**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,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       March 31,  2003**                                                                                                                                                                                                                                                                                                                               |
|                                                                        |       |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                        | **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** |
|                                                                        |       |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

**ANGELO AND MAXIE’S, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                                                     |   | **33-0147725**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  Incorporation or organization) |   | (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)       |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter periods that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

 

| Yes | ý |   | No | o |
|-----|--------|--------|----|---|

 

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

 

| Yes | o |   | No | ý |
|-----|---|--------|----|--------|

 

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of May 9, 2003:

 

Common Stock ($.01par value) 1,991,305

 

 

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**PART I - FINANCIAL INFORMATION**

 

**ITEM1.   FINANCIAL STATEMENTS.**

 

**ANGELO AND MAXIE’S, INC. ANDSUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands, except share data)**

** **
|                                                                                                                                                                        |   | **March 31, 2003**  |   | **December 30, 2002** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|-----------------------|--------|
|                                                                                                                                                                        |   | **(Unaudited****)** |   |                  |   |
| **ASSETS**                                                                                                                                                                  |   |                |   |                  |   |
| Current assets:                                                                                                                                                             |   |                |   |                  |   |
| Cash and cash  equivalents                                                                                                                                                  |   | $                   | 7,098  |                  | $      | 7,651 |   |
| Accounts  receivable, net                                                                                                                                                   |   | 505                 |   | 541                   |   |
| Inventories                                                                                                                                                                 |   | 379                 |   | 416                   |   |
| Prepaid expenses  and other current assets                                                                                                                                  |   | 673                 |   | 974                   |   |
| Total current  assets                                                                                                                                                       |   | 8,655               |   | 9,582                 |   |
| Equipment and  improvements:                                                                                                                                                |   |                |   |                  |   |
| Equipment                                                                                                                                                                   |   | 3,710               |   | 3,708                 |   |
| Leasehold  interests and improvements                                                                                                                                       |   | 12,558              |   | 12,554                |   |
|                                                                                                                                                                        |   | 16,268              |   | 16,262                |   |
| Less:  Accumulated depreciation and amortization                                                                                                                            |   | 3,238               |   | 2,934                 |   |
| Equipment and  improvements, net                                                                                                                                            |   | 13,030              |   | 13,328                |   |
| Other  non-current assets:                                                                                                                                                  |   |                |   |                  |   |
| Restricted cash                                                                                                                                                             |   | 2,702               |   | 2,702                 |   |
| Leased property  under capital leases, net                                                                                                                                  |   | 1,121               |   | 1,136                 |   |
| Intangibles, net                                                                                                                                                            |   | 4,315               |   | 4,315                 |   |
| Other  non-current assets                                                                                                                                                   |   | 496                 |   | 505                   |   |
| Total other  non-current assets                                                                                                                                             |   | 8,634               |   | 8,658                 |   |
| Total assets                                                                                                                                                                |   | 30,319              |   | 31,568                |   |
|                                                                                                                                                                        |   |                |   |                  |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                              |   |                |   |                  |   |
| Current  liabilities:                                                                                                                                                       |   |                |   |                  |   |
| Current portion  of non-current liabilities                                                                                                                                 |   | 126                 |   | 124                   |   |
| Accounts payable                                                                                                                                                            |   | 1,722               |   | 1,679                 |   |
| Accrued  liabilities                                                                                                                                                        |   | 3,450               |   | 4,322                 |   |
| Deferred gain                                                                                                                                                               |   | 967                 |   | —                |   |
| Liabilities of  discontinued operations                                                                                                                                     |   | —              |   | 170                   |   |
| Total current  liabilities                                                                                                                                                  |   | 6,265               |   | 6,295                 |   |
| Non-current  liabilities (excluding current portion):                                                                                                                       |   |                |   |                  |   |
| Deferred gain                                                                                                                                                               |   | —              |   | 967                   |   |
| Long-term  portion of landlord note                                                                                                                                         |   | 382                 |   | 407                   |   |
| Long-term  portion of capital lease obligation                                                                                                                              |   | 1,870               |   | 1,877                 |   |
| Other long-term  obligations                                                                                                                                                |   | 867                 |   | 921                   |   |
| Total  non-current liabilities (excluding current portion)                                                                                                                  |   | 3,119               |   | 4,172                 |   |
| Stockholders’  equity:                                                                                                                                                 |   |                |   |                  |   |
| Preferred stock,  $1.00 par value, 10,000,000 shares authorized;  4,134,736 shares issued and outstanding at March 31, 2003 and December 30,  2002                          |   | 4,135               |   | 4,135                 |   |
| Common stock,  $0.01 par value, 30,000,000 shares authorized;  1,991,305 and 1,978,733 shares issued and outstanding at March 31, 2003 and  December 30, 2002, respectively |   | 20                  |   | 20                    |   |
| Additional  paid-in capital                                                                                                                                                 |   | 65,425              |   | 65,416                |   |
| Retained deficit                                                                                                                                                            |   | (48,645             | )      | (48,470               | )      |
| Total  stockholders’ equity                                                                                                                                            |   | 20,935              |   | 21,101                |   |
| Total  liabilities and stockholders’ equity                                                                                                                            |   | $                   | 30,319 |                  | $      | 31,568 |   |

** **

The accompanyingnotes are an integral part of these consolidated financial statements.

 

1

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**ANGELO AND MAXIE’S, INC. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share data)**

**(Unaudited)**

** **
|                                                          |   | **Quarterly periods ended** |   |
|---------------------------------------------------------------|--------|-----------------------------|--------|
|                                                          |   | **March 31, 2003**          |   | **April 1, 2002** | ** ** |
|                                                          |   |                        |   |   |   |
| Revenues                                                      |   | $                           | 6,805  |   | $ | 7,327 |   |
| Operating costs  and expenses:                                |   |                        |   |   |   |
| Cost of sales                                                 |   | 2,439                       |   | 2,650 |   |
| Restaurant labor                                              |   | 1,571                       |   | 1,732 |   |
| Other operating  costs                                        |   | 1,159                       |   | 1,467 |   |
| Rent                                                          |   | 601                         |   | 616 |   |
| Total restaurant  costs                                       |   | 5,770                       |   | 6,465 |   |
| General and  administrative expenses                          |   | 668                         |   | 197 |   |
| Depreciation and  amortization                                |   | 320                         |   | 438 |   |
| Loss on disposal  of assets                                   |   | 11                          |   | 2 |   |
| Total restaurant  and operating costs                         |   | 6,769                       |   | 7,102 |   |
| Income from  operations                                       |   | 36                          |   | 225 |   |
| Interest  expense, net                                        |   | 30                          |   | 886 |   |
| Other income                                                  |   | (51                         | )      | (130 | ) |
| Income (loss)  from continuing operations before income taxes |   | 57                          |   | (531 | ) |
| Provision for  income taxes                                   |   | —                      |   | — |   |
| Income (loss)  from continuing operations                     |   | 57                          |   | (531 | ) |
| Loss from  discontinued operations                            |   | —                      |   | (430 | ) |
| Net income  (loss)                                            |   | $                           | 57     |   | $ | (961 | ) |
| Preferred  dividends                                          |   | 232                         |   | 222 |   |
| Net loss  applicable to common shares                         |   | $                           | (175   | ) | $ | (1,183 | ) |
| Net loss per  common share -                                  |   |                        |   |   |   |
| Basic and  diluted:                                           |   |                        |   |   |   |
| Continuing  operations                                        |   | $                           | (0.09  | ) | $ | (0.38 | ) |
| Discontinued  operations                                      |   | —                      |   | (0.22 | ) |
|                                                          |   | $                           | (0.09  | ) | $ | (0.60 | ) |
|                                                          |   |                        |   |   |   |
| Weighted-average  shares outstanding                          |   | 1,989                       |   | 1,977 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

 

2

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**ANGELO AND MAXIE’S, INC. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands, unaudited)**

 
|                                                                                                   |   | **Quarterly periods ended** |     |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------------|----------|
|                                                                                                   |   | **March 31, 2003**          |     | **April 1, 2002** | ** ** |
| Cash flows from  operating activities:                                                                 |   |                        | * * |   | * * |
| Net income  (loss)                                                                                     |   | $                           | 57       |   | $ | (961 | ) |
| Adjustments to  reconcile net income (loss) to cash flows (used in) provided by operating  activities: |   |                        |     |   |   |
| Depreciation and  amortization                                                                         |   | 320                         |     | 1,696 |   |
| Loss on disposal  of assets                                                                            |   | 11                          |     | 2 |   |
| Common stock  issued in lieu of compensation                                                           |   | 9                           |     | 35 |   |
| Amortization of  debt issuance costs, included in interest expense                                     |   | —                      |     | 3 |   |
| Changes in  working capital:                                                                           |   |                        |     |   |   |
| Decrease in  accounts receivable                                                                       |   | 36                          |     | 416 |   |
| Decrease in  inventories                                                                               |   | 37                          |     | 100 |   |
| Decrease  (increase) in prepaid expenses and other current assets                                      |   | 301                         |     | (178 | ) |
| Decrease  (increase) in other non-current assets                                                       |   | 9                           |     | (88 | ) |
| Decrease in  accounts payable                                                                          |   | (189                        | )        | (652 | ) |
| (Decrease)  increase in accrued liabilities                                                            |   | (879                        | )        | 197 |   |
| Decrease in  liabilities of discontinued operations                                                    |   | (170                        | )        | — |   |
| Increase in  other non-current obligations (excluding current portion)                                 |   | (54                         | )        | — |   |
| Cash (used in)  provided by operating activities                                                       |   | (512                        | )        | 570 |   |
| Cash flows used  in investing activities:                                                              |   |                        |     |   |   |
| Expenditures for  equipment and improvements                                                           |   | (11                         | )        | (332 | ) |
| Cash used in  investing activities                                                                     |   | (11                         | )        | (332 | ) |
| Cash flows used  in financing activities:                                                              |   |                        |     |   |   |
| Net payments  under revolving credit agreement                                                         |   | —                      |     | (200 | ) |
| Payments on  landloard notes                                                                           |   | (23                         | )        | (21 | ) |
| Reduction of  obligations under capital leases                                                         |   | (7                          | )        | (60 | ) |
| Cash used in  financing activities                                                                     |   | (30                         | )        | (281 | ) |
| Decrease in cash                                                                                       |   | (553                        | )        | (43 | ) |
| Cash and cash  equivalents, beginning of period                                                        |   | 7,651                       |     | 260 |   |
| Cash and cash  equivalents, end of period                                                              |   | $                           | 7,098    |   | $ | 217 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements

 

3

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**ANGELO AND MAXIE’S, INC. ANDSUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**March 31, 2003**

**(Unaudited)**

 

**(1)****                                 BASISOF PRESENTATION**

 

The accompanying consolidated financial statements ofAngelo and Maxie’s, Inc. and its wholly-owned subsidiaries (the “Company”) forthe quarterly periods ended March 31, 2003 and April 1, 2002, have beenprepared in accordance with generally accepted accounting principles, and withthe instructions to Form 10-Q.  Thesefinancial statements have not been audited by independent public accountants,but include all adjustments (consisting of a normal and recurring nature) thatare, in the opinion of management, necessary for a fair presentation of thefinancial condition, results of operations, and cash flows for such periods.However, these results are not necessarily indicative of results for any otherinterim period or for the full fiscal year.

 

The Company consummated the sale of 38 Chart Houserestaurants and one Peohe’s restaurant (the “Chart House Business”) to a thirdparty (the “Purchaser”) as of July 30, 2002. See Note 2 “Sale of Chart House Business.”  The Company has reclassified its Consolidated Statements ofOperations for the quarter ended April 1, 2002, to reflect these operations asdiscontinued in accordance with Statement of Financial Accounting Standards No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFASNo. 144”).

 

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities as of the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

 

Certain information and footnote disclosures normallyincluded in financial statements in accordance with generally accepted accountingprinciples have been omitted pursuant to requirements of the Securities andExchange Commission.  Managementbelieves that the disclosures included in the accompanying interim financialstatements and footnotes are adequate, but should be read in conjunction withthe consolidated financial statements and notes thereto included in theCompany’s Annual Report on Form 10-K for the year ended December 30, 2002.

 

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

 

**(2)****                                 SALEOF CHART HOUSE BUSINESS**

 

In May 2002, the Board of Directors of the Companyauthorized the sale of the Chart House Business.  The sale was completed as of July 30, 2002, for consideration ofapproximately $55.3 million, consisting of cash and the assumption ofapproximately $3.1 million of certain current liabilities.  The Company used a portion of the proceedsto repay all amounts outstanding on its senior, secured debt and a subordinatednote owed to a related party.  See Note3 “Debt.”  The Company recorded aprovision for estimated loss on sale of discontinued operations of $3.7 millionin second quarter of 2002, which was revised to $2.4 million in the thirdquarter of 2002, primarily as a result of the elimination of net liabilities tolandlords following the receipt of the landlords’ consent to assign certainleases to the Purchaser.  At March 31,2003, the Purchaser had not yet paid approximately $0.2 million of the purchaseprice provided for in the asset purchase agreement.  The Company has taken legal action to collect these funds.  See “Part II, Item 1. Legal Proceedings.”

 

Through July 29, 2002,the Company owned 38 Chart House and one Peohe’s restaurants, the operations ofwhich have been reported as discontinued.  Condensed financial information for the results of operations for thediscontinued operations is as follows (in thousands):

 
|                                 |   | **Quarterly period ended  April 1, 2002** |       |
|--------------------------------------|--------|-------------------------------------------|------------|
|                                 |   |                                      | ** ** |
| Revenues                             |   | $                                         | 27,865     |   |
| Total restaurant  costs              |   | 24,658                                    |       |
| General and  administrative expenses |   | 2,379                                     |       |
| Depreciation and  amortization       |   | 1,258                                     |       |
| Loss from  discontinued operations   |   | $                                         | (430       | ) |

 

4

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**(3)****                                 DEBT**

 

During 2000, the Companyentered into two note agreements with one landlord for an aggregate $0.7 million.  The notes amortize over seven year terms,bear interest at 9.0%, and are payable in monthly installments.  The Company made scheduled principalpayments on these notes totaling $23,000 and $21,000 during the first quartersof 2003 and 2002, respectively. Interest expense and cash paid for interest related to these notesamounted to $11,000 and $13,000 for the first quarters of 2003 and 2002,respectively.

 

During the first quarter of 2002, the Company had aRevolving Credit and Term Loan Agreement (“Credit Agreement”) with a group ofthree banks.  At April 1, 2002, theCompany had $25.0 million outstanding under the Credit Agreement, which accruedinterest at the prime rate, plus 2.75% (7.5% at April 1, 2002).  The balance outstanding under the CreditAgreement included $1.5 million funded by EGI-Fund (01) Investors, L.L.C.(“EGI-Fund (01)”), a related party, which accrued interest at 16.32% due to thesubordinate nature of the related party’s participation in the CreditAgreement.  Interest expense and cashpaid for interest related to the Credit Agreement totaled $485,000 and $34,000,respectively, for the first quarter of 2002. On August 1, 2002, all outstanding amounts under the Credit Agreementwere paid in full with net proceeds from the sale of the Chart House Business.

 

During the first quarter of 2002, the Company had a$5.0 million note owed to EGI-Fund (01), which accrued interest at theapplicable Eurodollar rate plus 16.0%, which was 17.87% at April 1, 2002.  Interest expense related to this notetotaled $0.3 million for the first quarter of 2002; no cash payments were madefor interest related to this note during that period.  On August 1, 2002, the note owed to EGI-Fund (01) was paid infull with net proceeds from the sale of the Chart House Business.

 

**(4)****                                 STOCK-BASEDCOMPENSATION**

 

The Company has elected to account for stock-basedcompensation under the intrinsic value method of accounting. This methodmeasures compensation cost as the excess, if any, of the quoted market price ofthe Company’s common stock at the grant date over the amount the employee mustpay for the stock. The Company’s policy is to grant stock options to purchasethe Company’s stock at a price equal to fair market value at the date of grant.  Had the Company elected to recognizecompensation expense determined under the fair value method of accounting forstock-based compensation as prescribed by FAS 123 and FAS 148, the Company’snet loss applicable to common shares and per share amounts would reflect thefollowing pro forma amounts (in thousands, except for per share data):

 
|                                            |   | **Quarterly periods ended** |   |
|-------------------------------------------------|--------|-----------------------------|--------|
|                                            |   | **March 31, 2003**          |   | **April 1, 2002** |   |
| Net loss  applicable to common shares:          |   |                        |   |   |   |
| As reported                                     |   | $                           | (175   | ) | $ | (1,183 | ) |
| Pro forma                                       |   | (175                        | )      | (1,251 | ) |
| Net loss per  common shares - Basic and diluted |   |                        |   |   |   |
| As reported                                     |   | $                           | (0.09  | ) | $ | (0.60 | ) |
| Pro forma                                       |   | (0.09                       | )      | (0.63 | ) |

 

**(5)****                                 RELATEDPARTY TRANSACTIONS**

 

Payments to related parties for rent at one restaurantapproximated $0.1 million in both the first quarter of 2003 and 2002.

 

In addition, during 2002, the Company was party to amarketing agreement with iDine Rewards Network, Inc. (“iDine”), a related partyand owner of the iDine frequent diner program. In connection with the advance sale of discounted food and beveragecredits, the Company received advertising in iDine publications and through therelationships iDine had established with major airlines to feature theCompany’s restaurants as preferred dining choices.  iDine provided web and print promotional services that weredesigned to create incentives for members to dine at the Company’s restaurants,especially during the Company’s restaurants’ non-peak days.  The Company received from iDine $1.0 millionduring the first quarter of 2002 related to the agreement.  Pursuant to the agreement, the Company paid$0.8 million to iDine towards its advances and for its marketing servicesduring the first quarter of 2002.  Thisagreement was terminated as of July 29, 2002, in conjunction with the sale ofthe Chart House Business.  See Note 2“Sale of Chart House Business.”  TheCompany has no further obligations under this agreement.

 

The relationships stem from one or more Companystockholders and/or members of the Company’s Board of Directors maintainingownership interest in and influential management positions at or with theseorganizations.

 

5

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**(6)****                                 COMMITMENTSAND CONTINGENCIES**

 

The Company periodically is a defendant in litigationincidental to its business activities. While any litigation or investigation has an element of uncertainty, theCompany believes that the outcome of any of these matters will not have amaterial adverse effect on its financial condition or operations.

 

The Company maintains letters of credit primarily tocover self-insurance reserves and lease obligations.  In connection with the termination of the Credit Agreement, andin order to minimize costs associated with outstanding letters of credit, theCompany established a cash collateral account equal to the full balance of itsobligations under outstanding letters of credit, which totaled $2.7 million atMarch 31, 2003.  Such funds arepresented on the consolidated balance sheets as restricted cash, a non-currentasset.

 

**(7)****                                 NEWACCOUNTING PRONOUNCEMENTS**

 

In November 2002, the Financial Accounting StandardsBoard issued Interpretation No. 45, “Guarantor’s Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness ofOthers” (“FIN 45”), which addresses the disclosure to be made by a guarantor inits interim and annual financial statements about its obligations underguarantees.  These disclosurerequirements have been adopted by the Company. FIN 45 also requires the recognition of a liability by a guarantor atthe inception of certain guarantees entered into subsequent to January 1, 2003.

 

FIN 45 requires theguarantor to recognize a liability for the non-contingent component of theguarantee, which is the obligation to stand ready to perform in the event thatspecified triggering events or conditions occur.  The initial measurement of this liability is the fair value ofthe guarantee at inception.  Therecognition of the liability is required even if it is not probable thatpayment will be required under the guarantee or if the guarantee was issuedwith a premium payment or as part of a transaction with multiple events.

 

As noted above, the Company has adopted the disclosurerequirements of FIN 45 and will apply the recognition and measurementprovisions for all guarantees entered into or modified after December 31,2002.  The Company has not entered intoor modified any guarantees subsequent to December 31, 2002.

 

In December 2002, the Financial Accounting StandardsBoard issued Financial Accounting Standards No. 148, “Accounting forStock-Based Compensation – Transition and Disclosure, an amendment of FASBStatement No. 123” (“FAS 148”). This Statement amends FAS 123 to providealternative methods of transition for a voluntary change to the fair valuemethod of accounting for stock-based employee compensation.  In addition, FAS 148 amends the disclosurerequirements of Statement of Financial Accounting Standards No. 123,“Accounting for Stock-Based Compensation” (“FAS 123”) to require prominentdisclosures regarding the accounting for stock-based employee compensation inboth annual and interim financial statements. Certain of the disclosure modifications are required for fiscal yearsending after December 15, 2002 and are included in Note 4 to theseconsolidated financial statements.

 

In January 2003, the Financial Accounting StandardsBoard issued Interpretation No. 46, “Consolidation of Variable InterestEntities, an interpretation of ARB No. 51” (“FIN 46”).  FIN 46 addresses the consolidation bybusiness enterprises of variable interest entities as defined therein. TheInterpretation applies immediately to variable interests in variable interestentities created after January 31, 2003, and to variable interests in variableinterest entities obtained after January 31, 2003.  The Company currently has no contractual relationships or otherbusiness relationships with a variable entity and therefore the adoption of FIN46 did not have a material effect on the Company’s consolidated financialposition, results of operations, or cash flows for the quarterly period endedMarch 31, 2003.

 

6

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*ThisQuarterly Report on Form 10-Q and the documents incorporated herein byreference contain forward-looking statements that have been made pursuant toprovisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements represent theCompany’s expectations or beliefs concerning future events, including anystatements regarding: future sales and gross profit percentages, the continuationof historical trends, the sufficiency of the Company’s cash balances, and cashgenerated from operating, financing and/or investing activities for theCompany’s future liquidity and capital resource needs.  Without limiting the foregoing, the words“believes,” “intends,” “projects,” “plans,” “expects,” “anticipates,” andsimilar expressions are intended to identify forward-looking statements.  The Company cautions that these statementsare further qualified by important economic and competitive factors that couldcause actual results to differ materially from those in the forward-lookingstatements.  These factors include,without limitation, risks of the restaurant industry, an industry with manywell-established competitors with greater financial and other resources thanthe Company, and the impact of changes in consumer trends, employeeavailability, and cost increases. Accordingly, such forward-looking statements do not purport to bepredictions of future events or circumstances and may not be realized.*

 

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**OVERVIEW**

 

The Company consummated the sale of the Chart HouseBusiness, comprised of 39 of its then-existing 45 restaurants, as of July 30,2002.  The operations of theserestaurants have been reclassified as discontinued operations for the firstquarter of 2002, in accordance with FAS 144. The sale was completed for consideration of approximately $55.3 million,consisting of cash and the assumption of approximately $3.1 million of certaincurrent liabilities.  The Company used aportion of the net proceeds from the sale to repay all amounts outstandingunder its Credit Agreement and a subordinated note owed to a relatedparty.  See “Liquidity and CapitalResources.”

 

The Company continues tooperate five Angelo and Maxie’s Steakhouses, which are full-service steakhouserestaurants located in New York, Washington DC, Virginia, and Florida.  The Company operated the following number ofrestaurants at the end of the first quarters of 2003 and 2002:

 

|                |   | **Angelo and  Maxie’s  Steakhouses** |   | **Discontinued  operations** |   | **Total** |   |
|---------------------|--------|-------------------------------------------|--------|------------------------------|--------|-----------|--------|
| First quarter  2003 |   | 5                                         |   | —                       |   | 5         |   |
| First quarter  2002 |   | 6                                         |   | 39                           |   | 45        |   |

 

The Company acquired the Angelo and Maxie’s Steakhouseconcept and one restaurant during 1999 to diversify its seafood dominatedportfolio.   The Company opened a totalof six additional Angelo and Maxie’s restaurants over 2000 and 2001.  One of these locations was closed during thefourth quarter of 2001 and another location was closed during the fourthquarter of 2002.  During 2001, theCompany canceled restaurant development plans for three locations, did not openany locations during 2002, and currently has no plans to open additionalrestaurants during 2003.  The Company andits financial advisor continue the review of strategic alternatives, includinga possible sale of the entire Company or the sale of the Angelo and Maxie’sSteakhouse concept and its five restaurants.

 

7

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**RESULTS OF OPERATIONS**

 

The following tablepresents the results of operations for each of the first quarters ended March31, 2003 and April 1, 2002.  Continuingoperations relate to the operations of the Company’s Angelo and Maxie’s Steakhouses.  The operations of the Chart House Businessare presented as discontinued.

 
|                                                                |   | **Quarterly periods ended** |   |
|---------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                |   | **March 31, 2003**          |   | **April 1, 2002** |   |
| **(****Unaudited, d****ollars in thousands)**                       |   | **Amount**                  |   | **%** |   | **Amount** |   | **%** |   |
|                                                                |   |                        |   |   |   |   |   |   |   |
| Revenues                                                            |   | $                           | 6,805  |   | 100.0 |   | $ | 7,327 |   | 100.0 |   |
| Operating costs  and expenses:                                      |   |                        |   |   |   |   |   |   |   |
| Cost of sales                                                       |   | 2,439                       |   | 35.9 |   | 2,650 |   | 36.2 |   |
| Restaurant labor                                                    |   | 1,571                       |   | 23.1 |   | 1,732 |   | 23.6 |   |
| Other operating  costs                                              |   | 1,159                       |   | 17.0 |   | 1,467 |   | 20.0 |   |
| Rent                                                                |   | 601                         |   | 8.8 |   | 616 |   | 8.4 |   |
| Total restaurant  costs                                             |   | 5,770                       |   | 84.8 |   | 6,465 |   | 88.2 |   |
| Restaurant  operating income (before depreciation and amortization) |   | 1,035                       |   | 15.2 |   | 862 |   | 11.8 |   |
| General and  administrative expenses                                |   | 668                         |   | 9.8 |   | 197 |   | 2.7 |   |
| Depreciation and  amortization                                      |   | 320                         |   | 4.7 |   | 438 |   | 6.0 |   |
| Loss on sales of  assets                                            |   | 11                          |   | 0.2 |   | 2 |   | 0.0 |   |
| Total restaurant  and operating costs                               |   | 6,769                       |   | 99.5 |   | 7,102 |   | 96.9 |   |
| Income from  operations                                             |   | 36                          |   | 0.5 |   | 225 |   | 3.1 |   |
| Interest  expense, net                                              |   | 30                          |   | 0.4 |   | 886 |   | 12.1 |   |
| Other income                                                        |   | (51                         | )      | (0.7 | ) | (130 | ) | (1.8 | ) |
| Income (loss)  from continuing operations before income taxes       |   | 57                          |   | 0.8 |   | (531 | ) | (7.2 | ) |
| Provision for  income taxes                                         |   | —                      |   | — |   | — |   | — |   |
| Net income  (loss) from continuing operations                       |   | 57                          |   | 0.8 |   | (531 | ) | (7.2 | ) |
| Loss from  discontinued operations                                  |   | —                      |   | — |   | (430 | ) | (5.9 | ) |
| Net income  (loss) applicable to common shares                      |   | $                           | 57     |   | 0.8 |   | $ | (961 | ) | (13.1 | ) |
| Preferred stock  dividends                                          |   | 232                         |   | 3.4 |   | 222 |   | 3.0 |   |
| Net loss  applicable to common shares                               |   | $                           | (175   | ) | (2.6 | ) | $ | (1,183 | ) | (16.1 | ) |

 

Angelo and Maxie’s revenues are derived entirely fromfood and beverage sales.  Revenuesdecreased $0.5 million, or 7.1%, to $6.8 million in the first quarter of 2003,compared to $7.3 million in the first quarter of 2002.  The decrease in revenues is due to theCompany’s exit from one restaurant during the fourth quarter of 2002.  Comparable sales for the first quarterdecreased 1.1%.

 

Cost of sales is composed of the cost of food andbeverages.  Cost of sales as apercentage of revenues decreased by 0.3 percentage points to 35.9% in the firstquarter of 2003, compared with 36.2% in the first quarter of 2002.  This improvement was primarily the result ofimproved margins on beverage sales.

 

Restaurant labor consists of restaurant managementsalaries, hourly staff payroll costs, and other payroll-related items.  Restaurant labor as a percentage of revenuesdecreased by 0.5 percentage points to 23.1% in the first quarter of 2003,compared with 

 

8

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23.6% in the first quarter of 2002. This improvement was primarily the result of the elimination of anunderperforming restaurant in December 2002 that incurred higher labor coststhan the Company’s other restaurants.

 

Other operating expenses consist primarily of variousrestaurant-level costs, which are generally variable and are expected tofluctuate with revenues.  Otheroperating costs as a percentage of restaurant revenues decreased by 3.0percentage points to 17.0% in the first quarter of 2003, compared with 20.0% inthe first quarter of 2002, primarily as a result of lower marketing costs.

 

Rent includes both fixedand variable portions of rent.  Rent asa percentage of revenues increased by 0.4 percentage points to 8.8% in thefirst quarter of 2003, compared with 8.4% in the first quarter of 2002, primarilyas a result of rent relief in the 2002 quarter related to an underperformingrestaurant that was subsequently closed.  The Company did not incur variable rent costs for any of its locationsin either period.

 

General andadministrative expenses are composed of expenses associated with corporate andadministrative functions that support restaurant operations, includingmanagement and staff salaries, employee benefits, travel, legal andprofessional fees, technology, and market research.  General and administrative expenses increased $0.5 million to$0.7 million in the first quarter of 2003, compared to $0.2 million in thefirst quarter of 2002.  The increase inthe quarterly periods is the result of the fixed general overhead costs beingallocated entirely to five operating restaurants following the sale of theChart House Business rather than being allocated both to continuing anddiscontinued operations.  The Companybelieves that the general and administrative expenses incurred in the first quarterof 2003 reflect a normal quarterly run-rate for these expenses.

 

Depreciation andamortization expense includes the depreciation of fixed assets and theamortization of leasehold improvements at both the restaurants and corporatelocations.  Depreciation andamortization decreased $0.1 million to $0.3 million in the first quarter of2003, compared to $0.4 million in the first quarter of 2002.  The prior period amount includes the finalamortization of a non-compete agreement related to a prior owner of theoriginal Angelo and Maxie’s Steakhouse. In addition, an impairment charge was realized in the third quarter of2002 related to corporate leasehold improvements, resulting in loweramortization expense in the current period compared with the prior period.

 

Interest expense, netdecreased $856,000 to $30,000 in the first quarter of 2003, compared to$886,000 in the first quarter of 2002. The Company paid all outstanding bank and related party debt balances infull with the proceeds from the sale of the Chart House Business.  The current quarter interest expense relatesto an outstanding term loan, offset by interest income earned on the Company’soutstanding investable cash.  Inaddition, the Company recognizes non-cash interest expense related to a capitallease.  See discussion of other incomefollowing.

 

Other income decreased$79,000 to $51,000 in the first quarters in 2003, compared to $130,000 in thefirst quarter of 2002.  The Companysubleased certain of its restaurant properties to third parties, but was not relievedof its primary obligation under the original leases.  These leases are characterized as capital leases in accordancewith FAS 13.  Amortization of the leasedproperty is included with depreciation and amortization.  The non-cash reduction of the capital leaseobligations and related non-cash recognition of interest expense are reflectedin other income.  The decrease from theprior period is the result of only one capital lease remaining on the balancesheet in the first quarter of 2003.

 

The Company issued SeriesA convertible preferred stock, par value $1.00 per share (“Series A PreferredStock”), during June 2001.  The Series APreferred Stock is entitled to dividends at the rate of 10.0% per annum, basedon the original issue price of $2.25 per share.  The Company accrued dividends on the Series A Preferred Stockaggregating $0.2 million during each of the first quarters of 2003 and 2002.

 

**LIQUIDITYAND CAPITAL RESOURCES**

 
|                                                 |   | **Quarterly periods ended** |   |
|------------------------------------------------------|--------|-----------------------------|--------|
|                                                 |   | **March 31, 2003**          |   | **April 1, 2002** |   |
| **(Unaudited, dollars in thousands)**                |   |                        |   |   |   |
| Net cash (used  in) provided by operating activities |   | $                           | (512   | ) | $ | 570 |   |
| Expenditures for  equipment and improvements         |   | (11                         | )      | (332 | ) |
| Cash used in  financing activities                   |   | (30                         | )      | (281 | ) |
| Net decrease in  cash                                |   | $                           | (553   | ) | $ | (43 | ) |

 

9

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The Company consummatedthe sale of the Chart House Business as of July 30, 2002.  The total cash consideration received fromthis transaction is approximately $52.0 million, of which $33.5 million wasused for the following financing and operating activities (in thousands):

 
| Retire senior,  secured debt and accrued interest (1)                                  |   | $     | 24,285 |   |
|----------------------------------------------------------------------------------------|--------|-------|--------|--------|
| Retire related  party subordinated debt, accrued interest, and accrued consulting fees |   | 6,510 |   |
| Establish  collateral for outstanding letters of credit                                |   | 2,702 |   |
|                                                                                   |   | $     | 33,497 |   |

 

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(1)          Includes$1.5 million to a related party, which was a participant under the CreditAgreement.

 

In connection with the termination of the CreditAgreement, and in order to minimize costs associated with outstanding lettersof credit, the Company established a cash collateral account equal to the fullbalance of its obligations under outstanding letters of credit, which totaled$2.7 million.  Such funds are disclosedon the Company’s balance sheet as restricted cash, a non-current asset.

 

The Company used theremaining net proceeds from the sale of the Chart House Business to settle $3.8million in costs associated with the transaction and for general corporatepurposes including, but not limited to, the settlement of short term liabilities,certain of which relate to the Chart House Business.  The Company had $7.1 million in cash for general corporatepurposes at March 31, 2003.  The Companybelieves that the remaining sale net proceeds, together with net cash providedby continuing operating activities, will be sufficient to fund its operatingexpenses and capital needs for at least the next twelve months.

 

Historically, the Companyrequired significant capital principally for the construction and openingexpenses for new restaurants and for the remodeling and refurbishing ofexisting restaurants.  The Company hasfunded its capital requirements through debt financing, both with third partybanks and related parties, tenant improvement monies, equity financing, andcash flows from operations.  The Companydoes not intend to fund any new restaurants or incur any major remodeling orrefurbishing costs during fiscal 2003.

 

Net cash used inoperating activities was $0.5 million in the first quarter of 2003, compared tonet cash provided by operating activities of $0.6 million in the first quarterof 2002.  In 2003, net cash used inoperating activities includes an aggregate $0.8 million related to payment of2002 bonuses, severance payments related to employees terminated in conjunctionwith the sale of the Chart House Business, and settlement of prior periodinsurance claims.  In 2002, operatingcash flow from the Chart House Business contributed to the positive net cashresults.  In connection with anagreement with iDine Rewards Network, Inc. (“iDine”), the Company received $1.0million in the first quarter of 2002 for marketing activities.  The Company in turn paid to iDine $0.8million during the first quarter of 2002 related to this agreement.  This agreement was terminated as of July 29,2002, in conjunction with the sale of the Chart House Business.  The Company has no further obligations underthis agreement.

 

 Net cash used in investing activities in thefirst quarter of 2003 included capital expenditures of $11,000.  Net cash used in investing activities in thefirst quarter of 2002 included capital expenditures of $332,000, of which themajority of the expenditures related to the Chart House Business.

 

Net cash used infinancing activities was $32,000 in the first quarter of 2003, primarilyrelated to scheduled payments under landlord notes.  Net cash used in financing activities was $260,000 in the firstquarter of 2002, primarily related to repayments under the Company’s CreditAgreement.

 

The Series A PreferredStock is entitled to dividends at the rate of 10.0% per annum, based on theoriginal price of $2.25 per share. Dividends are payable semiannually on June 1 and December 1.  Dividends paid through June 1, 2002 were inthe form of additional shares of Series A Preferred Stock, in part, because theCompany’s Credit Agreement prohibited the payment of cash dividends.  Subsequent to the retirement of amountsowing under the Credit Agreement, the Company began paying these dividends in cash.  The Company expects to satisfy futuredividend obligations in cash.

 

The Company is liableunder various capital and operating lease agreements, primarily related torestaurant locations.   The Company isalso contingently liable under letters of credit, primarily related to leasing obligationsand self-insurance reserves, and 

 

10

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guarantees on various third party leasing and debt agreements.  No material changes have occurred regardingthese commitments and contingencies from the Company’s prior fiscal year endedDecember 30, 2002.

 

**CRITICALACCOUNTING POLICIES**

 

A critical accounting policyis one that would materially affect the Company’s operations or financialcondition, and requires management to make estimates or judgments in certain circumstances.  Set forth below is a description of thoseaccounting policies which the Company believes are most critical and could havethe greatest impact on its operations or financial condition.

 

**Valuation of Exit Costs andRestructure Reserves.**  On an as-needed basis and subject toapproval of the Company’s Board of Directors, the Company establishes reservesfor unusual and non-recurring items associated with the activities of exitingrestaurant locations and reorganizing support staff to address changes in theCompany’s operations.  This requiresthat management make estimates for cash inflows and outflows based on judgment,market conditions, advice from counsel and consultants, and historicalexperience.  These estimates include,but are not limited to, future payments of rents, severance, legal andconsulting costs, consideration for contract modifications, and proceeds fromthe sale of disposed assets.  Because offactors beyond management’s control, actual results may be different from theestimates, which may cause the Company to record adjustments in futureperiods.  In June 2002, the FinancialAccounting Standards Board issued Statement of Financial Accounting StandardsNo. 146, “Accounting for Costs from Exit or Disposal Activities” (“FAS 146”).  FAS 146 requires, among other things, that aliability for costs associated with an exit or disposal activity be recognizedwhen the liability is incurred rather than at the time of commitment to aformal shutdown plan.  The adoption ofFAS 146 is effective for all exit or disposal activities initiated subsequentto December 31, 2002.

 

**Impairment of Assets.**  OnJanuary 1, 2002, the Company adopted FAS 142, which requires, among otherthings, that effective January 1, 2002, goodwill resulting from a businesscombination accounted for as a purchase no longer be amortized, but be subjectto ongoing impairment review.  On anongoing basis, the Company reviews its carrying value of restaurant assets andcompares them with fair market value. In determining the fair market value of its assets, management considersseveral factors requiring the exercise of business judgment.  Such judgments include developing valuationmultiples, such as the ratio of total capitalized value to restaurant earningsbefore interest, taxes, depreciation, and amortization for an industry peergroup of publicly traded companies, and applying those multiples to theCompany’s historical and projected operating performance.   The Company’s intangible assets at March31, 2003 include the Angelo and Maxie’s trade name and liquor licenses at eachof the restaurant locations totaling $4.3 million in the aggregate.  If management determines that the fairmarket value of its intangible assets is materially below the current carryingcost of the assets, an impairment charge is recognized in operating income inthe period the impairment is identified.

 

**Cost Capitalization and Depreciation Policies.** Costs for maintenance, repairs, and purchases are either expensed asincurred or capitalized and amortized over the cost’s estimated usefullife.  This requires management to makebusiness judgments regarding which costs should be capitalized and, ifcapitalized, the estimated useful life. Management has established the Company’s cost capitalization and deprecationpolicies based on historical experience in the restaurant industry, industryguidelines regarding useful lives, and adherence to applicable accountingstandards.  Maintenance, repairs, andminor purchases are expensed as incurred. Major purchases of equipment and facilities, and major replacements andimprovements, are capitalized.  Depreciationand amortization are recorded for financial reporting purposes using thestraight-line method over the estimated useful lives of the assets.  Equipment is depreciated over lives rangingfrom three to eight years.  Leaseholdinterests and improvements are amortized over the shorter of the lease term,including planned extensions, or the asset life, ranging up to 25 years.

 

**Self-InsuranceLiability.**  The Company was self-insured through October2002 for its workers’ compensation and general liability insurance programs,and continues to be self-insured for its employee health insuranceprogram.  The Company maintains stop-losscoverage with third party insurers to limit its total exposure.  The accrued liability associated with theseprograms is based on management’s estimate of the ultimate costs to be incurredto settle known claims and claims incurred, but not reported, as of the balancesheet date.  Our estimated liability isnot discounted and is based on a number of assumptions and factors, includinghistorical trends, actuarial assumptions, and economic conditions.  If actual trends differ from our estimates,our financial results could be impacted.

 

**NEWACCOUNTING PRONOUNCEMENTS**

 

In November 2002, theFinancial Accounting Standards Board issued Interpretation No. 45, “Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness of Others” (“FIN 45”), which addresses thedisclosure to be made by a guarantor in its interim and annual financialstatements about its obligations under guarantees.  These disclosure requirements have been adopted by the Company.  FIN 45 also requires the recognition of aliability by a guarantor at the inception of certain guarantees entered intosubsequent to January 1, 2003.

 

11

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FIN 45 requires theguarantor to recognize a liability for the non-contingent component of the guarantee,which is the obligation to stand ready to perform in the event that specifiedtriggering events or conditions occur. The initial measurement of this liability is the fair value of theguarantee at inception.  The recognitionof the liability is required even if it is not probable that payment will berequired under the guarantee or if the guarantee was issued with a premiumpayment or as part of a transaction with multiple events.

 

As noted above, theCompany has adopted the disclosure requirements of FIN 45 and will apply therecognition and measurement provisions for all guarantees entered into ormodified after December 31, 2002.  TheCompany has not entered into or modified any guarantees subsequent to December31, 2002.

 

In December 2002, the FinancialAccounting Standards Board issued Financial Accounting Standards No. 148,“Accounting for Stock-Based Compensation — Transition and Disclosure, anamendment of FASB Statement No. 123” (“FAS 148”). This Statement amendsFAS 123 to provide alternative methods of transition for a voluntary change tothe fair value method of accounting for stock-based employee compensation.  In addition, FAS 148 amends the disclosurerequirements of Statement of Financial Accounting Standards No. 123,“Accounting for Stock-Based Compensation” (“FAS 123”) to require prominentdisclosures regarding accounting for stock-based employee compensation in bothannual and interim financial statements. Certain of the disclosure modifications are required for fiscal yearsending after December 15, 2002 and are included in Note 4 to theconsolidated financial statements in Part I, Item 1.

 

In January 2003, theFinancial Accounting Standards Board issued Interpretation No. 46,“Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”(“FIN 46”).  FIN 46 addresses theconsolidation by business enterprises of variable interest entities as definedtherein. The Interpretation applies immediately to variable interests invariable interest entities created after January 31, 2003, and to variableinterests in variable interest entities obtained after January 31, 2003.  The Company currently has no contractualrelationships or other business relationships with a variable entity and thereforethe option of FIN 46 did not have a material effect on the Company’sconsolidated financial position, results of operations, or cash flows for thequarterly period ended March 31, 2003.

 

**SEASONALITY**

 

The Company’s business isseasonal in nature, with revenues and operating income for the first and fourthquarters greater than in the second and third quarters as the Company benefitsfrom urban, holiday, and winter vacation dining which is greater than thebenefits associated with dining during leisure travel in the spring and summerquarters.

 

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

 

The Company is exposed tomarket risk from changes in market rates earned on cash equivalents and changesin commodity prices.   The impact on theCompany’s results of operations of a one-point market rate change on its cashequivalent balance as of March 31, 2003, would not be material.  The Company does not use derivativeinstruments to manage borrowing costs, reduce exposure to adverse fluctuationsin the interest rate, nor for trading purposes.

 

The Company purchasescertain commodities such as beef, seafood, chicken, and cooking oil. Thesecommodities are generally purchased based upon purchase agreements orarrangements with vendors. These purchase agreements or arrangements maycontain features that fix the commodity price or define the price from anagreed upon formula. The Company does not use financial instruments to hedgecommodity prices because these purchase arrangements help control the ultimatecost paid and any commodity price fluctuations are generally short term innature.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

Within the 90 dayperiod prior to the date of this report, the Company carried out an evaluation,under the supervision and with the participation of the Company’s President andChief Executive Officer and the Company’s Chief Financial Officer, of theeffectiveness of the Company’s disclosure controls and procedures pursuant toRule 13a-14(c) of the Securities Exchange Act of 1934, as amended.  Based upon that evaluation, the Company’sPresident and Chief Executive Officer and Chief Financial Officer concludedthat the Company’s disclosure controls and procedures are effective in timelyalerting them to material information relating to the Company (including itsconsolidated subsidiaries) required to be disclosed by the Company in itsperiodic Exchange Act reports.  Therewere no significant changes in the Company’s internal controls or in otherfactors that could significantly affect these controls subsequent to the dateof the evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

12

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**PART II - OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS.**

 

On October 1, 2002, the Company filed a complaint inthe Chancery Court for the State of Delaware against the Purchaser and escrowagent Fidelity National Title.  Thisaction alleges several breaches by the Purchaser of its contractual obligationsunder the asset purchase agreement related to the sale of the Chart HouseBusiness and under a related escrow agreement. Aggregate damages sought, without regard to interest or legal fees, were$1.8 million.  The Company subsequentlyreceived $1.6 million through a release of escrowed funds and a payment made bythe Purchaser during the fourth quarter of 2002.  The Company has amended the complaint to release FidelityNational Title and continues to seek approximately $0.2 million, representing amountsthat the Company believes the Purchaser wrongfully failed to pay under theasset purchase agreement, and also seeks related interest, costs, andattorneys’ fees.  The Purchaser hasfiled a counterclaim, seeking a purchase price adjustment of $0.15 million.  The Chancery Court has ruled that theCompany’s remaining claim should be transferred to the Superior Court for theState of Delaware and that the Purchaser’s counterclaim should be resolvedthrough the dispute resolution mechanism provided for in the asset purchaseagreement.

 

The Company is unable to predict the outcome of thismatter.  The Company believes that theoutcome of this matter will not have a material adverse effect on its financialcondition or operations.

 

The Company periodically is a defendant in litigationincidental to its business activities. While any litigation or investigationhas an element of uncertainty, the Company believes that the outcome of any ofthese matters will not have a material adverse effect on its financialcondition or operations.

 

**ITEM2.  CHANGES IN SECURITIES AND USE OFPROCEEDS.**

 

None.

 

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES.**

 

None.

 

**ITEM 4.****     SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS.**

 

None.

 

**ITEM 5.****     OTHER INFORMATION.**

 

None.

 

**ITEM 6.****     EXHIBITS AND REPORTS ON FORM8-K.**

 

(a)                                  Exhibits:

 

3.1                                 (1)Restated Certificate of Incorporation of the Company, as amended. (1)

(2) Certificate ofAmendment of Restated Certificate of Incorporation of the Company. (2)

(3) Certificate ofAmendment of Restated Certificate of Incorporation of Chart House Enterprises,Inc. (4)

3.2                                 Amendedand Restated Bylaws of the Company. (1)

3.3                                 Certificateof Designations of the Series A Preferred Stock. (3)

4.1                                 SpecimenCommon Stock Certificate. (2)

4.2                                 SpecimenSeries A Preferred Stock Certificate. (3)

99.1                           Certificationof the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2                           Certificationof the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

----

(1)          Filed as an exhibit tothe Company’s Registration Statement on Form S-1 dated August 27, 1987, oramendments thereto dated October 6, 1987 and October 14, 1987 (Registration No.33-16795).

(2)          Filed as an exhibit tothe Company’s Registration Statement on Form S-1 dated July 20, 1989, oramendment thereto dated August 25, 1989 (Registration No. 33-30089).

(3)          as an exhibit to theCompany’s Registration Statement on Form S-2 dated March 27, 2001, oramendments thereto dated May 15, 2001, May 25, 2001, and May 31, 2001(Registration No. 333-57674).

(4)          Filed as an exhibit tothe Company’s Current Report on Form 10-Q for the quarter ended July 1, 2002,dated August 15, 2002.

 

(b)                                 Reportson Form 8-K.

 

None.

 

13

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|                    | ANGELO AND MAXIE’S,  INC. |
|-------------------------|--------------------------------|
|                    |                           |
|                    |                           |
| Date:  May 9, 2003 | By:                       | /s/ KENNETH R. POSNER |   |   |
|                    |                           | Kenneth  R. Posner |   |   |
|                    |                           | President  and Chief Executive Officer |   |
|                    |                           | (principal  executive officer) |   |
|                    |                           |   |   |   |
|                    |                           |   |   |   |
| Date:  May 9, 2003 | By:                       | /s/ EMANUEL N. HILARIO |   |   |
|                    |                           | Emanuel  N. Hilario |   |   |
|                    |                           | Vice  President and Chief Financial Officer |
|                    |                           | (principal  financial and accounting officer) |
|                         |                                |  |  |  |  |  |

 

14

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**CERTIFICATION**

 

I, Kenneth R. Posner, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of Angelo and Maxie’s, Inc.;

 

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

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the Registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The Registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the Registrant and we have:

 

a)              Designed suchdisclosure controls and procedures to ensure that material information relatingto the Registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)             Evaluated theeffectiveness of the Registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              Presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The Registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the Registrant’s auditors and the audit committee ofRegistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              All significant deficienciesin the design or operation of internal controls which could adversely affectthe Registrant’s ability to record, process, summarize and report financialdata and have identified for the Registrant’s auditors any material weaknessesin internal controls; and

 

b)             Any fraud, whether ornot material, that involves management or other employees who have asignificant role in the Registrant’s internal controls; and

 

6.               The Registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 
| Date:  May 9, 2003 | By:  | /s/ KENNETH R. POSNER                  |   |
|-------------------------|-----------|----------------------------------------|--------|
|                    |      | Kenneth  R. Posner                     |   |
|                    |      | President  and Chief Executive Officer |

 

15

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**CERTIFICATION**

 

I, Emanuel N. Hilario, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of Angelo and Maxie’s, Inc.;

 

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

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the Registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The Registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the Registrant and we have:

 

a)              Designed suchdisclosure controls and procedures to ensure that material information relatingto the Registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)             Evaluated theeffectiveness of the Registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              Presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The Registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the Registrant’s auditors and the audit committee ofRegistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              All significantdeficiencies in the design or operation of internal controls which couldadversely affect the Registrant’s ability to record, process, summarize andreport financial data and have identified for the Registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             Any fraud, whether ornot material, that involves management or other employees who have asignificant role in the Registrant’s internal controls; and

 

6.               The Registrant’s othercertifying officers and I have indicated in this quarterly report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 
| Date:  May 9, 2003 | By:  | /s/ EMANUEL N. HILARIO                      |   |
|-------------------------|-----------|---------------------------------------------|--------|
|                    |      | Emanuel  N. Hilario                         |
|                    |      | Vice  President and Chief Financial Officer |

 

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