1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

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

FOR THE THIRTEEN WEEKS ENDED JULY 29, 2001

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

COMMISSION FILE NUMBER: 0-28930

ROADHOUSE GRILL, INC.
----------------------
(Exact name of registrant as specified in its charter)

FLORIDA 65-0367604
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2703-A GATEWAY DRIVE, POMPANO BEACH, FLORIDA 33069
-----------------------------------------------------
(Address of principal executive offices and zip code)

Registrant's telephone number (954) 957-2600

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares of the registrant's common stock outstanding as of
September 10, 2001 was 9,708,741.
2

ROADHOUSE GRILL, INC.
FORM 10-Q
THIRTEEN WEEKS ENDED JULY 29, 2001

INDEX

PAGE NO.
--------

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets as of July 29, 2001
and April 29, 2001 (unaudited).............................................................. 1

Condensed Consolidated Statements of Operations for the Thirteen
Weeks Ended July 29, 2001 and July 30, 2000 (unaudited)..................................... 2

Condensed Consolidated Statement of Changes in Shareholders'
Equity for the Thirteen Weeks Ended July 29, 2001 (unaudited)............................... 3

Condensed Consolidated Statements of Cash Flows for the Thirteen
Weeks Ended July 29, 2001 and July 30, 2000 (unaudited)..................................... 4

Notes to Condensed Consolidated Financial Statements............................................ 5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................................... 10

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....................................... 17

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS............................................................................... 18

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 18

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PART I

ITEM 1. FINANCIAL STATEMENTS

ROADHOUSE GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 29, 2001 AND APRIL 29, 2001
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

JULY 29, APRIL 29,
2001 2001
---------- ----------

ASSETS
Current assets:
Cash and cash equivalents ............................................................... $ 2,207 $ 1,582
Accounts receivable ..................................................................... 726 1,512
Income tax receivable .................................................................. 1,814 2,253
Inventory ............................................................................... 1,574 1,462
Prepaid expenses ........................................................................ 1,783 2,080
---------- ----------
Total current assets ................................................................. 8,104 8,889
Property & equipment, net .................................................................. 85,553 87,204
Intangible assets, net of accumulated amortization of $599 and $557
at July 29, 2001 and April 29, 2001 respectively ........................................ 2,063 2,105
Other assets ............................................................................... 2,156 2,130
---------- ----------
Total assets ......................................................................... $ 97,876 $ 100,328
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................................ $ 5,758 $ 6,382
Accrued expenses ........................................................................ 10,144 8,818
Convertible note payable to shareholder ................................................ 1,500 1,500
Note payable to vendor ................................................................. 5,717 5,902
Current portion of long-term debt ...................................................... 31,752 33,077
Current portion of capitalized lease obligations ....................................... 795 1,013
---------- ----------
Total current liabilities ............................................................ 55,666 56,692
Long-term debt ............................................................................. 2,848 1,936
Capitalized lease obligations .............................................................. 4,585 4,729
---------- ----------
Total liabilities .................................................................... 63,099 63,357
Shareholders' equity:
Preferred stock $0.01 par value. Authorized 10,000,000 shares; issued and outstanding
0 shares as of July 29, 2001 and April 29, 2001 ......................................... -- --
Common stock $.03 par value. Authorized 30,000,000 shares; issued and outstanding
9,708,741 shares as of July 29, 2001 and April 29, 2001 ................................. 291 291
Additional paid-in-capital ................................................................. 50,039 50,039
Retained deficit ........................................................................... (15,553) (13,359)
---------- ----------
Total shareholders' equity ........................................................... 34,777 36,971
Commitments and contingencies (Note 2) ..................................................... -- --
---------- ----------
Total liabilities and shareholders' equity ........................................... $ 97,876 $ 100,328
========== ==========

See accompanying notes to condensed consolidated financial statements.

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ROADHOUSE GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JULY 29, 2001 AND JULY 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

THIRTEEN WEEKS ENDED
---------------------------
JULY 29, JULY 30,
2001 2000
---------- ----------

Total revenues ........................................................................... $ 43,230 $ 41,420
Cost of restaurant sales:
Food and beverage ..................................................................... 15,363 13,948
Labor and benefits .................................................................... 13,947 12,774
Occupancy and other ................................................................... 9,989 8,243
Pre-opening expenses .................................................................. 356 918
---------- ----------
Total cost of restaurant sales ........................................................ 39,655 35,883
Depreciation and amortization ............................................................ 2,473 2,352
General and administrative expenses ...................................................... 2,220 2,686
---------- ----------
Total operating expenses .............................................................. 44,348 40,921
---------- ----------
Operating (loss) income ............................................................... (1,118) 499
Other expense:
Interest expense, net ................................................................. 1,076 668
---------- ----------
(Loss) before income taxes ............................................................... (2,194) (169)
Income tax (benefit) ..................................................................... -- (58)
---------- ----------
Net (loss) ............................................................................... $ (2,194) $ (111)
========== ==========

Basic net (loss) per common share ........................................................ $ (0.23) $ (0.01)
========== ==========
Diluted net (loss) per common share ..................................................... $ (0.23) $ (0.01)
========== ==========
Weighted-average common shares outstanding ............................................... 9,708,741 9,708,741
========== ==========
Weighted-average common shares and share equivalents outstanding - assuming dilution ..... 9,708,741 9,708,741
========== ==========

See accompanying notes to condensed consolidated financial statements.

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ROADHOUSE GRILL, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THIRTEEN WEEKS ENDED JULY 29, 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)

COMMON STOCK ADDITIONAL
------------------------- PAID-IN- RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ----- ----------- --------- ---------

Balance April 29, 2001........ 9,708,741 $ 291 $ 50,039 $ (13,359) $ 36,971
Net loss ..................... -- -- -- (2,194) (2,194)
---------- ----- -------- --------- ---------
Balance July 29, 2001......... 9,708,741 $ 291 $ 50,039 $ (15,553) $ 34,777
========== ===== ======== ========= =========

See accompanying notes to condensed consolidated financial statements.

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ROADHOUSE GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED JULY 29, 2001 AND JULY 30, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)

JULY 29, JULY 30,
2001 2000
--------- ---------

Cash flows from operating activities
Net (loss) ........................................................ $ (2,194) $ (111)
Adjustments to reconcile net (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization .................................. 2,473 2,352

Changes in assets and liabilities:
Decrease in accounts receivable ................................... 786 20
(Increase) in inventory ........................................... (112) (18)
Decrease in income tax receivable ............................... 439 --
Decrease (increase) in prepaid expense ............................ 297 (50)
(Increase) in other assets ........................................ (26) (203)
(Decrease) in accounts payable .................................... (624) (3,534)
Increase (decrease) in accrued expenses ........................... 1,326 (1,204)
--------- ---------
Net cash provided by (used in) operating activities ............ 2,365 (2,748)
Cash flows from investing activities
Proceeds from payment on notes receivable ...................... -- 84
Proceeds from sale-leaseback transactions ......................... -- 2,564
Purchase of property and equipment ................................ (780) (4,361)
--------- ---------
Net cash (used in) investing activities ........................ (780) (1,713)
Cash flows from financing activities
Proceeds from borrowings on long-term debt ........................ -- 5,145
Payments on notes payable to vendor ............................. (185) --
Repayments of long-term debt ...................................... (413) (297)
Payments on capital lease obligations ............................. (362) (326)
--------- ---------
Net cash (used in) provided by financing activities ............ (960) 4,522
Increase in cash and cash equivalents ............................... 625 61
Cash and cash equivalents at beginning of period ..................... 1,582 378
--------- ---------
Cash and cash equivalents at end of period ........................... $ 2,207 $ 439
========= =========
Supplementary disclosures:
Interest paid ..................................................... $ 1,013 $ 806
========= =========
Income taxes paid ................................................. $ 0 $ 408
========= =========

Non-cash investing and financing activities:

During the thirteen weeks ended July 30, 2000, the Company entered into
one sale-leaseback transaction for real estate in the amount of
$527,000.

See accompanying notes to condensed consolidated financial statements.

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ROADHOUSE GRILL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The financial statements of Roadhouse Grill, Inc. (the "Company") for
the thirteen weeks ended July 29, 2001 and July 30, 2000 are unaudited and
reflect all adjustments (consisting of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the financial
statements for the interim periods. The financial statements should be read in
conjunction with the notes to consolidated financial statements included herein,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report on Form 10-K for
the fifty-two weeks ended April 29, 2001 ("fiscal year 2001").

The Company operates on a fifty-two or fifty-three week fiscal year.
Each fiscal quarter consists of thirteen weeks, except in the case of a
fifty-three week year, in which case the fourth fiscal quarter consists of
fourteen weeks.

The results of operations for the thirteen weeks ended July 29, 2001
are not necessarily indicative of the results for the entire fiscal year ended
April 28, 2002.

2. COMMITMENTS AND CONTINGENCIES

The Company is a party to legal proceedings arising in the ordinary
course of business. In the opinion of management, disposition of these matters
will not materially affect the Company's financial condition.

Two restaurants were opened during the thirteen weeks ended July 29,
2001. As of July 29, 2001, construction was underway on two restaurants that are
expected to open during the third quarter of fiscal year 2002. The estimated
aggregate cost to complete these restaurants is approximately $0.8 million that
will be funded through cash flow from operations. There can be no assurance that
the Company will generate sufficient cash from operations to fund the opening of
the two restaurants.

3. LIQUIDITY AND GOING CONCERN

The accompanying condensed consolidated financial statements have been
prepared on a going concern basis which assumes continuity of operations and the
realization of assets and settlement of liabilities in the ordinary course of
business.

During fiscal year 2001, the Company's primary sources of working
capital were the loan facilities with Finova Capital Corporation (described
below), the sale-leaseback facilities with CNL Fund Advisors and Franchise
Finance Corporation of America (described below) and a $1.5 million loan from
Berjaya Group (Cayman) Limited ("Berjaya"), the Company's principal shareholder
(described below). The Company has recently experienced significant cash flow
problems primarily due to the Company opening 32 new restaurants in the past 27
months combined with a net loss of $15.9 million in fiscal year 2001 and a net
loss of $2.2 million for the first quarter of fiscal year 2002. The Company
believes that its ability to generate cash from operations is dependent upon,
among other things, increased demand for its services, restructuring its
operations to minimize cash expenditures and the successful development of new
marketing strategies. The Company has implemented revenue enhancement programs
along with cost reduction initiatives designed to produce positive cash flow and
achieve sustainable profitable operations. There can be no assurance that these
initiatives will be effective in generating profits or producing sufficient cash
flows to fund previously incurred liabilities and current operations.

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additional financing. There can be no assurance that additional financing will
be available on terms acceptable to the Company. In the event the Company is
unable to secure such additional financing, the Company may have to
significantly curtail or cease its operations.

In September 1997, the Company entered into a $15.0 million loan
facility with Finova Capital Corporation ("Finova"). The facility consists of a
15-year term loan collateralized by real estate with an interest rate of 9.55%.
The proceeds were used in part to liquidate existing mortgages on 12
restaurants, which amounted to $7.4 million as of September 1997. The balance of
$7.3 million, net of fees and other costs, was primarily used for expansion of
the Company's operations. Monthly principal and interest payments for this
facility are due through October 2012. The balance on the note as of July 29,
2001 was $12.9 million.

On March 27, 1998, the Company entered into a $2.9 million loan
facility with Finova. The facility consists of a 10-year term loan
collateralized by personal property and fixtures at four Company-owned
restaurants with an interest rate of 8.96%. The proceeds, net of fees and other
costs, were used primarily for expansion of the Company's operations. The
balance of the loan as of July 29, 2001 was $2.2 million.

The Company also has a series of notes due to Finova in the aggregate
amount of approximately $8.3 million, which notes are collateralized by
improvements to real estate at eight leased restaurant locations. The notes,
which are due between May and November 2012, have interest rates ranging from
9.74% to 10.53%.

In October 1998, the Company entered into a $5.0 million, unsecured,
working capital revolving loan (the "Revolving Loan") with Finova, which matures
on December 31, 2001. In the first quarter of 2000, the Company collateralized
the Revolving Loan with improvements to real estate at three locations and real
estate and improvements at an additional location.

The Company has not made principal and interest payments for August or
September 2001 totaling $.7 million on its debt to Finova. Based on the
Company's current liquidity, it does not anticipate having sufficient funds
available to pay the $5.0 million Revolving Loan when due. The Company signed a
commitment letter (the "Commitment Letter") with Finova on August 30, 2001 to
(i) consolidate all of the Company's outstanding debt with Finova, other than
the Revolving Loan, into one term loan payable in 133 equal monthly installments
of principal and interest with an interest rate of 11.5% per annum and (ii)
convert, as of December 31, 2001, the Revolving Loan into an 84-month term loan
bearing interest at the higher of prime plus 3.0% or 11.5% per annum. Pursuant
to the Commitment Letter, the Company paid Finova the July 2001 principal and
interest payment of approximately $336,000 on August 31, 2001. The terms set
forth in the Commitment Letter are conditioned upon the Company paying the $.7
million on or before September 30, 2001. The Company plans to pay $.6 million to
Finova with a $1.6 million tax refund which the Company expects to receive
before September 30, 2001 and $.1 million from cash generated from operations.
The Company does not currently have the cash on hand to pay the $.7 million to
Finova. If the Company does not receive the tax refund prior to September 30,
2001, Finova will have the right to exercise any remedies available to it under
the notes, including acceleration of all amounts due to them and the sale or
disposition of the Company's assets used to secure the obligations, any of which
could significantly and negatively impact the Company's financial condition and
operating results.

The Company is required to maintain certain financial ratios in order
to be in compliance with covenants related to the debt with Finova. The Company
is not in compliance with the required cash flow coverage ratio. In the
Commitment Letter, Finova agreed to waive the existing covenant violations and
to modify the cash flow coverage ratio to reflect the Company's current
operations so long as the Company pays the $.7 million owed to Finova on or
before September 30, 2001. If the financial covenants are not modified or the
Company is not able to comply with the new financial covenants in the future,
Finova could immediately accelerate all amounts due to them and sell or
otherwise dispose of the Company's assets used to secure the obligations, any of
which could significantly and negatively impact the Company's financial
condition and operating results. Although the Company is currently negotiating a
definitive agreement with Finova based on the terms contained in the Commitment
Letter, there can be no assurance that such a definite agreement will be
executed.

The Company currently has two term loans with First Union National Bank
("First Union"). The outstanding balance on the loans as of July 29, 2001, was
$2.8 million. The Company is required to maintain certain financial ratios in
order to be in compliance with covenants related to the debt with First Union.
The Company is not in compliance with the required cash flow coverage ratio. The
Company is negotiating a waiver of certain covenant violations and an amendment
to the financial covenants. If the Company is not able to negotiate and comply
with the new financial covenants in the future, First Union could immediately
accelerate all amounts due to them and sell or otherwise dispose of the
Company's assets used to secure the

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obligations, any of which could significantly and negatively impact the
Company's financial condition and operating results.

The Company has a $10.0 million sale-leaseback credit facility with CNL
Fund Advisors ("CNL"). Due to the Company's current financial condition, it can
no longer utilize the CNL facility.

The Company has a $18.5 million sale-leaseback credit facility with
Franchise Finance Corporation of America ("FFCA") for the development of new
Roadhouse Grill restaurants. Due to the Company's current financial condition,
it can no longer utilize the FFCA facility.

The Company is currently making payments on its operating and capital
leases approximately 15 - 45 days after the due date, notwithstanding a five-day
grace period for such payments.

On February 14, 2001, Berjaya (which owns approximately 62% of the
Company's common stock) loaned the Company $1.5 million. The loan is evidenced
by a promissory note which bears interest at 10% per annum, is payable by the
Company on demand and is collateralized by intellectual property and certain
unencumbered real and personal property. The note is convertible at any time, at
Berjaya's option, into shares of the Company's common stock. The conversion rate
is based on the fair market value of the common stock on the day of conversion.

Due to the Company's recent liquidity problems, on February 21, 2001,
the Company issued two notes for an aggregate amount of $5.9 million to Colorado
Boxed Beef Company ("CBBC"), the Company's principal food supplier, for trade
payables. The notes bear interest at 9.5%. The note for $4.4 million was due no
earlier than 180 days from the date of the note. The $1.5 million note matured
on April 21, 2001. The Company was unable to make the $1.5 million payment in
April 2001. In July 2001, CBBC agreed to restructure the notes. Under the new
terms of the notes, the Company paid CBBC $200,000 in July 2001. If the Company
pays CBBC $1.0 million of the note on or before September 30, 2001, the notes
will be amortized over 48 months bearing interest at 11.5%. Such notes are
secured by the unencumbered fixed assets of 17 restaurant locations. The Company
plans to pay the $1.0 million to CBBC with a $1.6 million tax refund which the
Company expects to receive before September 30, 2001. The Company does not
currently have the cash on hand to pay the $1.0 million to CBBC. If the Company
does not receive the tax refund prior to September 30, 2001, the entire $5.9
million payable under the notes will be due and CBBC will have the right to
exercise any remedies available to it under the notes which could have a
material adverse effect on the Company's financial conditions and operating
results.

In April 2001, the Company agreed to a payment plan with Tinsley
Advertising and Marketing Inc. ("Tinsley") for the $1.7 million due to Tinsley
for advertising services previously provided by Tinsley to the Company. Pursuant
to the terms of the repayment plan, the Company paid Tinsley $50,000 seven days
after the date of the note and is obligated to pay Tinsley $20,000 a week from
April 1, 2001 through August 31, 2001 and, thereafter, $40,000 per week until
the debt is paid in full. The Company is currently in full compliance with its
payment obligations to Tinsley.

During January 1999, the Company entered into a Master Security
Agreement with Pacific Financial Company. The agreement consists of two 5-year
term loans collateralized by personal property and fixtures at two Company-owned
restaurants with an effective interest rate of 10.7%. Monthly principal and
interest payments are due through February 2004. The Company is currently making
payments on the loans approximately 45 days after the due date for such
payments.

The aforementioned factors raise substantial doubt about the Company's
ability to continue as a going concern. The accompanying condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

4. NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Among other provisions, SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. It also requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for financial statements for fiscal years beginning
after June 15, 2000. The implementation of SFAS No. 133 did not have a material
impact on the Company's financial position or results of operations.

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In July 2001, the FASB issued Statement No. 141, "Business
Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets".
Statement 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001 as well as all purchase
method business combinations completed after June 30, 2001. Statement 141 also
specifies criteria that intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill, noting
that any purchase price allocable to an assembled workforce may not be accounted
for separately. Statement 142 will require that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of Statement 142.
Statement 142 also requires that intangible assets with estimable useful lives
be amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with FAS Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of".

The Company is required to adopt the provisions of Statement 141
immediately, except with regard to business combinations initiated prior to July
1, 2001, which it expects to account for using the pooling-of-interests method,
and Statement 142 effective April 28, 2002. Furthermore, goodwill and intangible
assets determined to have an indefinite useful life acquired in a purchase
business combination completed after June 30, 2001, but before Statement 142 is
adopted in full will not be amortized, but will continue to be evaluated for
impairment in accordance with the appropriate pre-Statement 142 accounting
requirements. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 will continue to be amortized and tested for
impairment in accordance with the appropriate pre-Statement 142 accounting
requirements prior to the adoption of Statement 142.

Statement 141 will require, upon adoption of Statement 142, that the
Company evaluate its existing intangible assets and goodwill that were acquired
in a prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in Statement 141 for
recognition apart from goodwill. Upon adoption of Statement 142, the Company
will be required to reassess the useful lives and residual values of all
intangible assets acquired, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

In connection with Statement 142's transitional goodwill impairment
evaluation, the Statement requires the Company to perform an assessment of
whether there is an indication that goodwill is impaired as of the date of
adoption. To accomplish this, the Company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those
reporting units as of the date of adoption. The Company will then have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and the Company must perform
the second step of the transitional impairment test. In the second step, the
Company must compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of its assets
(recognized and unrecognized) and liabilities in a manner similar to a purchase
price allocation in accordance with Statement 141, to its carrying amount, both
of which would be measured as of the date of adoption. This second step is
required to be completed as soon as possible, but no later than the end of the
year of adoption. Any transitional impairment loss will be recognized as the
cumulative effect of a change in accounting principle in the Company's statement
of operations.

Any unamortized negative goodwill existing on the date Statement 142 is
adopted must be written off as a cumulative effect of a change in accounting
principle.

As of the date of adoption, the Company expects to have unamortized
goodwill in the amount of $1,529,000, and unamortized identifiable intangible
assets in the amount of $414,000, all of which will be subject to the transition
provisions of Statements 141 and 142. Amortization expense related to goodwill
was $33,000 for the quarter ended July 29, 2001. Because of the extensive effort
needed to comply with adopting Statements 141 and 142, it is not practicable to
reasonably estimate the impact of adopting these Statements on the Company's
financial statements at the date of this report, including whether it will be
required to recognize any transitional impairment losses as a cumulative effect
of a change in accounting principle.

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5. NET (LOSS) PER COMMON SHARE ("EPS")

Net (loss) per share has been calculated and presented in accordance
with Statement of Financial Accounting Standards No. 128 "Earnings per Share",
which requires the Company to compute and present basic and diluted earnings per
share. Basic EPS excludes all dilution and is based upon the weighted-average
number of common shares outstanding during the year. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to issue
common stock were exercised or converted into common stock. The following is a
reconciliation of the numerators (net loss) and the denominators (common shares
outstanding) of the basic and diluted per share computations for net (loss):

THIRTEEN WEEKS ENDED JULY 29, 2001
----------------------------------------------------
NET LOSS SHARES AMOUNT
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

BASIC EPS
Net loss available to common shareholders ............. $ (2,194) 9,708,741 $ (0.23)
EFFECT OF DILUTIVE SECURITIES
Stock options ......................................... -- -- --
--------- --------- ---------
DILUTED EPS ........................................... $ (2,194) 9,708,741 $ (0.23)
========= ========= =========

Options to purchase 680,896 shares of common stock at a
weighted-average exercise price of $5.04 per share were outstanding during the
thirteen weeks ended July 29, 2001. These options were not included in the
computation of diluted EPS because the Company recognized a loss during the
quarter and including such options would result in anti-dilutive EPS.

THIRTEEN WEEKS ENDED JULY 30, 2000
--------------------------------------------------
NET INCOME SHARES AMOUNT
----------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

BASIC EPS
Net loss available to common shareholders ............. $ (111) 9,708,741 $(0.01)
EFFECT OF DILUTIVE SECURITIES
Stock options ......................................... -- -- --
--------- --------- ------
DILUTED EPS ........................................... $ (111) 9,708,741 $(0.01)
========= ========= ======

Options to purchase 821,296 shares of common stock at a
weighted-average exercise price of $5.22 per share were outstanding during the
thirteen weeks ended July 30, 2000. These options were not included in the
computation of diluted EPS because the Company recognized a loss during the
quarter ended and including such options would result in anti-diluted EPS.

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

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding, among other things (i) the Company's growth strategies,
plans, objectives and expectations concerning the Company's operations, cash
flows, revenue, liquidity and capital resources, (ii) anticipated trends in the
economy and the restaurant industry, (iii) the Company's future financing plans
and (iv) the Company's ability to manage its debt and comply with financial
covenants in its debt instruments. In addition, when used in this Form 10-Q, the
words "believes," "anticipates," "expects" and similar words often are intended
to identify certain forward-looking statements. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of changes in trends in the economy and the restaurant industry, the
Company's results of operations, the likelihood that the Company will not be
able to cure past payment defaults under certain of its loan facilities,
availability of financing, increases in interest rates and other factors. In
light of the foregoing, there is no assurance that the forward-looking
statements contained in this Form 10-Q will in fact prove correct or occur. The
Company does not undertake any obligation to revise these forward-looking
statements to reflect future events or circumstances.

GENERAL

The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto, included elsewhere
in this Form 10-Q.

The Company operates, franchises and licenses high-quality,
full-service, casual dining restaurants under the name "Roadhouse Grill." The
Company was founded in 1992 and opened its first restaurant in 1993. As of July
29, 2001, there were 85 Company-owned Roadhouse Grill restaurants located in
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New York, North
Carolina, Ohio, South Carolina and Tennessee. Of these, 35 are located in
Florida. The Company also has three franchised locations in Malaysia, one
franchised location in Brasilia, Brazil and three franchised locations in Las
Vegas, Nevada.

On July 6, 2000, the Company entered into a joint venture agreement
with Cremonini S.p.A. ("Cremonini Group"), a leading publicly traded Italian
conglomerate, specializing in the food service industry in Europe. Under the
joint venture agreement, the Cremonini Group is authorized to open and operate
at least 60 Roadhouse Grill restaurants in Italy, France, Spain, Great Britain
and other principal European countries by the year 2004. The Company expects
that the joint venture will open its first Roadhouse Grill restaurant in Milan,
Italy by November 2001.

The Company's revenues are derived primarily from the sale of food and
beverages. Restaurant sales of food and alcoholic beverages accounted for
approximately 90% and 10%, respectively, of total restaurant sales during the
thirteen weeks ended July 29, 2001. Franchise and management fees during this
period accounted for less than 1% of the Company's total revenues. Restaurant
operating expenses include food and beverage, labor, direct operating and
occupancy costs. Direct operating costs consist primarily of costs of expendable
supplies, marketing and advertising expense, maintenance, utilities and
restaurant general and administrative expenses. Occupancy costs include rent,
real estate and personal property taxes and insurance. Certain elements of the
Company's restaurant operating expenses, including direct operating and
occupancy costs and to a lesser extent labor costs, are relatively fixed.

The average cash investment in the 83 Company-owned Roadhouse Grill
restaurants open the entire thirteen weeks ended July 29, 2001, was
approximately $1.3 million, including building structures (where applicable),
building or leasehold improvements and equipment and fixtures, but excluding
land and pre-opening costs. The average land acquisition cost for the 16
restaurant sites owned by the Company was approximately $884,000. The Company
has obtained financing in connection with the acquisition of its owned
properties, which financing generally has required a down payment of 10% of the
purchase price. The average annual occupancy cost for the restaurant sites
leased by the Company is approximately $183,000. The Company expects that the
average cash investment required to open the two Company-owned restaurants under
construction or development as of July 29, 2001, excluding land and pre-opening
costs, will be approximately $0.8 million and will be funded through cash
generated from operations. There can be no assurance that the Company will
generate sufficient cash from operations to fund the opening of the two
restaurants.

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RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain
selected statements of operations data expressed as a percentage of total
revenues:

THIRTEEN WEEKS ENDED
-------------------------------
JULY 29, 2001 JULY 30, 2000
------------- -------------

Total revenues ................................... 100.0% 100.0%
Cost of restaurant sales:
Food and beverage ............................. 35.5 33.7
Labor and benefits ............................ 32.3 30.8
Occupancy and other ........................... 23.1 19.9
Pre-opening expenses .......................... .8 2.2
---------- ----------
Total cost of restaurant sales ................ 91.7 86.6
Depreciation and amortization .................... 5.8 5.7
General and administrative ....................... 5.1 6.5
---------- ----------
Total operating expenses ...................... 102.6 98.8
---------- ----------
Operating (loss) income ....................... (2.6) 1.2
Other expense:
Interest expense, net ............................ 2.5 1.6
---------- ----------
(Loss) before income taxes ....................... (5.1) (0.4)
Income tax (benefit) ............................. (0.0) (0.1)
---------- ----------

Net (loss) ....................................... (5.1)% (0.3)%
========== ==========

THIRTEEN WEEKS ENDED JULY 29, 2001 ("FISCAL YEAR 2002 FIRST QUARTER") COMPARED
TO THIRTEEN WEEKS ENDED JULY 30, 2000 ("FISCAL YEAR 2001 FIRST QUARTER")

RESTAURANTS OPEN. At July 29, 2001 there were 85 Company-owned
restaurants open. At July 30, 2000, there were 76 Company-owned restaurants
open. This represents a 11.8% increase in the number of Company-owned
restaurants since July 30, 2000.

TOTAL REVENUES. Total revenues increased $1.8 million, or 4.4%, from
$41.4 million for the fiscal year 2001 first quarter to $43.2 million for the
fiscal year 2002 first quarter. This increase is primarily attributable to sales
generated at the 9 new Restaurants opened by the Company since the end of the
fiscal year 2001 first quarter (the "New Restaurants"). Sales at comparable
stores for the fiscal year 2002 first quarter decreased 4.0% compared with sales
in the fiscal year 2001 first quarter.

FOOD AND BEVERAGE. Food and beverage costs increased $1.4 million to
$15.3 million in the fiscal year 2002 first quarter from $13.9 million in the
fiscal year 2001 first quarter. This increase is primarily attributable to the
New Restaurants. As a percentage of sales, food and beverage costs increased
1.8% to 35.5% for the fiscal year 2002 first quarter from 33.7% for the fiscal
year 2001 first quarter. This increase can be attributable to a change in beef
procurement practices and a general increase in food cost. In the third quarter
of fiscal year 2001, the Company changed from using in house meat cutters to
purchasing precut portion controlled beef. The Company estimates that the change
to precut beef increased food and beverage costs as a percentage of revenue by
approximately 1.4%.

LABOR AND BENEFITS. Labor and benefits costs increased $1.2 million to
$13.9 million in the fiscal year 2002 first quarter from $12.8 million in the
fiscal year 2001 first quarter. The increase is primarily due to the operation
of the New Restaurants. As a percentage of sales, labor and benefits costs
increased 1.5% to 32.3% for the fiscal year 2002 first quarter from 30.8% for
the fiscal year 2001 first quarter. During the second half of fiscal year 2001,
the Company increased the number

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of hourly personnel at its restaurants in order to continue to provide excellent
customer service ("extreme service"). During the second half of fiscal year
2001, the Company also implemented an aggressive recruiting campaign to attract
talented restaurant managers. Due to the competitive labor market, the Company
has incurred higher management salaries.

OCCUPANCY AND OTHER. Occupancy and other costs increased $1.8 million
to $10.0 million in the fiscal year 2002 first quarter, or 21.2%, from $8.2
million in the fiscal year 2001 first quarter. The increase is primarily due to
the operation of the New Restaurants. As a percentage of sales, occupancy and
other costs increased by 3.2% from 19.9% for the fiscal year 2001 first quarter
to 23.1% for the fiscal year 2002 first quarter. The increase is due to the
operation of the New Restaurants and an increase in equipment rental expense and
utilities expense due to higher fuel costs.

PRE-OPENING EXPENSES. Pre-opening expenses decreased $562,000 to
$356,000 in the fiscal year 2002 first quarter, from $918,000 in the fiscal year
2001 first quarter. The decrease is primarily due to opening only two
restaurants during the fiscal year 2002 first quarter as compared to four
restaurant opened in the fiscal year 2001 first quarter.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$121,000 to $2.5 million in the fiscal year 2002 first quarter, or 5.1%, from
$2.4 million in the fiscal year 2001 first quarter. The increase is primarily
due to the operation of the New Restaurants opened since the end of the fiscal
year 2001 first quarter. As a percentage of sales, depreciation and amortization
was comparable for both periods presented.

GENERAL AND ADMINISTRATIVE. General and administrative costs decreased
$466,000 to $2.2 million in the fiscal year 2002 first quarter, or 17.3%, from
$2.7 million in the fiscal year 2001 first quarter. The decrease is primarily
the result of the Company restructuring the training program and a reduction in
corporate personnel.

TOTAL OTHER EXPENSE. Total other expense increased $408,000 to
$1,076,000 in the fiscal year 2002 first quarter, or 61.1%, from $668,000 in the
fiscal year 2001 first quarter. The increase is primarily due to additional
interest expense on additional debt incurred due to the development and opening
of the New Restaurants since the end of the fiscal year 2001 first quarter.

INCOME TAX (BENEFIT). The Company recognized no income tax benefit for
the fiscal year 2002 first quarter associated with the Company's fiscal year
2002 first quarter loss. Management believes that it is not likely that all of
its deferred tax assets will be realized in the future.

NEW ACCOUNTING STANDARDS

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142 effective April 28, 2002. Furthermore, goodwill and intangible assets
determined to have an indefinite useful life acquired in a purchase business
combination completed after June 30, 2001, but before Statement 142 is adopted
in full will not be amortized, but will continue to be evaluated for impairment
in accordance with the appropriate pre-Statement 142 accounting requirements.
Goodwill and intangible assets acquired in business combinations completed
before July 1, 2001 will continue to be amortized and tested for impairment in
accordance with the appropriate pre-Statement 142 accounting requirements prior
to the adoption of Statement 142.

And finally, any unamortized negative goodwill existing at the date
Statement 142 is adopted must be written off as the cumulative effect of a
change in accounting principle.

As of the date of adoption, the Company expects to have unamortized
goodwill in the amount of $1,529,000, and unamortized identifiable intangible
assets in the amount of $414,000, all of which will be subject to the transition
provisions of Statements 141 and 142. Amortization expense related to goodwill
was $33,000 for the year ended July 29, 2001. Because of the extensive effort
needed to comply with adopting Statements 141 and 142, it is not practicable to
reasonably estimate the impact of adopting these Statements on the Company's
financial statements at the date of this report, including whether it will be
required to recognize any transitional impairment losses as the cumulative
effect of a change in accounting principle.

LIQUIDITY AND CAPITAL RESOURCES

The Company's material financial commitments relate principally to its
working capital requirements and its obligations to make capital lease and term
loan payments, monthly interest payments on its various loans and lease payments
pursuant to certain real property leases. In addition, capital requirements
relating to the opening of new restaurants have been, and will continue to be,
significant.

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operations is dependent upon, among other things, increased demand for its
services, restructuring its operations to minimize cash expenditures and the
successful development of new marketing strategies. The Company has implemented
revenue enhancement programs along with cost reduction initiatives designed to
produce positive cash flow and achieve sustainable profitable operations. There
can be no assurance that these initiatives will be effective in generating
profits or producing sufficient cash flows to fund previously incurred
liabilities and current operations.

The Company anticipates that it may require additional debt or equity
financing in order to fund previously incurred liabilities and current
operations. If cash generated from the Company's operations is insufficient to
fund the Company's financial commitments and previous losses, and support the
Company's continued growth, the Company will have to obtain additional
financing. There can be no assurance that additional financing will be available
on terms acceptable to the Company. In the event the Company is unable to secure
such additional financing, the Company may have to significantly curtail or
cease its operations.

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Although the Company is currently negotiating a definitive agreement with Finova
based on the terms contained in the Commitment Letter, there can be no assurance
that such a definite agreement will be executed.

The Company has a $10.0 million sale-leaseback credit facility with CNL
Fund Advisors ("CNL"). Due to the Company's current financial condition, it can
no longer utilize the CNL facility.

The Company is currently making payments on its operating and capital
leases approximately 15 - 45 days after the due date, notwithstanding a five-day
grace period for such payments.

The aforementioned factors raise substantial doubt about the Company's
ability to continue as a going concern. The condensed consolidated financial
statements included in this Form 10-Q do not include any adjustments that might
result from the outcome of this uncertainty.

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SUMMARY OF CASH FLOWS

Cash provided by operating activities during the fiscal year 2002 first
quarter was $2.4 million, as compared with cash used by operating activities of
$2.7 million during the fiscal year 2001 first quarter

Cash used by investing activities during the fiscal year 2002 first
quarter was $0.8 million, as compared to $1.7 million used during the fiscal
year 2001 first quarter. Cash used by investing activities consisted primarily
of purchases of property and equipment.

Cash used by financing activities during the fiscal year 2002 first
quarter was $1.0 million, as compared to cash provided by financing activities
of $4.5 million during the fiscal year 2000 first quarter. Cash used by
financing activities in the fiscal year 2002 first quarter consisted of payments
on long term debt and capital lease obligations. Cash provided by financing
activities in the fiscal year 2001 first quarter consist primarily of proceeds
from long term debt offset by payments on long term debt and capital lease
obligations.

CAPITAL EXPENDITURES

The Company plans to open the two Company-owned restaurants under
construction or development as of July 29, 2001 during the last three quarters
of fiscal year 2002. The Company expects that the average cash investment
required to open these new restaurants, excluding land and pre-opening costs,
will be approximately $0.8 million, which will be funded through cash generated
by the Company's operations. There can be no assurance that the Company will
generate sufficient cash from operations to fund the opening of the two
restaurants.

SEASONALITY AND QUARTERLY RESULTS

The Company's operating results fluctuate seasonally because of its
geographic concentration. Of the 85 restaurants currently owned and operated by
the Company, 35 are located in residential areas in Florida.

The Company's restaurant sales generally increase from November through
April, the peaks of the Florida tourism season, and generally decrease from May
through October. In addition, because of its present geographic concentration,
the Company's results of operations may be materially adversely affected by a
decline in tourism in Florida, downturns in Florida's economy or by hurricanes
or other adverse weather conditions in Florida. Although the Company has
expanded its operations in other geographic markets, to, among other things,
offset some of the effects on its operating results due to its concentration in
the Florida market, there can be no assurance that the Company's restaurants
outside of the Florida area will be successful and have a positive effect on the
seasonal nature of its operating results. Because of the seasonality of the
Company's business, its results for any quarter are not necessarily indicative
of the results that may be achieved for a full year.

In addition to seasonality, the Company's quarterly and annual
operating results and comparable unit sales may fluctuate significantly as a
result of a variety of factors, including:

- the amount of sales contributed by new and existing restaurants;
- labor costs for the Company's personnel;
- the Company's ability to achieve and sustain profitability on a
quarterly or annual basis;
- consumer confidence and changes in consumer preferences;
- health concerns, including adverse publicity concerning food-related
illness;
- significance and variability of pre-opening expenses;
- the level of competition from existing or new competitors in the
full-service casual dining segment of the restaurant industry; and
- economic conditions generally and in each of the markets in which
the Company is located.

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IMPACT OF INFLATION

The primary inflationary factors affecting the Company's operations
include food, beverage and labor costs. Labor costs are affected by changes in
the labor market generally and, because many of the Company's employees are paid
at federal and state established minimum wage levels, changes in such wage laws
affect the Company's labor costs. In addition, most of the Company's leases
require the Company to pay taxes, maintenance, repairs and utilities, and these
costs are subject to inflationary pressures. The Company believes recent low
inflation rates in its principal markets have contributed to relatively stable
food and labor costs. There is no assurance that low inflation rates will
continue or that the Company will have the ability to control costs in the
future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's exposure to market risk is limited primarily to the fluctuating
interest rates associated with variable rate indebtedness which is subject to
interest rate changes in the United States and Eurodollar markets. The Company
does not currently use, and has not historically used, derivative financial
instruments to hedge against such market interest rate risk. At July 29, 2001,
the Company had approximately $10.8 million in variable rate indebtedness
outstanding, representing approximately 31% of the Company's total outstanding
indebtedness as of July 29, 2001.

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PART II

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal actions arising in the normal
course of business. While the resolution of any such action may have an impact
on the financial results for the period in which it is resolved, the Company
believes that the ultimate disposition of these matters will not, in the
aggregate, have a material adverse effect upon its business or financial
position.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The Exhibits listed on the accompanying Exhibit Index are filed with or
incorporated by reference in this report.

(b) The Company filed no reports on Form 8-K during the period covered by
this Form 10-Q.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf, by the undersigned, thereunto duly authorized.

ROADHOUSE GRILL, INC.

By: /s/ HARRY ROSENFELD
-----------------------------------
September 11, 2001 Harry Rosenfeld
Chief Financial Officer

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