FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended October 29, 2000 OR [ ] 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 0-12145 AMARILLO MESQUITE GRILL, INC. Exact name of registrant as specified in its charter) Kansas 48-0936946 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Suite 200 302 North Rock Road Wichita, Kansas 67206 (Address of principal executive offices) (Zip Code) (316) 685-7286 (Registrant's telephone number, including area code) 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 . As of October 29, 2000, 8,241,137 shares of common stock $.01 par value were outstanding. PART 1 - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements AMARILLO MESQUITE GRILL, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)

ASSETS ~~July~~October 3029 January 30 2000 2000 Current assets: Cash $ ~~397~~398,~~209~~888 $ 407,710 Accounts receivable 4153,~~797~~122 21,137 Advances to affiliate 2226,~~635~~368 45,655 Inventories ~~161~~172,~~675~~382 169,027 Prepaid expenses and other current assets ~~264~~206,~~734~~236 125,229 Total current assets ~~888~~856,~~050~~996 768,758 Property and equipment: Buildings 1,108,129 1,108,129 Leasehold improvements 23,~~901~~008,~~061~~440 2,868,805 Equipment and fixtures 5,~~428~~449,~~876~~318 5,164,940 Leased property under capital lease 1,234,626 1,234,626 10,~~672,692~~800.513 10,376,500 Less: accumulated depreciation and amortization 3,~~395~~632,~~853~~492 2,998,736 7,~~276~~168,~~839~~021 7,377,764 Other assets: Cost in excess of net tangible assets of purchased business, net of amortization of $~~297~~315,~~414~~619 and $261,004 ~~649~~631,~~597~~392 686,007 Deposits and other 43,302 40,922 ~~692~~674,~~899~~694 726,929 $8,~~857~~699,~~788~~711 $8,873,451 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable $6,~~163~~137,~~260~~458 $ 270,912 Note payable, related party ~~104~~42,~~356~~262 224,000 Current portion of long term debt - $ 36,075 Current portion of obligation under capital lease 45,038 45,038 Accounts payable 1,~~176~~172,~~934~~007 1,029,247 Accrued payroll ~~231~~212,~~065~~334 225,674 Other accrued liabilities ~~690~~745,~~976~~692 741,154 Total current liabilities 8,~~411~~354,~~629~~791 2,572,100 Long-term debt, less current portion - 5,904,586 Obligation under capital lease, less current portion ~~938~~927,~~570~~302 961,104 Stockholders' equity (deficit): Preferred stock, $.01 par value, authorized 10,000,000 shares, none issued - - Common stock, $.01 par value, authorized 20,000,000 shares, issued 8,301,137 shares at July 30, 2000 and at January 30, 2000 83,011 83,011 Additional paid-in capital 7,~~581~~606,~~542~~002 7,532,622 Accumulated deficit (78,~~886~~001,~~964~~395) (7,909,972) Treasury stock, 60,000 shares of common stock at cost ( 270,000) ( 270,000) Total stockholders' equity (deficit) ( ~~492~~582,~~411~~382) ( 564,339) $8,~~857~~699,~~788~~711 $8,873,451

[FN] See accompanying notes to consolidated financial statements. 2 AMARILLO MESQUITE GRILL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Thirteen Weeks Ended ~~Twenty~~Thirty-~~Six~~Nine Weeks Ended ~~July~~October 3029 ~~August~~October 131 ~~July~~October 3029 ~~August~~October 131 2000 1999 2000 1999 Net sales $5,~~127~~260,~~450~~497 $4,~~429~~353,~~388~~939 $1016,~~756~~017,~~803~~300 $ 913,~~060~~414,~~230~~169 Costs and expenses: Cost of goods sold 1,~~751~~839,~~628~~819 1,~~525~~533,~~247~~171 35,~~674~~514,~~812~~631 34,~~118~~651,~~047~~218 Operating expenses 2,~~728~~760,~~159~~154 2,~~139~~213,~~543~~648 58,~~585~~345,~~132~~286 46,~~340,~~554,202 Depreciation and amortization ~~246~~240,~~294~~308 ~~220~~225,~~729~~628 ~~492~~732,~~587~~895 ~~441~~667,~~457~~085 General and administrative ~~292~~339,~~139~~646 ~~307~~340,~~333~~509 ~~606~~945,~~234~~880 ~~617~~957,~~481~~990 5,~~018~~179,~~220~~927 4,~~192~~312,~~852~~956 1015,~~358~~538,~~765~~692 812,~~517~~830,~~539~~495 Operating income ~~109~~80,~~230~~570 ~~236~~40,~~536~~983 ~~398~~478,~~038~~608 ~~542~~583,~~691~~674 Other income (expense) Interest expense ( ~~166~~170,~~604~~541) ( ~~160~~161,~~045~~226) ( ~~326~~496,~~110~~651) ( ~~320~~481,~~398~~624) Noncash expense from issuance of stock options to related parties pursuant to debt guarantees ( 24,460) ( 24,460) ( 4873,~~920~~380) ( 4873,~~920~~380) (Provision ~~191~~for litigation settlement - (135,~~064~~000) (- ~~184~~135,~~505~~000) ( ~~375~~195,~~030~~001) (320,686) ~~369~~(570,~~318~~031) ~~Earnings~~ (~~loss~~690,004) Loss before income taxes ( 81114,~~834~~431) 52(279,~~031~~703) 23( 91,~~008~~423) ~~173~~(106,~~373~~330) Provision for income taxes - - - - Net ~~Earnings~~Loss ~~(loss)~~ $( 81(114,~~834~~431) $ 52(279,~~031~~703) $ 23( 91,~~008~~423) $ ~~173~~(106,~~373~~330) Net ~~earnings (~~loss) per common share- Basic and diluted $ (.01) $ (.0103) $ -(.01) $ (.0201) Average shares outstanding- Basic and diluted 8,241,137 78,~~723~~056,~~895~~668 8,241,137 7,~~711~~866,~~040~~450

[FN] See accompanying notes to consolidated financial statements. 3 AMARILLO MESQUITE GRILL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

~~Twenty~~Thirty ~~Six~~Nine Weeks Ended ~~July~~October 3029 ~~August~~October 131 2000 1999 Cash flows from operating activities: Net ~~earnings~~Loss $( 2391,~~008~~423) $( ~~173~~106,~~373~~330) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization ~~492~~732,~~587~~895 ~~441~~667,~~457~~085 Noncash expense from issuance of stock options pursuant to debt guarantees 4873,~~920~~380 4873,~~920~~380 Changes in assets and liabilities (Increase) decrease in accounts receivable 2( 12,~~360~~698) ( 922,~~321~~218) (Increase) decrease in inventories 7( 3,~~352~~355) 282,~~175~~861 (Increase) decrease in prepaid expenses and other current assets ( ~~139~~83,~~505~~387) ( 8830,~~077~~808) Increase (decrease) in accounts payable ~~147~~142,~~687~~760 1226,~~900~~615 Increase (decrease) in accrued expenses ( 448,~~788~~802) ( ~~172~~99,~~850~~228) Other net (- ~~2,380)~~ ( 1,540) Cash provided by (used in) operating activities ~~535~~749,~~241~~370 ~~433~~509,~~037~~817 Cash flows from investing activities: Purchase of property and equipment ( ~~355~~468,~~251~~537) ( ~~150~~323,~~708~~806) Cash used in investing activities ( ~~355~~468,~~251~~537) ( ~~150~~323,~~708~~806) Cash flows from financing activities: Sale of common stock - 24645,520 Repayment of notes payable and ~~Note~~note payable related party ( ~~167~~255,~~957~~853) - Repayment of long-term borrowings and capital lease obligations ( 2233,~~534~~802) ( ~~234~~361,~~496~~673) Cash provided by financing activities ( ~~190~~289,~~491~~655) ~~( 209~~262,~~976)~~847 Increase (decrease) in cash ( 108,~~501~~822) 72448,~~353~~858 Cash at beginning of period 407,710 214,513 Cash at the end of period $ ~~397~~398,~~209~~888 $ ~~286~~663,~~866~~371 Supplemental disclosure of cash flow information: Cash paid for interest $ ~~326~~496,~~110~~651 $ ~~320~~481,~~398~~674 Cash paid for income taxes $ - $ -

[FN] See accompanying notes to consolidated financial statements. 4 AMARILLO MESQUITE GRILL, INC. Notes to Consolidated Financial Statements (Unaudited) October 29, 2000 (1) Principles of Consolidation The consolidated financial statements include the accounts of Amarillo Mesquite Grill, Inc., and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated. (2) Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the thirty-nine week period ended October 29, 2000 are not necessarily indicative of the results that may be expected for the year ended January 28, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 10-K and Annual Report to Stockholders as filed on April 23, 2000. (3) Net Earnings Per Share The Company, as required under FASB Statement no. 128, Earnings Per Share, calculates and presents both a basic and diluted earnings per share in the financial statements. Earnings per common share is computed on the basis of the weighted-average number of common shares outstanding during each period presented. The Company has granted options to employees to purchase 1,261,350 shares of common stock at a weighted average exercise price of $1.97 per share. These options were not included in the computation of diluted earnings per share because the exercise price of those options exceeded the average market price of the common shares during the quarter. Also, since the Company had a net loss available to common stockholders, inclusion of these options would be antidilutive to earnings per share. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation. Results of Operations Three Months Ended October 29, 2000 Compared to Three Months Ended October 31, 1999. For the three months ended October 29, 2000, sales were $5,260,497 as compared to sales of $4,353,939 for the third quarter of the prior year. As of October 29, 2000, the Company operated fifteen Amarillo Mesquite Grills as compared to thirteen Amarillo Mesquite Grills as of October 31, 1999. Cost of sales, as a percentage of total sales, was 35.0% and 35.2% for the 2000 and 1999 periods respectively. Operating expenses, as a percentage of total sales, were 52.5% and 50.8% for the 2000 and 1999 periods respectively. The increase in operating expense is due to an increase in promotional costs related to various programs designed to increase customer counts and same store sales. In addition, the Company opened its fifteenth restaurant on the first day of the third quarter and incurred higher labor expenses as a result of this. General and administrative expenses, as a percentage of sales, was 6.5% for the quarter ended October 29, 2000, as compared to 7.8% for the third quarter of the prior year. The decrease in general and administrative, as a percentage of sales is the result of increasing sales while maintaining the dollar amount of expense at a fairly constant level for both periods. Depreciation and amortization is directly related to the acquisition and disposition of fixed assets. Two restaurants were opened between the end of the third quarter of 1999 and the third quarter of the current year, thereby accounting for the increase in depreciation and amortization. Interest expense was $170,541 for the quarter ended October 29, 2000 as compared to $161,226 for the same period a year ago. Interest expense is a function of the interest rate and the amount of debt. While the interest rate has remained relatively constant the amount of short and long-term debt has decreased. Accordingly interest expense has remained relatively constant. The Company incurred noncash expenses of $24,460 for the 2000 and 1999 periods respectively, relating to the issuance of stock options pursuant to debt guarantees. Historically the third quarter of the year is the weakest of the year in terms of sales and earnings and this year was no exception. For the third quarter ended October 29, 2000, the Company reported a loss of $114,431, or one cent per common share, as compared to a loss of $279,703, or three cents per common share, for the third quarter of the prior year. Nine Months Ended October 29, 2000 Compared to Nine Months Ended October 31, 1999. For the nine months ended October 29, 2000, sales were $16,107,300 as compared to sales of $13,414,169 for the first nine months of the prior year. The Company operated fifteen Amarillo Mesquite Grills as of October 29, 2000, as compared to thirteen Amarillo Mesquite Grills as of October 31, 1999. Cost of sales, as a percentage of total sales, was 34.4% and 34.7% for the 2000 and 1999 periods respectively. 6 Operating expense, as a percentage of total sales, was 52.1% and 48.9% for the 2000 and 1999 periods respectively. The increase in operating expense is due to an increase in promotional costs related to various programs designed to increase customer counts and same store sales. In addition, the Company opened its fifteenth restaurant on the first day of the third quarter and incurred higher labor expenses as a result of this. General and administrative expense, as a percentage of total sales was 5.9% for the nine months ended October 29, 2000, as compared to 7.1% for the first nine months of the prior year. The decrease in general and administrative expense is the result of reducing the dollar amount of certain expenses, principally training labor and area management expense, along with increasing sales. Depreciation and amortization is directly related to the acquisition and disposition of fixed assets. Interest expense was $496,651 for the nine months ended October 29, 2000, as compared to $481,624 for the same period a year ago. Interest expense is a function of the interest rate and the amount of debt. While the interest rate has increased over the past few months, the amount of short and long-term debt has decreased. Consequently, interest expense has remained relatively constant. Liquidity and Capital Resources The Company's primary sources of funding to finance its business have been its cash flow from operations, and proceeds principally from long term debt. On October 29, 2000 and January 30, 2000, the Company had an excess of current liabilities over current assets of $7,497,793 and $1,803,342, respectively. However included as a current liability as of October 29, 2000 is a bank note payable in the amount $5,904,586 which is due April 15, 2001. Management expects to renew the note on April 15, 2001 and commence making monthly principal payments based on a 60 month amortization period. Cash flow from operations, was $749,370 and $509,817 for 2000 and 1999 respectively. Management anticipates higher cash flow from operations in fiscal 2001 and that such higher operating cash flow will enable the Company to meet its financial obligations in fiscal 2001 as they come due. On May 12, 1998, the President of the Company loaned the Company $250,000 to fund construction cost overages. The note was an unsecured 10% demand note due January 3, 2001. As of October 29, 2000, the note had a balance of $42,262. Although the Company's President has made loans to the Company in the past, there is no assurance that he will make additional loans in the future. Substantially, all of the Company's revenues are derived from cash sales. The Company does not maintain significant receivables and inventories; therefore, working capital requirements for operations are not significant. The Company plans to continue expansion of the Amarillo Mesquite Grill concept in fiscal 2001. The Company intends to lease existing restaurant properties which are suitable for conversion to the Amarillo Mesquite Grill concept. It is expected that each conversion will require approximately $300,000 to $500,000 for equipment and remodel costs. A ground-up proto-type restaurant will cost approximately $1.3 million for the land, building and equipment. The Company has no commitments for financing at this time. In order for the Company to meet its expansion goals for fiscal 2001, it may need to raise additional funds through debt or equity instruments, the availability and terms of which will depend upon market and other conditions. There can be no assurance that such additional financing will be available on terms acceptable to the Company. 7 The Company has restructured its long-term bank debt to provide for interest only payments through April 15, 2001. The purpose of the restructuring is to use cash flow to open additional restaurants that would otherwise be used to retire long term debt. Management views this as a way to continue our growth, that should result in increased future earnings and cash flow, but do so without increasing bank debt. This report contains certain forward-looking statements, including those relating to the opening of additional restaurants and planned capital expenditures. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, actual results could differ materially from such forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company that objectives and plans of the Company will be achieved. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K Not applicable. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMARILLO MESQUITE GRILL INC. (Registrant) Date December 8, 2000 /s/CHRIS F. HOTZE Chris F. Hotze - President 10

FOR WITHHELD Chris F. Hotze 5,825,883 37,640 Linn F. Hohl 5,825,883 37,640 C. Howard Wilkins, Jr. 5,825,883 37,640 Alan Bundy 5,825,883 37,640

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