 million. Pursuant to the amendment, the Company was also obligated to make scheduled principal payments on the term
loan portion of the Credit Agreement of $0.4 million and $0.5 million on June 28, 2002 and July 31, 2002, respectively. A fee of $0.2 million would have been payable
if the Company's obligations under the Credit Agreement had not been satisfied in full on or before August 1, 2002. The Company completed its two scheduled principal payments on the term loan
as stipulated by the amendment and avoided the payment of the $0.2 million fee by retiring all amounts outstanding under the Credit Agreement on August 1, 2002. The Company no longer has
any ability to borrow amounts under the Credit Agreement.

The
Company also owed $6.5 million to EGI-Fund (01) Investors, L.L.C., a related party, at July 1, 2002. The amount consisted of an aggregate
$5.0 million in notes, due March 31, 2005, and accrued interest at the applicable Eurodollar rate, plus 16.0% (17.84% at July 1, 2002). The additional $1.5 million consists
of accrued interest and consulting fees.

15

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CRITICAL ACCOUNTING POLICIES

On December 12, 2001, the Securities and Exchange Commission issued Financial Reporting Release No. 60 (the "FRR") "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies." A critical accounting policy is one that would materially effect the Company's operations or financial condition, and requires management to make
estimates or judgments in certain circumstances. The following disclosures discuss those accounting policies which the Company believes are most critical and could have the greatest impact on its
financial condition.

Valuation of Exit Costs and Restructure Reserves.On an as needed basis and subject to approval of the Company's Board of
Directors, the Company establishes reserves for unusual and non-recurring items associated with the activities of exiting restaurant locations and reorganizing support staff to address
changes in the Company's operations. This requires that management make estimates for cash inflows and outflows based on judgment, market conditions, advice from counsel and consultants, and
historical experience. These estimates include, but are not limited to, future payments of rents, severance, legal and consulting costs, consideration for contract modifications, and proceeds from
sale of disposed assets. Because of factors beyond management's control, actual results may be different from the estimates, which may cause the Company to record adjustments in future periods.

Impairment of Assets.On January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142 "Accounting for Goodwill and Other Intangible Assets" ("SFAS 142"), which requires, among other things, that effective January 1, 2002, goodwill resulting from a business
combination accounted for as a purchase no longer be amortized, but be subject to ongoing impairment review. On an ongoing basis, the Company reviews its carrying value of restaurant assets and
compares them with fair market value. In determining the fair market value of its assets, management considers several factors requiring the exercise of business judgment. Such judgments include
developing valuation multiples such as the ratio of total capitalized value to restaurant earnings before interest, taxes, depreciation and amortization for an industry peer group of publicly traded
companies and applying those ratios to the Company's historical and projected operating performance. If management determines that the fair market value of its intangible assets is materially below
the current carrying cost of the assets, an impairment charge is recognized in operating income in the period the impairment is identified.

Cost Capitalization and Depreciation Policies.Costs for maintenance, repairs, and purchases are either expensed as incurred
or capitalized and amortized over the costs estimated useful life. This requires management to make business judgments regarding which costs should be capitalized and, if capitalized, its estimated
useful life. Management has established the Company's cost capitalization and depreciation policies based on historical experience in the restaurant industry, industry guidelines regarding useful
lives, and adherence to applicable accounting standards. Maintenance, repairs, and minor purchases are expensed as incurred. Major purchases of equipment and facilities, and major replacements and
improvements, are capitalized. Depreciation and amortization are recorded for financial reporting purposes using the straight-line method over the estimated useful lives of the assets.
Leasehold interests and improvements are amortized over the shorter of the lease term, including planned extensions, or the asset life. Equipment is depreciated over lives ranging from three to eight
years. Leasehold interests and improvements are depreciated over lives ranging from one to 40 years.

SEASONALITY

The Company's business is seasonal in nature, with revenues and operating income for the second and third quarters greater than in the first and fourth quarters
as the Company benefits from expanded seating capacity and the generally higher level of leisure travel in the spring and summer quarters.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risk from changes in interest rates on debt and changes in commodity prices. The Company's exposure to interest rate risk
consisted of its Credit Agreement that was benchmarked to the prime rate and the subordinated promissory note that was benchmarked to the LIBOR rate. The impact on the Company's results of operations
of a one-point interest rate change on its outstanding debt balance as of July 1, 2002, would be approximately $0.3 million in incremental interest expense per annum. The
Company's exposure to market risk from changes in interest rates has decreased substantially due to the repayment of all amounts owed under the Credit Agreement and subordinated promissory note as of
August 1, 2002. The Company does not use derivative instruments to manage borrowing costs or reduce exposure to adverse fluctuations in the interest rate. The Company does not use derivative
instruments for trading purposes.

The
Company purchases certain commodities such as beef, seafood, chicken, and cooking oil. These commodities are generally purchased based upon purchase agreements or arrangements with
vendors. These purchase agreements or arrangements may contain features that fix the commodity price or define the price from an agreed upon formula. The Company does not use financial instruments to
hedge commodity prices because these purchase arrangements help control the ultimate cost paid and any commodity price fluctuations are generally short term in nature.

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PART IIOTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of Stockholders of the Company was held on May 14, 2002. Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and Regulation 14A thereunder for the purpose of electing directors and approving a stock option grant to the president and chief financial officer of the
Company.

There
was no solicitation in opposition to management's nominees for directors.

At
the meeting, eight directors were elected and the stock option grant to the president and chief financial officer of the Company was approved.

Each
stockholder is entitled to one vote for each share of Common Stock held and one vote for each six shares of Preferred Stock held. The tables below summarize the results of the
stockholder vote:

Number of
shares

Percentage

Representing
number of
votes

PercentageShares outstanding and entitled to vote

5,916,113

100.0

2,634,384

100.0Shares represented in person or by proxy at meeting

5,502,808

93.0

2,240,646

85.1Shares not voted at meeting

413,305

7.0

393,738

14.9


|                                                                                      |                             | Votes
for |           | Votes
against/withheld |        | Votes
abstained |   | Broker
non-votes
|------------------------------------------------------------------------------------- | --------------------------- | --------- | --------- | ---------------------- | ------ | --------------- | - | ----------------
|Proposal I (Election of Directors):                                                   |                             |           |           |                        |        |                 |   |                 
|                                                                                      | Barbara R. Allen            |           | 2,229,474 |                        | 11,172 |                 |  |                 
|                                                                                      | Linda Walker Bynoe          |           | 2,229,474 |                        | 11,172 |                 |  |                 
|                                                                                      | William M. Diefenderfer III |           | 2,229,658 |                        | 10,988 |                 |  |                 
|                                                                                      | Jeffery D. Klein            |           | 2,229,755 |                        | 10,891 |                 |  |                 
|                                                                                      | Robert A. McCormack         |           | 2,229,755 |                        | 10,891 |                 |  |                 
|                                                                                      | Stephen Ottmann             |           | 2,228,401 |                        | 12,245 |                 |  |                 
|                                                                                      | Thomas J. Walters           |           | 2,225,034 |                        | 15,612 |                 |  |                 
|                                                                                      | Samuel Zell                 |           | 2,228,029 |                        | 12,617 |                 |  |                 
|Proposal II (Approval of stock option grant to president and chief financial officer) |                             | 1,184,794 |           | 162,659                |        | 72,241          |   | 820,952         

ITEM 5. OTHER INFORMATION

On August 14, 2002, the Company issued a press release announcing certain changes in its management and board of directors. Mr. Thomas J. Walters
resigned as Chief Executive Officer and a director of the Company. In addition, four of the Company's other directors resigned. The Company appointed its President, Kenneth R. Posner, to the
additional position of Chief Executive Officer. Emanuel N. Hilario, the Company's Vice President-Finance and Controller, was appointed Chief Financial Officer. The Company hereby incorporates by
reference the information set forth in the press release, a copy of which is attached hereto as Exhibit 99.1.

On
July 19, 2002, the Board of Directors of the Company, upon the recommendation of its Audit Committee, authorized the engagement of KPMG LLP as the Company's independent
certified public accountants for the year 2002, subject to a customary approval process by KPMG. KPMG completed its approval process and the engagement became effective on August 9, 2002.

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During
the Company's fiscal years ended December 25, 2000 and December 31, 2001, and the interim period between December 31, 2001 and July 19, 2002, neither
the Company nor someone on its behalf consulted KPMG LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, (ii) the type of
audit opinion that might be rendered on the Company's consolidated financial statements, or (iii) any other matter or event set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

---

The
Company filed a report on Form 8-K on May 21, 2002. Under Item 5, the Company reported it had issued a press release announcing that it had
agreed to sell its Chart House and Peohe's restaurants.

The
Company filed a report on Form 8-K on May 31, 2002. Under Item 4, the Company reported that Arthur Andersen, LLP notified the Company that it would be
resigning as the Company's certifying accountant.

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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.

|                      |  | ANGELO AND MAXIE'S, INC.
|--------------------- |  | ------------------------
|Date: August 15, 2002 |  | By:                     
|Date: August 15, 2002 |  | By:                     

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