**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

**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 September 29, 2003**                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                              |
| ** ̈** |   | **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 of registrant as specified in its charter)

 

| **Delaware**                                                    |   | **33-0147725**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  Incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**2 North Riverside, Seventh Floor, Chicago, IL60606**

(Address of principal executive offices, including zip code)

 

**(312) 466-3950**

(registrant’s telephone number, including area code)

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter periods that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

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

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined by Rule12b-2 of the Exchange Act).

 

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

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of November 13, 2003:

 

Common Stock ($.01 par value) 1,998,295

 

 

----

 

**PART I - FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS.**

 

**ANGELO AND MAXIE’S,INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS**

**(In thousands, exceptshare data)**

** **
|                                                                                                                                                                           |   | **September 29, 2003** |   | **December 30, 2002** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|-----------------------|--------|
|                                                                                                                                                                           |   | **(Unaudited)**        |   |                  |   |
| **ASSETS**                                                                                                                                                                     |   |                   |   |                  |   |
| Current assets:                                                                                                                                                                |   |                   |   |                  |   |
| Cash and cash equivalents                                                                                                                                                      |   | $                      | 5,730  |                  | $      | 7,651 |   |
| Accounts receivable, net                                                                                                                                                       |   | 590                    |   | 541                   |   |
| Inventories                                                                                                                                                                    |   | 365                    |   | 416                   |   |
| Prepaid expenses and other current assets                                                                                                                                      |   | 492                    |   | 974                   |   |
| Total current assets                                                                                                                                                           |   | 7,177                  |   | 9,582                 |   |
| Equipment and improvements (held for sale)1:                                                                                                                                   |   |                   |   |                  |   |
| Equipment                                                                                                                                                                      |   | 3,830                  |   | 3,708                 |   |
| Leasehold interests and improvements                                                                                                                                           |   | 8,422                  |   | 12,554                |   |
|                                                                                                                                                                           |   | 12,252                 |   | 16,262                |   |
| Less: Accumulated depreciation and amortization                                                                                                                                |   | 3,326                  |   | 2,934                 |   |
| Equipment and improvements, net                                                                                                                                                |   | 8,926                  |   | 13,328                |   |
| Other non-current assets:                                                                                                                                                      |   |                   |   |                  |   |
| Restricted cash                                                                                                                                                                |   | 2,627                  |   | 2,702                 |   |
| Leased property under capital leases, net                                                                                                                                      |   | 1,092                  |   | 1,136                 |   |
| Intangibles, net (held for sale)1                                                                                                                                              |   | 3,670                  |   | 4,278                 |   |
| Other non-current assets                                                                                                                                                       |   | 497                    |   | 542                   |   |
| Total other non-current assets                                                                                                                                                 |   | 7,886                  |   | 8,658                 |   |
| Total assets                                                                                                                                                                   |   | 23,989                 |   | 31,568                |   |
|                                                                                                                                                                           |   |                   |   |                  |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                  |   |                   |   |                  |   |
| Current liabilities:                                                                                                                                                           |   |                   |   |                  |   |
| Current portion of non-current liabilities                                                                                                                                     |   | 30                     |   | 124                   |   |
| Accounts payable                                                                                                                                                               |   | 1,366                  |   | 1,679                 |   |
| Accrued liabilities                                                                                                                                                            |   | 3,473                  |   | 4,322                 |   |
| Deferred gain                                                                                                                                                                  |   | 967                    |   | —                |   |
| Liabilities of discontinued operations                                                                                                                                         |   | —                 |   | 170                   |   |
| Total current liabilities                                                                                                                                                      |   | 5,836                  |   | 6,295                 |   |
| Non-current liabilities (excluding current portion):                                                                                                                           |   |                   |   |                  |   |
| Deferred gain                                                                                                                                                                  |   | —                 |   | 967                   |   |
| Long-term portion of landlord note                                                                                                                                             |   | —                 |   | 407                   |   |
| Long-term portion of capital lease obligation                                                                                                                                  |   | 1,855                  |   | 1,877                 |   |
| Other long-term obligations                                                                                                                                                    |   | 705                    |   | 921                   |   |
| Total non-current liabilities (excluding current portion)                                                                                                                      |   | 2,560                  |   | 4,172                 |   |
|                                                                                                                                                                           |   |                   |   |                  |   |
| Stockholders’ equity:                                                                                                                                                     |   |                   |   |                  |   |
| Preferred stock, $1.00 par value, 10,000,000 shares authorized;  4,134,736 shares issued and outstanding at September 29, 2003 and December  30, 2002                          |   | 4,135                  |   | 4,135                 |   |
| Common stock, $0.01 par value, 30,000,000 shares authorized;  1,998,295 and 1,987,733 shares issued and outstanding at September 29, 2003  and December 30, 2002, respectively |   | 20                     |   | 20                    |   |
| Additional paid-in capital                                                                                                                                                     |   | 65,442                 |   | 65,416                |   |
| Retained deficit                                                                                                                                                               |   | (54,004                | )      | (48,470               | )      |
| Total stockholders’ equity                                                                                                                                                |   | 15,593                 |   | 21,101                |   |
| Total liabilities and stockholders’ equity                                                                                                                                |   | $                      | 23,989 |                  | $      | 31,568 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

----

(1) See Note 2 "Sale ofthe Angelo and Maxie's Brand and Related Operating Assets".

 

1

----

 

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

**CONSOLIDATED STATEMENTSOF OPERATIONS**

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

**(Unaudited)**

 

 
|                                                    |   | **Quarterly periods ended** |   | **Nine month periods ended** |   |
|---------------------------------------------------------|--------|-----------------------------|--------|------------------------------|--------|
|                                                    |   | **September 29,  2003**     |   | **September 30,  2002**      |   | **September 29,  2003** |   | **September 30,  2002** |   |
|                                                    |   |                        |   |                         |   |   |   |   |   |
| Revenues                                                |   | $                           | 5,722  |                         | $      | 5,634 |   | $ | 18,945 |   | $ | 19,690 |   |
| Operating costs and expenses:                           |   |                        |   |                         |   |   |   |   |   |
| Cost of sales                                           |   | 2,080                       |   | 2,041                        |   | 6,797 |   | 7,044 |   |
| Restaurant labor                                        |   | 1,429                       |   | 1,442                        |   | 4,478 |   | 4,802 |   |
| Other operating costs                                   |   | 1,117                       |   | 1,077                        |   | 3,478 |   | 3,851 |   |
| Rent                                                    |   | 601                         |   | 585                          |   | 1,802 |   | 1,763 |   |
| Total restaurant costs                                  |   | 5,227                       |   | 5,145                        |   | 16,555 |   | 17,460 |   |
| General and administrative expenses                     |   | 568                         |   | 597                          |   | 1,927 |   | 915 |   |
| Depreciation and amortization                           |   | 149                         |   | 278                          |   | 763 |   | 1,037 |   |
| Impairment of assets and restructuring charges          |   | 15                          |   | 497                          |   | 4,428 |   | 7,558 |   |
| (Gain) loss on disposal of assets                       |   | (15                         | )      | —                       |   | (6 | ) | 2 |   |
| Total restaurant and operating costs                    |   | 5,944                       |   | 6,517                        |   | 23,667 |   | 26,972 |   |
| Loss from operations                                    |   | (222                        | )      | (883                         | )      | (4,722 | ) | (7,282 | ) |
| Interest expense, net                                   |   | 30                          |   | 580                          |   | 82 |   | 2,617 |   |
| Other income                                            |   | (51                         | )      | (51                          | )      | (153 | ) | (151 | ) |
| Loss from continuing operations before income taxes     |   | (201                        | )      | (1,412                       | )      | (4,651 | ) | (9,748 | ) |
| Provision for income taxes                              |   | —                      |   | —                       |   | — |   | — |   |
| Loss from continuing operations                         |   | (201                        | )      | (1,412                       | )      | (4,651 | ) | (9,748 | ) |
| Discontinued operations:                                |   |                        |   |                         |   |   |   |   |   |
| Income (loss) from operations                           |   | —                      |   | (805                         | )      | — |   | 146 |   |
| Income (loss) on sale                                   |   | (201                        | )      | 1,248                        |   | (188 | ) | (2,433 | ) |
| Income (loss) from discontinued operations              |   | (201                        | )      | 443                          |   | (188 | ) | (2,287 | ) |
| Net loss                                                |   | $                           | (402   | )                            | $      | (969 | ) | $ | (4,839 | ) | $ | (12,035 | ) |
| Preferred dividends                                     |   | 232                         |   | 234                          |   | 696 |   | 681 |   |
| Net loss applicable to common shares                    |   | $                           | (634   | )                            | $      | (1,203 | ) | $ | (5,535 | ) | $ | (12,716 | ) |
| Net income (loss) per common share - basic and diluted: |   |                        |   |                         |   |   |   |   |   |
| Continuing operations                                   |   | $                           | (0.22  | )                            | $      | (0.83 | ) | $ | (2.68 | ) | $ | (5.27 | ) |
| Discontinued operations                                 |   | (0.10                       | )      | 0.22                         |   | (0.10 | ) | (1.15 | ) |
|                                                    |   | $                           | (0.32  | )                            | $      | (0.61 | ) | $ | (2.78 | ) | $ | (6.42 | ) |
|                                                    |   |                        |   |                         |   |   |   |   |   |
| Weighted-average shares outstanding                     |   | 1,996                       |   | 1,982                        |   | 1,993 |   | 1,980 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

2

----

 

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

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(In thousands,unaudited)**

 

 
|                                                                              |   | **Nine month periods ended** |     |
|-----------------------------------------------------------------------------------|--------|------------------------------|----------|
|                                                                              |   | **September 29, 2003**       |     | **September 30, 2002** |   |
| Cash flows from operating activities:                                             |   |                         | * * |   | * * |
| Net loss                                                                          |   | $                            | (4,839   | ) | $ | (12,035 | ) |
| Adjustments to reconcile net loss to cash flows used in operating  activities:    |   |                         |     |   |   |
| Depreciation and amortization                                                     |   | 763                          |     | 3,238 |   |
| (Gain) loss on disposal of assets                                                 |   | (6                           | )        | 2 |   |
| Loss provision for impairment of assets and restructuring charges                 |   | 4,399                        |     | 5,575 |   |
| Provision for estimated loss on disposal                                          |   | —                       |     | 2,433 |   |
| Common stock issued in lieu of compensation                                       |   | 27                           |     | 79 |   |
| Amortization of debt issuance costs, included in interest expense                 |   | —                       |     | 443 |   |
| Changes in working capital:                                                       |   |                         |     |   |   |
| Decrease (increase) in accounts receivable                                        |   | (49                          | )        | 2,372 |   |
| Decrease in inventories                                                           |   | 51                           |     | 227 |   |
| Decrease (increase) in prepaid expenses and other current assets                  |   | 482                          |     | (404 | ) |
| Decrease (increase) in other non-current assets                                   |   | 8                            |     | (501 | ) |
| Decrease in accounts payable                                                      |   | (313                         | )        | (7,552 | ) |
| Decrease in accrued liabilities                                                   |   | (1,081                       | )        | (1,286 | ) |
| Increase (decrease) in liabilities of discontinued operations                     |   | (170                         | )        | 1,455 |   |
| Increase (decrease) in other non-current obligations (excluding  current portion) |   | (216                         | )        | 442 |   |
| Cash used in operating activities                                                 |   | (944                         | )        | (5,512 | ) |
| Cash flows from investing activities:                                             |   |                         |     |   |   |
| Proceeds from sale of Chart House Business, net of transaction costs              |   | —                       |     | 50,001 |   |
| Proceeds from sale of other assets                                                |   | 15                           |     | — |   |
| Cash in escrow                                                                    |   | —                       |     | (2,000 | ) |
| Expenditures for equipment and improvements                                       |   | (80                          | )        | (913 | ) |
| Cash provided by (used in) investing activities                                   |   | (65                          | )        | 47,088 |   |
| Cash flows from financing activities:                                             |   |                         |     |   |   |
| Debt issuance costs                                                               |   | —                       |     | (400 | ) |
| Decrease (increase) in restricted cash for letters of credit                      |   | 75                           |     | (2,748 | ) |
| Net payments under revolving credit agreement                                     |   | —                       |     | (14,395 | ) |
| Preferred dividends                                                               |   | (464                         | )        | — |   |
| Payments of long-term debt                                                        |   | (501                         | )        | (10,883 | ) |
| Payments from borrowings from related parties                                     |   | —                       |     | (5,000 | ) |
| Payments on acquisition indebtedness                                              |   | —                       |     | (125 | ) |
| Reduction of obligations under capital leases                                     |   | (22                          | )        | (162 | ) |
| Cash used in financing activities                                                 |   | (912                         | )        | (33,713 | ) |
| (Decrease) increase in cash                                                       |   | (1,921                       | )        | 7,863 |   |
| Cash and cash equivalents, beginning of period                                    |   | 7,651                        |     | 260 |   |
| Cash and cash equivalents, end of period                                          |   | $                            | 5,730    |   | $ | 8,123 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements

 

3

----

 

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

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**September 29, 2003**

**(Unaudited)**

 

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

 

Theaccompanying consolidated financial statements of Angelo and Maxie’s, Inc. andits wholly-owned subsidiaries (the “Company”) for the quarterly periods endedSeptember 29, 2003 and September 30, 2002, and the nine month periods endedSeptember 29, 2003 and September 30, 2002, have been prepared in accordancewith generally accepted accounting principles, and with the instructions toForm 10-Q.  These financial statementshave not been audited by independent public accountants, but include alladjustments (consisting of a normal and recurring nature) that are, in theopinion of management, necessary for a fair presentation of the financial condition,results of operations, and cash flows for such periods. However, these resultsare not necessarily indicative of results for any other interim period or forthe full fiscal year.

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities as of the date of the financial statementsand the reported amounts of revenues and expenses during the reportingperiod.  Actual results could differfrom those estimates.

 

Certaininformation and footnote disclosures normally included in financial statementsin accordance with generally accepted accounting principles have been omittedpursuant to requirements of the Securities and Exchange Commission.  Management believes that the disclosuresincluded in the accompanying interim financial statements and footnotes areadequate, but should be read in conjunction with the consolidated financialstatements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 30, 2002.

 

Certain priorperiod balances have been reclassified to conform to the current periodpresentation.

 

**(2)****                                 SALEOF THE ANGELO AND MAXIE’S BRAND AND RELATED OPERATING ASSETS**

 

In August2003, the Board of Directors approved the sale of three of the Company's fivesteakhouses which are located in Midtown Manhattan, New York, Reston, Virginia,and Washington, D.C.  The purchaser,McCormick and Schmick Restaurant Corp. ("M&S"), intends toconvert all three steakhouses to another restaurant concept. OnOctober 31, 2003, the Company entered into a definitive agreement to sellthe three steakhouses to M&S for $5.35 million in cash, subject tocertain adjustments for current assets and liabilities.  See Note 9 “Subsequent Events”.  The transaction, which is expected to closein January 2004, is subject to satisfaction of certain conditions.  No assurances can be given that the salewill be consummated.

 

In September2003, the Board of Directors approved a proposal to sell the Company'sremaining two steakhouses which are the flagship location on Park Avenue in NewYork City and its steakhouse in West Palm Beach, Florida, and certain Angeloand Maxie's intellectual property.  Noassurances can be provided as to whether or when a transaction will beconsummated.

 

In connectionwith the two proposed sales of the Company’s five steakhouses and relatedintellectual property, the assets of the Angelo and Maxie’s restaurants areconsidered to be held for sale as of September 29, 2003 in accordance withStatement of Financial Accounting Standards No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets” (“FAS 144”).  However, the assets of the Angelo and Maxie’srestaurants are not presented as held for sale on the Consolidated BalanceSheet as of September 29, 2003 and the operations of the restaurants are notpresented as discontinued on the Statements of Operations for the quarterly andnine month periods ended September 29, 2003 because the Company believes such apresentation would not be meaningful to the reader.

 

**(3)****                                 SALEOF THE CHART HOUSE BUSINESS**

 

In May 2002,the Board of Directors of the Company authorized the sale of the 38 Chart Houserestaurants and 1 Peohe’s restaurant (the “Chart House Business”).  The sale was completed as of July 30, 2002,for consideration of approximately $55.3 million, consisting of cash and theassumption of approximately $3.1 million of certain current liabilities thenoutstanding.  The Company used a portionof the proceeds to repay all amounts outstanding on its senior, secured debtand a subordinated note owed to a related party.  See Note 5 “Debt”.  TheCompany recorded a provision for estimated loss on sale of discontinuedoperations of $3.7 million in second quarter of 2002, which was revised to $2.4million in the third quarter of 2002, primarily as a result of the eliminationof net liabilities to landlords following the receipt of the landlords’ consentto assign certain leases to the purchaser. In the

 

4

----

 

quarterly period endedSeptember 29, 2003, the Company further adjusted its liabilities associatedwith the sale resulting in a $0.2 million loss for the quarterly and nine monthperiods ended September 29, 2003.  AtSeptember 29, 2003, the purchaser had not yet paid approximately $0.2 millionof the purchase price provided for in the asset purchase agreement.  The Company has taken legal action tocollect these funds.  See “Part II, Item1. Legal Proceedings.”

 

Through July29, 2002, the Company owned the Chart House Business which consisted of 38Chart House and one Peohe’s restaurants, the operations of which have been reportedas discontinued.  Condensed financialinformation for the results of operations for the discontinued operations is asfollows (in thousands):

 
|                                       |   | **Quarterly period ended  September 30, 2002** |       | **Nine month period ended  September 30, 2002** |       |
|--------------------------------------------|--------|------------------------------------------------|------------|-------------------------------------------------|------------|
|                                       |   |                                           | ** ** |                                            | ** ** |
| Revenues                                   |   | $                                              | 9,676      |                                            | $          | 68,859 |   |
| Total restaurant costs                     |   | 9,941                                          |       | 61,739                                          |       |
| General and administrative expenses        |   | 326                                            |       | 4,713                                           |       |
| Depreciation and amortization              |   | 154                                            |       | 2,201                                           |       |
| Interest expense, related to capital lease |   | 60                                             |       | 60                                              |       |
| Income (loss) from discontinued operations |   | $                                              | (805       | )                                               | $          | 146 |   |

 

 

**(4)****                                 IMPAIRMENTOF 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” (“FAS 142”), whichrequires, among other things, that effective January 1, 2002, goodwill andcertain other intangible assets resulting from a business combination accountedfor as a purchase no longer be amortized, but be subject to ongoing impairmentreview.  In connection with the transitionalgoodwill and certain other intangible assets impairment evaluation, FAS 142required the Company to perform an assessment of whether there was anindication that goodwill and certain other intangible assets were impaired asof the date of adoption.  To accomplishthis evaluation, the Company determined the carrying value of each reportingunit by assigning the assets and liabilities, including the existing goodwilland certain other intangible assets, to those reporting units as of the date ofadoption.  During the second quarters of2002 and 2003, the Company completed its required review by comparing itscarrying value for the Angelo and Maxie’s restaurant business to estimated fairmarket value.  In determining theestimated fair market value of its assets, management considers several factorsrequiring the exercise of its business judgment.  Such business judgment includes developing valuation multiplessuch as the ratio of total capitalized value to restaurant earnings beforeinterest, taxes, depreciation, and amortization for an industry peer group ofpublicly traded companies and applying those ratios to the Company’s historicaland projected operating performance. Such evaluation indicated that the recorded value of goodwill and tradename of Angelo and Maxie’s was impaired by $5.4 million and$0.7 million at the end of the second quarters of 2002 and 2003,respectively, and that the recorded value of the restaurant leaseholdimprovements were impaired by $3.6 million at the end of the secondquarter of 2003.  Previously, theCompany had reported that the goodwill and trade name of Angelo and Maxie's wasimpaired by $4.3 million at the end of the second quarter of 2003.  During the third quarter of 2003, based onthe facts and circumstances from the proposed sales transactions (seeNote 2 "Sale of the Angelo and Maxie's Brand and Related OperatingAssets"), the Company concluded that the $4.3 million impairment from the second quarter of2003 should have been allocated between the restaurant leasehold improvementsand the goodwill and trade name.  TheConsolidated Balance Sheet as of September 29, 2003 has been reclassifiedto conform to this presentation.  At theend of the third quarter of 2003, the Company concluded that there was no furtherimpairment with respect to the goodwill and trade name and the restaurantoperating assets.

 

During thethird quarter of 2002, the Company determined that corporate leaseholdimprovements had been impaired due to the significant reduction in corporate staffutilizing the assets subsequent to the sale of the Chart House Business.  The Company recorded a $0.2 million chargeto continuing operations to reflect these assets at fair value. The Companyalso recorded in the second quarter of 2002 a $1.7 million charge for severancedue to the corporate work force reduction associated with the sale of the ChartHouse Business.  In the third quarter of2002, the Company recorded a $0.3 million charge for excess corporate costsrelated to the reduction in staffing requirements as a result of the sale ofthe Chart House Business for which the Company will not receive future economicbenefit.  Such costs primarily includeexcess corporate office lease payments. The unpaid balance of $1.5 million for accrued severance and excesscorporate costs is presented in the September 30, 2002 balance sheet in accruedliabilities.  On June 30, 2003 theCompany’s lease on its Chicago corporate headquarters expired and the Companyrelocated to a space commensurate with its current needs.  In connection therewith, the Companyrecorded a $0.1 million charge during the second quarter of 2003 resulting fromthe Company receiving lower than anticipated proceeds for the sale and disposalof its furniture and equipment located at the vacated facility.

 

In June 2002,the Financial Accounting Standards Board issued Statement of FinancialAccounting Standards No. 146, “Accounting for Costs from Exit or DisposalActivities” (“FAS 146”).  FAS 146requires, among other things, that a liability for costs associated with anexit or disposal activity be recognized when the liability is incurred ratherthan at the time of commitment to a formal shutdown plan.  The adoption of FAS 146 is effective for allexit or disposal activities initiated subsequent to December 31, 2002.  The Company has adopted FAS 146 as ofJanuary 1, 2003 with no material impact.

 

5

----

 

**(5)****                                 DEBT**

 

The Companyhad a Revolving Credit and Term Loan Agreement (“Credit Agreement”) with a groupof three banks.  The Company madescheduled principal payments on the term loan portion of the Credit Agreementof $0.4 million and $0.5 million during the second and third quarters of 2002,respectively.  On August 1, 2002, alloutstanding amounts, including principal of $24.1 million and accrued interestof $0.2 million, were paid in full with proceeds from the sale of the ChartHouse Business.  See Note 3 “Sale of theChart House Business.”  Interest underthe Credit Agreement accrued at the prime interest rate, plus 2.75%.  The balance outstanding under the CreditAgreement, prior to retirement, included $1.5 million funded by EGI-Fund (01)Investors, L.L.C. (“EGI-Fund (01)”), a related party, which accrued interest atLIBOR plus 14.0% due to the subordinate nature of the related party’sparticipation in the Credit Agreement. Cash paid for interest, net of amounts capitalized, was $1.7 million forthe third quarter ended September 30, 2002. On May 1, 2002, the Credit Agreement was amended to provide for, amongother things, an extension of the maturity date to August 30, 2002.  In connection with this amendment, theCompany paid fees of $0.4 million, which is included with interest expense inthe statement of operations for the nine months ended September 30, 2002.

 

During theperiod from November 2000 to January 2001, related parties made available tothe Company an aggregate $11.0 million pursuant to unsecured notes.  Amounts outstanding under the notes weresubordinated to amounts owing under the Credit Agreement.  The proceeds were used to fund workingcapital requirements as well as scheduled principal payments on the term loan.The terms of the notes were amended and restated in February 2001, increasing theavailability of borrowing to $13.0 million. During June 2001, one note was repaid and availability under the secondnote agreement was reduced to $5.0 million in conjunction with the Companyraising 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% and had ascheduled maturity of March 31, 2005.  Afee of 12.0% per annum was charged on the unused portion of the availability ofthe borrowings under the note through June 2001.  On August 1, 2002, all outstanding amounts were paid in full withproceeds from the sale of the Chart House Business.  See Note 3 “Sale of the Chart House Business” and Note 7 “RelatedParty Transactions”.

 

During thesecond quarter of 2003, the Company prepaid, without penalty, two notesaggregating to $0.5 million that were held by one of its landlords. The notesoriginally were in the aggregate amount of $0.7 million, amortized over sevenyear terms, bore interest at 9.0%, and were payable in monthlyinstallments.  The Company made noprincipal payments on these notes during the third quarter of 2003, and $46,000(prior to repayment) and $63,000 during the nine month periods ended September29, 2003 and September 30, 2002, respectively. Interest expense and cash paid for interest related to these notes waszero and $12,000 for the third quarters of 2003 and 2002, respectively, and$18,000 and $38,000 for the nine month periods ended September 29, 2003 andSeptember 30, 2002, respectively.

 

 

**(6)****                                 STOCK-BASEDCOMPENSATION**

 

In December2002, the Financial Accounting Standards Board issued Financial AccountingStandards No. 148, “Accounting for Stock-Based Compensation – Transition andDisclosure, an amendment of FASB Statement No. 123” (“FAS 148”).  This Statement amends Statement of FinancialAccounting Standards No. 123, “Accounting for Stock-Based Compensation” (“FAS123”) 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 FAS 123 to require prominent disclosures regarding theaccounting for stock-based employee compensation in both annual and interimfinancial statements.  The Company haspreviously adopted this Standard.

 

The Companyhas elected to account for stock-based compensation under the intrinsic valuemethod of accounting. This method measures compensation cost as the excess, ifany, of the quoted market price of the Company’s common stock at the grant dateover the amount the employee must pay for the stock. The Company’s policy is togrant stock options to purchase the Company’s stock at a price equal to fairmarket value at the date of grant.  Hadthe Company elected to recognize compensation expense determined under the fairvalue method of accounting for stock-based compensation as prescribed by FAS123 and FAS 148, the Company’s net loss applicable to common shares and pershare amounts would reflect the following pro forma amounts (in thousands,except for per share data):

 

6

----

 
|                                           |   | **Quarterly periods ended** |   | **Nine month periods ended** |   |
|------------------------------------------------|--------|-----------------------------|--------|------------------------------|--------|
|                                           |   | **September 29, 2003**      |   | **September 30, 2002**       |   | **September 29, 2003** |   | **September 30, 2002** |   |
| Net loss applicable to common shares:          |   |                        |   |                         |   |   |   |   |   |
| As reported                                    |   | $                           | (634   | )                            | $      | (1,203 | ) | $ | (5,535 | ) | $ | (12,716 | ) |
| Pro forma                                      |   | (634                        | )      | (1,816                       | )      | (5,535 | ) | (13,405 | ) |
| Net loss per common shares - Basic and diluted |   |                        |   |                         |   |   |   |   |   |
| As reported                                    |   | $                           | (0.32  | )                            | $      | (0.61 | ) | $ | (2.78 | ) | $ | (6.42 | ) |
| Pro forma                                      |   | (0.32                       | )      | (0.92                        | )      | (2.78 | ) | (6.77 | ) |

 

 

**(7)****                                 RELATEDPARTY TRANSACTIONS**

 

Payments torelated parties for rent at one restaurant approximated $0.1 million in boththe third quarters of 2003 and 2002, and approximated $0.3 million in both thenine month periods ended September 29, 2003 and September 30, 2002.  Other payments to related partiestotaled $8.0 million in the third quarter of 2002, including payments relatedto debt repayments of $6.5 million, plus interest of $1.2 million (see Note 5“Debt”).  The remainder of the otherpayments to related parties made in the third quarter of 2002 related toconsulting fees.

 

During 2001and 2002, the Company was party to a marketing agreement with iDine RewardsNetwork, Inc. (“iDine”), a related party and owner of the iDine frequent dinerprogram.  In connection with the advancesale of discounted food and beverage credits, the Company received advertisingin iDine publications and through the relationships iDine had established withmajor airlines to feature the Company’s restaurants as preferred diningchoices.  iDine provided web and printpromotional services that were designed to create incentives for members todine at the Company’s restaurants, especially during the Company’s restaurants’non-peak days.  The Company receivedfrom iDine $1.0 million in the three month period ended April 1, 2002.  Pursuant to the agreement, the Company paid$0.1 million and $2.6 million during the quarterly and nine month periods endedSeptember 30, 2002, respectively, to iDine for its marketing services duringthose periods and for advances, including those received in the second half of2001.  This agreement was terminated asof July 29, 2002, in conjunction with the sale of the Chart House Business.  See Note 3 “Sale of the Chart HouseBusiness”.  The Company has no furtherobligations under this agreement.

 

In the secondquarter of 2003, the Company entered into a loaned employee agreement withiDine, which provided for, among other things, that the Company’s President andChief Executive Officer provide advisory services to iDine’s ExecutiveManagement Team for up to sixteen hours per week, in exchange for a fixedamount to be paid to the Company.  Theoriginal agreement commenced May 19, 2003 and expired June 30, 2003.  Subsequently, the agreement was amended bythe Company and iDine to, among other things, extend the termination date fromJune 30, 2003 to August 8, 2003.  Duringthe quarterly period ended September 29, 2003 the Company recognized $19,000 ofservice revenues in connection with this agreement.  The $19,000 of service revenues for the third quarter of 2003 dueto the Company was outstanding as of September 29, 2003.  For the nine month period ended September29, 2003, the Company recognized $32,000 of service revenues pursuant to thisagreement.

 

On June 26,2003, the Company entered into an operating lease for office space with arelated party.  This agreement providesfor, among other things, that the landlord provide office space for theCompany’s six corporate employees and certain office services.  This agreement is terminable by either partywith a thirty day notice.  The Companymade payments of $5,000 pursuant to this agreement in the quarterly and ninemonth periods ended September 29, 2003.

 

Therelationships stem from one or more Company stockholders and/or members of theCompany’s Board of Directors maintaining ownership interest in and influentialmanagement positions at or with these organizations.

 

**(8)****                                 COMMITMENTSAND CONTINGENCIES**

 

The Companyperiodically is a defendant in litigation incidental to its businessactivities.  While any litigation orinvestigation has an element of uncertainty, the Company believes that theoutcome of any of these matters will not have a material adverse effect on itsfinancial condition or operations.

 

The Companymaintains letters of credit primarily to cover self-insurance reserves andlease obligations.  In connection withthe termination of the Credit Agreement, and in order to minimize costsassociated with outstanding letters of credit, the Company established a cashcollateral account equal to the full balance of its obligations underoutstanding letters of credit, which totaled $2.6 million at September 29,2003.  Such funds are presented on theconsolidated balance sheets as restricted cash, a non-current asset.

 

7

----

 

The Company iscontingently liable, in certain circumstances, for lease obligations of 23properties subleased or assigned to third parties in the event of a default bythe third party.  In connection with thesale of the Chart House Business, the Company received the guarantee of theultimate parent of the purchaser with respect to 22 of these properties.

 

 

**(9)****                                 SUBSEQUENTEVENTS**

 

On October 31, 2003, the Company entered into a definitive agreement tosell the three steakhouses to M&S for $5.35 million in cash, subject tocertain adjustments for current assets and liabilities.  See Note 2 “Sale of the Angelo and Maxie's Brandand Related Operating Assets”.  The transaction,which is expected to close in January 2004, is subject to satisfaction ofcertain conditions.  No assurances canbe given that the sale will be consummated.

 

The Companydeclared a dividend on each share of the Company’s Series A Preferred Stock outstandingon November 14, 2003.  Holders ofrecord on that date will receive a cash dividend of $0.1125 per share onDecember 1, 2003.

 

 

**(10)****                          NEWACCOUNTING PRONOUNCEMENTS**

 

In November2002, the Financial Accounting Standards Board issued Interpretation No. 45,“Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingIndirect Guarantees 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 theCompany.  FIN 45 also requires therecognition of a liability by a guarantor at the inception of certainguarantees entered into subsequent to January 1, 2003.  FIN 45 requires the guarantor to recognize aliability for the non-contingent component of the guarantee, which is theobligation to stand ready to perform in the event that specified triggeringevents or conditions occur.  The initialmeasurement of this liability is the fair value of the guarantee atinception.  The recognition of theliability is required even if it is not probable that payment will be requiredunder the guarantee or if the guarantee was issued with a premium payment or aspart of a transaction with multiple events. The Company has adopted the disclosure requirements of FIN 45 and willapply the recognition and measurement provisions for all guarantees enteredinto or modified after December 31, 2002. The Company has not entered into or modified any guarantees subsequentto December 31, 2002.

 

In January2003, the Financial Accounting Standards Board issued Interpretation No. 46,“Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”(“FIN 46”).  FIN 46 addresses the consolidationby business enterprises of variable interest entities as defined therein.  The Interpretation applies immediately tovariable interests in variable interest entities created after January 31,2003, and to variable interests in variable interest entities obtained afterJanuary 31, 2003.  The Company currentlyhas no contractual relationships or other business relationships with avariable interest entity and therefore the adoption of FIN 46 did not have a materialeffect on the Company’s consolidated financial position, results of operations,or cash flows for the current periods presented.

 

In May 2003,the Financial Accounting Standards Board issued Financial Accounting StandardsNo. 150, “Accounting for Certain Financial Instruments with Characteristics ofboth Liabilities and Equity.”  ThisStatement establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity.  It requires that an issuerclassify a financial instrument that is within its scope as a liability (or anasset in some circumstances).  ThisStatement is effective for financial instruments entered into or modified afterMay 31, 2003, and otherwise is effective at the beginning of the first interimperiod beginning after June 15, 2003. The Company adopted this Standard on July 1, 2003, with no materialimpact.

 

8

----

 

*This Quarterly Report on Form 10-Q and thedocuments incorporated herein by reference contain forward-looking statementsthat have been made pursuant to provisions of the Private Securities LitigationReform Act of 1995.  Forward-lookingstatements represent the Company’s expectations or beliefs concerning futureevents, including any statements regarding: future sales and gross profitpercentages, the continuation of historical trends, the sufficiency of theCompany’s cash balances, and cash generated from operating, financing and/orinvesting activities for the Company’s future liquidity and capital resourceneeds.  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 arefurther 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 be predictionsof future events or circumstances and may not be realized.*

 

**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS.**

 

**OVERVIEW**

 

The Companyconsummated the sale of the Chart House Business, comprised of 39 of itsthen-existing 45 restaurants, as of July 30, 2002.  The operations of these restaurants have been presented asdiscontinued operations for the third quarter and nine month periods endedSeptember 30, 2002, in accordance with FAS 144.  The sale was completed for consideration of approximately $55.3million, consisting of cash and the assumption of approximately $3.1 million ofcertain current liabilities.  TheCompany used a portion of the net proceeds from the sale to repay all amountsoutstanding under its Credit Agreement and a subordinated note owed to arelated party.

 

The Companycontinues to operate five Angelo and Maxie’s Steakhouses, which arefull-service steakhouse restaurants located in New York, Washington D.C.,Virginia, and Florida.  The Companyoperated the following number of restaurants at the following period ends:

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

 

The Companyacquired the Angelo and Maxie’s Steakhouse concept and one restaurant during1999 to diversify its seafood dominated portfolio.  The Company opened a total of six additional Angelo and Maxie’srestaurants over 2000 and 2001.  One ofthese locations was closed during the fourth quarter of 2001 and anotherlocation was closed during the fourth quarter of 2002.  During 2001, the Company canceled restaurantdevelopment plans for three locations, did not open any locations during 2002,and currently has no plans to open additional restaurants during 2003.

 

In August2003, the Board of Directors approved the sale of three of the Company's fivesteakhouses which are located in Midtown Manhattan, New York, Reston, Virginia,and Washington, D.C.  The purchaser,McCormick and Schmick Restaurant Corp. ("M&S"), intends toconvert all three steakhouses to another restaurant concept.  On October 31, 2003, the Company enteredinto a definitive agreement to sell the three steakhouses to M&S for $5.35million in cash, subject to certain adjustments for current assets andliabilities.  The transaction, which isexpected to close in January 2004, is subject to satisfaction of certainconditions.  No assurances can be given thatthe sale will be consummated.

 

In September2003, the Board of Directors approved a proposal to sell the Company'sremaining two steakhouses which are the flagship location on Park Avenue in NewYork City and its steakhouse in West Palm Beach, Florida, and certain Angeloand Maxie's intellectual property.  Noassurances can be provided as to whether or when a transaction will beconsummated.

 

 

9

----

 

**RESULTS OF OPERATIONS**

 

The following table presentsthe results of operations for each of the quarterly and nine month periodsended September 29, 2003 and September 30, 2002.  Continuing operations relate to the operations of the Company’sAngelo and Maxie’s Steakhouses.  Theoperations of the Chart House Business are presented as discontinued.  In connection with the proposed sale of theCompany’s Angelo and Maxie’s Steakhouses and related intellectual property, theassets of the Angelo and Maxie’s restaurants are considered to be held for saleas of September 29, 2003 in accordance with FAS 144.  However, the operations of the Angelo and Maxie’s restaurants arenot presented as discontinued for the quarterly and nine month periods endedSeptember 29, 2003 because the Company believes such a presentation would notbe meaningful to the reader.

 

 
|                                                                |   | **Quarterly  periods ended** |   | **Nine month  periods ended** |   |
|---------------------------------------------------------------------|--------|------------------------------|--------|-------------------------------|--------|
| **(Unaudited,  dollars in**                                         |   | **September  29,  2003**     |   | **September  30,  2002**      |   | **September  29,  2003** |   | **September  30,  2002** |   |
| **thousands)**                                                      |   | **Amount**                   |   | **%**                         |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   | **Amount** |   | **%** |   |
|                                                                |   |                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                            |   | $                            | 5,722  |                          | 100.0  |   | $ | 5,634 |   | 100.0 |   | $ | 18,945 |   | 100.0 |   | $ | 19,690 |   | 100.0 |   |
|                                                                |   |                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating costs and  expenses:                                      |   |                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                       |   | 2,080                        |   | 36.4                          |   | 2,041 |   | 36.2 |   | 6,797 |   | 35.9 |   | 7,044 |   | 35.8 |   |
| Restaurant labor                                                    |   | 1,429                        |   | 25.0                          |   | 1,442 |   | 25.6 |   | 4,478 |   | 23.6 |   | 4,802 |   | 24.4 |   |
| Other operating costs                                               |   | 1,117                        |   | 19.5                          |   | 1,077 |   | 19.1 |   | 3,478 |   | 18.4 |   | 3,851 |   | 19.6 |   |
| Rent                                                                |   | 601                          |   | 10.5                          |   | 585 |   | 10.4 |   | 1,802 |   | 9.5 |   | 1,763 |   | 9.0 |   |
| Total restaurant costs                                              |   | 5,227                        |   | 91.3                          |   | 5,145 |   | 91.3 |   | 16,555 |   | 87.4 |   | 17,460 |   | 88.7 |   |
| Restaurant operating  income (before depreciation and amortization) |   | 495                          |   | 8.7                           |   | 489 |   | 8.7 |   | 2,390 |   | 12.6 |   | 2,230 |   | 11.3 |   |
| General and administrative  expenses                                |   | 568                          |   | 9.9                           |   | 597 |   | 10.6 |   | 1,927 |   | 10.2 |   | 915 |   | 4.6 |   |
| Depreciation and  amortization                                      |   | 149                          |   | 2.6                           |   | 278 |   | 4.9 |   | 763 |   | 4.0 |   | 1,037 |   | 5.3 |   |
| Impairment of assets and  restructuring charges                     |   | 15                           |   | 0.3                           |   | 497 |   | 8.8 |   | 4,428 |   | 23.4 |   | 7,558 |   | 38.4 |   |
| (Gain) loss on sales of  assets                                     |   | (15                          | )      | (0.3                          | )      | — |   | — |   | (6 | ) | (0.0 | ) | 2 |   | — |   |
| Total restaurant and  operating costs                               |   | 5,944                        |   | 103.9                         |   | 6,517 |   | 115.7 |   | 23,667 |   | 124.9 |   | 26,972 |   | 137.0 |   |
| Loss from operations                                                |   | (222                         | )      | (3.9                          | )      | (883 | ) | (15.7 | ) | (4,722 | ) | (24.9 | ) | (7,282 | ) | (37.0 | ) |
| Interest expense, net                                               |   | 30                           |   | 0.5                           |   | 580 |   | 10.3 |   | 82 |   | 0.4 |   | 2,617 |   | 13.3 |   |
| Other income                                                        |   | (51                          | )      | (0.9                          | )      | (51 | ) | (0.9 | ) | (153 | ) | (0.8 | ) | (151 | ) | (0.8 | ) |
| Loss from continuing  operations before income taxes                |   | (201                         | )      | (3.5                          | )      | (1,412 | ) | (25.1 | ) | (4,651 | ) | (24.5 | ) | (9,748 | ) | (49.5 | ) |
| Provision for income taxes                                          |   | —                       |   | —                        |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Loss from continuing  operations                                    |   | (201                         | )      | (3.5                          | )      | (1,412 | ) | (25.1 | ) | (4,651 | ) | (24.5 | ) | (9,748 | ) | (49.5 | ) |
|                                                                |   |                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations:                                            |   |                         |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from  operations                                      |   | —                       |   | —                        |   | (805 | ) | (14.3 | ) | — |   | — |   | 146 |   | 0.7 |   |
| Income (loss) on sale                                               |   | (201                         | )      | (3.5                          | )      | 1,248 |   | 22.2 |   | (188 | ) | (1.0 | ) | (2,433 | ) | (12.4 | ) |
| Income (loss) from  discontinued operations                         |   | (201                         | )      | (3.5                          | )      | 443 |   | 7.9 |   | (188 | ) | (1.0 | ) | (2,287 | ) | (11.6 | ) |
| Net loss                                                            |   | $                            | (402   | )                             | (7.0   | ) | $ | (969 | ) | (17.2 | ) | $ | (4,839 | ) | (25.5 | ) | $ | (12,035 | ) | (61.1 | ) |
| Preferred stock dividends                                           |   | 232                          |   | 4.1                           |   | 234 |   | 4.2 |   | 696 |   | 3.7 |   | 681 |   | 3.5 |   |
| Net loss applicable to  common shares                               |   | $                            | (634   | )                             | (11.1  | ) | $ | (1,203 | ) | (21.4 | ) | $ | (5,535 | ) | (29.2 | ) | $ | (12,716 | ) | (64.6 | ) |

 

10

----

 

Angelo andMaxie’s revenues are derived primarily from food and beverage sales.  Revenues increased $0.1 million, or 1.6%, to$5.7 million in the third quarter of 2003, compared to $5.6 million in thethird quarter of 2002.  The increase inrevenues is due to the Company’s 4.9% increase in comparable sales partlyoffset by the Company’s exit from one restaurant during the fourth quarter of2002.

 

Revenuesdecreased $0.7 million, or 3.8%, to $18.9 million for the nine months endedSeptember 29, 2003, compared to $19.7 million for the nine months endedSeptember 30, 2002.  The decrease inrevenues is due to the Company’s exit from one restaurant during the fourthquarter of 2002.  Comparable sales forthe nine month period increased 1.6%.

 

Cost of salesis composed of the cost of food and beverages. Cost of sales as a percentage of revenues increased by 0.2 percentagepoints to 36.4% in the third quarter of 2003, compared with 36.2% in the thirdquarter of 2002.  This increase wasprimarily the result of cost increases to certain products coupled with thediscounting of food items during happy hours at several of the Company’slocations.  For the nine months endedSeptember 29, 2003, cost of sales as a percentage of revenues increased 0.1percentage points to 35.9%, compared with 35.8% for the nine months endedSeptember 30, 2002, driven primarily by the same factors that impacted thequarterly results.

 

Restaurantlabor consists of restaurant management salaries, hourly staff payroll costs,and other payroll-related items. Restaurant labor as a percentage of revenues decreased by 0.6 percentagepoints to 25.0% in the third quarter of 2003, compared with 25.6% in the thirdquarter of 2002.  This improvement wasprimarily the result of the elimination of an underperforming restaurant in December2002 that incurred higher labor costs than the Company’s other restaurantscoupled with productivity improvements at a majority of the remainingrestaurant locations.  For the ninemonths ended September 29, 2003 restaurant labor as a percentage of revenuesdecreased 0.8 percentage points to 23.6%, compared with 24.4% for the ninemonths ended September 30, 2002, driven primarily by the same factors thatimpacted the quarterly results.

 

Otheroperating expenses consist primarily of various restaurant-level costs, whichare generally variable and are expected to fluctuate with revenues.  Other operating costs as a percentage ofrestaurant revenues increased by 0.4 percentage points to 19.5% in the thirdquarter of 2003, compared with 19.1% in the third quarter of 2002, primarily asa result of higher utility and insurance costs.  For the nine months ended September 29, 2003, other operatingcosts as a percentage of revenues decreased 1.2 percentage points to 18.4%,compared with 19.6% for the nine months ended September 30, 2002, primarily dueto lower marketing spending in the current year and partly offset by higherutility and insurance costs.

 

Rent includesboth fixed and variable portions of rent. Rent as a percentage of revenues increased by 0.1 percentage points to10.5% in the third quarter of 2003, compared with 10.4% in the third quarter of2002, primarily as a result of rent relief in the 2002 quarter related to anunderperforming restaurant that was subsequently closed.  The Company did not incur variable rentcosts for any of its locations in either period.  For the nine months ended September 29, 2003, rent as apercentage of revenues increased 0.5 percentage points to 9.5%, compared with9.0% for the nine months ended September 30, 2002, primarily due to the highertotal revenues for the comparative nine month period in 2002 coupled by rentrelief in the 2002 related to an underperforming restaurant that wassubsequently closed.

 

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 for the third quarter of 2003of $0.6 million were flat compared to the third quarter of 2002.  For the nine months ended September 29,2003, general and administrative expenses increased $1.0 million to $1.9million from $0.9 million for the nine months ended September 30, 2002.  This increase is the result of the fixedgeneral overhead costs being allocated entirely to five operating restaurantsfollowing the sale of the Chart House Business rather than being allocated bothto continuing and discontinued operations.

 

Depreciationand amortization expense includes the depreciation of fixed assets and theamortization of leasehold improvements at both the restaurants and corporatelocations.  For the quarterly periodended September 29, 2003, depreciation and amortization expense decreased $0.2million to $0.1 million from $0.3 million for the quarterly period endedSeptember 30, 2002.  The decrease in thequarterly result is primarily due to the ceasing of depreciation on therestaurant fixed assets and leasehold improvements in connection with theassets being classified as held for sale during the third quarter of 2003 inaccordance with FAS 144.  For the ninemonths ended September 29, 2003, depreciation and amortization expensedecreased $0.2 million to $0.8 million from $1.0 million for the nine monthsended September 30, 2002.  The decreasein the year-to-date result is primarily due to the same factors that influencedthe decrease in the quarterly results as well as the prior period amountincluding the final amortization of a non-compete agreement related to a priorowner of the original Angelo and Maxie’s Steakhouse.

 

11

----

 

During thesecond quarter of 2003, the Company completed its required review by comparingits carrying value for the Angelo and Maxie’s restaurant business to estimatedfair market value.  In determining theestimated fair market value of its assets, management considers several factorsrequiring the exercise of its business judgment.  Such business judgment includes developing valuation multiplessuch as the ratio of total capitalized value to restaurant earnings beforeinterest, taxes, depreciation, and amortization for an industry peer group ofpublicly traded companies and applying those ratios to the Company’s historicaland projected operating performance. Such evaluation indicated that the recorded value of the Angelo andMaxie’s trade name was impaired by $0.7 million and that the recordedvalue of the restaurant leasehold improvements were impaired by$3.6 million at the end of the second quarter of 2003.  Previously, the Company had reported thatthe goodwill and trade name of Angelo and Maxie's was impaired by$4.3 million at the end of the second quarter of 2003.  During the third quarter of 2003, based onthe facts and circumstances from the proposed sale of the Angelo and Maxie'sbrand and related operating assets, the Company concluded that the $4.3 million impairment from the second quarter of2003 should have been allocated between the restaurant leasehold improvementsand the goodwill and trade name.  At theend of the third quarter of 2003, the Company concluded that there was nofurther impairment with respect to the goodwill and trade name and therestaurant operating assets.  Inaddition, on June 30, 2003 the Company’s lease on its Chicago corporateheadquarters expired and the Company relocated to a space commensurate with itscurrent needs.  In connection therewith,the Company recorded a $0.1 million restructuring charge during the secondquarter of 2003 resulting from the Company receiving lower than anticipatedproceeds for the sale and disposal of its furniture and equipment located atthe vacated facility.

 

Impairment ofassets and restructuring charges were $0.5 million and $7.6 million for thethird quarter and nine month periods ended September 30, 2002,respectively.  During the third quarterof 2002, the Company determined that corporate leasehold improvements had beenimpaired due to the significant reduction in corporate staff utilizing theassets subsequent to the sale of the Chart House Business.  The Company wrote down the assets to fairvalue, resulting in a third quarter charge to continuing operations of $0.2million.  In addition, the Companyrecorded a $0.3 million charge for excess corporate costs related to thereduction in staffing requirements as a result of the sale of the Chart HouseBusiness for which the Company will not receive future economic benefit.  Such costs primarily include excess corporateoffice lease payments.  During thesecond quarter of 2002, the Company completed its required review by comparingits carrying value for the Angelo and Maxie’s Steakhouse business to fairmarket value.  Such evaluation indicatedthat the recorded value of goodwill and trade name of Angelo and Maxie’s wasimpaired by $5.4 million, and a related charge to continuing operations wasrecorded in the second quarter of 2002. The Company also recorded in the second quarter of 2002 a $1.7 millioncharge for severance due to the corporate work force reduction associated withthe sale of the Chart House Business.

 

Interestexpense, net, decreased $550,000 to $30,000 in the third quarter of 2003,compared to $580,000 in the third quarter of 2002.  Interest expense, net decreased $2.5 million to $0.1 million inthe nine months ended September 29, 2003, compared to $2.6 million in the ninemonths ended September 30, 2002.  TheCompany paid all outstanding bank and related party debt balances in full withthe proceeds from the sale of the Chart House Business in the third quarter of2002.  The current quarter interestexpense relates to non-cash interest expense related to a capital lease offsetby interest income earned on the Company’s cash invested in overnight investmentinstruments.  The interest expense forthe nine months ended September 29, 2003 relates to interest on a landlord noteretired and extinguished in the second quarter of 2003, coupled by non-cashinterest expense related to a capital lease, offset by interest income earnedon the Company’s cash invested in overnight investment instruments.

 

In 2002, theCompany recognized a $2.4 million loss on the sale of the Chart HouseBusiness.  The loss is comprised of $1.9million in transaction costs, consisting primarily of investment banking and legalfees, and a $0.4 million difference between the net book value of assetsdisposed and the consideration received. In the third quarter of 2003, the Company further adjusted itsliabilities associated with the sale resulting in a $0.2 million loss for thequarterly and nine month periods ended September 29, 2003.

 

The Companyissued Series A convertible preferred stock, par value $1.00 per share (“SeriesA Preferred Stock”), during June 2001. The Series A Preferred Stock is entitled to dividends at the rate of10.0% per annum, based on the original issue price of $2.25 per share.  The Company accrued dividends on the SeriesA Preferred Stock aggregating $0.2 million during each of the third quarters of2003 and 2002.

 

**LIQUIDITY AND CAPITAL RESOURCES**

** **
| **(Unaudited, dollars in thousands)**              |   | **Nine month periods ended** |   |
|----------------------------------------------------|--------|------------------------------|--------|
|                                               |   | **September 29, 2003**       |   | **September 30, 2002** |   |
| Net cash used in operating activities              |   | $                            | (944   | ) | $ | (5,512 | ) |
| Expenditures for equipment and improvements        |   | (80                          | )      | (913 | ) |
| Proceeds from the sale of the Chart House Business |   | —                       |   | 50,001 |   |
| Proceeds from sale of other assets                 |   | 15                           |   | — |   |
| Cash in escrow                                     |   |                         |   | (2,000 | ) |
| Cash used in financing activities                  |   | (912                         | )      | (33,713 | ) |
| Net increase (decrease) in cash                    |   | $                            | (1,921 | ) | $ | 7,863 |   |

 

12

----

 

Net cash usedin operating activities was $0.9 million in the first nine months of 2003,compared to net cash used by operating activities of $5.5 million in the firstnine months of 2002.  In 2003, net cashused in operating activities includes an aggregate $1.4 million related topayment of 2002 bonuses, severance payments related to employees terminated inconjunction with the sale of the Chart House Business, and settlement ofpreviously reserved insurance claims. In 2002, the net cash used in operating activities was primarily due tothe settlement of accounts payable and other liabilities of the Chart HouseBusiness.  In connection with anagreement with iDine Rewards Network, Inc. (“iDine”), the Company received $1.0million in the nine month period of 2002 for marketing activities and theadvance sale of food and beverage credits. The Company in turn paid to iDine $2.6 million during the nine monthperiod of 2002 related to this agreement including advances received in2001.  This agreement was terminated asof July 29, 2002, in conjunction with the sale of the Chart HouseBusiness.  The Company has no furtherobligations under this agreement.

 

Historically,the Company required significant capital principally for the construction andopening expenses 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 in capital expenditures for the nine month periods endedSeptember 29, 2003 and September 30, 2002 was $80,000 and $913,000,respectively, primarily for the replacement of restaurant equipment andleasehold improvements resulting from normal wear and tear.

 

Net cash usedin financing activities was $0.9 million in the first nine months of 2003,including $0.5 million used to settle the payment of both scheduled paymentsand the early retirement and payoff of the landlord notes.  There were no pre-payment fees or penaltiesassociated with the early retirement of this debt obligation.  The Series A Preferred Stock is entitled todividends at the rate of 10.0% per annum, based on the original price of $2.25per share.  Dividends are payablesemiannually on June 1 and December 1. Dividends paid through June 1, 2002 were in the form of additionalshares of Series A Preferred Stock, in part, because the Company’s CreditAgreement prohibited the payment of cash dividends.  Subsequent to the retirement of amounts owing under the CreditAgreement, the Company began paying these dividends in cash.  The Company paid in June 2003 its scheduleddividend of $0.5 million in cash.  TheCompany expects to satisfy future dividend obligations in cash.

 

Net cash usedin financing activities was $33.7 million in 2002, representing primarily theretirement of both bank and related party debt, primarily with the proceedsfrom the sale of the Chart House Business. The Company also used $2.7 million of the proceeds from the sale of theChart House Business to collateralize outstanding letters of credit.

 

The Company isliable under various capital and operating lease agreements, primarily relatedto restaurant locations.  The Company isalso contingently liable under letters of credit, primarily related to leasingobligations and self-insurance reserves, and guarantees on various third partyleasing and debt agreements.  Nomaterial changes have occurred regarding these commitments and contingenciesfrom the Company’s prior fiscal year ended December 30, 2002.

 

**CRITICAL ACCOUNTING POLICIES**

 

A critical accountingpolicy is one that would materially affect the Company’s operations orfinancial condition, and requires management to make estimates or judgments incertain circumstances.  Set forth belowis a description of those accounting policies which the Company believes aremost critical and could have the greatest impact on its operations or financialcondition.

 

**Valuation of ExitCosts and Restructure 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” (“FAS146”).  FAS 146 requires, among otherthings, that a liability for costs associated with an exit or disposal activitybe recognized when the liability is incurred rather than at the time ofcommitment to a formal shutdown plan. The Company adopted this Standard as of January 1, 2003 with no materialimpact.

 

**Impairment of Assets.**  On January 1, 2002, the Company adopted FAS142, which requires, among other things, that effective January 1, 2002,goodwill resulting from a business combination accounted for as a purchase nolonger be amortized, but be subject to ongoing impairment review.  On an ongoing basis, the Company reviews itscarrying value of restaurant assets and compares

 

13

----

 

them with fair marketvalue.  In determining the fair marketvalue of its assets, management considers several factors requiring theexercise of its business judgment.  Suchbusiness judgment includes developing valuation multiples, such as the ratio oftotal capitalized value to restaurant earnings before interest, taxes, depreciation,and amortization for an industry peer group of publicly traded companies, andapplying those multiples to the Company’s historical and projected operatingperformance.  If management determinesthat the fair market value of its assets is materially below the currentcarrying cost of the assets, an impairment charge is recognized in operatingincome in the period the impairment is identified.

 

**Cost Capitalizationand Depreciation Policies.**  Costs for maintenance, repairs, and purchases are either expensedas incurred 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. Depreciation and amortization are recorded for financial reportingpurposes using the straight-line method over the estimated useful lives of theassets.  Equipment is depreciated overlives ranging from three to eight years. Leasehold interests and improvements are amortized over the shorter ofthe lease term, including planned extensions, or the asset life, ranging up to25 years.

 

**Self-InsuranceLiability.**  TheCompany was self-insured through October 2002 for its workers’ compensation andgeneral liability insurance programs, and continues to be self-insured for itsemployee health insurance program.  TheCompany maintains stop-loss coverage with third party insurers to limit itstotal exposure.  The accrued liabilityassociated with these programs is based on management’s estimate of theultimate costs to be incurred to settle known claims and claims incurred, butnot reported, as of the balance sheet date. Our estimated liability is not discounted and is based on a number ofassumptions and factors, including historical trends, actuarial assumptions,and economic conditions.  If actualtrends differ from our estimates, our financial results could be impacted.

 

**NEW ACCOUNTING PRONOUNCEMENTS**

 

In November2002, the Financial Accounting Standards Board issued Interpretation No. 45,“Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingIndirect Guarantees 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.  FIN 45requires the guarantor to recognize a liability for the non-contingentcomponent of the guarantee, which is the obligation to stand ready to performin the event that specified triggering events or conditions occur.  The initial measurement of this liability isthe fair value of the guarantee at inception. The recognition of the liability is required even if it is not probablethat payment will be required under the guarantee, or if the guarantee wasissued with a premium payment or as part of a transaction with multipleevents.  The Company has adopted thedisclosure requirements of FIN 45 and will apply the recognition andmeasurement provisions for all guarantees entered into or modified afterDecember 31, 2002.  The Company has notentered into or modified any guarantees subsequent to December 31, 2002.

 

In January2003, the Financial 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 appliesimmediately to variable interests in variable interest entities created afterJanuary 31, 2003, and to variable interests in variable interest entitiesobtained after January 31, 2003.  TheCompany currently has no contractual relationships or other businessrelationships with a variable entity and therefore the adoption of FIN 46 didnot have a material effect on the Company’s consolidated financial position,results of operations, or cash flows for the quarterly period ended September29, 2003.

 

In May 2003,the Financial Accounting Standards Board issued Financial Accounting StandardsNo. 150, “Accounting for Certain Financial Instruments with Characteristics ofboth Liabilities and Equity.”  ThisStatement establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity.  It requires that an issuerclassify a financial instrument that is within its scope as a liability (or anasset in some circumstances).  ThisStatement is effective for financial instruments entered into or modified afterMay 31, 2003, and otherwise is effective at the beginning of the first interimperiod beginning after June 15, 2003. The Company adopted this Standard on July 1, 2003, with no materialimpact.

 

14

----

 

**SEASONALITY**

 

The Company’sbusiness is seasonal in nature, with revenues and operating income for thefirst and fourth quarters greater than in the second and third quarters as theCompany benefits from urban, holiday, and winter vacation dining which isgreater than the benefits associated with dining during leisure travel in thespring and summer quarters.

 

** **

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

 

The Company isexposed to market risk from changes in market rates earned on cash equivalentsand changes in commodity prices.  Theimpact on the Company’s results of operations of a one-point market rate changeon its cash equivalent balance as of September 29, 2003, would not bematerial.  The Company does not usederivative instruments to manage borrowing costs, reduce exposure to adversefluctuations in the interest rate, nor for trading purposes.

 

The Companypurchases certain commodities such as beef, seafood, chicken, and cookingoil.  These commodities are generallypurchased based upon purchase agreements or arrangements with vendors.  These purchase agreements or arrangementsmay contain features that fix the commodity price or define the price from anagreed upon formula.  The Company doesnot use financial instruments to hedge commodity prices because these purchasearrangements help control the ultimate cost paid and any commodity pricefluctuations are generally short term in nature.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

As of September 29, 2003, the Company carriedout an evaluation, under the supervision and with the participation of theCompany’s President and Chief Executive Officer and the Company’s ChiefFinancial Officer, of the effectiveness of the Company’s disclosure controlsand procedures pursuant to Rule 13a-14(c) of the Securities Exchange Act of1934, as amended.  Based upon thatevaluation, the Company’s President and Chief Executive Officer and ChiefFinancial Officer concluded that the Company’s disclosure controls andprocedures are effective in timely alerting them to material informationrelating to the Company (including its consolidated subsidiaries) required tobe disclosed by the Company in its periodic Exchange Act reports.  There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of the evaluation, including anycorrective actions with regard to significant deficiencies and materialweaknesses.

 

15

----

 

**PART II - OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS.**

 

On October 1, 2002, the Company filed a complaint in the Chancery Courtfor the State of Delaware against the purchaser and escrow agent FidelityNational Title.  This action allegesseveral breaches by the purchaser of its contractual obligations under theasset purchase agreement related to the sale of the Chart House Business andunder 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, representingamounts that the Company believes the purchaser wrongfully failed to pay underthe asset purchase agreement, and also seeks related interest, costs, andattorneys’ fees.  The purchaser hasfiled a counterclaim, seeking a purchase price adjustment of $0.15million.  The Chancery Court has ruledthat the Company’s remaining claim should be transferred to the Superior Courtfor the State 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 this matter.  The Company believes that the outcome ofthis matter will not have a material adverse effect on its financial conditionor operations.

 

The Company periodically is a defendant in litigation incidental to itsbusiness activities.  While anylitigation or investigation has an element of uncertainty, the Company believesthat the outcome of any of these matters will not have a material adverseeffect on its financial condition or operations.

 

**ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.**

 

None.

 

**ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.**

 

None.

 

**ITEM4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None.

 

**ITEM5.   OTHER INFORMATION.**

 

None.

 

**ITEM 6.   EXHIBITS ANDREPORTS ON FORM 8-K.**

 
| (a)    |   | Exhibits:                                                                                                                                                                                |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                     |
| 3.1    |   | (1) Restated  Certificate of Incorporation of the Company, as amended. (1)                                                                                                               |
|   |   | (2)  Certificate of Amendment of Restated Certificate of Incorporation of the  Company. (2)                                                                                              |
|   |   | (3)  Certificate of Amendment of Restated Certificate of Incorporation of Chart  House Enterprises, Inc. (4)                                                                             |
| 3.2    |   | Amended and  Restated Bylaws of the Company. (1)                                                                                                                                         |
| 3.3    |   | Certificate  of Designations of the Series A Preferred Stock. (3)                                                                                                                        |
| 4.1    |   | Specimen  Common Stock Certificate. (2)                                                                                                                                                  |
| 4.2    |   | Specimen  Series A Preferred Stock Certificate. (3)                                                                                                                                      |
| 31.1   |   | Certification  of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002. |
| 31.2   |   | Certification  of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002. |
| 32.1   |   | Certification  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                 |
| 32.2   |   | Certification  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                 |

 

16

----

 

----

(1)          Filedas an exhibit to the Company’s Registration Statement on Form S-1 dated August27, 1987, or amendments thereto dated October 6, 1987 and October 14, 1987(Registration No. 33-16795).

(2)          Filedas an exhibit to the Company’s Registration Statement on Form S-1 dated July20, 1989, or amendment thereto dated August 25, 1989 (Registration No.33-30089).

(3)          Filedas an exhibit to the Company’s Registration Statement on Form S-2 dated March27, 2001, or amendments thereto dated May 15, 2001, May 25, 2001, and May 31,2001 (Registration No. 333-57674).

(4)          Filedas an exhibit to the Company’s Current Report on Form 10-Q for the quarterended July 1, 2002, dated August 15, 2002.

 

 

(b)                                 Reportson Form 8-K.

 

The Companyfiled a report on Form 8-K on August 15, 2003. Under Item 12, the Company reported it had issued a press releaseentitled “Angelo and Maxie's Reports Second Quarter Results, Announces ProposedSale of Three Steakhouses and Provides Strategic Alternatives Review Update”,and such press release, which contained the Company's Consolidated Statementsof Operations for the quarterly period ended June 30, 2003, was furnished as anexhibit thereto.

 

17

----

 

**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|   | ANGELO AND MAXIE’S,  INC. |
|--------|--------------------------------|
|   |                           |
|   |                           |
| Date:  | November 13, 2003              |   | By:  | /s/ KENNETH  R. POSNER |   |
|   |                           |   | Kenneth R.  Posner |
|   |                           |   | President  and Chief Executive Officer |
|   |                           |   | (principal  executive officer) |
|   |                           |
|   |                           |
| Date:  | November 13,  2003             |   | By:  | /s/ EMANUEL  N. HILARIO |   |
|   |                           |   | Emanuel N.  Hilario |
|   |                           |   | Vice  President and Chief Financial Officer |
|   |                           |   | (principal  financial and accounting officer) |
|        |                                |  |  |  |  |  |

 

18

----