UNITED STATES

                        SECURITIES & EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



                  For the Quarterly period ended April 1, 2001


ACT OF 1934

          For the transition period from ___________ to ______________

                         Commission file number: 0-28234

                            MEXICAN RESTAURANTS, INC.
             (Exact name of registrant as specified in its charter)

             TEXAS                                      76-0493269
(State or other jurisdiction of            (IRS Employer Identification Number)
incorporation or organization)

     1135 EDGEBROOK, HOUSTON, TEXAS                          77034-1899
(Address of Principal Executive Offices)                     (Zip Code)

        Registrant's telephone number, including area code: 713-943-7574

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 [ ]

Number of shares outstanding of each of the issuer's classes of common stock, as
of May 11, 2001: 3,522,905 shares of common stock, par value $.01.


                         PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

                   Mexican Restaurants, Inc. and Subsidiaries

                           Consolidated Balance Sheets

ASSETS                                                                          4/1/01            12/31/00
                                                                            ------------       ------------
Current assets:
  Cash and cash equivalents                                                 $  1,116,230       $    636,334
  Royalties receivable                                                            69,342             66,798
  Other receivables                                                              673,518            611,603
  Inventory                                                                      591,219            718,629
  Taxes receivable                                                                90,283            257,080
  Prepaid expenses and other current assets                                      704,914            529,830
                                                                            ------------       ------------
          Total current assets                                                 3,245,506          2,820,274
                                                                            ------------       ------------
Property, plant and equipment                                                 25,639,040         25,550,871
  Less accumulated depreciation                                               (7,661,554)        (7,339,223)
                                                                            ------------       ------------
           Net property, plant and equipment                                  17,977,486         18,211,648
Deferred tax assets                                                            1,108,456          1,167,661
Property held for resale                                                       1,100,000          1,100,000
Other assets                                                                   8,376,181          8,209,243
                                                                            ------------       ------------
                                                                            $ 31,807,629       $ 31,508,826
                                                                            ============       ============
Current liabilities:
  Current installments of long-term debt                                    $         --       $         --
  Accounts payable                                                             2,285,918          2,953,649
  Accrued sales and liquor taxes                                                 495,665            452,617
  Accrued payroll and taxes                                                    1,198,397          1,006,457
  Accrued expenses                                                               906,764            327,390
                                                                            ------------       ------------
          Total current liabilities                                            4,886,744          4,740,113
                                                                            ------------       ------------
Long-term debt, net of current portion                                         8,100,000          8,300,000
Other liabilities                                                                584,654            537,219
Deferred gain                                                                  2,981,975          3,042,832

Stockholders' equity:
  Preferred stock, $.01 par value, 1,000,000 shares
    authorized                                                                        --                 --
  Capital stock, $0.01 par value, 20,000,000 shares
    authorized, 4,732,705 shares issued                                           47,327             47,327
  Additional paid-in capital                                                  20,121,076         20,121,076
  Retained earnings                                                            6,409,764          6,025,121
  Deferred compensation                                                         (161,193)          (171,519)
  Treasury stock, cost of 1,191,000 and 1,135,000 shares, respectively       (11,162,718)       (11,133,343)
                                                                            ------------       ------------
          Total stockholders' equity                                          15,254,256         14,888,662
                                                                            ------------       ------------
                                                                            $ 31,807,629       $ 31,508,826
                                                                            ============       ============



                        Consolidated Statements of Income

                                                             13-WEEK            13-WEEK
                                                           PERIOD ENDED       PERIOD ENDED
                                                             04/01/01            4/02/00
                                                           ------------       ------------
  Restaurant sales                                         $ 15,451,021       $ 15,545,467
  Franchise fees and royalties                                  306,491            341,839
  Other                                                          20,489              5,402
                                                           ------------       ------------
                                                             15,778,001         15,892,708
                                                           ------------       ------------
Costs and expenses:
  Cost of sales                                               4,249,537          4,410,447
  Labor                                                       5,111,579          5,214,059
  Restaurant operating expenses                               3,784,719          3,556,370
  General and administrative                                  1,295,250          1,374,593
  Depreciation and amortization                                 573,593            496,000
  Pre-opening costs                                                 254             50,901
  Asset impairments and restaurant closing costs                     --                 --
                                                           ------------       ------------
                                                             15,014,932         15,102,370
                                                           ------------       ------------
    Operating income (loss)                                     763,069            790,338
                                                           ------------       ------------
Other income (expense):
  Interest income                                                10,674              4,416
  Interest expense                                             (191,752)          (204,898)
  Other, net                                                      9,768             (1,271)
                                                           ------------       ------------
                                                               (171,310)          (201,753)
                                                           ------------       ------------
  Income before income tax expense                              591,759            588,585
  Income tax expense                                            207,116            206,000
                                                           ------------       ------------
    Net income                                             $    384,643       $    382,585
                                                           ============       ============
Basic and diluted  income per share                        $       0.11       $       0.11
                                                           ============       ============
Weighted average number of shares (basic and diluted)         3,526,107          3,620,914
                                                           ============       ============
                                                              3,530,718          3,620,953
                                                           ============       ============



                      Consolidated Statements of Cash Flows

                                                                          13-WEEK PERIODS ENDED
                                                                        4/1/01            4/2/00
                                                                     -----------       -----------
Cash flows from operating activities:
  Net income                                                         $   384,643       $   382,585
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Deferred compensation                                               10,326            12,832
      Depreciation and amortization                                      573,593           496,000
      Deferred gain amortization                                         (60,857)          (63,523)
      Deferred taxes                                                      59,205                --
      Loss on sale of fixed assets                                         1,368             9,671
  Changes in assets and liabilities:
      Royalties receivable                                                (2,544)          (51,118)
      Other receivables                                                  (61,915)          (55,937)
      Income tax receivable/payable                                      166,797            80,309
      Inventory                                                          127,410            10,703
      Prepaid and other current assets                                  (182,010)          (48,810)
      Other assets                                                        (9,886)           24,324
      Accounts payable                                                  (667,731)         (847,589)
      Accrued expenses and other liabilities                             814,362           165,127
      Other liabilities                                                   49,150            51,132
                                                                     -----------       -----------
        Total adjustments                                                817,268          (216,879)
                                                                     -----------       -----------
        Net cash provided by operating activities                      1,201,911           165,706
                                                                     -----------       -----------
Cash flows from investing activities:
      Payment for purchase of acquisition, net of cash acquired               --                --
      Purchase of property, plant and equipment                         (492,640)         (830,792)
      Proceeds from sale of property, plant and equipment                     --           176,399
                                                                     -----------       -----------
        Net cash used in investing activities                           (492,640)         (654,393)
                                                                     -----------       -----------
Cash flows from financing activities:
      Net borrowings under line of credit                               (200,000)          160,000
      Purchase of treasury stock                                         (29,375)               --
                                                                     -----------       -----------
      Net cash provided by (used in) financing activities               (229,375)          160,000
                                                                     -----------       -----------

                                                                     -----------       -----------
      Increase (decrease) in cash and cash equivalents                   479,896          (328,687)
                                                                     -----------       -----------
Cash and cash equivalents at beginning of period                         636,334           743,935
                                                                     -----------       -----------
Cash and cash equivalents at end of period                           $ 1,116,230       $   415,248
                                                                     ===========       ===========
Supplemental disclosure of cash flow information:
      Cash paid during the period:
        Interest                                                     $    93,161       $   345,655
        Income Taxes                                                 $     7,375       $   679,463
      Non-cash investing and financing activity:
        Sale of property for note receivable                         $   244,109       $        --




1.      Basis of Presentation

               In the opinion of Mexican Restaurants, Inc. (the "Company"), the
        accompanying consolidated financial statements contain all adjustments
        (consisting only of normal recurring accruals and adjustments) necessary
        for a fair presentation of the consolidated financial position as of
        April 1, 2001, and the consolidated statements of income and cash flows
        for the 13-week periods ended April 1, 2001 and April 2, 2000. The
        consolidated statements of income for the 13-week period ended April 1,
        2001 is not necessarily indicative of the results to be expected for the
        full year.

2.      Accounting Policies

               During the interim periods the Company follows the accounting
        policies set forth in its consolidated financial statements in its
        Annual Report and Form 10-K (file number 0-28234). Reference should be
        made to such financial statements for information on such accounting
        policies and further financial details.

3       Net Income (loss) per Common Share

               Basic income per share is based on the weighted average shares
        outstanding without any dilutive effects considered. Diluted income per
        share reflects dilution from all contingently issuable shares, including
        options and warrants. Stock options and warrants outstanding at April 1,
        2001 and April 2, 2000 of 949,570 and 725,270 shares, respectively, were
        not considered in the computation of net income per common share because
        the effect of their inclusion would have been antidilutive.

Item 2 Management's Discussion And Analysis Of Financial Condition And Results
Of Operations

Special Note Regarding Forward-Looking Statements

               This Form 10-Q contains forward-looking statements within the
        meaning of the Private Securities Litigation Reform Act of 1995. Such
        forward-looking statements involve known and unknown risks,
        uncertainties and other factors which may cause the actual results,
        performance or achievements of the Company to be materially different
        from any future results, performance or achievements expressed or
        implied by such forward-looking statements. Such factors include, among
        others, the following: accelerating growth strategy; dependence on
        executive officers; geographic concentration; increasing susceptibility
        to adverse conditions in the region; changes in consumer tastes and
        eating habits; national, regional or local economic and real estate
        conditions; demographic trends; inclement weather; traffic patterns; the
        type, number and location of competing restaurants; inflation; increased
        food, labor and benefit costs; the availability of experienced
        management and hourly employees; seasonality and the timing of new
        restaurant openings; changes in governmental regulations; dram shop
        exposure; and other factors not yet experienced by the Company. The use
        of words such as "believes", "anticipates", "expects", "intends" and
        similar expressions are intended to identify forward-looking statements,
        but are not the exclusive means of identifying such statements. Readers
        are urged to carefully review and consider the various disclosures made
        by the Company in this report and in the Company's Annual Report and
        Form 10-K for the fiscal year ended December 31, 2000, that attempt to
        advise interested parties of the risks and factors that may affect the
        Company's business.


Results of Operations

               Revenues. The Company's revenues for the first quarter of fiscal
        2001 were down $114,707 or 0.7% to $15.8 million compared with the same
        quarter a year ago. Restaurant sales for the first quarter of 2001 were
        down $94,446 compared with the same quarter a year ago, to $15.5
        million. The decline was due to a decrease in the number of restaurants.
        Two restaurants were closed, one was converted to a franchise and one
        new restaurant was opened since the end of the first quarter of fiscal
        2000. Company-owned same-store sales for the quarter increased 2.8%.
        Franchise-owned same-stores sales for the quarter increased 2.1%.

               Costs and Expenses. Cost of sales, consisting primarily of food
        and beverage costs, but also including paper and supplies, decreased as
        a percentage of restaurant sales in the first quarter of 2001 to 27.5%
        as compared with 28.4% in the same quarter in fiscal 2000. The
        improvement was primarily due to a menu price increase across all
        concepts, except Casa Ole. This was partly offset by small increases in
        meat and cheese prices.

               Labor and other related expenses decreased as a percentage of
        restaurant sales to 33.1% in the first quarter of 2001 as compared with
        33.5% in the same quarter in fiscal year 2000. The decrease was
        primarily due to operating improvements at the Tortuga Coastal Cantina
        restaurants. The improvement was also partly due to last year's closure
        of under performing restaurants. Offsetting these improvements were
        workers' compensation insurance increases of 120.0%.

               Restaurant operating expenses, which primarily includes rent,
       property taxes, utilities, repair and maintenance, liquor taxes and
       advertising, increased as a percentage of restaurant sales to 24.5% in
       the first quarter of 2001 as compared with 22.9% in the same quarter in
       fiscal 2000. The majority of the increase was due to higher utility

               General and administrative expenses decreased by 5.8%, or $79,343
        from the same quarter in fiscal 2000. The decrease was due primarily to
        staff reductions in January 2001, resulting in a decrease in
        compensation costs. General and administrative expenses were 8.2% of
        total revenues in the first quarter of fiscal 2001 compared to 8.6% in
        the first quarter of fiscal 2000.

               Depreciation and amortization expense of $573,593, increased by
        $77,393 compared to the same quarter in the last fiscal year. This was
        due to the addition of two new stores in February and October 2000, four
        remodelings during fiscal 2000, as well as other fixed asset additions
        in the last four quarters. The closed restaurants mentioned above had
        relatively low book values of fixed assets so their closure did not
        significantly reduce depreciation.

               Pre-opening costs decreased approximately $50,000 as no new
        restaurants were opened in the first quarter of 2001. One new restaurant
        was opened in the first quarter of fiscal 2000.

               Other Income (Expense). Net other income (expense) of $171,310
        decreased by $30,443 compared to the same quarter in the last fiscal
        year. The decrease was due primarily to a decreased level of debt and a
        reduction in interest rates. The average debt balance was 9.1% lower
        than the balance in the comparable quarter last year.

               Income Tax Expense. The Company's effective tax rate was 35.0%
        in both the 1st quarter of 2001 and the comparable quarter last year.
        Expense changed by less than $1,200.

Liquidity and Capital Resources

               Net cash provided by operating activities was $1.2 million for
        the 13-week period ended April 1, 2001, compared to $0.2 million for the
        same period last year. As of April 1, 2001, the Company had a working
        capital deficit of $1.6 million, which is common in the restaurant
        industry, since restaurant companies do not typically require a
        significant investment in either accounts receivable or inventory.


               During the first 13 weeks of 2001, capital expenditures on
        property, plant and equipment were approximately $0.5 million as
        compared to $0.8 million for the same period in 2000. Capital
        expenditures included the remodeling of two restaurants. Additionally,
        the Company had cash outlays for necessary replacement of equipment and
        leasehold improvements in various older units. The Company estimates its
        capital expenditures for the remainder of the fiscal year will be
        approximately $1.1 million.

               The Company has a $9.5 million credit facility with Bank of
        America. At December 31, 2001, the credit facility will be reduced to
        $8.5 million and will mature on July 15, 2002. The interest rate is
        either the prime rate or LIBOR plus a stipulated percentage.
        Accordingly, the Company is impacted by changes in the prime rate and
        LIBOR. The Company is subject to a non-use fee ranging from 0.25% to
        0.5% on the unused portion of the revolver from the date of the credit
        agreement. As of April 1, 2000, the Company had $8.1 million outstanding
        on the revolving line of credit. The acquisition of La Senorita, which
        closed on April 30, 1999, used $4.2 million of the revolving line. The
        balance was used for new restaurant construction, remodeling and other
        working capital needs.

               Bank of America notified the Company in early February 2001 that
        it was asking the Company to find a replacement lender. They also
        indicated that to facilitate the effort they were moving the Company's
        account to the bank's Special Assets Group. As of December 31, 2000, the
        Company was in compliance with all of its loan covenants. However, based
        on tighter covenants that went into effect in the first quarter of
        fiscal 2001, the Company was out of compliance with a loan covenant at
        the end of the first quarter of fiscal 2001 and anticipates being out of
        compliance at the end of the second quarter. The bank, in return for
        additional fees and an increase in interest rates, has agreed to waive
        the 2001 first and second quarter lack of compliance and amend certain
        future covenant ratios under the debt agreement. The Company has
        received and is evaluating alternative finance proposals from several
        lenders. The goal is to enter into a term loan for at least $5.0
        million, and to establish a new revolving line of credit. Without
        property sales, the Company anticipates that it will use excess cash
        flow during fiscal 2001 to pay down approximately $2.0 million of
        outstanding indebtedness.

               The Company also has a $9.8 million forward commitment agreement
        with Franchise Finance Corporation of America ("FFCA"). At April 1,
        2001, the Company had approximately $9.8 million available under the
        FFCA forward commitments.

               The Company's management believes that with its forward
        commitments with Franchise Finance Corporation of America, along with
        operating cash flow and the Company's revolving line of credit with Bank
        of America (and its successor), funds will be sufficient to meet
        operating requirements and to finance routine capital expenditures and
        remodels through the end of the 2001 fiscal year.

Recent Accounting Pronouncements

        Statement of Financial Accounting Standards No. 133, Accounting for
        Derivative Instruments and Hedging Activities ("SFAS 133"), was issued
        by the Financial Accounting Standards Board in June 1998. SFAS 133
        standardizes the accounting for derivative instruments, including
        certain derivative instruments embedded in other contracts. Under the
        standard, entities are required to carry all derivative instruments in
        the statement of financial position at fair value. The Company adopted
        SFAS 133 beginning in fiscal year 2001. The Company does not expect the
        adoption of SFAS 133 to have a material effect on its financial
        condition or results of operation because the Company does not enter
        into derivative or other financial instruments for trading or
        speculative purposes nor does the Company use or intend to use
        derivative financial instruments or derivative commodity instruments.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

               The Company does not have or participate in transactions
        involving derivative, financial and commodity instruments. The Company's
        long-term debt bears interest at floating market rates. Based on amount
        outstanding at April 1, 2001, a 1% change in interest rates would change
        interest expense by $20,000.

                          PART II - OTHER INFORMATION

Not Applicable



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

Mexican Restaurants, Inc.

Dated:  May 15, 2001                                 By:  /s/ Curt Glowacki
Curt Glowacki                                           ------------------------
Chief Executive Officer
(Principal Executive Officer)

Dated: May 15, 2001                                  By:  /s/ Andrew J. Dennard
Andrew J. Dennard                                       ------------------------
Vice President, Chief Financial Officer & Treasurer
(Principal Financial Officer and
Principal Accounting Officer)