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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(MARK ONE)

For the Fiscal Year Ended April 27, 2003

OR

For the transition period from           to

Commission File Number: 0-28930

ROADHOUSE GRILL, INC.

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     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 [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

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     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [  ] No [X]

     The aggregate market value of the voting common stock held by non-affiliates of the registrant as of July 23, 2003 (based upon the last reported sale price of the registrant’s common stock on the Pink Sheets on July 23, 2003), was $1,750,525 (calculated by excluding shares owned beneficially by the Company’s principal stockholder, as well as the Company’s directors and executive officers as a group, from total outstanding shares solely for the purpose of this response).

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X ] No [  ]

     The number of shares of the registrant’s common stock outstanding as of July 23, 2003 was 29,220,663.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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ROADHOUSE GRILL, INC.

FORM 10-K
FISCAL YEAR ENDED APRIL 27, 2003

INDEX

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FORWARD LOOKING STATEMENTS

     This report contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Statements preceded by, followed by, or that include the words “believes,” “expects,” “anticipates,” or similar expressions are generally considered to be forward-looking statements. Specifically, this report contains forward-looking statements, including statements relating to the following:

	•		the Company’s implementation of the roadhouse-style dining concept;
	•		anticipated trends in the economy and the restaurant industry;
	•		the Company’s strategies, plans, objectives and expectations concerning the Company’s future market position, operations, cash flow, margins, revenue, profitability, restaurant-level economics, liquidity and capital resources;
	•		the impact of the Company’s reorganization under Chapter 11 of the Bankruptcy Code;
	•		the Company’s ability to manage its debt and comply with the terms of its debt instruments, operating leases and capital leases;
	•		the Company’s ability to maintain financial and accounting controls, management controls, reporting systems and procedures;
	•		the Company’s ability to further develop its business beyond its existing restaurants;
	•		the Company’s ability to recruit, train and retain management personnel;
	•		the Company’s ability to manage labor, food costs and other operating expenses and to operate its restaurants on a profitable basis;
	•		costs associated with opening, or completing construction on, new restaurants; and
	•		the Company’s ability to locate suitable franchisees in markets which it does not serve to develop restaurants in those markets.

     The forward-looking statements reflect the Company’s current view about future events and are subject to risks, uncertainties and assumptions. The Company wishes to caution readers that certain important factors may have affected and could in the future affect its actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The following important factors, in addition to factors the Company discusses elsewhere in this report, including the section entitled “Risk Factors,” could prevent the Company from achieving its goals, and cause the assumptions underlying the forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements:

	•		the Company’s ability to make future debt, capital lease and operating lease payments;
	•		the Company’s ability to comply with its debt instruments and lease agreements in the future;
	•		availability of additional financing;
	•		relisting of the Company’s stock;
	•		outcome of the SEC inquiry;

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	•		net losses;
	•		the Company’s ability to identify suitable locations and open new restaurants or locate suitable franchisees;
	•		the Company’s ability to acquire adequate food supply and to obtain favorable food costs;
	•		changes in consumer preferences, tastes and eating habits;
	•		the availability of qualified labor and the Company’s ability to control its labor costs effectively;
	•		competition from other restaurants;
	•		international conflicts involving the United States and their effect on domestic economic conditions;
	•		construction delays;
	•		events that may impact the cost of food or other products used in the Company’s operations such as the impact of instances of Mad Cow Disease;
	•		increase in interest rates; and
	•		national, regional and local economic and weather conditions.

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ITEM 1. BUSINESS

GENERAL

     The Company operates, franchises and licenses high-quality full-service casual dining restaurants under the name “Roadhouse Grill.”

     The Company is a Florida corporation founded in 1992 which opened its first Roadhouse Grill restaurant in Pembroke Pines, Florida (the greater Fort Lauderdale area) in 1993. As of April 27, 2003, there were 70 Company owned Roadhouse Grill restaurants located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio, and South Carolina. Of these, 35 are located in Florida. Subsequent to April 27, 2003, an additional new restaurant opened in North Carolina. The Company also has three franchised locations in Malaysia, one franchised location in Brasilia, Brazil, one franchised location in Las Vegas, Nevada, one franchised location in Cincinnati, Ohio and four joint venture restaurants in Italy, including one which was opened subsequent to April 27, 2003.

     The Company’s primary business is the operation of full-service, casual dining restaurants targeted toward singles, couples, families and senior citizens. Roadhouse Grill restaurants offer a diverse, moderately priced lunch and dinner menu highlighting exhibition cooking of steaks and other grilled entrees. In addition to steaks and other grilled items, the restaurants feature daily fresh baked yeast rolls, free peanuts and certain appetizers as signature items. Guest satisfaction comes from a pleasant restaurant atmosphere in which high-quality food and beverages are served at competitive prices. The Company motivates its employees to provide friendly and efficient service on a consistent basis.

     The key elements that define the Roadhouse Grill concept are:

	•		Premium Quality Grilled Entrees and a Diverse Menu. Roadhouse Grill restaurants offer a wide variety of steaks, chicken, seafood and other entrees, many of which are grilled in an exhibition style kitchen.
	•		High Price/Value to Guests. Roadhouse Grill restaurants strive to provide a high price/value dining experience for its guests by offering a broad, moderately priced menu and serving high quality generous portions.
	•		Attentive, Friendly Service. The Company believes that a distinctive, enjoyable dining experience is made possible through excellent service. Accordingly, the Company seeks to hire individuals who possess strong initiative and the ability to provide quality and personalized service.
	•		Spacious, Open Layout. Roadhouse Grill restaurants are designed to have a fun and casual atmosphere. The interior of each restaurant is large, open and visually appealing, with exposed ceilings to help create Roadhouse Grill’s casual ambiance.

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•

Broad Customer Appeal. The Roadhouse Grill concept is designed to appeal to a broad range of customers, including business people, couples, singles and, particularly, families. The Company believes that to be attractive to families, a concept must be appealing to both children and parents. Consequently, Roadhouse Grill restaurants furnish children with coloring menus, balloons and a free souvenir cup. In addition, each restaurant offers a special “Kids’ Menu” featuring an assortment of entrees. For adults, each Roadhouse Grill restaurant offers beverages from its full-service bar, which is separated from the dining area.

RECENTLY COMPLETED PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

     On January 18, 2002 (the “Petition Date”), an involuntary petition (the “Involuntary Petition”) for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) was filed against the Company by certain of its creditors, all of which were affiliated with one another (collectively, the “Petitioning Creditors”), in the United States Bankruptcy Court for the Southern District of Florida (the “Court”). Prior to the Petition Date, the Company had been experiencing significant cash flow problems primarily resulting from the opening of 31 new restaurants in the prior three years combined with a net loss of $15.9 million in fiscal year 2001 and a net loss of $21.4 million in fiscal year 2002. Prior to the filing of the Involuntary Petition, the Company had been in negotiations with the Petitioning Creditors and its other major creditors in an effort to effect an out-of-court restructuring of its liabilities.

     In response to the filing of the Involuntary Petition, the Company initially filed a motion requesting the Court to abstain from taking jurisdiction over the Company to allow out-of-court restructuring efforts to continue. Ultimately, however, the Company decided to consent to the entry of an order for relief in the Chapter 11 case, provided that the order would not be entered until the Company had an opportunity to prepare a Chapter 11 plan of reorganization.

     On April 16, 2002 (the “Relief Date”), the Court entered an order for relief and the Company filed its proposed Chapter 11 plan of reorganization and its disclosure statement in support of its plan of reorganization. Subsequent to the entry of the order for relief, the Company temporarily operated its businesses as a debtor-in-possession pursuant to Chapter 11 of the Bankruptcy Code and concentrated its efforts on emerging from Chapter 11 as quickly as possible.

     In its plan of reorganization, the Company classified the claims of its creditors and interests of its equity security holders and provided for the treatment of such claims and interests. Under the Bankruptcy Code, various classes of claims and interests were entitled to vote on whether to accept or reject the plan of reorganization. On June 12, 2002, the Company filed Debtor’s Second Amended and Restated Chapter 11 Plan of Reorganization, as Modified (the “Plan”) and Debtor’s Second Amended and Restated Disclosure Statement in Support of Chapter 11 Plan of Reorganization, as Modified (the “Disclosure Statement”). The Court conducted a hearing on June 12, 2002 to consider approval of the Disclosure Statement. On June 20, 2002, the Court issued an order approving the Disclosure Statement, authorizing the Disclosure

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Statement, Plan and ballot to be disseminated to creditors and equity security holders and scheduling a hearing on confirmation of the Plan for August 21, 2002.

     On June 25, 2002, a hearing was held on the motion of the Petitioning Creditors to terminate the exclusivity period within which only the Company could file a plan of reorganization and to delay the hearing on confirmation of the Plan. On June 26, 2002, the Court terminated exclusivity but refused to postpone the hearing on confirmation of the Plan.

     Thereafter, Restaurants Acquisition I, Inc., an entity affiliated with the Petitioning Creditors, filed a competing plan of reorganization, dated July 15, 2002 (the “RAI Plan”). The Petitioning Creditors and creditors affiliated with them (collectively, “CNL”) vigorously opposed confirmation of the Plan. In addition, certain other creditors initially cast ballots rejecting the Plan and/or filed objections to confirmation of the Plan.

     As the date of the confirmation hearing approached, the Company engaged in further negotiations with rejecting and objecting creditors in an effort to resolve their objections to the Plan. By August 19, 2002, most of the objections had been resolved and the Company filed a modification of the Plan reflecting the resolution of those objections (the “Modification”).

     As of August 19, 2002, the principal remaining objections were the objections of CNL. However, the Company reached agreement with CNL shortly before the commencement of the confirmation hearing. Under the agreement, CNL withdrew its objections to the Plan, changed its rejections to acceptances of the Plan and caused the RAI Plan to be withdrawn. The agreement was embodied in a term sheet between the Company and CNL dated August 21, 2002 (the “Term Sheet”).

     The hearing on confirmation of the Plan, as modified by the Modification and the Term Sheet, took place on August 21, 2002. At the close of the hearing, the Court announced that the Plan, as modified by the Modification, the Term Sheet and the Confirmation Order (as hereinafter defined) (the “Confirmed Plan of Reorganization”), would be confirmed. On August 23, 2002, the Court issued its Order Confirming Debtor’s Second Amended and Restated Chapter 11 Plan of Reorganization, as Modified (the “Confirmation Order”).

     The Confirmed Plan of Reorganization became effective on September 20, 2002 (the “Effective Date”). Under the Confirmed Plan of Reorganization, the Company received an infusion of new capital of $5.0 million in exchange for 13,888,889 shares of the authorized but unissued common stock of the Company, constituting 47.53% of the outstanding stock of the reorganized Company. The 13,888,889 shares were issued in a private placement pursuant to Section 4(2) of, and Regulation D promulgated under, the Securities Act of 1933, as amended (the “Private Placement Securities”). The Private Placement Securities were issued to Berjaya Group (Cayman) Limited (“Berjaya”), Prime Gaming Philippines, Inc. (“Prime”), Tonto Capital Partners GP, and Stephen C. Saterbo (“Saterbo”), as more particularly set forth in the table immediately below and reflecting the post-restructuring percentage ownership for each respective investment.

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     Berjaya is the Company’s majority shareholder, representing, with its affiliates, ownership of approximately 66.5% of the Company’s outstanding Common Stock. It is headquartered in Malaysia. Prime is an affiliate of Berjaya. It is 70% owned by Berjaya Group Berhad, which owns 100% of Berjaya. Prime is headquartered in the Philippines. Tonto Capital Partners GP is affiliated with Ayman Sabi, the Company’s Chief Executive Officer, President, and a director. See Item 13. “Certain Relationships and Related Transactions”. Saterbo is a senior vice president, member of the board of directors, and substantial shareholder of Colorado Boxed Beef Company, a former major supplier to the Company.

     Additionally, pursuant to the Confirmed Plan of Reorganization Berjaya received, in full satisfaction of a $1.5 million loan to the Company, 4,166,667 shares of the Company’s authorized but unissued common stock at $0.36 per share, representing 14.26% of the outstanding stock of the reorganized Company.

     In accordance with the Confirmed Plan of Reorganization, each existing holder of Common Stock received additional Common Stock equal to 15% of the shares which they previously held. After issuance of the additional shares, the existing shareholders own an aggregate of 11,165,107 shares of the outstanding common stock, representing 38.21% of the outstanding stock of the reorganized Company. The total number of shares of common stock outstanding after effecting the Confirmed Plan of Reorganization is 29,220,663.

     Under bankruptcy law, actions by creditors to collect indebtedness owed prior to the Petition Date and/or prior to the Relief Date were stayed and certain other pre-petition and Gap (January 18, 2002 through April 16, 2002, which is the period of time between the Petition Date and the Relief Date) contractual obligations could not be enforced against the Company. The Company received approval from the Court to pay certain pre-petition and “gap” liabilities including employee salaries and wages, benefits, and other employee obligations. Liabilities through the date the Company emerged from bankruptcy, September 20, 2002, which were incurred pre-petition or during the “gap period” had previously been classified as liabilities subject to compromise. With the Company having emerged from bankruptcy, these liabilities were adjusted during the fifty-two weeks ended April 27, 2003 to the amounts to be paid pursuant to the Confirmed Plan of Reorganization. As a result, the Company has recorded an extraordinary gain relating to the early extinguishment of debt in the accompanying consolidated

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statements of operations in the amount of $1.9 million for the fifty-two weeks ended April 27, 2003. This gain results primarily from obligations to pay lease obligations that were stayed while the Company was in bankruptcy and other obligations that were canceled as a result of the bankruptcy proceeding.

     As of April 27, 2003, substantially all bankruptcy claims have been resolved. See Note 9 of Notes to Consolidated Financial Statements for a description of the debt agreements that have been executed in settlement of certain bankruptcy claims. Currently, the Company is working to resolve certain remaining open bankruptcy claims. Settlement of these claims could result in the execution of additional debt agreements pursuant to the provisions of the Plan of Reorganization and the recognition of additional extraordinary gains or losses to the extent that the final settlement amount differs from the liabilities currently recorded in the Company’s Consolidated Balance Sheet. However, these remaining open bankruptcy claims are not considered material to the Company’s financial position and any extraordinary gain or loss that may result is not expected to be material to the Company’s future consolidated results of operations.

     As restructured under the Confirmed Plan of Reorganization, the Company’s secured and unsecured debt, as well as assumed leases and executory contracts, will require substantial monthly payments over extended future periods. The Company’s future success will depend, in part, on its ability to meet these payment obligations. There is no assurance that the Company will be able to do so.

     The Company has incurred $3.6 million of expenses relating to its reorganization, including $2.7 million and $0.9 million, respectively, during the fifty-two weeks ended April 27, 2003 and April 28, 2002. These expenses primarily include fees for legal, accounting, consulting, and outside services. Additionally, on the Petition Date, the Company stopped accruing interest on all unsecured pre-petition debt in accordance with SOP 90-7. With the confirmation of its Plan of Reorganization, the Company is now required to make regular payments on all debt pursuant to the Confirmed Plan of Reorganization.

RISK FACTORS

THE COMPANY HAS RECENTLY EMERGED FROM BANKRUPTCY AND THERE CAN BE NO ASSURANCE THAT IT CAN SUCCESSFULLY EXECUTE ITS PLAN OF REORGANIZATION

     The Confirmed Plan of Reorganization became effective September 20, 2002. As restructured under the Confirmed Plan of Reorganization, the Company’s secured and unsecured debt, as well as assumed leases and executory contracts, now require substantial monthly payments. The Company’s ability to operate successfully will depend on, among other things, its ability to meet future payment obligations over the extended periods. The Company currently has no available credit line or other instrument to provide operating capital. As such, it depends upon cash flow from operations and from asset sales to support its capital and operating requirements. There can be no assurance that the future cash flows of the Company will be sufficient to fund these obligations.

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     The effect, if any, which the Company’s bankruptcy proceedings had on its operations cannot be accurately predicted or quantified. The Company believes that its bankruptcy and consummation of the Confirmed Plan of Reorganization did not have a material impact on its relationships with its customers, employees or suppliers. Nevertheless, there could be a detrimental impact on future sales and patronage because of the negative image of the Company that may have been created by its bankruptcy.

OWNERSHIP OF APPROXIMATELY 66.5% OF THE COMPANY’S OUTSTANDING COMMON STOCK BY ONE SHAREHOLDER WILL LIMIT OTHER SHAREHOLDERS’ ABILITY TO INFLUENCE CORPORATE MATTERS.

     At April 27, 2003, Berjaya beneficially owned, directly or indirectly, approximately 66.5% of the Company’s outstanding common stock. See Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” As a result, Berjaya is able to control major decisions of corporate policy, elect the Company’s entire board of directors and determine the outcome of any major transaction or other matters submitted to the Company’s shareholders, including potential mergers or acquisitions, and amendments to the Company’s articles of incorporation. Shareholders other than Berjaya are therefore likely to have little or no influence on decisions regarding such matters. Third parties may be discouraged from making a tender offer or bid to acquire the Company because of this concentration of ownership.

THE COMPANY HAS EXPERIENCED SIGNIFICANT LOSSES AND CASH FLOW PROBLEMS IN THE PAST.

     The Company has experienced recent significant operating losses and cash flow problems. The Company currently has no available credit line or other instrument to provide operating capital. As such, it depends upon cash flow from operations and from asset sales to support its capital and operating requirements. There can be no assurance that the Company will be able to achieve and sustain sufficient positive cash flow to support its operations or expansion.

THE COMPANY’S PROFITABILITY IS DEPENDENT IN LARGE MEASURE ON FOOD AND SUPPLY COSTS WHICH ARE NOT WITHIN THE COMPANY’S CONTROL.

     The Company’s profitability is dependent in large measure on its ability to anticipate and react to changes in food and supply costs. Various factors beyond the Company’s control, including climatic changes, disease or illness in beef cattle that could impact supply in the marketplace and government regulations, may affect food costs. Specifically, the Company’s dependence on frequent, timely deliveries of beef, poultry, seafood and produce subjects it to the risks of possible shortages or interruptions in supply caused by adverse weather or other conditions which could adversely affect the availability and cost of any such items. While the Company believes that it has been able to anticipate and react to increasing food costs through purchasing practices, menu changes and price adjustments in the past, there can be no assurance that the Company will be able to do so in the future. The failure to react to these increases could materially and adversely affect the Company’s business and result of operations in future periods.

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THE COMPANY’S OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER DUE TO VARIOUS FACTORS BEYOND ITS CONTROL, INCLUDING SEASONALITY.

     The Company’s operating results fluctuate seasonally because of its geographic concentration. Of the 71 restaurants currently owned and operated by the Company, 35 are located in generally residential or light commercial 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 have been and may continue to 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. To offset this seasonal trend and to attempt to reduce the decline in sales during the off-season, the Company runs special promotions for its customers, incentive contests for its employees and otherwise focuses marketing initiatives to increasing sales during these periods. Also, adverse publicity in Florida relating to Roadhouse Grill restaurants could have a more pronounced effect on the Company’s results of operations than might be the case if its restaurants were broadly dispersed geographically. 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;
	•		changes in food and product costs;
	•		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;
	•		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’s restaurants are located.

     In addition, the Company has experienced variability in the amount and percentage of revenues attributable to preopening expenses. The Company typically incurs the most significant portion of preopening expenses associated with a given restaurant within the two months immediately preceding and the month of the opening of the restaurant. The Company’s experience to date has been that labor and operating costs associated with a newly opened

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restaurant for the first several months of operation are materially greater than those expected after that time, both in aggregate dollars and as a percentage of revenues. Accordingly, the volume and timing of new restaurant openings has had, and is expected to continue to have, a meaningful impact on preopening expenses and labor and operating costs. Therefore, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for a full fiscal year, and, from time to time in the future, the Company’s results of operations may be below the expectations of public market analysts and investors.

INTENSE COMPETITION IN THE RESTAURANT INDUSTRY COULD PREVENT THE COMPANY FROM INCREASING OR SUSTAINING ITS REVENUES AND PROFITABILITY.

     The restaurant industry, particularly the full-service casual dining segment, is highly competitive. The Company competes with a broad range of restaurants, including national and regional casual dining chains as well as locally-owned restaurants, some of which operate with concepts similar to that of the Company. The Company competes in the areas of price, service, location, concept and food quality, including taste, freshness, and nutritional value.

     The Company has numerous well-established competitors, some of which dominate the industry. These competitors possess substantially greater financial, marketing, personnel and other resources than the Company. Many of the Company’s competitors have achieved significant national, regional and local brand name and product recognition. The Company also engages in extensive advertising and promotional programs, both generally and in response to efforts by additional competitors to enter new markets or introduce new products. In addition, the Company competes with other restaurant companies and retailers for sites and labor.

     The Company believes that the full-service casual dining segment is likely to continue to attract a significant number of new entrants. In addition, the full-service restaurant industry is characterized by the frequent introduction of new food products, which are accompanied by substantial promotional campaigns. In recent years, numerous companies in the full-service casual restaurant industry have introduced products intended to capitalize on growing consumer preference for food products which are, or are perceived to be, healthful, nutritious, low in calories and low in fat content. The Company will be subject to increasing competition from companies whose products or marketing strategies address these consumer preferences. The Company may need to modify or refine elements of its restaurant system to evolve its concept in order to compete with popular new restaurant formats or concepts that develop from time to time. There can be no assurance that the Company will be successful in implementing these modifications.

     The restaurant business is often affected by changes in:

	•		consumer tastes;
	•		national, regional or local economic conditions;
	•		demographic trends;
	•		consumer confidence in the economy;
	•		discretionary spending priorities;
	•		weather conditions;

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	•		Tourist travel;
	•		Traffic patterns; and
	•		The type, number and location of competing restaurants.

     Changes in these factors could prevent the Company from increasing or sustaining its revenues and profitability and result in a material adverse effect on its business, financial condition, results of operations or cash flows.

THE COMPANY IS DEPENDENT UPON SUPPLY AND QUALITY OF FOOD PRODUCTS.

     The success of the Company’s restaurants depends upon frequent deliveries of food products. The Company is routinely exposed to the risks that shortages or interruptions in supply can occur and adversely affect the availability, quality and cost of these critical food products. Regional weather conditions may also adversely affect product supply and quality. The Company has not experienced significant difficulty in obtaining adequate supplies of food products on a timely basis. However, there can be no assurance that in the future inadequate supplies of food products, especially steak products, might not have a material adverse effect on the Company’s operations and profitability.

THE COMPANY IS AFFECTED BY LITIGATION AND PUBLICITY CONCERNING FOOD QUALITY, HEALTH AND OTHER ISSUES WHICH CAN CAUSE GUESTS TO AVOID ITS RESTAURANTS AND WHICH CAN RESULT IN LIABILITIES.

     Health concerns, including adverse publicity concerning food-related illness, although not specifically related to the Company’s restaurants, could cause guests to avoid certain restaurant groups including the Company’s restaurants, which would have a negative impact on its sales. The Company may also be the subject of complaints or litigation from guests alleging food-related illness, injuries suffered on the premises or other food quality, health or operational concerns. A lawsuit or claim could result in an adverse decision against the Company that could have a material adverse effect on its business and results of operations. The Company may also be subject to litigation which, regardless of the outcome, could result in adverse publicity. Adverse publicity resulting from such allegations may materially adversely affect the Company and its restaurants, regardless of whether such allegations are true or whether the Company is ultimately held liable. Such litigation, adverse publicity or damages could have a material adverse effect on the Company’s business, competitive position and results of operations.

THE COMPANY COULD FACE LABOR SHORTAGES, INCREASED LABOR COSTS, AND OTHER ADVERSE EFFECTS OF VARYING LABOR CONDITIONS.

     The development and success of the Company’s restaurants depend, in large part, on the efforts, abilities, experience and reputations of the general managers and chefs at each restaurant. The Company’s inability to recruit and retain qualified individuals may delay the opening of new restaurants or result in higher employee turnover in existing restaurants, which could materially and adversely affect the Company’s results of operations or business. In addition, the Company’s success depends in part upon its ability to attract, motivate and retain a sufficient number of qualified employees, including restaurant managers, kitchen staff and wait staff. Qualified individuals needed to fill these positions are in short supply and the inability to recruit and retain

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such individuals may delay the planned openings of new restaurants or result in high employee turnover in existing restaurants. A significant delay in finding qualified employees or high turnover of existing employees could cause the Company’s business and results of operations to suffer. Also, competition for qualified employees could require the Company to pay higher wages to attract sufficient qualified employees.

INCREASES IN THE MINIMUM WAGE MAY HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY’S BUSINESS AND FINANCIAL RESULTS.

     A number of the Company’s employees are subject to various minimum wage requirements. The federal minimum wage has remained at $5.15 per hour since September 1, 1997. Any minimum wage increase may have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

THE COMPANY MAY NOT BE ABLE TO CONTINUE TO SUCCESSFULLY EXPAND ITS RESTAURANT OPERATIONS.

     Subsequent to April 27, 2003, the Company opened one Company-owned restaurant. No additional Company-owned restaurants are currently expected to be opened in fiscal year 2004. The Company’s ability to expand successfully will depend on a number of factors, including:

	•		identification and availability of suitable locations;
	•		competition for restaurant sites;
	•		negotiation of favorable lease arrangements;
	•		timely development of commercial, residential, street or highway construction near its restaurants;
	•		management of the costs of construction and development of new restaurants;
	•		securing required governmental approvals and permits;
	•		recruitment of qualified operating personnel, particularly managers and chefs;
	•		weather conditions; and
	•		competition in new markets.

     The opening of additional restaurants will depend in part upon the Company’s ability to generate sufficient funds from operations or the sale of assets or to obtain sufficient equity or debt financing on favorable terms to support its expansion. The Company may require additional debt or equity financing to continue to open new restaurants. The Company cannot be certain that additional financing will be available when and to the extent required or that, if available, it will be on acceptable terms. If the Company is unable to obtain additional funds in a timely manner or on acceptable terms, it may have to curtail or suspend any expansion of its operations.

     The Company may not be able to open new restaurants on a timely basis, if ever, and, if opened, these restaurants may not operate on a profitable basis. The Company expects to experience delays in restaurant openings from time to time. Delays or failures in opening planned new restaurants could have an adverse effect on the Company’s business, financial condition, results of operations or cash flows.

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THE COMPANY IS DEPENDENT UPON ITS CHIEF EXECUTIVE OFFICER AND ITS OTHER KEY EMPLOYEES.

     The Company believes that the development of its business has been, and will continue to be, dependent on the services of Ayman Sabi, its Chief Executive Officer, and other key employees. The loss of Mr. Sabi’s services, or the loss of the services of other key employees, could have a material adverse effect on the Company’s business, and there can be no assurance that an adequate replacement could be found for Mr. Sabi or the other key employees in the event of their unavailability. The Company’s continued growth will further depend on its ability to attract and retain additional skilled senior management personnel, including, but not limited to, senior operations personnel and restaurant managers.

FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS COULD HARM THE COMPANY’S BUSINESS AND REPUTATION.

     The Company is subject to regulation by federal agencies and to licensing and regulation by state and local health, sanitation, building, zoning, safety, fire and other departments relating to the development and operation of restaurants. These regulations include matters relating to:

	•		the environment;
	•		building construction;
	•		zoning requirements; and
	•		the preparation and sale of food and alcoholic beverages.

     The Company’s facilities are licensed and subject to regulation under state and local fire, health and safety codes. The development and construction of future restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. Various federal and state labor laws govern the Company’s operations and its relationship with its employees, including minimum wage, overtime, safety and working conditions, fringe benefit and citizenship requirements. In particular, the Company is subject to the regulations of the Immigration and Naturalization Service (INS). Given the location of many of the Company’s restaurants, even if the Company operates those restaurants in strict compliance with INS requirements, the Company’s employees may not all meet federal citizenship or residency requirements, which could lead to disruptions in the Company’s work force. Material increases in unemployment tax rates, sales taxes or the cost of compliance with any applicable law or regulation could materially and adversely affect the Company’s business.

     Sales of alcoholic beverages account for approximately 10% of the Company’s revenues. The Company is required to comply with the alcohol licensing requirements of the various government agencies, including states and municipalities where the Company’s restaurants are located. Alcoholic beverage control regulations require each Roadhouse Grill restaurant to apply to a state authority and, in certain locations, county and/or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to provide service for extended hours. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. If a liquor license for any restaurant were lost, revenues for that restaurant would be adversely affected. Alcoholic beverage control regulations relate to numerous aspects of the Company’s restaurants, including minimum age of patrons consuming, and employees serving,

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alcoholic beverages, hours of operation, advertising, wholesale purchasing, inventory control, and handling, storage and dispensing of alcoholic beverages. The Company is also subject to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Any liability under such statutes could have a material adverse effect on the Company’s results of operations and financial condition. The Company carries liquor liability coverage as part of its existing comprehensive general liability insurance. However, there can be no assurance that the Company’s insurance coverages will be adequate.

     The federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. The Company is required to comply with the Americans with Disabilities Act and regulations relating to accommodating the needs of the disabled in connection with the construction of new facilities and with significant renovations of existing facilities, which will over time require an incremental capital investment by the Company.

     In connection with the Company’s franchise operations, it is required to comply with Federal Trade Commission and state laws and regulations that govern the offer, sale and termination of franchises and the refusal to renew franchises.

     Failure to comply with the regulations described above could negatively impact the Company’s business and reputation.

THE COMPANY IS SELF-INSURED IN CERTAIN OF ITS INSURANCE COVERAGES AND HAS EXPERIENCED INCREASED INSURANCE COSTS.

     The Company maintains insurance to cover the potential liabilities associated with a number of the risks that the Company may encounter in its business operations. These include property and flood coverage, auto, workers’ compensation, general liability and umbrella, directors and officers liability, employers practice liability and crime insurance. Many of the policies, such as property, flood and directors and officers liability include deductibles ranging from $100,000 to $250,000 per claim. For many policy years, under workers’ compensation, employers practice liability and general liability coverage, the Company is effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $300,000 per claim and on an aggregate basis. The Company is also self-insured in regards to the medical insurance benefits that it provides to its managers and certain other employees. These employees who elect to receive medical insurance benefits are required to contribute a portion of the cost of providing the insurance benefits. Total insurance costs incurred by the Company for the fiscal years of 2003, 2002 and 2001 were $6.3 million, $3.5 million and $4.4 million, respectively.

     Due to the trends currently being experienced in the insurance industry, the Company believes that its insurance costs will continue to represent a significant expense to the Company and may increase in the future. Management is continuing to evaluate options relating to controlling these costs including changes in its insurance carriers and brokers, modifications to certain of the provisions of its policies including deductibles and self-insured retention limits and

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changes in the portion of costs incurred in providing coverage for its employees that are allocated to the employees who participate in the plan.

THE COMPANY’S COMMON STOCK IS QUOTED ON THE PINK SHEETS, AND INVESTORS MAY FIND IT MORE DIFFICULT TO SELL THE COMPANY’S COMMON STOCK.

     Effective May 2, 2002, the Company’s common stock was delisted from the NASDAQ National Market. As a result of its delisting, the Company’s common stock is currently quoted on the Pink Sheets.

     The fact that the Company’s common stock is not listed is likely to make trading its shares more difficult for broker-dealers, shareholders and investors, potentially leading to further declines in share price. It may also make it more difficult for the Company to raise additional capital. An investor may find it more difficult to sell the Company’s common stock or to obtain accurate quotations of the share price of its common stock. Management has not determined when or whether it will apply again for listing on a Nasdaq market.

     The Company is also subject to an SEC rule concerning the trading of so-called penny stocks. Under this rule, broker-dealers who sell securities governed by the rule to persons who are not established customers or accredited investors must make a special suitability determination and must receive the purchaser’s written consent to the transaction prior to the sale. This rule may deter broker-dealers from recommending or selling the Company’s stock, which may negatively affect the liquidity of the Company’s stock.

COMPANY RESTAURANT OPERATIONS

MENU

     The Roadhouse Grill menu, which was revised and expanded in June 2003, features aged USDA Choice steaks and prime rib, beef ribs, chicken and seafood, all of which are grilled to order. The Company’s steaks are aged both before and after being cut and trimmed. The menu features over sixty items, including 13 cuts of steak ranging from 6 oz. to 18 oz. The Company is known for its “Roadie” (bourbon marinated sirloin), prime rib, and award-winning baby-back ribs. In addition to grilled selections, the new menu offers a variety of specialty drinks, a pasta dish, seafood, a wide variety of appetizers, sandwiches, and salads, including signature items such as Roadhouse cheese wraps and a variety of desserts, most notably the “messy sundae.” Each entree is served with a choice of a house salad or Caesar salad, a choice of baked sweet potato, baked potato, home fries, french fries or rice pilaf, homemade yeast rolls and peanuts. Roadhouse Grill restaurants are open seven days a week for lunch and dinner and offer full bar service. Entrée prices range from $5.79 to $18.99. From 11:00 a.m. to 3:00 p.m. Monday through Friday, in addition to its full menu, each Roadhouse Grill offers a selection of 20 lunch menu items ranging from charbroiled steak salad to hand-breaded chicken strips and french fries, all prepared to order quickly and priced at $8.99 or less.

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UNIT ECONOMICS

     The 69 Company-owned Roadhouse Grill restaurants open for the entire 52 weeks in fiscal year 2003 generated average net sales of approximately $2.0 million, average restaurant-level cash flow (restaurant revenues less cost of restaurant sales, excluding pre-opening expenses) of $166,000 and average operating income (restaurant-level cash flow less depreciation and amortization) of $63,000. The Company’s average cash investment for these 69 restaurants 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. Restaurant-level economics are affected to the extent that the Company constructs free-standing units on Company-owned or leased land, rather than leasing existing buildings. In such cases, initial development costs are substantially greater and occupancy costs (other than depreciation) are substantially less when the Company leases existing buildings. The Company cannot predict if average unit-level economics would be altered significantly if in the future the mix of restaurants placed in leased buildings compared to free-standing buildings on Company-owned or leased land were to change materially from the Company’s current mix.

RESTAURANT OPERATIONS AND MANAGEMENT

     Restaurant Personnel. The Company believes that excellent service contributes significantly to a distinctive, enjoyable dining experience. Accordingly, the Company seeks to hire individuals who possess strong initiative and the ability to provide quality and personalized service. Roadhouse Grill attempts to foster the individuality of its employees, encouraging them to interact with customers on a friendly, casual basis. The Company recruits both experienced restaurant managers from outside the Company and promotes qualified employees from within the Company. The Company seeks to retain high-quality restaurant managers and personnel by providing them with opportunities for promotion and financial incentives based on individual restaurant performance. These financial incentives include a bonus plan that enables each restaurant manager to earn a portion of a bonus pool by achieving certain predetermined performance goals. To further enhance the “team” concept within the Company, restaurant managers also have an opportunity for financial incentives based on the consolidated financial results of the Company.

     Roadhouse Grill restaurants generally operate with a general manager, a dining room manager, a kitchen manager and one or two assistant managers depending upon volume. The general manager of each restaurant has primary responsibility for managing the day-to-day operations of the restaurant in accordance with Company standards. The general manager and kitchen manager of each restaurant generally are responsible for interviewing, hiring and training restaurant staff. Each restaurant has a staff of approximately 60 to 70 employees. The Company currently employs seven directors of operations, each of whom is responsible for supervising the operations of eight to 13 restaurants.

     The Company devotes a significant amount of time and resources to restaurant management and staff training. Each new manager participates in an eight-week training program, which is conducted both at designated training restaurants and the corporate office,

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before assuming an assistant manager position (or, in some instances, a kitchen manager position) at a Roadhouse Grill restaurant. This program is designed to provide training in all areas of restaurant operations, including food preparation and service, alcoholic beverage service, Company philosophy, operating standards, policies and procedures, and business management and administration techniques. These new managers are also trained and evaluated in regards to behavioral skills and other topics to ensure they possess the ability to succeed in managing the Company’s operations. The managers of the training restaurant conduct weekly evaluations of each manager trainee.

     In connection with the opening of each new restaurant, the Company sends an experienced training team to train and assist the new restaurant employees. The training team generally arrives at each restaurant two weeks prior to opening and remains for four weeks after opening. Typically, the general manager, the dining room manager and the kitchen manager of each new restaurant are individuals who have been managers at an existing Roadhouse Grill restaurant.

     The development and success of the Company’s restaurants depend, in large part, on the efforts, abilities, experience and reputations of the general managers and chefs at such restaurants. The Company’s inability to recruit and retain high-quality personnel may delay the opening of new restaurants or result in higher employee turnover in existing restaurants, which could materially and adversely affect the Company’s results of operations or business. Competition for qualified employees could require the Company to pay higher wages to attract sufficient qualified employees.

     Purchasing. To better insure uniform quality and obtain competitive prices, the Company contracts centrally for most restaurant food products and other supplies. Individual restaurants decide the amount of each item they require and place orders directly with the Company’s distributors several times a week. Managers also arrange for produce items to be provided by local vendors that meet the Company’s quality standards. Corporate management closely monitors prices and other supply contract terms for locally and centrally contracted items. Because of the volume of its aggregate orders and the volume of supplies delivered to each individual restaurant, the Company believes that it is able to obtain favorable prices for its supplies.

     The Company’s profitability is dependent in large measure on its ability to anticipate and react to changes in food and supply costs. Various factors beyond the Company’s control, including climatic changes, disease or illness in beef cattle that could impact supply in the marketplace and government regulations, may affect food costs. Specifically, the Company’s dependence on frequent, timely deliveries of beef, poultry, seafood and produce subjects it to the risks of possible shortages or interruptions in supply caused by adverse weather or other conditions which could adversely affect the availability and cost of any such items. The failure to react to these increases could materially and adversely affect the Company’s business and result of operations. In addition, during fiscal year 2003, the Company purchased approximately 79% of its food and other restaurant supplies from two distributors. The Company’s dependence on a small number of suppliers subjects it to the risk of possible shortages or interruptions in supply if any of these distributors is not able to provide food and supplies to the Company’s

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restaurants in a timely manner. The Company believes it is able to manage this risk by working solely with high-quality, financially stable vendors and therefore realize the benefits of primarily centralized distribution.

     Hours of Operation. The Company’s Roadhouse Grill restaurants are open seven days a week, typically from 11:00 a.m. to 10:00 p.m. Sunday through Thursday and from 11:00 a.m. to 11:00 p.m. on Friday and Saturday.

     Reporting and Financial Controls. The Company maintains financial and accounting controls for each of its restaurants through the use of centralized accounting and management information systems. The Company has also developed and continues to enhance corporate policies and procedures designed to maintain consistency in its operations and to strengthen internal accounting controls. Through the review of periodic financial information, on-site visits to its restaurants and other means, the Company evaluates compliance with its policies and procedures. In addition, each restaurant is equipped with a computerized accounting system that allows restaurant management to efficiently manage labor, food cost and other direct operating expenses, that provide corporate management rapid access to financial data and that reduces time devoted by its restaurant managers to administrative responsibilities. Guest counts, sales, cash deposits and labor cost information are collected daily from each restaurant. Physical inventories of all food and beverage items are performed weekly. Each restaurant manager prepares a restaurant level weekly profit and loss statement, and at the end of each accounting period, operating statements are prepared for each location. The weekly and accounting period operating statements are reviewed at both the corporate level and restaurant level for variances from expected results to allow for any corrective actions to be taken as quickly as possible.

ADVERTISING AND MARKETING

     The Company attempts to build brand-awareness by providing a distinctive dining experience that results in a significant number of new customers being attracted through word of mouth, as well as by traditional marketing efforts and promotional activities. The Company believes that clustering multiple restaurants in target markets will help build brand-awareness and increase efficiencies in its marketing efforts. The Company also utilizes radio, billboard and print advertising to promote its restaurants and build brand-awareness. The Company’s motto is: “Roadhouse Grill...Eat, Drink and be Yourself.” The Company also markets at the restaurant level through sponsorship of community charity activities, sporting events, festivals and Chamber of Commerce events. For fiscal year 2002 and 2003, advertising and marketing expense relating to Roadhouse Grill restaurants amounted to approximately 1.7% and 2.4% of total revenues, respectively.

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RESTAURANT LOCATIONS

     The following table sets forth the location of Company-owned restaurants open as of April 27, 2003:

Note: Subsequent to April 27, 2003, one additional Company-owned restaurant was opened in North Carolina.

RESTAURANT INDUSTRY AND COMPETITION

     The restaurant industry is highly competitive. The Company competes with a broad range of restaurants, including national and regional casual dining chains as well as locally-owned restaurants, some of which operate with concepts similar to that of the Company. A number of competitors have been in existence longer than the Company and have substantially greater financial, marketing and other resources and wider geographical diversity than the Company. The entrance of new competitors into the Company’s market areas or the expansion of operations by existing competitors could have a material adverse effect on the Company’s results of operations and financial condition. There is no assurance that the Company will be able to compete successfully in the markets in which it operates. In addition, the Company competes with other restaurant companies and retailers for sites, labor and, in many cases, customers. The Company believes that the key competitive factors in the restaurant industry are quality of food and service, price, location and concept. To the extent that one or more of its competitors becomes more successful with respect to any of the key competitive factors, the Company’s business could be adversely affected.

     The restaurant industry has few non-economic barriers to entry and is affected by changes in consumer tastes as well as national, regional and local economic conditions, demographic trends, traffic patterns, and the type, number and location of competing restaurants. Dependence on fresh meats and produce also subjects restaurant companies to the risk that

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shortages or interruptions of supply could adversely affect the availability, quality or cost of ingredients. In addition, factors such as inflation, increased food, labor and employee benefit costs and the availability of qualified management and hourly employees also may adversely affect the restaurant industry generally and the Company’s restaurants in particular. The Company’s significant investment in and long-term commitment to each of its restaurant sites limits its ability to respond quickly or effectively to changes in local competitive conditions or other changes that could affect the Company’s operations. The Company’s continued success is dependent to a large extent on its reputation for providing high quality and value and this reputation may be affected not only by performance of Company-owned restaurants but also by the performance of franchisee-owned restaurants over which the Company has limited control.

SEASONALITY

     The Company’s operating results fluctuate seasonally because of its geographic concentration. Of the 71 restaurants currently owned and operated, 35 are located in generally residential or light commercial 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 have been and may continue to 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. To offset this seasonal trend and to attempt to reduce the decline in sales during the off-season, the Company runs special promotions for its customers, incentive contests for its employees and otherwise focuses marketing initiatives to increasing sales during these periods.

GOVERNMENT REGULATION

     Each Roadhouse Grill restaurant is subject to and affected by various federal, state and local laws and governmental regulations, including those relating to the preparation, sale and service of food and alcoholic beverages, designation of non-smoking and smoking areas, accessibility of restaurants to disabled customers, development and construction of restaurants and environmental matters. Difficulties or failures in obtaining the required construction and operating licenses, permits or approvals could delay or prevent the opening of a new restaurant. Roadhouse Grill believes that it is operating in material compliance with applicable laws and regulations.

     The Company is also subject to laws governing its relationship with employees, including minimum wage requirements, overtime, working conditions and immigration requirements. Legislative proposals are introduced by governmental authorities from time to time that would, if enacted, have a material adverse effect on the Company’s business by increasing the Company’s operating costs. Material increases in unemployment tax rates, sales taxes or the cost of compliance with any applicable law or regulation could materially and adversely affect the Company’s business. There is no assurance that the Company would be able to pass such

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increased costs on to its guests or that, if it were able to do so, it could do so in a short period of time.

     Sales of alcoholic beverages account for approximately 10% of the Company’s revenues. Alcoholic beverage control regulations require each Roadhouse Grill restaurant to apply to a state authority and, in certain locations, county and/or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to provide service for extended hours. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. If a liquor license for any restaurant were lost, revenues for that restaurant would be adversely affected. Alcoholic beverage control regulations relate to numerous aspects of the Company’s restaurants, including minimum age of patrons consuming, and employees serving, alcoholic beverages, hours of operation, advertising, wholesale purchasing, inventory control, and handling, storage and dispensing of alcoholic beverages. The Company is also subject to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. The Company carries liquor liability coverage as part of its existing comprehensive general liability insurance. There can be no assurance that the Company’s insurance coverages will be adequate.

     The federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. The Company is required to comply with the Americans with Disabilities Act and regulations relating to accommodating the needs of the disabled in connection with the construction of new facilities and with significant renovations of existing facilities, which require an incremental capital investment by the Company.

     In connection with its sale of franchises, the Company is subject to the United States Federal Trade Commission rules and regulations and state laws that regulate the offer and sale of franchises. The Company also is subject to laws that regulate certain aspects of the franchise relationship.

     The Company is subject to various local, state and federal laws regulating the discharge of pollutants into the environment. The Company believes that its operations are in material compliance with applicable environmental laws and regulations. The Company conducts environmental audits of all proposed restaurant sites in order to determine whether there is any evidence of contamination prior to purchasing or entering into a lease with respect to such sites. However, there can be no assurance that the Company will not incur material environmental liability in connection with any of its owned or leased properties.

     Various states have recently enacted legislation requiring the protection of customer credit card numbers by the suspension of printing the credit card numbers on customer receipts. The Company is working with its point of sale systems vendors in order to ensure compliance with the new laws by the various effective dates, the earliest of which is currently scheduled for July 2005. It is anticipated that the application of new system software will require system upgrades at certain of the Company’s restaurant locations. Although the exact cost cannot be determined at this time, a material incremental capital investment may be required.

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INSURANCE

     The Company maintains insurance to cover the potential liabilities associated with a number of the risks that the Company may encounter in its business operations. These include property and flood coverage, auto, workers’ compensation, general liability and umbrella, directors and officers liability, employers practice liability and crime insurance. Many of the policies, such as property, flood and directors and officers liability include deductibles ranging from $100,000 to $250,000 per claim. For many policy years, under workers’ compensation, employers practice liability and general liability coverage, the Company is effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $300,000 per claim and on an aggregate basis. The Company is also self-insured in regards to the medical insurance benefits that it provides to its managers and certain other employees. These employees who elect to receive medical insurance benefits are required to contribute a portion of the cost of providing the insurance benefits. Total insurance costs incurred by the Company for the fiscal years of 2003, 2002 and 2001 were $6.3 million, $3.5 million and $4.4 million, respectively.

     Due to the trends currently being experienced in the insurance industry, the Company believes that its insurance costs will continue to represent a significant expense to the Company and may increase in the future. Management is continuing to evaluate options relating to controlling these costs including changes in its insurance carriers and brokers, modifications to certain of the provisions of its policies including deductibles and self-insured retention limits and changes in the portion of costs incurred in providing coverage for its employees that are allocated to the employees who participate in the plan.

EMPLOYEES

     At April 27, 2003, the Company employed 5,213 persons, of whom 4,917 were restaurant employees, 246 were restaurant management and supervisory personnel, and 50 were corporate personnel. Restaurant employees include both full-time and part-time workers and substantially all are paid on an hourly basis. No Company employees are covered by collective bargaining agreements, and the Company has never experienced an organized work stoppage, strike or labor dispute. The Company believes its relations with its employees are generally satisfactory.

TRADEMARKS, SERVICE MARKS AND TRADE DRESS

     The Company believes that its rights in trademarks, service marks and trade dress are important to its marketing efforts. Roadhouse Grill has registered the “Roadhouse Grill” service mark and other designs and slogans with the U.S. Patent and Trademark Office and with the respective trademark offices in other countries. Roadhouse Grill has certain other foreign trademarks in various stages of the registration process; however, the Company has temporarily ceased the registration process in several countries and will resume such process on a case-by-case basis in certain of those countries in the near future.

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     The Company believes that its trademarks and service marks have significant value and are essential to the Company’s ability to create demand for and awareness of its restaurants. There can be no assurance, however, that the Company’s marks would be upheld if challenged or that the Company would not be prevented from using its marks. The Company also relies on trade secrets and proprietary know-how. The Company employs various methods to protect its concepts and recipes. However, these methods may not completely protect the Company.

EXPANSION STRATEGY

     The Company’s long-term strategy is to expand the Roadhouse Grill concept in relation to Company-owned restaurants in a much slower and more controlled manner than was incurred in the past. One additional restaurant was opened in June 2003. No other new restaurant openings are currently planned for fiscal year 2004. Subject to the operating results of its existing restaurants and the identification of suitable locations, the Company plans to open approximately one to three restaurants per year over the next three years. The Company’s focus in fiscal year 2004 will be to maximize its return on its investment in its existing restaurants in the United States and to expand the number of franchised and joint venture locations internationally. Management believes that opportunities exist that would enable the Company to expand its joint venture and franchised operations. Management also believes that this type of growth opportunity will require significantly lower capital resources from the Company.

     The Company’s ability to open new restaurants will depend on a variety of factors, many of which may be beyond the Company’s control, including the Company’s ability to: locate suitable restaurant sites; negotiate acceptable lease or purchase terms; obtain required governmental approvals and construct new restaurants in a timely manner; attract, train and retain qualified and experienced personnel and management; generate sufficient cash from operations or obtain sufficient debt or equity financing on favorable terms; and continue to operate its restaurants profitably. Due to these factors and others discussed in this report, there is no assurance that the Company will be able to continue to effectively develop or operate additional restaurants.

     The Company believes the site selection process is critical to the long-term success of any restaurant, and, accordingly, devotes significant time and effort to the investigation and evaluation of potential locations. Among the factors in the site selection process are market demographics (including population, age and median household income); traffic patterns and activity; site visibility, accessibility and parking; and proximity to residential developments, office complexes, hotels, retail establishments and entertainment areas. Another important factor is the convenience of the potential location to both lunch and dinner guests and the occupancy cost of the proposed site. The Company’s development strategy is to cluster restaurants in markets that can support them with cost-effective media advertising. In addition, the Company believes that clustering multiple units allows more efficient supervision of the restaurants.

     Corporate management of the Company determines which geographic areas may be suitable for Roadhouse Grill restaurants. Potential sites in those geographic areas are identified

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by Company personnel, consultants and independent real estate brokers. In connection with the Company’s evaluation, Company personnel visit and analyze each potential site.

     When the Company has developed restaurants in existing buildings, construction has taken approximately 90 to 120 days after required construction permits have been obtained. Construction of restaurants on vacant land is a longer process and has generally ranged from 120 to 180 days. The Company’s experience to date has been that obtaining construction permits has generally taken from 30 to 180 days. The Company engages outside general contractors for construction of its restaurants and expects to continue this practice for the foreseeable future.

     The Company’s prototypical restaurant format is approximately 6,800 square feet with seating for approximately 260 guests. Facilities range in size from 5,000 to 12,000 square feet with seating for approximately 190 to 398 guests. The Company uses a standardized design in constructing restaurants, with modifications made for each particular site. The Company is assisted by outside architects in the design of individual restaurants. The Company makes its standardized design available to its franchisees and has final right of approval on the design of each franchised restaurant.

     The Company believes its restaurants have a comfortable atmosphere and are visually appealing with exposed ceilings and brick and lapboard cedar walls decorated with colorful murals and neon signs. The typical interior also includes multi-level seating, a full-service bar, an exhibition grill and display kitchen. The exterior of each restaurant features rough-sawed siding, a wrap-around wood plank porch, a tin roof trimmed in neon and an oversized “Roadhouse Grill” sign. In addition to the public areas, each restaurant has a food preparation and storage area including a fully- equipped kitchen.

FRANCHISE AND JOINT VENTURE RESTAURANTS

     The following table sets forth the location of franchise and joint venture restaurants open as of April 27, 2003:

Franchise

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Joint Venture

FRANCHISE OPERATIONS

     In addition to operating Company-owned restaurants, the Company has six franchise locations. The Company currently has five franchisees: Roadhouse Operating Company, LLC (“Roadhouse Operating”), Roadhouse Grill Asia Pacific (H.K.) Limited (“Roadhouse Grill Hong Kong”), Roadhouse Grill Asia Pacific (Cayman) Limited (“Roadhouse Grill Asia”), Brent Empreendimentos e Alimentacao Ltda. (“Roadhouse Grill Brazil”), and NAHI, Inc. Berjaya, the majority shareholder of the Company, directly or indirectly owns Roadhouse Grill Hong Kong and Roadhouse Grill Asia.

     The Company is currently seeking to develop additional franchising opportunities on an international basis with primary focus on development in Europe, South America, and the Caribbean. The Company also will be actively seeking multi-unit franchising in the United States in the foreseeable future. There can be no assurance that the Company will be successful in its efforts.

     Roadhouse Operating. Roadhouse Operating entered into an initial franchise agreement and Master Development Agreement with the Company (the “Roadhouse Operating Master Development Agreement”) in August 1995. Pursuant to the Roadhouse Operating Master Development Agreement, the Company was required to enter into a franchise agreement with Roadhouse Operating for each new franchise restaurant prior to the opening of that restaurant. Pursuant to the Roadhouse Operating Master Development Agreement, and in each case pursuant to a separate franchise agreement, Roadhouse Operating opened three Roadhouse Grill restaurants. Two of these have been closed, and one is currently being operated.

     The Roadhouse Operating Master Development Agreement provided for the exclusive development of up to five restaurants, over a period which ended October 31, 1999, in Clark County, Nevada (which includes the Las Vegas, Nevada metropolitan area). Under the Roadhouse Operating Master Development Agreement, Roadhouse Operating’s exclusive right to develop Roadhouse Grill restaurants was contingent upon it meeting the development schedule set forth in the Roadhouse Operating Master Development Agreement.

     Roadhouse Operating is obligated to pay the Company a percentage royalty fee based on gross sales. Under the Roadhouse Operating Master Development Agreement, Roadhouse Operating is not obligated to pay any area development or initial franchise fees. As of April 27,

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2003, the receivable from Roadhouse Operating was approximately $0.1 million. Due to lack of payment, this amount has been fully reserved.

     The Company is the guarantor of equipment leases for three restaurants, two of which are currently closed, owned by Roadhouse West G.P., an affiliate of Roadhouse Operating. In addition, management understands that other parties have also guaranteed these obligations. Roadhouse West G.P. is currently in default of the payment terms of the operating leases. The balance of the remaining lease payments due was approximately $1.0 million as of April 27, 2003. The leases are collateralized by the leased equipment and certain leasehold improvements. Roadhouse West G.P. has recently filed for Chapter 11 Bankruptcy. The Company cannot predict the outcome of these proceedings but believes that any potential liability will be mitigated by the factors described above and, accordingly, has provided no reserve for any possible obligations that may arise relating to these proceedings. The United States Trustee’s office has recently filed a motion to convert the Chapter 11 Bankruptcy to Chapter 7 liquidation, citing that no feasible reorganization plan is being or will be provided.

     Roadhouse Operating was not able to meet the development schedule under the Roadhouse Operating Master Development Agreement, which expired on October 31, 1999. As of the date of this report, the Company has taken no action to enforce compliance with the development of new restaurants required under the Roadhouse Operating Master Development Agreement due to the bankruptcy proceedings.

     Roadhouse Grill Hong Kong. In January 1996, the Company entered into a Master Development Agreement with Roadhouse Grill Hong Kong (the “Hong Kong Master Development Agreement”), which is for an indefinite period and provides for the development and franchising of Roadhouse Grill restaurants in Hong Kong. Under the Hong Kong Master Development Agreement, Roadhouse Grill Hong Kong is not required to develop any specific number of restaurants in Hong Kong, but any restaurants that it develops are credited against the development obligations of Roadhouse Grill Asia under Roadhouse Grill Asia’s Master Development Agreement with the Company. Roadhouse Grill Hong Kong is not required to pay any franchise or reservation fee for restaurants that it develops, but is responsible for paying or reimbursing approved expenses incurred by the Company in connection with the opening of each restaurant. In addition, Roadhouse Grill Hong Kong is required to pay the Company a royalty on gross sales in connection with the operation of each of its restaurants. Under certain circumstances, Roadhouse Grill Hong Kong or the Company may grant franchises to third parties in Hong Kong. In that event, the Company is entitled to receive 50% of any franchise and reservation fees and 40% of any royalty fee, payable by the third party franchisee to Roadhouse Grill Hong Kong, subject to limitations on the amounts payable to the Company of $10,000 per restaurant in the case of franchise and reservations fees and royalty fees based on gross sales.

     As of April 27, 2003, Roadhouse Grill Hong Kong had not developed or opened any Roadhouse Grill restaurants, and the Company does not anticipate that Roadhouse Grill Hong Kong will develop any Roadhouse Grill restaurants in the foreseeable future.

     Roadhouse Grill Asia. In January 1996, the Company entered into a Master Development Agreement with Roadhouse Grill Asia (the “Asia Master Development

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Agreement”), which is for an indefinite period and covers countries in Asia and the Pacific Rim (other than Hong Kong), including, but not limited to, Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, the Philippines and Thailand. Under the Asia Master Development Agreement, Roadhouse Grill Asia is required to open and maintain at least 30 Roadhouse Grill restaurants during the first ten years of the Asia Master Development Agreement, with a minimum of two restaurants to be developed each year. Under certain circumstances, Roadhouse Grill Asia or the Company may grant franchises to third parties in the territory. The fee arrangements under the Asia Master Development Agreement are substantially the same as those under the Hong Kong Master Development Agreement. See Item 13 “Certain Relationships and Related Transactions.”

     Roadhouse Grill Asia currently operates three franchised Roadhouse Grill restaurants in Malaysia. The Company accrued less than $0.1 million in royalty income from those restaurants during fiscal year 2003. Royalty income is currently being offset against interest that the Company owes to Berjaya. This offset of royalty income will continue until the royalty receivable exceeds the amount due Berjaya, which approximates $129,000 as of April 27, 2003. Once the royalty receivable exceeds the payable to Berjaya, the Company expects to begin collecting the earned royalty fees.

     Roadhouse Grill Asia has not met the development schedule under the Asia Master Development Agreement. As of the date of this filing, the Company has taken no action to enforce compliance with the development of new stores required under the Asia Master Development Agreement and is currently in discussion with Roadhouse Grill Asia regarding the agreement.

     Roadhouse Grill Brazil. In May 1999, the Company entered into a Master Development Agreement with Roadhouse Grill Brazil, which provides for the development and franchising of Roadhouse Grill restaurants in Brazil. Under the agreement, Roadhouse Grill Brazil is required to open and maintain at least eight Roadhouse Grill restaurants during the first ten years of the term of the agreement. Roadhouse Grill Brazil pays the Company a one-time franchise fee for each new restaurant opened and an ongoing service fee based on gross sales. Roadhouse Grill Brazil currently operates one Roadhouse Grill restaurant in Brasilia, Brazil. As of April 27, 2003, the receivable from Roadhouse Grill Brazil was less than $0.1 million.

     Ohio franchisee. In March 2002, the Company entered into a Master Development Agreement with NAHI, Inc., granting the exclusive right to build five restaurants in five years in the Cincinnati/Tri State area of Ohio and Kentucky. In order to maintain these exclusive rights, the franchisee must comply with the terms of the agreement including, but not limited to, opening one restaurant per year. Currently, there is one franchised location open pursuant to this Master Development Agreement.

JOINT VENTURE OPERATIONS

     On July 6, 2000, the Company entered into a joint venture agreement with the Cremonini Group, a publicly-traded Italian conglomerate, specializing in the food service industry in

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Europe. Under the original joint venture agreement, Cremonini Group is required to open and operate at least 60 Roadhouse Grill restaurants in Italy, France, Spain, Great Britain and other principal European countries. The Company is not required to make any capital outlay in connection with the joint venture. In accordance with the terms of the joint venture agreement, the Company owns a 1.5% equity interest in the joint venture and has an option to purchase up to an additional 8.5% equity interest in the joint venture. In addition, the Company is entitled to royalty fees based on gross sales. The Company opened its first joint venture Roadhouse Grill restaurant in Milan, Italy in November 2001, and it currently operates four restaurant locations in Italy, including one which was opened subsequent to April 27, 2003.

     By letter dated June 20, 2002, Cremonini notified the Company that it was immediately suspending the performance of its obligations under the joint venture agreement and ancillary agreements. The Company believes that the original joint venture agreement remains in effect and is currently in discussions with the Cremonini Group regarding the original agreement. No assurances can be made as to the possible outcome of these discussions. However, if the Company cannot reach an agreement with Cremonini, the Company will attempt to make arrangements with one or more other candidates to develop Roadhouse Grill restaurants in Europe. There can be no assurance that the Company will be able to make such arrangements. Further, if arrangements can be made, the terms may differ substantially from the terms of the joint venture with Cremonini.

ITEM 2.  PROPERTIES

     As of April 27, 2003, all but 12 of the Company’s open restaurants were located in leased space. Initial lease expirations range from five to 20 years, with the majority of the leases providing the Company with renewal options extending the lease term. All of the Company’s leases provide for a minimum annual rent, and several leases call for annual or other escalations at various points in the lease term or for additional rent based on sales volume at the particular location over specified minimum levels. Generally, the leases are triple net leases, which require the Company to pay the costs of insurance, taxes and a portion of the lessors’ operating costs. All 12 of the Company’s restaurants that are located on owned land are pledged as collateral on the debt used to acquire the land and building. The Company believes its facilities are in satisfactory condition, are suitable for their intended use and are, in the aggregate, sufficient for the present business needs of the Company.

     The Company owns a 30,500 square foot office building in Pompano Beach, Florida. The Company relocated its corporate headquarters to this facility in October 1999. The Company occupies approximately 19,000 square feet of the new facility and has leased the remaining 11,500 square feet for a five-year period ending in December 2005 with an option to renew by the tenant for an additional five-year period.

     The Company also owns the land and building related to a closed store that is currently held for sale. The Company is presently actively marketing this facility and pursuing a sale of this facility during fiscal year 2004.

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ITEM 3.  LEGAL PROCEEDINGS

BANKRUPTCY

     Please refer to ITEM 1, BUSINESS, RECENTLY COMPLETED PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, for a complete discussion of the Company’s recently completed Chapter 11 bankruptcy proceedings.

CLASS ACTION SUIT AND SEC INFORMAL INVESTIGATION

     As a result of a review of its accounting records, the Company, in August 2001, restated its previously reported, audited financial statements for the fiscal years ended April 30, 2000 and April 25, 1999, and the related, unaudited quarterly financial statements for those periods, as well as the unaudited financial statements for the quarters ended July 30, 2000, October 29, 2000, and January 28, 2001. In connection with the restatement, the Company filed amended Form 10-Ks for fiscal years 2000 and 1999, and amended Form 10-Qs for the fiscal 2001, 2000 and 1999 quarters containing the restated financial statements.

     The restatement occurred because of a determination by the Company that certain operating expenses were more appropriately attributable to fiscal 2000 and 1999 than later periods. The restatement resulted in a decrease in net income for fiscal 2000 and 1999, and the related quarterly periods, and an increase in net income for the quarters ended July 30, 2000, October 29, 2000 and January 28, 2001.

     On April 10, 2002, a purported class action complaint alleging violations of federal securities laws was filed in the United States District Court for the Southern District of Florida against the Company, the then chairman of the Company’s board of directors, and the Company’s president and chief executive officer. This action (the “Action”) is styled: Sears v. Roadhouse Grill, Inc, et al., Case No. 02-CV-60493.

     The Action purports to be brought on behalf of all purchasers of the stock of the Company between August 31, 1998 and August 1, 2001, with certain exclusions, and appears to be based principally, if not solely, on the fact that certain financial statements have been restated as described above. The Company believes there is no merit to the Action. The Company further believes that, under section 510(b) of the Bankruptcy Code, even if claims of the type asserted in the Action are allowed, they will be subordinated, in the Chapter 11 Case, to the claims of all creditors of the Company. Accordingly, such claims are treated under the Confirmed Plan of Reorganization as subordinate to the claims of all creditors.

     As the Company filed for relief under Chapter 11 of the United States Bankruptcy Code on April 16, 2002, any claims in this Action should have been filed by the plaintiffs with the Court. If the plaintiffs had filed a claim with the Court, their claim against the Company would have been subordinated to the claims of all creditors of the Company. However, no claim against the Company was filed during the bankruptcy proceedings. Based on discussions with the Company’s legal counsel, the Company believes that the class action suit is not likely to result in an unfavorable outcome to the Company. The Company further believes that even if the

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action brought by the plaintiffs is successful, the plaintiffs will share only in the distribution of stock in the reorganized company with the holders of the existing Common Stock.

     On July 26, 2002, the plaintiffs filed an amended class action complaint. The individual defendants filed a motion to dismiss the amended complaint on September 4, 2002, and the plaintiffs filed an opposition thereto on October 3, 2002. On April 4, 2003, the court heard arguments on the motion to dismiss and dismissed the amended complaint. The plaintiffs filed a second amended class action complaint on May 5, 2003. The individual defendants filed a motion to dismiss the second amended class action complaint on June 4, 2003, to which plaintiffs have not yet responded.

     The Company believes that the individual defendants are covered, with respect to the claims asserted in the Action, by the Company’s Directors and Officers Liability Insurance Policy issued by National Union Fire Insurance Co. of Pittsburgh, Pa. The policy provides directors and officers liability coverage and corporate securities coverage. It has aggregate limits of $5,000,000 and a self-insured retention for securities claims of $250,000. With respect to the case against the defendants, to the extent permitted by law the Company intends to indemnify the individual defendants.

     On August 3, 2001, the Securities and Exchange Commission (“SEC”) informed the Company that it is conducting an informal investigation regarding the restatement of the Company’s audited financial statements for the fiscal years ended 2000 and 1999 and the first three fiscal quarters of fiscal 2001. The Company has cooperated fully with the SEC and will continue to do so. The outcome of the SEC inquiry cannot be determined as of the date of this report.

OTHER

     The Company is a party to certain legal proceedings arising in the ordinary course of business. While it is not possible to predict or determine the outcome of any of these proceedings, the Company does not believe that any resulting liability will have a material adverse effect on the Company’s financial position or results of operations or its business.

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

     Effective May 15, 2003, the following actions were taken upon the written consent of the holders of a majority of the outstanding shares of the common stock of the Company: (a) the election of five directors to serve until the next annual meeting of shareholders (see Item 10 for the identity of the Company’s directors), or until their successors are elected and qualified, (b) the ratification of the appointment of Grant Thornton LLP as the Company’s independent auditors for fiscal year 2003, (c) the approval of Amended and Restated Articles of Incorporation for the Company and (d) the approval of the 2003 Stock Option Plan.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     As of April 27, 2003, the Company’s authorized and issued common equity consisted of 29,220,663 shares of common stock, par value $0.03 per share. The Company’s common stock is currently quoted on the Pink Sheets under the symbol “GRLL.PK.” The Company’s common stock previously traded on the Nasdaq National Market until the stock was delisted in May 2002.

     The following table sets forth, for the periods indicated, the highest and lowest closing sale prices for the common stock, as reported by the Nasdaq National Market through May 2002 and on the Pink Sheets thereafter:

DIVIDEND POLICY

     The Company has not declared or paid any cash dividends or distributions on its capital stock. The Company does not intend to pay any cash dividends on its common stock in the foreseeable future, as the current policy of the Company’s Board of Directors is to retain all earnings, if any, to support operations and finance expansion. Future declaration and payment of dividends, if any, will be determined in light of then current conditions, including the Company’s

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earnings, operations, capital requirements, financial condition, and other factors deemed relevant by the Board of Directors, at their discretion.

SHAREHOLDERS

     As of July 23, 2003, there were approximately 80 shareholders of record of the Company’s common stock. A portion of the Company’s outstanding common stock is held of record in broker “street name” for the benefit of individual investors and the Company believes that as of the date of this report there are approximately 900 beneficial holders of its common stock.

EQUITY COMPENSATION PLAN INFORMATION

     See Item 12.

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ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth for the periods and dates indicated selected financial data of the Company. The following should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Form 10-K.

STATEMENT OF
OPERATIONS DATA:

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BALANCE SHEET DATA:

* Note, for fiscal year 2002, total current liabilities, long term debt, capital lease debt and total liabilities do not include liabilities classified as subject to compromise.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     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 April 27, 2003, there were 70 Company owned Roadhouse Grill restaurants located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio, and South Carolina. Of these, 35 are located in Florida. One additional restaurant in North Carolina was opened subsequent to April 27, 2003. The Company also has three franchised restaurants in Malaysia, one franchised restaurant in Brasilia, Brazil, one franchised restaurant in Las Vegas, Nevada, one franchised restaurant in Cincinnati, Ohio, and four joint venture restaurants in Italy, including one which was opened subsequent to April 27, 2003.

REVENUES

     The Company’s revenues are derived primarily from the sale of food and beverages. In fiscal year 2003, restaurant sales generated from lunch and dinner amounted to approximately 26% and 74% of restaurant sales, respectively, as compared to 27% and 73%, respectively, in fiscal year 2002. Restaurant sales of food and beverages accounted for approximately 90% and 10%, respectively, of total restaurant sales in each of fiscal years 2003 and 2002. Franchise and management fees during fiscal year 2003

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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.

     Of the Company’s 71 currently operating Company-owned restaurants, one was opened in April 2003 and one was opened in June 2003. The Company’s new restaurants can be expected to generate above-average sales during the initial weeks that the restaurant is open, commonly referred to as the “honeymoon” period. As the restaurant is open longer, sales generally decline after initial trial by guests. There is no assurance that a new Roadhouse Grill restaurant will attain profitable operations. Furthermore, costs during the first several months of operation can be expected to be higher than the Company’s average costs, primarily cost of food and beverage sales and labor costs. There is no assurance that these costs will decline to more normalized levels as the restaurant matures.

     The average cash investment of the 69 Company-owned Roadhouse Grill restaurants open the entire 52 weeks in fiscal year 2003 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 12 restaurant sites operating and owned by the Company was approximately $838,000. The average annual occupancy cost for the restaurant sites leased by the Company is approximately $214,000.

     During the second and fourth quarters of fiscal 2002, the Company recognized impairment losses and restructuring charges of $5.8 million and $6.8 million, respectively, for the write-down of assets at 18 Company-owned restaurants at which operations had ceased or at which operations are currently being closed. During the second quarter of fiscal 2003, the Company recognized an additional asset impairment of $5.1 million relating primarily to certain restaurants that are not performing as expected and fixtures and equipment owned or relating to capital leases at certain of the closed restaurants. The Company also recognized during the second quarter of fiscal 2003 a restructuring charge of $0.1 million primarily relating to finalizing the estimated lease commitment for a closed restaurant. Also, during the thirteen weeks ended April 27, 2003, the Company recognized an asset impairment of $0.8 million relating to the final closure of the restaurant sites discussed above and an analysis of the value of the equipment removed and retained from these locations. The Company closed 13 of the restaurants by the end of fiscal year 2002 and four restaurants were closed during the thirteen weeks ended July 28, 2002. The remaining restaurant continues to be operated while the Company is considering a possible sale.

CRITICAL ACCOUNTING POLICIES

     Roadhouse Grill’s accounting policies are more fully described in Note 3 of the Notes to Consolidated Financial Statements. As disclosed therein, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the Company’s Consolidated Financial Statements.

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PROPERTY AND EQUIPMENT

     The Company accounts for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company regularly reviews the performance of its individual restaurants to identify possible under performing operations that should be assessed for possible impairments of long-lived assets. As part of this analysis, management considers factors that have in the past and may continue to impact operating results. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

INTANGIBLE ASSETS

     The Company accounts for intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”. As of April 27, 2003, the Company had unamortized goodwill in the amount of $1.5 million and unamortized identifiable intangible assets in the amount of $0.4 million. In accordance with SFAS No. 142, goodwill is subject to an annual impairment test based on its fair value and no amortization of goodwill is recorded. The intangible assets which have been determined to have a finite life are being amortized over their useful lives.

USE OF ESTIMATES

     The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results, particularly with respect to matters impacted by the proceedings under Chapter 11, could differ materially from those estimates. Amounts reported in the Company’s Consolidated Financial Statements that are based, in part, on the use of estimates include reserves relating to the collectibility of accounts receivable, insurance reserves relating to claim costs required to be funded by the Company, the recoverability of deposits and other prepaid items, estimated accrued property taxes and other accrued liabilities for which actual invoices have not yet been received and the liability for unredeemed gift certificates and gift cards. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. Roadhouse Grill constantly re-evaluates these significant factors and makes adjustments where facts and circumstances dictate.

     Management believes that the assumptions and other factors used to determine these estimates are reasonable and that, with the exception of insurance reserves relating to claim costs required to be funded by the Company, changes in these assumptions would not have a material impact on the Company’s financial position or results of operations. In regards to insurance reserves, recorded liabilities are based upon an estimate of the total amount that may be paid to settle claims required to be funded by the Company and

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incurred through the balance sheet date including consideration of amounts paid-to-date in relation to the individual claims, an analysis of the loss development on all reported claims, potential legal or other related costs and any stop loss limits applicable under the Company’s insurance policies. Such reserves are subject to change based upon any development that occurs in relation to the outstanding claims subsequent to the preparation of the Company’s Consolidated Balance Sheet. As of April 27, 2003 and April 28, 2002, total recorded insurance reserves were $2.0 million and $1.1 million, respectively.

     In addition, asset impairment charges, restructuring charges, and the reserve for restructuring are predominantly based on estimates of the market value of assets of which the Company plans to dispose and the amount of future cash flows estimated to be realized relating to impaired assets that are anticipated to be utilized in the Company operations in the future or expenditures estimated to be used to settle the outstanding obligations. Such estimates will also be affected by the time interval required to dispose of those assets to be sold. The assumptions used, particularly in regards to estimates of future cash flows to be realized relating to impaired or potentially impaired assets, are critical in assessing a potential impairment and, if any, estimating the amount of the impairment. These assumptions require consideration and projection of future trends in key operating ratios and the timing and impact of possible changes in operations relating to specific assets. Changes in these assumptions could have a material impact on the timing and amount of possible asset impairments and therefore the Company’s results of operations.

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RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated the percentage relationship to total revenues of certain statements of operations data.

STATEMENTS OF OPERATIONS
DATA:

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