SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

     (MARK ONE)

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

For the Thirteen Weeks Ended July 25, 2004

OR

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

For the transition period from ___________ to ___________

Commission File Number: 0-28930

ROADHOUSE GRILL, INC.

2703-A GATEWAY DRIVE, POMPANO BEACH, FL 33069

Registrant’s telephone number, including area code (954) 957-2600

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

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

COMMON STOCK, PAR VALUE $0.03 PER SHARE
(Title of Class)

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     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 o

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

     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 o

     The number of shares of the registrant’s common stock outstanding as of September 9, 2004 was 29,220,663.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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FORM 10-Q
THIRTEEN WEEKS ENDED JULY 25, 2004

INDEX

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PART 1 FINANCIAL INFORMATION

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

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ROADHOUSE GRILL, INC.

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

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ROADHOUSE GRILL, INC.

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

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ROADHOUSE GRILL, INC.

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

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ROADHOUSE GRILL, INC.

(1) BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

     Roadhouse Grill, Inc. (the “Company”) was incorporated under the laws of the state of Florida in 1992. The principal business of the Company is the operation of full service specialty restaurants. The Company has also granted franchises and licenses to operate restaurants under the “Roadhouse Grill” name. The Company opened its first restaurant in Pembroke Pines, Florida (the greater Ft. Lauderdale area) in 1993. As of July 25, 2004, there were 69 company-owned Roadhouse Grill restaurants, 34 of which are located in Florida and the balance of which are located in Alabama, Arkansas, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio and South Carolina.

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

     The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     See the Company’s Annual Report on Form 10-K for the fifty-two weeks ended April 25, 2004 for a summary of significant accounting policies.

(3) LIQUIDITY

     The Company’s material financial commitments relate principally to its working capital requirements and its obligations to make operating and capital lease and term loan payments. As of July 25, 2004, total minimum annual payments required under the Company’s note and lease obligations, including interest thereon, were $17.2 million. See discussion below regarding the Company’s total contractual cash obligations. In addition, capital requirements relating to the opening of new restaurants have in the past been (and may in the future be) significant.

     The Company did not open any new restaurants during the thirteen weeks ended July 25, 2004. The Company opened one new restaurant during the fiscal year ended April 25, 2004 at a total cost of approximately $1.8 million, of which $0.4 million was expended during the fiscal year ended April 25, 2004. The Company does not currently have any additional Company-owned restaurants under development for fiscal year 2005. At this time, it is expected that the cash required to develop new restaurants beyond fiscal 2005, if any, will be funded from operations. Should cash from operations be insufficient for future expansion, and additional capital through debt and equity sources be unavailable, there can be no assurance that the Company will be able to open additional restaurants.

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     During the thirteen weeks ended July 25, 2004, the Company’s primary sources of working capital were cash provided by operations and the sale of food and beverage credits (see Note 8). During the fifty-two weeks ended April 25, 2004, the Company also collected $0.6 million in federal income tax refunds. Further, the Company filed for approximately $0.1 million in additional federal and state income tax refunds during fiscal year 2004. These additional tax refunds were collected subsequent to July 25, 2004.

     On August 6, 2004, the Company closed a transaction with Sovereign Roadhouse LLC, a wholly-owned subsidiary of Sovereign Investment Company, (“Sovereign”) involving the sale and leaseback of eleven restaurant properties that were previously owned. The sale price for the eleven properties was $21.8 million. The Company used $18.1 million of the net proceeds from the property sale to pay expenses related to the transaction and to repay $24.6 million of secured debt, which was repaid at a discount (resulting in a gain on extinguishment of debt of approximately $7.0 million). The remaining net proceeds from the sale of approximately $3.6 million will be used for working capital, including new marketing initiatives to promote the Company’s existing restaurants. See Note 9 for information regarding the sale/leaseback transaction.

     The Company has experienced significant cash flow problems in the past and may suffer from cash flow problems in the future. The Company believes that its ability to generate cash from operations is dependent upon, among other things, demand for its products, a continued commitment to providing an excellent dining experience for its customers, the development and implementation of successful marketing strategies, the cost levels of its various food products, and its continuing efforts to reduce its operating costs. The Company implemented revenue enhancement programs including the implementation of a new menu with enhanced menu items in June 2003. The Company also has taken, and continues to take, steps to control its costs. There can be no assurance that these initiatives will be effective in generating profits or producing sufficient cash flows to fund operating requirements, including debt repayments and lease obligations.

     Capital requirements relating to the implementation of the Company’s business plan have been and will continue to be significant. If cash generated from the Company’s operations and other possible sources described above are insufficient to fund the Company’s financial commitments and working capital requirements (including amounts required to support future growth), the Company will have to obtain additional financing. There can be no assurance that additional debt and/or equity financing will be available on terms acceptable to the Company, or at all. In the event the Company were to be unable to secure needed additional financing, the Company might have to significantly curtail its operations.

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     The following table summarizes the Company’s future contractual cash obligations for the remainder of fiscal year 2005, each of the next four fiscal years and thereafter as of July 25, 2004 (dollars in thousands). See Note 4 for further information regarding these obligations. Operating lease commitments include estimated common area maintenance expenses.

     Other commitments represent minimum amounts due to certain vendors under contractual agreements. Amounts reflected above could change as additional commitments may be made, cancellation provisions may be exercised by the Company or by its creditors, or agreements may be modified as warranted by changes in business or operational needs. Amounts due under long term debt agreements may be accelerated to the extent the Company realizes excess cash flow as described in Note 4. As described above and in Note 9, on August 6, 2004, the Company executed a sale and leaseback of eleven of its restaurant properties. As a result of this transaction, the Company’s minimum annual note and lease obligations have been reduced by approximately $1.7 million for each of fiscal years 2005 through 2009 and total obligations thereafter have increased by approximately $33.8 million.

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     The following table summarizes on a pro-forma basis (as if the sale-leaseback transaction had occurred on July 25, 2004) the Company’s future contractual cash obligations for the remainder of fiscal year 2005, each of the next four fiscal years and thereafter as of July 25, 2004 (dollars in thousands).

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(4) LONG-TERM DEBT

     As of July 25, 2004, the Company’s long-term debt was comprised of the following items (amounts in thousands):

     The carrying amount of property and equipment and asset held for sale used as collateral was approximately $46.2 million and $47.4 million at July 25, 2004 and April 25, 2004, respectively.

     The debt agreements resulting from the Company’s 2002 bankruptcy proceedings may require prepayments of principal to the extent the Company generates excess cash flow from operations, as defined in the agreements.

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     In April 2004, the Company executed the credit agreement relating to the secured note due Finova Capital Corporation. Such note bears interest at 9% and matures in October 2010. In accordance with the terms of the credit agreement, the Company is required to comply with various financial and non-financial covenants including limitations on capital expenditures and new indebtedness. As of July 25, 2004, the Company was in compliance with the terms of the credit agreement.

     On August 6, 2004, the Company executed a sale and leaseback transaction involving eleven of the restaurant properties that were previously owned. The net proceeds of the transaction were used, in part, to repay $24.6 million of debt, including all of the debt previously owed to Finova Capital Corporation and U. S. Mortgage LLC described above. See further discussion at Note 9.

(5) COMMITMENTS AND CONTINGENCIES

CLASS ACTION SUIT AND SEC INFORMAL INVESTIGATION

     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”) was styled: Sears v. Roadhouse Grill, Inc, et al., Case No. 02-CV-60493. On April 4, 2003, the court heard arguments on a motion to dismiss and dismissed the amended class action complaint. The plaintiffs filed a second amended class action complaint on May 5, 2003 naming only the individual defendants and not the Company. The individual defendants filed a motion to dismiss the second amended class action complaint on June 4, 2003, to which plaintiffs responded. The court heard oral arguments on the matter on October 30, 2003 and in March 2004 the second amended class action complaint was dismissed. No further actions have occurred in regards to this matter since the second amended class action complaint was dismissed and, as such, the Company believes that it will have no liability in regard to this matter.

     On August 3, 2001, the Securities and Exchange Commission (“SEC”) informed the Company that it intended to conduct 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 cooperated fully with the SEC and, at this time, believes that this matter has been concluded.

GUARANTOR OF EQUIPMENT LEASES

     The Company is the guarantor of equipment leases for three restaurants that are owned by one of its franchisees, Roadhouse West G.P., two of which are currently closed. In addition, the Company believes that other parties have also guaranteed these obligations. Roadhouse West G.P. is currently in default of the payment terms of the operating leases, and recently filed a petition under Chapter 11, which has now been converted into a Chapter 7 proceeding. The balance of the remaining lease payments due was approximately $1.0 million as of July 25, 2004. The leases are collateralized by the leased equipment and certain leasehold improvements. The Company cannot predict the outcome of the 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.

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OTHER AGREEMENTS

     The Company is a party to various agreements relating to services performed at its restaurants. Such agreements are generally for periods of one year or less and none of these agreements, individually, require payments that would be material to the Company’s financial position or results of operations.

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 liability resulting from these proceedings will have a material adverse effect on the Company’s financial position, results of operations or its business.

(6) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Please see the Notes to Condensed Consolidated Financial Statements in the Company’s Form 10-K for the fiscal year ended April 25, 2004 for a full discussion of the Company’s related party transactions.

(7) NET LOSS PER COMMON SHARE (“EPS”)

     Basic net loss per common share equals net loss divided by the weighted average shares outstanding during the period. The computation of diluted net loss per share includes dilutive common stock equivalents in the weighted average shares outstanding. The reconciliation between the computations is as follows (dollars in thousands, except per share data):

     Options to purchase 1,395,000 shares of common stock at a weighted average exercise price of $0.36 per share were outstanding during the thirteen weeks ended July 25, 2004, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

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     No options to purchase shares of common stock were outstanding during the thirteen weeks ended July 27, 2003.

(8) ADVANCE SALE OF FOOD AND BEVERAGE CREDITS

     In June 2003, the Company entered into an agreement with a loyalty and rewards company (the “Rewards Company”) involving the discounted advance sale of food and beverage credits to be used at its restaurants. As part of the agreement, during fiscal 2004, the Company received $2.3 million in exchange for the credits, which is recorded in the Condensed Consolidated Balance Sheet as unearned revenue. The amount of the discount provided to the Rewards Company relating to the sale of food and beverage credits is recognized as advertising expense (which is included in occupancy and other) in the Condensed Consolidated Statement of Operations as the credits are used at the restaurants. Throughout the term of the agreement, the Company and the Rewards Company share in the proceeds of credit card transactions resulting from use of the credits by members of the Rewards Company. The Company believes that the members of the Rewards Company were predominantly not current customers of the Company’s restaurants at inception. In June 2004, the Company renewed the agreement with the Rewards Company. Under the current agreement, the Company expects to receive $3.0 million in exchange for the sale of additional food and beverage credits, of which $1.5 million was received upon execution of the renewed agreement. As of July 25, 2004 and April 25, 2004 the unearned revenue related to this program was $1.5 million and $0.4 million, respectively.

(9) ASSET SALE/LEASEBACK

     On August 6, 2004, the Company closed a transaction with Sovereign Roadhouse LLC, a wholly-owned subsidiary of Sovereign, involving the sale and leaseback of eleven restaurant properties that were previously owned. The sale price for the eleven properties was $21.8 million. T