U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)


	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended April 30, 2006.


	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
0-18369

BOSTON RESTAURANT ASSOCIATES, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware			61-1162263
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
999 Broadway, Suite 400 Saugus, Massachusetts			01906
(Address of Principal Executive Offices			(Zip Code)

(781) 231-7575

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

None

Securities registered under Section 12(g) of the Securities Exchange Act of 1934:

Common Stock, $.01 par value per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

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 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 the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act (Check One):


Large Accelerated Filer	Accelerated Filer	Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The aggregate market value of registrant’s Common Stock, $.01 par value per share, held by non-affiliates of the registrant as of the end of the second quarter fiscal year 2006 was $4,080,399 based upon the average of the closing bid and asked prices of such stock on that date as reported on the OTC Bulletin Board. As of June 29, 2006 there were 7,035,170 shares of the registrant’s Common Stock, $.01 par value per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

INDEX

PART I

ITEM 1.

BUSINESS

ITEM 1A.

RISK FACTORS

ITEM 2.

PROPERTIES

ITEM 3.

LEGAL PROCEEDINGS

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6.

SELECTED FINANCIAL DATA

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.

CONTROLS AND PROCEDURES

ITEM 9B.

OTHER INFORMATION

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11.

EXECUTIVE COMPENSATION

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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FORM 10-K

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘‘SAFE
HARBOR’’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995

Forward-looking statements in this report, including without limitation statements relating to the adequacy of the Company’s working capital and other resources, ability to obtain additional financing, the timing of the Company’s new store openings and future expansion, the Company’s potential merger transaction, and anticipated future cash flows from particular sources are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without limitation: risks associated with the Company’s ability to obtain funding; potential quarterly fluctuations in the Company’s operating results; seasonality of sales; competition; risks associated with expansion; risks associated with the failure to close the Company’s merger transaction; the Company’s reliance on key employees; risks generally associated with the restaurant industry; risks associated with geographic concentration of the Company’s restaurants, risks associated with serving alcoholic beverages, and other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as ‘‘may’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’, ‘‘ ‘‘estimate’’, ‘‘anticipate’’ or ‘‘believe’’ or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to have been correct, it can give no assurance that such expectations will prove to have been correct. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. (See ‘‘Item 1. Business — Risk Factors.’’)

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PART I


ITEM 1.	BUSINESS

General

During the fiscal year ended April 30, 2006 (‘‘Fiscal 2006’’) Boston Restaurant Associates, Inc. (the ‘‘Company’’) operated a chain of sixteen restaurants including one sit down and twelve fast-service, high volume pizzerias under the ‘‘Pizzeria Regina’’ name, three full-service family-style Italian/American restaurants under the ‘‘Polcari’s North End’’ name for the entire year and one Polcari’s North End restaurant for three months. A majority of restaurants are located in metropolitan Boston, Massachusetts.

The Pizzeria Regina restaurants feature the Company’s signature product, its premium Neapolitan style, thin crust pizza, prepared in gas-fired brick ovens. The original Pizzeria Regina, located in Boston’s historic North End, has served the Company’s premium brick oven pizza since 1926. The Company believes that the Pizzeria Regina brand name and the pizza itself are local symbols of superior and distinctive pizza. Of the currently existing Pizzeria Regina restaurants, twelve are food court kiosks (self-service, take-out style emphasizing pizza slices with common area seating), while the original 1926 North End Pizzeria Regina is a wait service restaurant (full-service style emphasizing whole pizzas with in-restaurant seating). (See ‘‘Pizzeria Regina Restaurants.’’)

The Polcari’s North End restaurants are full-service Italian/American, family-style restaurants that capture the community spirit of the 1940s and 1950s in Boston’s Italian North End neighborhood. These restaurants highlight exposed gas-fired brick ovens in open view of diners, memorabilia and photographs depicting 1940s and 1950s scenes in Boston’s North End, and large tables to encourage family-style dining. (See ‘‘Polcari’s North End Restaurants.’’)

The first Pizzeria Regina was opened in 1926, and the predecessor corporation was incorporated in 1986. The Company became public in 1994, and since that date has continuously operated a restaurant chain which has increased over time to the present 16 operating restaurants. The Company’s principal offices are located at 999 Broadway, Saugus, Massachusetts 01906 and its telephone number is (781) 231-7575 and its corporate website is www.polcaris.com As used in this Report, unless otherwise indicated, the term ‘‘Company’’ refers to Boston Restaurant Associates, Inc. and its subsidiaries. We make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as practicable after we electronically file such material with or furnish it to the Securities and Exchange Commission (the ‘‘SEC’’).

The information found on our website is not part of this or any other report we file with or furnish to the SEC.

You may read and copy any document we file at the SEC’s public reference room located at: Headquarters Office, 100F Street N.E., Room 1580, Washington, DC 20549.

You may obtain information on the operation of the Public Reference Room by Calling the SEC at 1-800-SEC-0330. Our SEC filings are also available at the SEC’s website at http://www.sec.gov. This website address is included in this document as an inactive textual reference only.

Recent Developments

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the Merger Agreement, the preferred stockholders of the Company would be entitled to receive a liquidation preference of $0.85 per share ($974,998) plus accrued and unpaid dividends as set forth in the certificate of designation for the preferred stock, without interest, as well as the product of the number of shares of common stock that such shares of preferred stock are convertible into immediately prior to the merger and $.70, without interest. The consummation of the Merger is subject to customary closing conditions, including the approval of the stockholders of the Company. In addition, the consummation of the Merger is subject to the condition that certain transaction costs incurred by the Company not exceed $625,000. The Company has determined that it is unlikely that the Company will satisfy this condition and has sought a waiver from Dolphin. As of June 29, 2006, the Company has not received that waiver.

In any event, the Company is required to pay certain of Dolphin’s expenses. As of the date hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P. hold a 40.3% beneficial interest in the Company’s common stock. Peter Salas, a member of the Company’s Board of Directors, is President of Dolphin Asset Management Corp. an affiliate of Dolphin, and its related companies.

Financing

For the year ended April 30, 2006, after an asset impairment of approximately $307,000 the Company had income from continuing operations before dividends to preferred shareholders of approximately $228,000. As of that date, the Company had a working capital deficiency of approximately $1,175,000 and stockholders’ equity of $55,000. The Company was in compliance with all financial covenants for fiscal year ended April 30, 2006.

The Company has analyzed cash flow and believes that cash flow from operations will be sufficient to fund operations for the next twelve months. The Company’s growth and expansion will be dependent upon obtaining additional financing. There can be no assurance that any future additional financing will be available on commercially reasonable terms, or at all, and the success or lack of success of the Company’s restaurants opened within recent years and planned to be opened in the future may have a critical effect on the Company’s ability to raise funds through the sale of stock or otherwise.

Pizzeria Regina Restaurants

The Company currently operates thirteen Pizzeria Regina restaurants which are fast-service, high volume pizzerias that feature premium brick oven pizza and cater primarily to the lunchtime diner (with the exception of the original North End location, which serves both the lunch and dinner markets). Of these thirteen restaurants, twelve are food court kiosks and the original North End Pizzeria Regina is a wait-service restaurant.

The Pizzeria Regina restaurants feature the Company’s premium Neapolitan style, thin crust, brick oven pizza. This pizza features a proprietary dough and pizza sauce, which the Company believes combine to produce a distinct flavor and superior pizza. These pizzas are offered with a wide variety of fresh vegetable and cured meat toppings. The Company believes that the premium quality of its pizza, a result of a proprietary ingredient mix and baking process, provides appeal to both the lunch and dinner markets. The original Pizzeria Regina, located in Boston’s historic North End, has served the Company’s premium brick oven pizza since 1926.

The Company’s twelve food court kiosks primarily serve pizza by the slice with multiple topping choices and operate side-by-side with other fast food vendors in retail malls. Menu items are presented in a self-service, take-out style designed to allow customers to order, pay for and consume their food in a very short period of time. Customers who desire to sit down after purchasing their food may join customers of other food court vendors in one or more designated common areas within the mall. The focused menu, self-service, take-out style and common seating provide food court customers with a fast, low cost dining alternative as compared to more traditional full-service restaurants.

The Company intends to seek locations for additional Pizzeria Regina food court kiosks in malls and high traffic areas. Management estimates that the cost of opening a typical food court kiosk

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currently is approximately $550,000. The Company cannot guarantee that actual costs will not significantly exceed these estimates, that the Company will be able to obtain financing necessary to construct additional food courts kiosks, that the Company will be able to complete the construction of new kiosks on a timely basis and within budget, if at all, or that the Company will be able to operate these kiosks successfully.

In April, 2006 the Company entered into a long term lease with Station Landing, LLC in Medford, Massachusetts.

Polcari’s North End Restaurants

In March 1995, the Company opened its first Polcari’s North End restaurant in Saugus, Massachusetts, recreating a restaurant similar to one that the Company’s predecessor had operated from 1954-1989 in Boston’s North End. The Polcari’s North End restaurant concept is designed to create an Italian/American casual dining ambiance that captures the community spirit of the 1940s and 1950s in Boston’s Italian North End neighborhood. The restaurant highlights exposed gas-fired brick ovens in open view of diners. In addition, memorabilia and photographs depicting scenes in Boston’s North End in the 1940s and 1950s are used to create a neighborhood atmosphere rich with history. The restaurant also features large tables of six or more seats to encourage family style dining and a value-oriented menu that includes branded Pizzeria Regina pizza, large Italian/American pasta dishes and fresh baked breads.

The Company has also developed a bistro-restaurant concept, which was inspired by the success of the Saugus-based Polcari’s North End™ restaurant. Unlike the Saugus restaurant, the bistro restaurants are smaller in size, creating a more intimate family dining experience. In addition, the menu is a modified version of the Saugus-based offerings, providing for a lighter dining experience. The bistro restaurants operate under the Polcari’s North End™ trademark in order to capitalize on that mark’s recognition for quality. The Company currently operates two Polcari’s North End bistro Restaurants in Woburn, Massachusetts and Salem, New Hampshire.

Site Selection

The Company considers the specific location of a restaurant to be critical to the restaurant’s long term success. It devotes significant time and resources to the investigation and evaluation of each prospective site, including consideration of local market demographics, population density, average household income levels and site characteristics such as visibility, accessibility and traffic.

The Company seeks sites for the Pizzeria Regina kiosk restaurants within high-traffic locations including food courts and retail shopping malls located in metropolitan areas. The Company also considers existing local competition and, to the extent such information is available, the sales of other comparably priced restaurants operating in the area.

Restaurant Operations

The Company invests substantial time and effort in its training programs, which focus on all aspects of restaurant operations, including kitchen, bar and dining room operations, food quality and preparation, alcoholic beverage service, liquor liability avoidance, customer service and employee relations. The Company holds regular meetings of its managers to address new products, continuing training and other aspects of business management. Managers also attend periodic seminars conducted by Company personnel and outside experts on a broad range of topics.

New employees are trained by experienced employees who have demonstrated their ability to implement the Company’s commitment to provide high quality food and attentive service. The Company has developed manuals regarding its policies and procedures for restaurant operations. Supervisory management regularly visits Company restaurants and meets with their management teams to ensure compliance with the Company’s strategies and standards of quality in all aspects of restaurant operations and personnel development.

The Company seeks to attract and retain quality restaurant managers by providing them with an appropriate balance of autonomy and direction. Annual performance objectives and budgets for each

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restaurant are jointly determined by restaurant managers and senior management. To provide incentives, the Company has implemented a cash bonus program tied to achievement of specified objectives.

The staff for a typical Pizzeria Regina kiosk restaurant consists of one general manager, two managers and approximately 12 to 15 hourly employees. The staff of the original Pizzeria Regina consists of a general manager, two managers, and approximately 15 to 25 hourly employees. The staff for a typical Polcari’s North End restaurant consists of one general manager, two managers, one kitchen manager and approximately 40 to 60 hourly employees. Most of the Company’s hourly employees are part-time personnel. The general manager of each restaurant is primarily responsible for the day-to-day operations of the entire restaurant and for maintaining standards of quality and performance established by the Company.

Purchasing and Commissary Operations

The Company maintains a commissary where pizza dough is produced for the Company’s restaurants. The dough preparation requires a high degree of consistency that would be more difficult to maintain at the individual restaurant locations. The Company believes that close, centralized monitoring of the dough preparation ensures a more consistent premium product. All other food preparation is performed on site at the restaurant level.

The Company negotiates directly with wholesale suppliers of certain high volume food ingredients such as cheese, tomato sauce, and flour to ensure consistent quality and freshness of products across its restaurants and to obtain competitive pricing. These ingredients are then purchased for the Company by a third party independent distributor at the negotiated price and redistributed to the Company’s restaurants. All other food ingredients and beverage products are purchased directly by the general manager of each restaurant in accordance with corporate guidelines. The Company believes that essential food and beverage products are available from a choice of many qualified wholesale suppliers.

Advertising and Marketing

The Company’s target market for the Pizzeria Regina restaurants is very broad, consisting of individuals and families who seek fast-service and high value-to-price meals during the lunch period. The target market for the Polcari’s North End restaurants is adults and families who seek moderately priced Italian dinner entrees in a comfortable environment. The Company believes that its focus on premium quality, service and value is the most effective approach to attracting customers. The Company plans to rely upon local advertising, high volume traffic flow at retail malls and word of mouth exposure to market its restaurants.

Competition

The restaurant business is highly competitive. Price, restaurant location, food quality, service and attractiveness of facilities are important aspects of competition, and the competitive environment is often affected by factors beyond the Company’s or a particular restaurant’s control, including changes in the public’s tastes and eating and drinking habits, population and traffic patterns and local economic conditions. The Company’s restaurants compete with a wide variety of restaurants ranging from national and regional restaurant chains (some of which have substantially greater financial resources than the Company) to locally-owned restaurants. There is also active competition for liquor licenses in certain markets and for advantageous commercial real estate sites suitable for restaurants. The Pizzeria Regina restaurants compete with other fast-service, high volume food providers on the basis of price, value, location, menu and speed of service. The Polcari’s North End restaurants compete with other casual, full-service restaurants primarily on the basis of menu selection, quality, price, service, ambiance and location.

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Seasonality

Certain of the Company’s restaurants are subject to seasonal fluctuations in sales volume. Sales at the Pizzeria Regina restaurants are typically higher in June through August, and in November and December due to increased volume in shopping malls during the holiday and tourist seasons and school vacations.

Employees

As of June 29, 2006 the Company had approximately 425 employees, of whom 11 were corporate and administrative personnel, approximately 55 were field supervision or restaurant managers or management trainees, and the remainder were hourly restaurant personnel. Many of the Company’s hourly employees work part-time. The Company believes that its relationship with its employees is good. None of the Company’s employees are covered by a collective bargaining agreement.

Trademarks and Service Marks

The Company regards its trademarks and its service marks as having significant value and as being important factors in the marketing of its products. The Company’s most significant trademarks are ‘‘Pizzeria Regina,’’ the Regina crown design logo, and ‘‘Polcari’s North End,’’ each of which are U.S. registered trademarks owned by the Company. The Company has also registered with the U.S. Patent and Trademark Office ‘‘Regina,’’ the ‘‘Polcari’s’’ logo, ‘‘Pizzeria Regina of Boston’s North End’’ and ‘‘Pizzeria Regina, Boston’s Brick Oven Pizza’’ as service marks.

Government Regulation

The Company is subject to a variety of federal, state, local laws, and regulations. Each of the Company’s restaurants is subject to licensing and regulation by a number of government authorities, including alcoholic beverage control, health, safety, sanitation, building and fire agencies in the state or municipality in which the restaurant is located. Difficulties in obtaining or failure to obtain required licenses or approvals could delay or prevent the development of a new restaurant in a particular area.

The selection of new restaurant sites is affected by federal, state, local laws, regulations regarding environmental matters, zoning and land use and the sale of alcoholic beverages. Various requirements (particularly at the local level) may result in increases in the cost and time required for opening new restaurants, as well as increases in the cost of operating restaurants. Difficulties in obtaining necessary licenses or permits could cause delays in or cancellations of new restaurant openings.

A significant portion of the Company’s revenues at the Polcari’s North End restaurants and the original Pizzeria Regina location in the North End is attributable to the sale of alcoholic beverages. Alcoholic beverage control regulations require each of the Company’s restaurants that serve alcohol to apply to both a state authority and municipal authorities for a license or permit to sell alcoholic beverages on the premises. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations affect numerous aspects of restaurant operations, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, storage and dispensing of alcoholic beverages. The failure of the Company to obtain or retain liquor service licenses could have a material adverse affect on the particular restaurant’s operations and the business of the Company overall.

The Company is 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 presently carries liquor liability coverage for its restaurants, as well as excess liability coverage. The Company has never been named as a defendant in a lawsuit involving ‘‘dram shop’’ liability. The Company cannot guarantee that dram shop insurance will continue to be available to the Company at commercially reasonable prices, if at all, or that such insurance, if maintained, will be sufficient to cover any claims against the Company for dram shop liability for which it may be held liable.

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The Company’s restaurant operations are all subject to federal and state laws governing such matters as minimum wage and health insurance requirements. A significant number of the Company’s personnel are paid at rates related to the federal minimum wage, and increases in the minimum wage could increase the Company’s labor costs.


ITEM 1A.	RISK FACTORS

In addition to the risks discussed elsewhere in this Form 10-K, investors should consider carefully the following risk factors in evaluating an investment in the Company.

The Company’s Ability To Grow, Including Its Plans To Open A New Pizzeria Regina Restaurant In Medford, Massachusetts, May Be Dependent On Additional Funding

For the year ended April 30, 2006, the Company has income before dividends to preferred shareholders of approximately $298,000. As of that date, the Company had a working capital deficiency of approximately $1,175,000 and stockholders’ equity of $55,000. The long-term financial stability of the Company and compliance with the bank covenants will be substantially dependent upon achieving sustained profitable operations. If the Company fails to comply with bank covenants, the bank debt could be due on demand. The Company’s growth, including its plans to open a new Pizzeria Regina restaurant in Medford, Massachusetts, will be dependent upon obtaining adequate additional financing. There can be no assurance that any future additional financing will be available on commercially reasonable terms, or at all, and the success or lack of success of the Company’s restaurants opened within recent years may have a critical effect on the Company’s ability to raise funds through the sale of stock or otherwise.

The Company May Be Unable to Expand As Planned

The Company intends to open additional restaurants in an orderly manner as conditions permit, including its plans to open a new Pizzeria Regina restaurant in Medford, Massachusetts. The Company’s ability to open additional Company restaurants will depend upon a number of factors, such as identifying satisfactory sites, negotiating satisfactory leases, securing required governmental permits and approvals, obtaining of any required financing at acceptable terms, providing adequate supervision of construction, and recruiting and training management personnel, some of which are beyond the control of the Company. The Company cannot guarantee that it will be able to open any other future restaurants within budget or on a timely basis, if at all, or that any of the new restaurants will operate profitably. If the Company is unable to expand, it may reduce the Company’s ability to increase profitability.

The Restaurant Business Is Risky

The Company’s future performance will be subject to a number of factors that affect the restaurant industry generally, including: (i) the highly competitive nature of the industry, (ii) general and local economic conditions, (iii) changes in tastes and eating and drinking habits, (iv) changes in food costs due to shortages, inflation or other causes, (v) population and traffic patterns, (vi) demographic trends, (vii) general employment, and wage and benefit levels in the restaurant industry, which may be affected by changes in federal and local minimum wage requirements or by federally or locally mandated health insurance, (viii) the number of people willing to work at or near the minimum wage and (ix) weather conditions. (See ‘‘Competition.’’)

We Are Dependent on Key Executive Officers

The future success of the Company will depend in large part on the continued services of its President, George R. Chapdelaine, as well as on the Company’s ability to attract and retain other qualified senior management personnel. The Company carries $2,000,000 of key man life insurance on the life of Mr. Chapdelaine.

Insiders Control the Company

The Company’s executive officers, directors and their affiliates and members of their immediate families control the vote of approximately 67.2% of the outstanding shares of the Common Stock. As

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a result, they have the practical ability to implement or block changes in the Company’s management and direction which may or may not be in the best interest of stockholders generally.

The Merger May Not Be Completed

On March 17, 2006 the Company entered into and Agreement and Plan of Merger by and among the Company, Dolphin Direct Equity Partners, LP and Braidol Acquisition Corp., a wholly owned subsidiary of Dolphin by which Braidol will merge with and into the Company with the Company surviving the Merger. The consummation of the Merger is subject to customary closing conditions, including the approval of stockholders of the Company. Should the merger be completed, stockholder’s common and preferred stock would be redeemed and stockholders would no longer participate in any future earnings, should there be any future earnings. In addition, the consummation of the Merger is subject to the condition that certain transaction costs incurred by the Company not exceed $625,000. The Company has determined that it is unlikely that the Company will satisfy this condition and has sought a waiver from Dolphin. As of June 29, 2006, the Company has not received that waiver. Under certain circumstances, if the Merger is not completed, the Company is required to pay a termination fee of up to $325,000, less any expenses it has paid for the benefit of Dolphin and its affiliates. In addition, the Company estimates that it will be required to incur direct transaction costs of $625,000, which include fees related to financial advisors, attorneys, accountants and financial printers. The Company has capitalized certain of these costs as deferred merger costs at April 30, 2006. If the Merger is not closed, the Company’s financial results, including earnings per share, could suffer, and the Company’s market price could decline.

The Company’s Restaurants Are Concentrated in Massachusetts

A total of eleven of the Company’s sixteen existing restaurants are located in eastern Massachusetts. As a result, the Company’s results of operations may be materially affected by changes in the Massachusetts economy.

Our Stock Is Relatively Illiquid and the Price Is Volatile

Compared to many other publicly traded companies, the Company is relatively small and has a relatively low average daily trading volume. Quarterly operating results of the Company or other restaurant companies, changes in general conditions in the economy, the restaurant industry, or the financial markets, or other developments affecting the Company, its competitors or the financial markets could cause the market price of the Company’s Common Stock to fluctuate significantly. These broad market fluctuations may adversely affect the market price of the Company’s Common Stock. In addition, the low trading volume may make it difficult for a stockholder to buy or sell a significant amount of stock without affecting the market price. The Company’s securities are principally traded on the OTC Bulletin Board or its successor. (See ‘‘Item 5. Market for Registrant Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.’’)


ITEM 2.	PROPERTIES

Of the Company’s sixteen restaurants operating on April 30, 2006, fifteen were located in leased space and one restaurant, the North End Pizzeria Regina location, is owned by the Company.

All of the Company’s leases provide for a minimum annual rent, and most call for additional rent based on sales volume at the particular location over a specified minimum level. Generally, these leases are net leases, which require the Company to pay the cost of insurance, taxes and a portion of the lessor’s operating costs. Certain mall locations also require the Company to participate in upkeep of common areas and promotional activities.

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The following table sets forth certain information with respect to the Company’s restaurant properties:


Location			Type⁽¹⁾
Auburn Mall Auburn, MA			food court
North End Boston, MA⁽²⁾			wait service
Faneuil Hall Marketplace Boston, MA			food court
Prudential Center Boston, MA			food court
South Station Boston, MA			food court
Burlington Mall⁽³⁾ Burlington, MA			food court
Holyoke Mall Holyoke, MA			food court
Independence Mall Kingston, MA			food court
South Shore Plaza Braintree, MA			food court
Solomon Pond Mall Marlborough, MA			food court
Oviedo Market Place Oviedo, FL			food court
Paramus Park Paramus, NJ			food court
Providence Place Providence, RI			food court
Salem, NH			Polcari’s North End (bistro)
Saugus, MA			Polcari’s North End
Woburn, MA			Polcari’s North End (bistro)


(1)	Pizzeria Regina food court locations have no independent seating capacity. Seating is centralized in the common areas of the food courts. The North End seats approximately 75 customers; the Saugus Polcari’s North End location seats approximately 360 customers; the two bistro restaurants each seat approximately 200 customers.


(2)	Company-owned. This property is subject to a mortgage in favor of Commerce Bank and Trust Company. (See ‘‘Item 7. Management’s Discussion And Analysis Of Financial Condition and Results of Operations — Liquidity and Capital Resources.’’)

The Company occupies approximately 5,325 square feet of executive office space in Saugus, Massachusetts. The lease for this location expires on October 31, 2006 and the Company anticipates negotiating a new lease. The Company also leases approximately 5,000 square feet of warehouse space located in Somerville, Massachusetts under a lease expiring on July 31, 2007 (including all extension options that may be exercised by the Company in its discretion) and approximately 2,741 square feet for its commissary located in Charlestown, Massachusetts under a lease expiring on August 14, 2006. In April 2006 the Company entered into a long-term lease with Station Landing LLC in Medford, Massachusetts.

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ITEM 3.	LEGAL PROCEEDINGS

The Company is not a party to any material litigation proceedings. On March 6, 2006 a Charge of Discrimination was filed by a former employee with the Massachusetts Commission Against Discrimination and with the Equal Opportunity Commission. The Company intends to vigorously defend this action.

From time to time the Company has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of its business. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.


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

None

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PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Common Stock is traded publicly on the OTC Bulletin Board . As of May 26, 2006, there were approximately 600 holders of record of the Company’s Common Stock. On June 19, 2006, the last bid and asked price of the Company’s Common Stock as reported on the OTC Bulletin Board were each $.67 per share, respectively.

The table below represents the quarterly high and low bid and asked prices for the Company’s Common Stock for the Company’s last two fiscal years, as reported on the OTC Bulletin Board. The prices listed in this table reflect quotations without adjustment for retail mark-up, mark-down or commission, and may not represent actual transactions.


	High Bid			Low Bid			High Asked			Low Asked
Fiscal Year Ended April 30, 2006
First Quarter		$	1.01		$	.37		$	1.50		$	.47
Second Quarter		$	.99		$	.47		$	.99		$	.55
Third Quarter		$	.67		$	.39		$	.80		$	.49
Fourth Quarter		$	.67		$	.55		$	.67		$	.60
Fiscal Year Ended April 24, 2005
First Quarter		$	.65		$	.53		$	.75		$	.65
Second Quarter		$	.60		$	.30		$	.70		$	.36
Third Quarter		$	.63		$	.25		$	.75		$	.30
Fourth Quarter		$	.62		$	.40		$	1.00		$	.50

The Company has never paid cash dividends on its capital stock and does not anticipate paying any cash dividends in the foreseeable future other than dividends on its Series A Preferred Stock. The Company’s Credit Facility prohibits the payment of cash dividends without the lender’s prior consent.

Company Equity Compensation Plans

The Company presently maintains a 1994 Employee Combination Stock Option Plan under which options are no longer issued, a 1994 Director Stock Option Plan, and the Combination Stock Option and Share Award Plan (the ‘‘2002 Plan’’), pursuant to which it granted equity awards to eligible persons. The following table gives information about those plans.


Plan category	(a)		(b)			(c)
	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrant and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		1,210,000		$	.75		300,000
Equity compensation plans not approved by security holders		0			0		0
Total		1,210,000		$	.75		300,000

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ITEM 6.	SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the fiscal periods indicated: a 53 week period for fiscal 2006 and, a 52 week period for fiscal 2005, 2004, 2003, and 2002, which have been derived from the Company’s audited financial statements.


	April 30, 2006				April 24, 2005				April 25, 2004⁽¹⁾				April 27, 2003⁽¹⁾				April 28, 2002
Income Statement Data:
Total revenues		$	23,535,406			$	22,629,052			$	19,482,986			$	19,697,538			$	20,580,156
Costs and expenses:
Cost of food, beverages and liquor			4,477,172				4,628,052				3,769,034				3,620,451				4,056,393
Other operating expenses			14,735,338				13,912,348				12,044,045				11,666,240				12,243,675
General and administrative			2,484,226				2,450,578				2,738,690				2,610,666				2,132,756
Depreciation and amortization			981,549				976,686				930,272				922,366				1,003,709
Pre-opening costs			312				93,196				77,140				—				—
Litigation and settlement credits			(28,805	)			(98,259	)			(246,228	)			(443,445	)			—
Charge for asset impairment			306,787				—				—				—				—
Total costs and expenses			22,956,579				21,962,601				19,312,953				18,376,278				19,436,533
Operating income			578,827				666,451				170,033				1,321,260				1,143,623
Interest expense, net			(372,941	)			(475,132	)			(493,200	)			(377,829	)			(467,766	)
Other income, net			21,936				8,418				221,630				9,436				8,866
Income (loss) from continuing Operations			227,822				199,737				(101,537	)			952,867				684,723
Income (loss) from discontinued operations			70,436				(628,452	)			(3,335,741	)			40,022				206,008
Net income (loss)			298,258				(428,715	)			(3,437,278	)			992,889				890,731
Less: Preferred stock dividends			(78,866	)			(20,583	)			—				—				—
Income (loss) available to common shareholders			219,392			$	(449,298	)		$	(3,437,278	)		$	992,889			$	890,731
Income (loss) per share of common stock (Basic and Diluted):
Continuing Operations		$	.02			$	.03			$	(.01	)		$	.13			$	.10
Discontinued Operations		$	.01			$	(.09	)		$	(.48	)		$	.01			$	.03
Income (loss) available to common shareholders		$	.03			$	(.06	)		$	(.49	)		$	.14			$	.13
Balance Sheet Items:
Total Assets		$	6,390,678			$	6,741,301			$	7,740,807			$	8,273,745			$	8,640,734
Long Term Obligations		$	3,533,640			$	3,981,286			$	2,353,177			$	3,213,292			$	3,750,876
Total Liabilities		$	6,335,266			$	6,905,281			$	8,409,528			$	5,535,187			$	6,895,065

(1)

In fiscal 2005, the Company closed its Pizzeria Regina in Richmond, Virginia, completed the assets sale of Polcari’s of Hyannis, Inc. and entered into an agreement for the asset sale of Polcari’s of Cambridge, Inc. The sale of Polcari’s of Cambridge, Inc., was completed in fiscal 2006. The Income Statement Data for fiscal 2004, 2003, and 2002 has been reclassified to reflect Polcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc., and Pizzeria Regina at Richmond, Virginia as discontinued operations. See Note 13 to the Company’s Consolidated Financial Statement.


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

This Management’s Discussion and Analysis describes the principal factors affecting the results of operations, liquidity and capital resources, as well as the critical accounting policies of the Company. This discussion should be read in conjunction with the accompanying audited financial statements,

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which include additional information about our significant accounting policies and practices and the transactions that underlie our financial results.

The Company reports the results of its Pizzeria Regina restaurants and its Polcari North End restaurants as one operating segment since they have similar economic characteristics.

Except as otherwise indicated, references to years mean our fiscal year ended April 30, 2006, April 24, 2005 and April 25, 2004.

RESULTS OF OPERATIONS

Overview:

The key factors that affect our operating results are the impact of new store openings, comparable restaurant sales, which are driven by comparable customer counts and check average, and our ability to manage operating expenses such as food cost, labor and benefits and other costs. Changes in the number of restaurants in operation can dramatically change the absolute dollar amounts of revenues and expenses, and opening of new stores can dramatically affect operating profits. Each restaurant unit’s contribution margin will vary over the life of the restaurant. Margins tend to be low when a restaurant is first opened until customer traffic reaches planned levels. Margins can also deteriorate at the end of a unit’s life cycle due to a decline in customer traffic caused by a variety of factors outside the control of the Company. These economic conditions impact both the Pizzeria Regina units and the Polcari North End units.

There were 16 units in continuing operations for all fiscal 2006 and one for 3 months. There were 15 units in continuing operations for all fiscal 2005, one new Pizzeria Regina was added in the third month of fiscal 2005. There were 14 units in operation for all fiscal 2004, and one new Pizzeria Regina was added in the twelfth month of fiscal 2004.

During fiscal 2006 the Company completed the asset sale of Polcari’s of Cambridge, Inc. on July 22, 2005.

On March 17, 2006, the Company entered into an Agreement and Plan of Merger (the ‘‘Merger Agreement’’) by and among the Company, Dolphin Direct Equity Partners, LP (‘‘Dolphin’’) and Braidol Acquisition Corp., (‘‘Braidol’’) a wholly-owned subsidiary of Dolphin (‘‘Sub’’), whereby Braidol Sub will merge (the ‘‘Merger’’) with and into the Company with the Company surviving the Merger. Under the terms of the Merger Agreement, the common stockholders of the Company, would be entitled to receive an amount equal to $0.70, without interest, per share of common stock. Under the terms of the Merger Agreement, the preferred stockholders of the Company would be entitled to receive a liquidation preference of $.0.85 per share $974,998 plus all accrued but unpaid dividends as set forth in the certificate of designation for the preferred stock, without interest, as well as the product of the number of shares of common stock that such shares of preferred stock are convertible in to immediately prior to the merger and $.70, without interest. The consummation of the Merger is subject to customary closing conditions, including the approval of the stockholders of the Company. In addition, the consummation of the Merger is subject to the condition that certain transaction costs incurred by the Company not exceed $625,000. The Company has determined that it is unlikely that the Company will satisfy this condition and has sought a waiver from Dolphin. As of June 29, 2006, the Company has not received that waiver.

In any event, the Company is required to pay certain of Dolphin’s expenses. Under certain circumstances, if the Merger is not completed, the Company is required to pay a termination fee of up to $325,000, less any expenses it has paid for the benefit of Dolphin and its affiliates. As of the date hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P. hold a 40.3% beneficial interest in the Company’s common stock. Peter Salas, a member of the Company’s Board of Directors, is President of Dolphin Asset Management Corp. an affiliate of Dolphin, and its related companies.

If the merger is successfully completed, the Company will operate as a private Company with no SEC reporting obligations.

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The following table sets forth all revenues, costs and expenses as a percentage of total revenues for the periods indicated for revenue and expense items included in the consolidated statements of operations:


	April 30, 2006			April 24, 2005			April 25, 2004
Revenues:
Restaurant Sales		100.0	%		100.0	%		99.9	%
Other		—			—			.1
Total Revenues		100.0			100.0			100.0
Costs and expenses:
Cost of food, beverages and liquor		19.0			20.4			19.3
Other operating expenses-payroll		29.3			29.5			30.3
Other operating expenses exclusive of payroll		33.3			32.0			31.5
General and administrative		10.5			10.8			14.1
Depreciation and amortization		4.2			4.3			4.8
Pre-opening costs		—			.4			.4
Litigation and settlement credits		(.1	)		(.4	)		(1.3	)
Charge for asset Impairment		1.3			—			—
Operating income (loss)		2.5			3.0			.9
Interest expense, net		(1.6	)		(2.1	)		(2.5	)
Other income, net		.1			—			1.1
Income (loss) from continuing operations		1.0			.9			(.5	)
Income (loss) from discontinued operations		.3			(2.8	)		(17.1	)
Net income (loss)		1.3	%		(1.9	)%		(17.6	)%

Results of Operations for the Years Ended April 30, 2006 and April 24, 2005

During fiscal 2006 the Company completed the asset sale of Polcari’s of Cambridge, Inc. on July 22, 2005 and recorded a gain on the sale of $132,004.

Restaurant Sales

Restaurant sales in fiscal 2006 were $23,535,000 compared to $22,629,000 in fiscal 2005. The Company believes the increase in restaurant sales in fiscal 2006 compared to fiscal 2005 was attributable to the improved economy in the Northeastern United States and to the Pizzeria Regina at South Station in Boston, Massachusetts operating for the entire period. Sales volume for the restaurants open throughout both fiscal 2006 and 2005 increased by 3.3%.

Net sales at the Company’s Pizzeria Regina restaurants increased 5.9% to $14,594,000 in fiscal 2006 from $13,785,000 in fiscal 2005. The increase in restaurant sales volume was principally due to the improved economy in the Northeastern United States and to the Pizzeria Regina at South Station being open for the entire period.

Net sales at the Company’s full service casual dining restaurants increased by .7% to $8,870,000 in fiscal 2006 from $8,806,000 in fiscal 2005. The increase in restaurant sales was primarily attributable to an improved economy in the Northeastern United States.

Sales at the Company’s commissary were $71,000 in fiscal 2006 compared to $38,000 in fiscal 2005. The increase in commissary sales was primarily attributable to purchases from a licensee.

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Costs and Expenses

Cost of Food, Beverages and Liquor

Cost of food, beverages and liquor as a percentage of total revenues for all restaurants was 19% in fiscal 2006 compared to 20% in fiscal 2005. The decrease as a percentage of total revenues was primarily attributable to the elimination of food items at two Pizzeria Regina locations and to a decrease in cheese costs.

The cost of food, beverages and liquor was $4,477,000 in fiscal 2006 compared to $4,628,000 in fiscal 2005. The dollar decrease was due in part to the elimination of food items at two Pizzeria Regina locations and to a decrease in cheese costs.

The cost of food, beverages, and liquor as a percentage of restaurant sales at the Pizzeria Regina restaurants was 16% in fiscal 2006 compared to 18% in fiscal 2005. The decrease as a percentage of restaurant sales was principally due to the elimination of food items at two Pizzeria Regina locations and to a decrease in cheese costs.

The cost of food, beverages and liquor at the Pizzeria Regina restaurants was $2,278,000 in fiscal 2006 compared to $2,447,000 in fiscal 2005. The dollar decrease was due to two Pizzeria Regina locations that eliminated certain food items from their menus and to a decrease in cheese costs.

The cost of food, beverages and liquor as a percentage of restaurant sales at the Company’s full service casual dining restaurants was 25% in both fiscal 2006 and fiscal 2005.

The cost of food, beverages and liquor at the Company’s full service casual dining restaurants was $2,199,000 in fiscal 2006 compared to $2,181,000 in fiscal 2005. The dollar increase is a result of higher revenues.

Other Operating Expenses

Payroll Expenses. Payroll expenses as a percentage of total revenues for all restaurants were 29% in fiscal 2006 compared to 30% in fiscal 2005. The decrease as a percentage of total revenues was attributable to the Pizzeria Regina locations which generally have lower payroll costs than the Company’s full service casual dining restaurants.

Payroll expenses for all the restaurants were $6,892,000 in fiscal 2006 compared to $6,676,000 in fiscal 2005. The dollar increase in payroll expenses was primarily due to the Pizzeria Regina at South Station in Boston, Massachusetts being open for the entire period and to higher employee incentive costs.

Payroll expenses at the Pizzeria Regina restaurants were 25% of restaurant sales in fiscal 2006 compared to 26% in fiscal 2005. The decrease as a percentage of restaurant sales was principally due to the reduction in personnel at two Pizzeria Regina restaurants due to the elimination of food items from their menus.

Payroll expenses at the Pizzeria Regina restaurants were $3,606,000 in fiscal 2006 compared to $3,585,000 in fiscal 2005. This dollar increase was primarily due to higher employee incentive costs and to the Pizzeria Regina at South Station, Boston, Massachusetts being open for the entire period.

Payroll expenses at the Company’s full service casual dining restaurants increased to 32% of restaurant sales in fiscal 2006 from 30% of restaurant sales in fiscal 2005. The increase as a percentage of restaurant sales was primarily attributable to higher employee incentive costs.

Payroll expenses at the Company’s full service casual dining restaurants were $2,848,000 in fiscal 2006 compared to $2,678,000 in fiscal 2005. This dollar increase was primarily due to higher employee incentive costs.

Payroll expenses at the Company’s Commissary were $438,000 for fiscal 2006 as compared to $413,000 in fiscal 2005.

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Other Operating Expenses, Exclusive of Payroll.

Other operating expenses, exclusive of payroll, were 33% of total revenues in fiscal 2006 compared to 32% in fiscal 2005. The increase as a percentage of total revenues was primarily attributable to costs associated with the negotiation and extension of the Company’s leases for certain Pizzeria Reginas.

Other operating expenses, exclusive of payroll were $7,843,000 in fiscal 2006 compared to $7,237,000 in fiscal 2005. This dollar increase is primarily attributable to the Pizzeria Regina at South Station in Boston, Massachusetts being open for the entire period and to costs associated with the negotiation and extension of the Company’s leases for certain Pizzeria Reginas.

Other operating expenses, exclusive of payroll, from the Pizzeria Regina restaurants were 34% of restaurant sales in fiscal 2006 compared to 33% in fiscal 2005. The increase as a percentage of sales was primarily attributable to costs associated with the negotiation and extension of the Company’s leases for certain Pizzeria Reginas and to higher energy costs.

Other operating expenses, exclusive of payroll from the Pizzeria Regina restaurants were $4,962,000 in fiscal 2006 compared to $4,540,000 in fiscal 2005. This dollar increase was primarily attributable to the addition of a new Pizzeria Regina restaurant at South Station operating for the entire period and to costs associated with the negotiation and extension of the Company’s leases for certain Pizzeria Reginas and to higher energy costs.

Other operating expenses, exclusive of payroll, from the Company’s full service casual dining restaurants increased to 31 % of restaurant sales in fiscal 2006 from 29% of restaurant sales in fiscal 2005. The increase as a percentage of restaurant sales was primarily attributable to higher energy and maintenance costs at the Company’s full service casual dining restaurants.

Other operating expenses, exclusive of payroll, from the Company’s full service casual dining restaurants were $2,747,000 in fiscal 2006 compared to $2,569,000 in fiscal 2005. The dollar increase was primarily attributable to higher energy costs and maintenance at the Company’s full service casual dining restaurants.

Other operating expenses also include commissary expenses, which were $134,000 in fiscal 2006 and $128,000 in fiscal 2005.

General and Administrative Expenses

General and administrative expenses were 11% of total revenues in both fiscal 2006 and in fiscal 2005.

General and administrative expenses were $2,484,000 in fiscal 2006, compared to $2,451,000 in fiscal 2005. The dollar increase is consistent with prior year.

Depreciation and Amortization Expenses

Depreciation and amortization expenses as a percentage of total revenues were 4% in both fiscal 2006 and fiscal 2005.

Depreciation and amortization expense was $982,000 in fiscal 2006, as compared to $977,000 in fiscal 2005.

Pre-Opening Costs

Pre-opening expenses in fiscal 2006 were $0 compared to $93,000 in fiscal 2005. The costs which consist of labor, rent and training materials are primarily attributable to the opening of the new Pizzeria Regina restaurant at South Station in Boston, Massachusetts in fiscal 2005.

Litigation and Settlement Credits

In 1998 the Company formed a joint venture with Italian Ventures, LLC, a Kentucky limited liability company (‘‘Italian Ventures’’), and entered into a development agreement with it.

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Approximately eight months after the joint venture and development agreement were entered into, the Company filed a lawsuit against Italian Ventures and certain related parties seeking dissolution of the joint venture. In fiscal 2001, the Company reached a settlement of the dispute with Italian Ventures, LLC in which it agreed to pay royalties on future revenues from certain ‘‘Bistro restaurants’’, as defined in the settlement agreement. The Company accrued a liability of $955,000 in the fourth quarter of fiscal 2001 as the estimated cost of the obligation to pay the future royalties, based upon a forecast of Bistro restaurant gross sales for the period May 2001 through April 2008 using historical information and estimates of growth of existing Bistro units, as well as anticipated future Bistro unit openings and closings. In the fourth quarter of fiscal 2003, the Company reduced the accrual by $443,000 to reflect the Company’s revised estimate of its remaining obligation under the settlement agreement with Italian Ventures. In 2004, the Company experienced the opening of an under performing Polcari’s in Cambridge, Massachusetts, which caused the Company to reassess its expansion plans due to financial constraints. As a result of this reassessment in fiscal 2004 the amount of accrual was reduced by $246,000 to $258,000 to reflect the Company’s revised estimates of the remaining obligations under the settlement agreement with Italian Ventures. In fiscal 2005, the Company closed a Polcari’s bistro restaurant in Hyannis, Massachusetts. As a result, the Company reduced the accrual by $98,000 to reflect the Company’s revised estimate of its remaining obligation under the settlement agreement with Italian Ventures. As of the end of fiscal 2005, the total remaining accrual was $126,000. In fiscal 2006, the Company reduced the accrual by $29,000 to reflect the Company’s revised estimate of its remaining obligations under the settlement agreement with Italian Ventures.

Charge for Asset Impairment

The Company recorded an impairment charge of $307,000 in the fourth quarter of fiscal 2006 which is included in the consolidated statements of operations related to the write-down of certain long-lived assets. The Company reviewed the carrying value of its long-lived assets and noted that the expected future cash flows for its Polcari’s bistro restaurant in Salem, New Hampshire are not sufficient to recover the recorded carrying value of long-lived assets at this location. The Company then reviewed the revenue and income trends at this location and determined that cash flow would not improve. Subsequent to this analysis the Company reviewed various scenarios and weighed the probability of each scenario. Accordingly, the Company recognized an impairment charge to reduce the carrying value of the leasehold improvementsto zero and restaurant equipment to a fair value of $161,000. The Company currently plans to continue to operate this restaurant for its remaining lease term.

Other Income

Other income was $22,000 in fiscal 2006 compared to $8,000 in fiscal 2005. The increase was primarily due to insurance reimbursement for business interruption insurance at the Pizzeria Regina restaurant in Paramus, New Jersey, due to a malfunction of the Paramus Mall’s HVAC system, which resulted in the closure of the entire mall.

Interest Expense and Interest Income

Interest expense decreased to $390,000 in fiscal 2006, compared to $478,000 in fiscal 2005. This decrease was primarily due to a refinancing of the Company’s credit facility.

Interest income was $17,000 in fiscal 2006 compared to $3,000 in fiscal 2005 due to an increase in cash reserves and higher interest rates.

Discontinued Operations

In the fiscal 2006 period, the sale of Polcari’s of Cambridge, Inc. was completed on July 22, 2005. In fiscal 2005, the Company completed the asset sale of Polcari’s of Hyannis, Inc. in March, 2005 and closed the Pizzeria Regina in Richmond, Virginia at the end of the lease term in November, 2004. The financial results of Polcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc. and Pizzeria Regina in Richmond, Virginia are reflected in discontinued operations for all periods presented.

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The income from discontinued operations was $70,000 in the fiscal 2006 period compared to a loss of $628,000 in fiscal 2005 period. In the fiscal 2006 period, the income from discontinued operations represents operating losses from the Polcari’s bistro restaurant in Hyannis, Massachusetts, the Polcari’s North End restaurant in Cambridge, Massachusetts and a gain of $132,000 from the disposal of certain assets of the Polcari’s North End Restaurant in Cambridge, Massachusetts. In the fiscal 2005 period, the loss of $628,000 from discontinued operations represents operating losses from the Polcari’s bistro restaurant in Hyannis, Massachusetts, the Polcari’s North End restaurant in Cambridge, Massachusetts, and the Pizzeria Regina restaurant in Richmond, Virginia, and a gain of $15,000 from the disposal of certain assets of the Polcari’s bistro restaurant in Hyannis, Massachusetts.

Results of Operations for the Years Ended April 24, 2005 and April 25, 2004

During fiscal 2005 the Company closed the Pizzeria Regina in Richmond, Virginia at the end of the lease term, completed the asset sale of Polcari’s of Hyannis, Inc. and entered into an agreement to sell the assets of Polcari’s of Cambridge, Inc. on July 22, 2005 therefore the following results of operations for fiscal year ended April 24, 2005, April 25, 2004, and April 27, 2003 have been reclassified to reflect Polcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc., and Pizzeria Regina in Richmond, Virginia as discontinued operations.

Restaurant Sales

Restaurant sales in fiscal 2005 were $22,629,000 compared to $19,466,000 in fiscal 2004. The Company believes the increase in restaurant sales in fiscal 2005 compared to fiscal 2004 was attributable to the opening of the new Pizzeria Regina at the Prudential Center in Boston, Massachusetts in April 2004, the new Pizzeria Regina at South Station in Boston, Massachusetts in July 2004, and by the improved economy in the Northeastern United States. Sales volume for the restaurants open throughout both fiscal 2005 and 2004 increased by 3.8%.

Net sales at the Company’s Pizzeria Regina restaurants increased 25.5% to $13,785,000 in fiscal 2005 from $10,985,000 in fiscal 2004. The increase in restaurant sales volume was principally due to the opening of the new Pizzeria Regina at the Prudential Center, the new Pizzeria Regina at South Station and to an increase in same store sales of 3.4%.

Net sales at the Company’s full service casual dining restaurants increased by 4.4% to $8,806,000 in fiscal 2005 from $8,436,000 in fiscal 2004. The increase in restaurant sales was primarily attributable to an increase in same store sales of 4.4%.

Sales at the Company’s commissary were $38,000 in fiscal 2005 compared to $45,000 in fiscal 2004. The decrease in commissary sales was primarily attributable to the closing of a domestic Pizzeria Regina franchise in Las Vegas, Nevada in April 2004.

Franchise Fees and Royalties

During fiscal 2005, the Company recognized approximately $300 in royalties from a domestic Pizzeria Regina franchise at the Palms Casino Resort in Las Vegas, Nevada which closed on April 30, 2004, compared to approximately $17,000 in royalties in fiscal 2004.

Costs and Expenses

Cost of Food, Beverages and Liquor

Cost of food, beverages and liquor as a percentage of total revenues for all restaurants was 20% in fiscal 2005 compared to 19% in fiscal 2004. The increase as a percentage of total revenues was primarily attributable to the two Pizzeria Regina locations which have higher food costs than the other Pizzeria Regina units due to the addition of food items to their menus and to an increase in costs from suppliers in general.

The cost of food, beverages and liquor was $4,628,000 in fiscal 2005 compared to $3,769,000 in fiscal 2004. The dollar increase was due in part to the two additional Pizzeria Regina locations and an increase in costs from suppliers in general.

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The cost of food, beverages, and liquor as a percentage of restaurant sales at the Pizzeria Regina restaurants was 18% in fiscal 2005 compared to 16% in fiscal 2004. The increase as a percentage of restaurant sales was primarily due to the opening of the two new Pizzeria Regina restaurants which have higher food costs due to the additional food items to their menus and from an increase in cost from suppliers in general.

The cost of food, beverages and liquor at the Pizzeria Regina restaurants was $2,447,000 in fiscal 2005 compared to $1,741,000 in fiscal 2004. The dollar increase was primarily due to the opening of two additional Pizzeria Regina restaurants.

The cost of food, beverages and liquor as a percentage of restaurant sales at the Company’s full service casual dining restaurants increased to 25% in fiscal 2005 from 24% in fiscal 2004. The increase as a percentage of restaurant sales was principally due to increases in costs from suppliers in general.

The cost of food, beverages and liquor at the Company’s full service casual dining restaurants was $2,181,000 in fiscal 2005 compared to $2,028,000 in fiscal 2004. The dollar increase was primarily due to increases in costs from suppliers in general.

Other Operating Expenses

Payroll Expenses. Payroll expenses as a percentage of total revenues for all restaurants were 29% in fiscal 2005 compared to 30% in fiscal 2004. The decrease as a percentage of total revenues was attributable to the opening of the two additional Pizzeria Regina locations which generally have lower payroll costs than the Company’s full service casual dining restaurants. This was partially offset by startup costs associated with the opening of these two locations because, as is typical in the restaurant industry, the Company overstaffed these locations during the first few months of their operations to help them succeed.

Payroll expenses for all the restaurants were $6,676,000 in fiscal 2005 compared to $5,914,000 in fiscal 2004. The dollar increase in payroll expenses was primarily due to the two new Pizzeria Regina restaurants in Boston, Massachusetts.

Payroll expenses at the Pizzeria Regina restaurants were 26% of restaurant sales in fiscal 2005 compared to 25% in fiscal 2004. The increase as a percentage of restaurant sales was principally due to the two new Pizzeria Regina restaurants in Boston, Massachusetts and to increased costs in employee health benefits.

Payroll expenses at the Pizzeria Regina restaurants were $3,585,000 in fiscal 2005 compared to $2,798,000 in fiscal 2004. This dollar increase was primarily due to the opening of two new Pizzeria Regina locations and to increased costs in employee health benefits.

Payroll expenses at the Company’s full service casual dining restaurants decreased to 30% of restaurant sales in fiscal 2005 from 32% of restaurant sales in fiscal 2004. The decrease as a percentage of restaurant sales was primarily attributable to lower employee incentive costs.

Payroll expenses at the Company’s full service casual dining restaurants were $2,678,000 in fiscal 2005 compared to $2,712,000 in fiscal 2004. This dollar decrease was primarily due to lower employee incentive costs.

Payroll expenses at the Company’s Commissary were $413,000 for fiscal 2005 as compared to $404,000 in fiscal 2004.

Other Operating Expenses, Exclusive of Payroll.

Other operating expenses, exclusive of payroll, were 32% of total revenues in fiscal 2005 compared to 31% in fiscal 2004. The increase as a percentage of total revenues was attributable to higher promotion, energy and maintenance costs.

Other operating expenses, exclusive of payroll were $7,237,000 in fiscal 2005 compared to $6,130,000 in fiscal 2004. This dollar increase is primarily attributable to the new Pizzeria Regina at Prudential Center in Boston, Massachusetts, the new Pizzeria Regina at South Station in Boston, Massachusetts and higher energy costs.

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Other operating expenses, exclusive of payroll, from the Pizzeria Regina restaurants were 33% of restaurant sales in both fiscal 2005 and in fiscal 2004.

Other operating expenses, exclusive of payroll from the Pizzeria Regina restaurants were $4,540,000 in fiscal 2005 compared to $3,624,000 in fiscal 2004. This dollar increase was primarily attributable to the addition of two new Pizzeria Regina locations and higher energy costs.

Other operating expenses, exclusive of payroll, from the Company’s full service casual dining restaurants increased to 29% of restaurant sales in fiscal 2005 from 28% of restaurant sales in fiscal 2004. The increase as a percentage of restaurant sales was primarily attributable to an increase in promotions at the Polcari’s bistro restaurant in Salem, New Hampshire and higher energy costs and maintenance at the Company’s full service casual dining restaurants.

Other operating expenses, exclusive of payroll, from the Company’s full service casual dining restaurants were $2,569,000 in fiscal 2005 compared to $2,381,000 in fiscal 2004. The dollar increase was primarily attributable to the increase in promotions at the Polcari’s bistro restaurant in Salem, New Hampshire and higher energy costs and maintenance at the Company’s full service casual dining restaurants.

Other operating expenses also include commissary expenses, which were $128,000 in fiscal 2005 and $125,000 in fiscal 2004.

General and Administrative Expenses

General and administrative expenses were 11% of total revenues in fiscal 2005 compared to 14% in fiscal 2004. The decrease as a percentage of total revenues was attributable to a higher revenue base and lower employee incentive costs and lower consulting costs.

General and administrative expenses were $2,451,000 in fiscal 2005, compared to $2,739,000 in fiscal 2004. The dollar decrease was primarily attributable to lower employee incentive costs and consulting costs.

Depreciation and Amortization Expenses

Depreciation and amortization expenses as a percentage of total revenues were 4% in the fiscal 2005 period compared to 5% in the fiscal 2004 period. The decrease as a percentage of total revenue was attributable to a higher revenue base.

Depreciation and amortization expense was $977,000 in fiscal 2005, as compared to $930,000 in fiscal 2004. The increase in depreciation and amortization expense was primarily due to the addition of two Pizzeria Regina restaurants in Boston, Massachusetts.

Pre-Opening Costs

Pre-opening expenses in fiscal 2005 were $93,000 compared to $77,000 in fiscal 2004. The costs which consist of labor, rent and training materials are primarily attributable to the opening of the new Pizzeria Regina restaurant at South Station in Boston, Massachusetts in fiscal 2005 and to the new Pizzeria Regina restaurant at the Prudential Center restaurant in Boston, Massachusetts in fiscal 2004.

Litigation and Settlement Credits

In 1998 the Company formed a joint venture with Italian Ventures, LLC, a Kentucky limited liability company (‘‘Italian Ventures’’), and entered into a development agreement with it. Approximately eight months after the joint venture and development agreement were entered into, the Company filed a lawsuit against Italian Ventures and certain related parties seeking dissolution of the joint venture. In fiscal 2001, the Company reached a settlement of the dispute with Italian Ventures, LLC in which it agreed to pay royalties on future revenues from certain ‘‘Bistro restaurants’’, as defined in the settlement agreement. The Company accrued a liability of $955,000 in the fourth quarter of fiscal 2001 as the estimated cost of the obligation to pay the future royalties,

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based upon a forecast of Bistro restaurant gross sales for the period May 2001 through April 2008 using historical information and estimates of growth of existing Bistro units, as well as anticipated future Bistro unit openings and closings. In the fourth quarter of fiscal 2003, the Company reduced the accrual by $443,000 to reflect the Company’s revised estimate of its remaining obligation under the settlement agreement with Italian Ventures. In 2004, the Company experienced the opening of an under performing Polcari’s in Cambridge, Massachusetts, which caused the Company to reassess its expansion plans due to financial constraints. As a result of this reassessment in fiscal 2004 the amount of accrual was reduced by $246,000 to $258,000 to reflect the Company’s revised estimates of the remaining obligations under the settlement agreement with Italian Ventures. In fiscal 2005, the Company closed a Polcari’s bistro restaurant in Hyannis, Massachusetts. As a result, the Company reduced the accrual by $98,000 to reflect the Company’s revised estimate of its remaining obligation under the settlement agreement with Italian Ventures. As of the end of fiscal 2005, the total remaining accrual was $126,000.

Other Income

Other income was $8,000 in fiscal 2005 compared to $222,000 in fiscal 2004. The prior year’s other income mainly consisted of insurance proceeds related to the temporary closing of the Faneuil Hall Pizzeria Regina restaurant.

Interest Expense and Interest Income

Interest expense decreased to $478,000 in fiscal 2005, compared to $496,000 in fiscal 2004. This decrease was primarily due to a decrease in interest expense under the Company’s credit facility.

Interest income was $3,000 in both fiscal 2005 and fiscal 2004 years.

Discontinued Operations

In fiscal 2005, the Company completed the asset sale of Polcari’s of Hyannis, Inc. and entered into an agreement for the asset sale of Polcari’s of Cambridge, Inc. The Company received approximately $552,000 of net proceeds from the sale of Polcari’s of Hyannis. The sale of Polcari’s of Cambridge, Inc. is scheduled to be completed on July 22, 2005 and the net proceeds will be recorded when the sale is completed. In November 2004, at the end of the lease term, the Company ceased operations of the Pizzeria Regina in Richmond, Virginia. The Company has reclassified its financial results to reflect Polcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc., and Pizzeria Regina in Richmond, Virginia as discontinued operations.

The loss from discontinued operations was $628,000 in fiscal 2005 compared to $3,336,000 in fiscal 2004. In fiscal 2005, the loss from discontinued operations represents operating losses from the Polcari’s bistro restaurant in Hyannis, Massachusetts, the Polcari’s North End restaurant in Cambridge, Massachusetts, and the Pizzeria Regina restaurant in Richmond, Virginia of $643,000 and a gain of $15,000 from the disposal of certain assets of the Polcari’s bistro in Hyannis, Massachusetts. In fiscal 2004, the loss of $3,336,000 from discontinued operations represents operating losses from the Polcari’s bistro restaurant in Hyannis, Massachusetts the Pizzeria Regina restaurant in Richmond, Virginia and the Polcari’s North End in Cambridge, Massachusetts, including an impairment charge of $2,163,000 related to the write-down of certain long lived assets for that location.

The Company reviewed the carrying value of its long lived assets and noted that the expected future cash flows for this location were not sufficient to recover the recorded carrying value of long-lived assets at this location. Accordingly, the Company recognized an impairment charge to reduce the carrying value of long lived assets at this location. The Company recognized an impairment charge to reduce the carrying value of leasehold improvements to zero and restaurant equipment to an estimated fair market value based on the estimated residual value of the equipment.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of funding during fiscal 2006 were cash provided by operations, and the proceeds received from the disposition of the assets of Polcari’s of Cambridge.

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At April 30, 2006, the Company had a working capital deficit of $1,175,000 compared to a deficit of $1,339,000 at the end of fiscal 2005, and cash and cash equivalents $812,000, compared to $687,000 at the end of fiscal 2005. For the year ended April 30, 2006, the Company has net income before dividends to preferred shareholders of approximately $298,000. As of that date, the Company had stockholders’ equity of $55,000 as compared to a deficit of $164,000 at the end of fiscal 2005.

During fiscal 2006, the Company had a net increase in cash and cash equivalents of $124,000, reflecting net cash provided by operating activities of $794,000, net cash used for investing activities of $203,000 and net cash used for financing activities of $467,000.

Net cash provided by operating activities of $794,000 included net income of $298,000, depreciation and amortization expense of $981,000, a charge for asset impairment of $307,000, a decrease in inventories of $122,000, an increase in accounts payables of $216,000 and a decrease in accounts receivables of $13,000. This was partially offset by, an increase of other assets of $561,000 , a decrease in other long-term liabilities of $29,000, a decrease in deferred rent of $16,000, a decrease in accrued expenses of $324,000, an increase in prepaid expenses of $52,000 and a reduction of the litigation settlement of $29,000 and a gain on sale of discontinued operations of $132,000. Net cash used for investing activities of $203,000 reflects capital expenditures associated with the Polcari’s North End restaurant, Polcari’s North End bistro restaurants and various Pizzeria Regina restaurants partially offset by the asset sale of Polcari’s North End in Cambridge, Massachusetts, in the amount of $214,000. Net cash used for financing activities of $467,000 consisted of repayments of long term debt, lease obligations, stockholders loans and payments of preferred dividends.

At April 30, 2006, the Company had current liabilities of $2,802,000, including $998,000 of accounts payable, $1,422,000 of accrued expenses and, current maturities of long term obligations in the amount of $382,000. At April 30, 2006, the Company had long-term obligations, less current maturities, in the amount of $3,534,000, including $76,000 of notes payable to a stockholder, $1,579,000 due under its credit facility with Commerce Bank and Trust Company, $1,450,000 of convertible subordinated debentures, $352,000 of deferred rent, and $77,000 of other long-term liabilities primarily related to the litigation settlement agreement with Italian Ventures, LLC.

Regardless of whether the Company completes the Merger described in ‘‘Results of Operations — Overview’’ of this Item 7, the Company believes that its existing resources, together with cash flow generated from operations, will be sufficient to fund its cash flow requirements and maintain debt covenant compliance for the next twelve months. Under certain circumstances, if the Merger is not completed, the Company is required to pay a termination fee of up to $325,000, less any expenses it has paid for the benefit of Dolphin and its affiliates. In addition, the Company estimates that it will be required to incur direct transaction costs of $625,000, which include fees related to financial advisors, attorneys, accountants and financial printers. The Company has capitalized certain of these costs as deferred merger costs at April 30, 2006.

However, the Company’s growth will be dependent upon obtaining additional financing. There can be no assurance that any future additional financing will be available on commercially reasonable terms, or at all, and the success or lack of success of the Company’s restaurants opened within the last year and planned to be opened in the future may have a critical effect on the Company’s ability to raise funds through the sale of stock or otherwise.

Contractual Obligations

The Company has long-term contractual obligations primarily in the form of leases and debt obligations. The following table summarizes the Company’s contractual obligations and their aggregate maturities as of April 30, 2006. (See discussions of cash flows, financial position and capital resources as well as the Notes to the April 30, 2006 consolidated financial statements for further details).

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Contractual Obligations	Total			Less than 1 year			1-3 years			3-5 years			More than 5 years
Long term debt obligations⁽¹⁾		$	3,404,045		$	374,754		$	866,068		$	713,223		$	1,450,000
Operating lease obligations			19,215,983			3,107,683			5,601,400			3,764,200			6,742,700
Purchase obligations			—			—			—			—			—
Shareholder Note⁽²⁾			82,431			6,736			14,440			15,812			45,443
Total			22,702,459			3,489,173			6,481,908			4,493,235			8,238,143


(1)	Consists principally of bank borrowings under the Credit Facility and the $1,450,000 principal amount of long term convertible debentures.


(2)	Consists principally of shareholder note.

The Company requires cash to pay its operating expenses and to service the obligations listed above. The Company’s principal sources of funds are its operations. The Company cannot guarantee that its operations will generate cash in future periods.

The Credit Facility requires compliance with various financial covenants, of which the most restrictive are cash to debt ratio and profitability. If the Company defaults under any of the provisions of the Credit Facility, all amounts outstanding under each of the term facilities become due and payable, and the bank may proceed against its collateral, which includes substantially all of the Company’s assets. As of April 30, 2006 the Company was in compliance with the financial covenants of the Credit Facility.

CRITICAL ACCOUNTING POLICIES

The Company considers its accounting policies with respect to the use of estimates, long-lived assets and goodwill, and revenue recognition as the most critical to its results of operations and financial condition.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For example, in fiscal 2001 the Company recorded a non-recurring charge for a litigation settlement agreement. This estimate was based on projected sales of current and future bistro restaurants, which assumed the number and timing of new Bistro Restaurants as defined in the settlement agreement as demonstrated by our discussion of this accrual in our results of operations. The actual royalty payments ultimately required to be paid may vary significantly from both the Company’s original and its revised estimates.

Long-Lived Assets

The Company evaluates its long-lived assets under the provisions of Statement of Financial Accounting Standards No. 144 (‘‘SFAS No. 144’’). SFAS No. 144 establishes accounting standards for the impairment of long-lived assets and certain identifiable intangibles to be held and used and for long-lived assets, and certain identifiable intangibles to be disposed of.

Whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable, the Company reviews the carrying values of its long-lived and identifiable intangible assets for possible impairment, as appropriate. In fiscal 2006 the Company recorded an impairment charge of $307,000 related to the write down of certain long-lived assets of a Polcari’s Bistro located in Salem, New Hampshire. In fiscal 2004, the Company recorded an impairment charge of $2,163,000, included in discontinued operations, related to the write-down of certain long-lived

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assets of the Polcari’s North End located in Cambridge, Massachusetts. The Company determined that the future cash flows which the Company estimated would be received from the respective restaurants would not be sufficient to recover the recorded carrying value of the long-lived assets applicable to that location.

Goodwill

Goodwill resulting from the excess of cost over fair value of net assets acquired is being tested for impairment in accordance with the guidelines in SFAS No. 142. SFAS No. 142 requires among other things, that companies no longer amortize goodwill but test goodwill for impairment at least annually. As of April 30, 2006, the Company’s goodwill of $453,643 was associated with the acquisition of Capucino’s, Inc. in 1994. No adjustment to the $453,643 balance of goodwill was deemed necessary during the year ended April 30, 2006. Prior to the adoption of SFAS 142, the Company amortized goodwill over twenty years.

Revenue Recognition

Substantially all restaurant sales represent retail sales to the general public through Company-owned restaurants. Such amounts are recognized as revenue at the point of sale.

Franchise fees resulting from the sale of individual franchise locations are recognized as revenue upon the commencement of franchise operations. Revenues from the sale of area development rights are recognized proportionately as the franchised restaurants commence operations. Franchise royalties, which are based on a percentage of franchised restaurants’ sales are recognized when revenue is earned.

Recently Issued Accounting Standards

In May 2005, the FASB issued SFAS No. 154, ‘‘Accounting Changes and Error Correction’’, replaces ABP Opinion 20, ‘‘Accounting Changes,’’ and FASB Statement No. 3, ‘‘Reporting Accounting Changes in Interim Financial Statements,’’ and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior period’s financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of error made in fiscal years beginning after the date SFAS No. 154 was issued. At the present time, we do not believe that adoption of SFAS No. 154 will have a material effect on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123R which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. It eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, and generally requires that such transactions be accounted for using a fair-value-based method. As permitted by the current SFAS No. 123, Accounting for Stock-Based Compensation, we have been accounting for share-based compensation to employees using APB Opinion No. 25's intrinsic value method and, as such, we generally recognize no compensation cost for employee stock options. Under the original guidance of SFAS No. 123R, we were to adopt the statement's provisions for the interim period beginning after June 15, 2005. However, in April 2005, as a result of an action by the Securities and Exchange Commission, companies were allowed to adopt the provisions of SFAS No. 123R at the beginning of their fiscal year that begins after June 15, 2005. Consequently, we adopted SFAS No. 123R on May 1, 2006. While we expect that the requirement to expense stock options and other equity interests that have been or will be granted pursuant to our equity incentive program will significantly increase our operating expenses and result in lower earnings per share, the amount of the increase in operating expenses will depend on the level of future grants, the terms and fair values of such grants,

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and expected volatilities, among other factors, present at the grant dates. The adoption of SFAS No. 123R will have no impact on our cash flows.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS.

Interest Rate Risk.

We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, borrowings under the Credit Facility described in Item 7 bear interest at a variable rate based on the bank’s prime rate. A 100 basis point change in the Credit Facility interest rate (approximately 9.75% at April 30, 2006) would cause the interest expense for fiscal 2007 to change by approximately $13,000. This computation is determined by considering the impact of hypothetical interest rates on our variable long-term debt at April 30, 2006. However, the nature and amount of our borrowings under the Credit Facility may vary as a result of future business requirements, market conditions covenant compliance and other factors.

Our other outstanding long-term debt bears fixed rates of interest. The Company believes there is no material exposure to a market interest rate risk that could affect future results of operations or financial conditions.

Commodity Price Risk.

Many of the food products and other operating essentials purchased by us are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, production problems, delivery difficulties and other factors that are beyond our control. Our supplies and raw materials are available from several sources and we are not dependent upon any single source for these items. The Company negotiates directly with wholesale suppliers of certain high volume food ingredients such as cheese, tomato sauce, and flour to ensure consistent quality and competitive pricing. These ingredients are then purchased for the Company by a third party independent distributor at the negotiated price and redistributed to the Company’s restaurants. All other food ingredients and beverage products are purchased directly by the general manager of each restaurant in accordance with corporate guidelines. Certain significant items that could be subject to price fluctuations are cheese and flour products. The Company believes that it will be able to pass through increased commodity costs by adjusting menu pricing in most cases. However, we believe that any changes in commodity pricing that cannot be offset by changes in menu pricing or other product delivery strategies would not be material.


ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS


			Page
Index to Financial Statements			F-1
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Financial Statements
Balance sheets			F3 – F-4
Statements of operations			F-5
Statements of stockholders’ equity (deficit)			F-6
Statements of cash flows			F-7
Summary of accounting policies			F-8 – F-14
Notes to consolidated financial statements			F-15 – F-32

The Company’s Financial Statements, together with the Report of the Registered Public Accounting Firm have been included at Item 15 and appear at Pages F-1 through F-32.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rule 13a-15 or 15d-15), which have been designed to ensure that material information related to the Company is timely disclosed. Based upon that evaluation, they concluded that the disclosure and procedures were effective and remained unchanged in the fourth quarter of year ended April 30, 2006. In addition, there was no change in the Company's internal controls over financial reporting that occured during the Company's fourth quarter that has materially affected, or is reasonably likely to materially affect, internal controls over financial reporting.


ITEM 9B.	OTHER INFORMATION

None.

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PART III


ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information with respect to directors:


Directors	Age		Position	Since
George R. Chapdelaine		61	Chief Executive Officer, President and Director		1994
Hugh Devine		58	Director		2000
Edward P. Grace III		56	Director		2004
Roger Lipton		65	Director		1996
John P. Polcari, Jr.		75	Director		1994
Peter E. Salas		52	Director		2005
Robert C. Taft		53	Director		2004

Mr. Chapdelaine was elected President, Chief Executive Officer and a director of the Company in April 1994. Mr. Chapdelaine served as President, Chief Executive Officer and a director of Pizzeria Regina, Inc., a predecessor of the Company, from 1982 until it was acquired by the Company in April 1994. Prior to 1982, Mr. Chapdelaine worked in the food service industry in various capacities, including as an independent marketing consultant, a general manager of the Food Service division for H.P. Hood, Inc. and a sales manager for Chiquita Brands, a subsidiary of United Brands. Mr. Chapdelaine holds an MBA from Clark University and graduated with a B.S. in Hotel and Restaurant Management from Oklahoma State University. He currently serves on the Board of the Massachusetts Restaurant Association.

Mr. Devine has been the President of Devine & Pearson Advertising, Inc. (an advertising and communications agency with 29 years experience marketing to the food service industry) since 1976. Mr. Devine is nationally recognized for identifying marketing opportunities for clients, both food service operators and manufacturers of food, beverages, equipment and supplies. He serves on the boards of directors of the YMCA, American Association of Advertising Agencies and Advertising Club of Greater Boston.

Mr. Grace has been President of Phelps Grace International, Inc., an investment management company, and Managing Director of Grace Venture Partners, LP. since 1998. Mr. Grace has over
30 years experience in the food service industry. He was the founder, Chairman, President and CEO of Bugaboo Creek Steak House, Inc., operator of both The Capital Grill, a 20 location fine dining restaurant, and the Bugaboo Creek Steak House, a casual dining restaurant chain with locations throughout the East Coast, from 1989 until 1996. He was Vice Chairman and a Director of RARE Hospitality International, Inc. from 1996 to 1998. From 1992 until 1994 he was the Chairman of Homestyle Buffet, Inc., a 34 location buffet style restaurant chain. Mr. Grace has served as the director of a number of public and private companies, including Professional Facilities Management, Inc., Not Your Average Joe's Inc., The Gemesis Corporation and Shawmut Design & Construction, Inc. He is currently a Trustee of Johnson & Wales University and of Bryant College and in the past has served on the boards of a number of other trade associations, and educational and philanthropic organizations, including the National Restaurant Association.

Mr. Lipton has been President of Lipton Financial Services, Inc. (a money management and investment banking firm, specializing in restaurant, franchising and retailing industries) since 1993. Since February 1995, he has also been a Managing Director of Axiom Capital Management, Inc., a NASD broker/dealer. From 1981 until February 1995, he was Managing Director of Ladenburg, Thalmann & Co., Inc., a broker/dealer and investment banking firm.

Mr. Polcari was a founder of Pizzeria Regina, Inc. and has been employed by the Company and its predecessor in various capacities from its inception. He is a recipient of the National Restaurant Association’s state restaurateur of the year award for the Commonwealth of Massachusetts.

Mr. Salas has been President of Dolphin Asset Management Corporation and its related companies (‘‘Dolphin’’) since he founded it in 1988. Dolphin and its affiliates are the beneficial owners

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of approximately 40.3% of the Company’s outstanding capital stock, as set forth under the heading ‘‘Security Ownership of Certain Beneficial Owners and Management. Affiliates of Dolphin have entered into a merger agreement to acquire the Company. See ‘‘Item 13. Certain Relationships and Related Transactions.’’ Prior to founding Dolphin, he was with J.P. Morgan Investment Management, Inc. for ten years. Mr. Salas is currently a director and Chairman of the Board of both Tengasco, Inc. (AMEX: TGC), an independent oil and gas producer, and of ACT Teleconferencing, Inc. (OTC: ACTT), a global teleconferencing provider. He is also a director of Williams Controls, Inc. (OTCBB: WMCO), a manufacturer of electronic throttle controls, and Southwall Technologies, Inc. (OTCBB: SWTX), a manufacturer of energy control systems. Mr. Salas received an A.B. degree from Harvard in 1978.

Mr. Taft has been the CEO of Caffino, Inc., a chain of double drive-through espresso bars, since September 2003. He has over 25 years experience in the food service industry. During 2002 and 2003 Mr. Taft was Chief Concept Officer of Ultimate Franchise System, Inc., and was President of Sonofresco from 2001 to 2002 He was Chief Operating Officer of Fuddruckers, Inc., a fast casual restaurant chain with over 200 franchised and company owned locations, from 1999 until 2001. From 1996 until 1999, he served as President of the Au Bon Pain Bakery Cafes unit of Au Bon Pain, Inc., a fast service chain with over 250 locations. From 1993 until 1996, Mr. Taft was the President and CEO of Papa Gino’s, Inc. He has served on the boards of Ultimate Franchise Systems, Inc. and the Washington and Massachusetts Restaurant Associations.

Management

Anthony Buccieri, 51, was appointed Vice President of Operations in April 1994. Mr. Buccieri joined a predecessor of the Company in 1974 and has served in various capacities since that date, including as operations supervisor since 1983. Ms. Fran Ross, 53, was appointed a Company Vice President in, February 1995 and Chief Financial Officer in October 1995.

CORPORATE GOVERNANCE

General

The Board of Directors of the Company believes that good corporate governance is important to ensure that the Company is managed for the long-term benefit of its stockholders. In response to the wave of corporate scandals and Congress’s enactment of the Sarbanes-Oxley Act of 2002 (‘‘Sarbanes-Oxley’’), in the Fall of 2002 the Board reviewed our corporate governance policies and practices and compared them to the provisions of Sarbanes-Oxley, the new and proposed rules of the SEC under that statute and practices suggested by various authorities in corporate governance. Based upon that review, in December 2002 the Board of Directors took steps to implement the then proposed new rules and listing standards. In particular, the Board:


	•	adopted a new charter for our Audit Committee reflecting the requirements of Sarbanes-Oxley and the rules adopted or then proposed for audit committees;


	•	adopted a charter for our Compensation Committee;


	•	created a Corporate Governance and Nominating Committee (initially consisting of the entire Board) and adopted its charter;


	•	Reviewed the independence standards for directors then being proposed or adopted by the SEC and Nasdaq and assessed the independence of existing board and committee members under those standards; and


	•	adopted a Code of Ethics and a Code of Conduct which applies to all executive officers, directors, employees and agents of the Company.

Subsequent to the December 2002 meeting, the Board also approved adjustments in the actions taken at that meeting to conform to changes in regulations subsequently adopted by the SEC and the Nasdaq Stock Market, Inc.

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Board of Directors and Regular Committees

The Board of Directors has responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board’s primary responsibility is to oversee the management of the Company and, in so doing, to serve the best interests of the Company and its stockholders. Management keeps the directors informed of Company activity through regular written reports and presentations at Board and committee meetings.

The Board of Directors held eight meetings during the fiscal year ended April 30, 2006. All of the Company’s directors are encouraged to attend the Company’s annual meeting of stockholders. All of the Company’s directors were in attendance at the Company’s September, 2005 Annual Meeting.

The Board of Directors also acted by unanimous written consent in lieu of a special meeting on three occasions. Each current director attended at least 75% of the meetings of the Board of Directors and of committees of which he or she was a member held during the last fiscal year. Under the standards of the Nasdaq Stock Market, Inc. (NASD Rule 4200(a)(15)), the Company has determined that five of the seven directors, Messrs. Devine, Grace, Lipton, Salas and Taft, satisfy the requirements to be an independent director.

The Board currently has the following committees: an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating Committee.

Audit Committee. The primary function of our Audit Committee is to assist the Board in fulfilling its oversight responsibilities with respect to the management of the Company. The Audit Committee is directly responsible for the oversight of : (i) the integrity of the Company’s disclosure controls and procedures; (ii) the integrity of the Company’s internal controls over financial reporting; and (iii) the qualifications, independence, appointment, compensation and performance of the Company’s independent auditors. It also is responsible for administering the Company’s Code of Ethics and Code of Conduct, the establishment of ‘‘whistle-blowing’’ procedures, and the oversight of certain other compliance matters.

Under its charter adopted in December 2002, as subsequently amended and supplemented by SEC and stock market rules, the Audit Committee must consist of not less than one or more than three directors, all of whom satisfy the independence standards of the SEC, the Nasdaq Stock Market. The Audit Committee has been composed of Mr. Devine, Mr. Grace and Mr. Taft, all of whom the Board of Directors determined satisfy those standards. In 2005, the Board of Directors reviewed the qualifications of Mr. Grace and Mr. Taft and determined that each was an ‘‘audit committee financial expert’’ as defined by SEC rules. The Audit Committee held six meetings during the fiscal year ended April 30, 2006.

Compensation Committee. The purpose of the Compensation Committee is to assist the Board in the discharge of its responsibilities related to the fair and competitive compensation of executives and key employees of the Company. It is charged with periodic review of the compensation philosophy of the Company, annual evaluation of the performance of the principal executives and key employees, annual review of the total compensation of those persons, approval of grants under and supervision of the administration of stock plans, and issuance of an annual report to stockholders in accordance with SEC rules.

Under its charter as adopted in December 2002, the Compensation Committee must consist of a minimum of one director, and each member must be a non-employee, outside director under various standards of the tax laws and rules of the SEC, who also satisfies the independence requirements of the Nasdaq Stock Market. The Compensation Committee currently has been composed of Mr. Devine, Mr. Grace and Mr. Lipton all of whom the Board determined satisfy those standards.

The Compensation Committee held one meeting during the fiscal year ended April 30, 2006.

Corporate Governance and. Nominating Committee. The purpose of the Corporate Governance and Nominating Committee is to review and evaluate the Company’s policies, codes of conduct and guidelines, evaluate and make recommendations to the Board concerning Board committees, review

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and evaluate the CEO and other senior management (other than related to compensation), serve as a focal point for management succession planning, and identify and evaluate candidates for nomination as directors.

Under its charter as adopted in December 2002, the Corporate Governance and Nominating Committee may consist of either the entire Board or, if less than the entire Board, a committee of not less than two non-employee members of the Board of Directors, each of whom satisfies the independence requirements of the Nasdaq Stock Market. The Board of Directors considered the functions of the Corporate Governance and Nominating Committee and the fact that two of the directors who are not independent within the meaning of the Nasdaq definition are major stockholders and collectively the owners of approximately 20.8% of the Company’s outstanding capital stock, and determined that it was appropriate for the entire Board of Directors to serve as the Corporate Governance and Nominating Committee. The Board met as the Corporate Governance and Nominating Committee once during the last fiscal year.

Under its charter, the Corporate Governance and Nominating Committee is responsible for identifying candidates to serve as directors (whether such directorships are filled by the Board or by stockholders), gathering information on such candidates, conducting interviews of candidates and their references, and making recommendations to the full Board of Directors.

The Corporate Governance and Nominating Committee may consider nominees recommended by stockholders and other sources, such as directors, officers, third party search firms or other appropriate sources. In evaluating candidates, it will consider personal integrity, sound business judgment, business and professional skills and experience, independence (as defined under SEC and Nasdaq rules), diversity, potential conflicts of interest, the extent to which a candidate would fill a present need, and concern for the long term interests of stockholders. In any particular situation, the committee may focus on persons possessing a particular background, experience or qualifications which the Committee believes would be important to enhance the effectiveness of the Board. The evaluation process for stockholder recommendations is the same as for candidates from any other source.

ADDITIONAL INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), requires the Company's directors and executive officers, and persons who beneficially own more than 10% of the Company's Common Stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Reporting persons are also required to furnish the Company with copies of all Forms 3, 4, and 5 they file.

Based solely on the Company's review of the copies of Forms 3, 4 and 5 which it has received and written representations from certain reporting persons the Company believes that all of its directors, executive officers, and greater than 10% stockholders complied with all Section 16(a) filing requirements applicable to them during the Company's fiscal year ended April 30, 2006.


ITEM 11.	EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation during each of the last three fiscal years of the Chief Executive Officer and of each executive officer and others whose annual salary and bonus exceeded $100,000 for services in all capacities to the Company during fiscal 2006 (collectively, the ‘‘Named Executive Officers’’).

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SUMMARY COMPENSATION TABLE


			Annual Compensation				Long-Term Compensation
Name and Principal Positions	Fiscal Year Ended		Salary ($)		Bonus ($)		Securities Underlying Stock Options(#)
George R. Chapdelaine		4/30/2006		241,000		0		0
President and CEO		4/24/2005		232,000		0		50,000
		4/25/2004		222,000		0		100,000
Anthony Buccieri		4/30/2006		137,000		0		0
Vice President Operations		4/24/2005		135,000		0		20,000
		4/25/2004		129,000		0		0
Fran V. Ross		4/30/2006		135,000		0		0
Vice President and		4/24/2005		130,000		0		20,000
Chief Financial Officer		4/25/2004		125,000		0		0
John Polcari, Jr.		4/30/2006		105,000		0		0
		4/24/2005		105,000		0		50,000
		4/25/2004		99,900		25,000		0

Stock Options

The following table presents certain information concerning stock options held by the Named Executive Officers. No stock options were granted to or exercised by the Named Executive Officers during the last fiscal year.

FISCAL YEAR-END OPTION VALUES

Name

Number of Shares of Common Stock
Underlying Unexercised Options at
April 30, 2006 Exercisable/ Unexercisable

Value of Unexercised In-the-Money Options
at April 30, 2006($)Exercisable/
Unexercisable

George R. Chapdelaine CEO

230,000/0

$39,600/$0

Anthony Buccieri

65,000/0

13,200/$0

Fran V. Ross

65,000/0

$13,200/$0

John Polcari, Jr.⁽¹⁾

135,000/0

52,800/$0


(1)	includes options and warrants of spouse

Employment Contract

The Company and Mr. Chapdelaine, the Chief Executive Officer and President of the Company, entered into a two year employment agreement automatically renewable annually dated April 23, 2004. This agreement has been renewed through April 2007. Mr. Chapdelaine was also provided with an automobile plus the cost of annual insurance and with such other employee benefits as were generally available to employees or officers of the Company. Pursuant to the employment agreement, the Company agreed to grant Mr. Chapdelaine stock options to acquire 100,000 shares of Common Stock that vest over two years.

Under the terms of the employment agreement, if Mr. Chapdelaine's employment with the Company is terminated by the Company without cause, or if Mr. Chapdelaine terminates his employment with the Company for good reason (either a material reduction in his overall level of responsibility or the relocation of the Company's executive offices to a location that is more than 35 miles from Boston, Massachusetts, in each case without his consent) or due to a change in control of the Company, then the Company must continue to pay Mr. Chapdelaine his then-current base salary, payable monthly, during a one-year severance period, and Mr. Chapdelaine may not compete with the Company during that period.

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Mr. Chapdelaine's employment agreement also contains a non-competition provision that prohibits Mr. Chapdelaine from directly or indirectly competing with the Company as long as he is an employee of the Company and, in the case of his voluntarily termination or his termination by the Company for cause, for a period of two years thereafter. The agreement also contains confidentiality provisions that provide that Mr. Chapdelaine may not disclose proprietary information of the Company, other than in furtherance of the business of the Company or in response to a court order.

Bonus Program

The Company has adopted an incentive program under which key contributors, selected by the Compensation Committee, will be paid cash bonuses. The aggregate amount of these bonuses will be based upon a formula related to the financial performance of the Company. Bonuses, if any, will be allocated by the Compensation Committee among the individual employees based upon their performance during the year. No bonuses were paid during the last fiscal year.

Compensation of Directors

Non-employee directors of the Company presently do not receive cash compensation for their services as directors. The Company provides health insurance benefits or the cash equivalent to its directors and reimburses them for their out-of-pocket expenses in attending board meetings. In addition, directors were eligible for the grant of stock options under the 2002 Combination Stock Option and Share Award Plan. No options to purchase shares of common stock were awarded to directors under these plans during fiscal 2006.

In May, 2005, the Company created a special committee comprised of Messrs. Grace, Devine and Taft to evaluate strategic alternatives for the Company. Members of the committee were each paid a fee of $5,000. See ‘‘Item 13. Certain Relationships and Related Transactions.’’

Compensation Committee Report

The Compensation Committee of the Board of Directors, comprised of independent directors, is responsible for assisting the Board in the discharge of its responsibilities related to the fair and competitive compensation of executives and key employees of the Company. Among other responsibilities, the Compensation Committee reviews and recommends to the Board of Directors the compensation of the Chief Executive Officer and each of the other executive officers of the Company.

The objective of the Compensation Committee in determining the compensation of the Company’s executive officers is to provide a base compensation which allows the Company to attract and retain experienced talent. The Compensation Committee’s philosophy is to align the executive officers’ interests with the success of the Company; therefore, the Committee has established bonus payments based on the Company’s performance. The cash compensation for each executive officer consists of a base salary plus the potential for an annual performance bonus. Mr. Chapdelaine’s salary for fiscal 2006 was based upon his pre-existing contract, and the amount of his bonus for fiscal 2006 was based upon his performance in relation to financial targets. The Company entered into a new automatically renewable employment agreement with Mr. Chapdelaine in April 2004. This agreement has been renewed through April 2007. The terms of this new employment agreement are in line with the Compensation Committee’s executive officer compensation philosophy.

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COMPENSATION COMMITTEE: Hugh Devine, Edward P. Grace, III, Roger Lipton

Performance Graph

The following graph compares the change in Boston Restaurant Associates, Inc.’s cumulative total stockholder return the last five fiscal years with the cumulative return on the Russell 2000 and the Standard & Poor Index for Hotel, Restaurant and Leisure for that period.

Indemnification Agreements

The Company has entered into indemnification agreements with each of its directors and anticipates that it will enter into similar agreements with any future directors. Generally, the indemnification agreements attempt to provide the maximum protection permitted by Delaware law with respect to indemnification of directors.

The indemnification agreements provide that the Company will pay certain amounts incurred by a director in connection with any civil or criminal action or proceeding and specifically including actions by or in the name of the Company (derivative suits) where the individual’s involvement is by reason of the fact that he is or was a director. Such amounts include, to the maximum extent permitted by law, attorney’s fees, judgments, civil or criminal fines, settlement amounts, and other expenses customarily incurred in connection with legal proceedings. Under the indemnification agreements, a director will not receive indemnification if he is found not to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Company Equity Compensation Plans

The Company presently maintains a 1994 Director Stock Option Plan and a 1994 Employee Combination Stock Option Plan under which options are no longer issued, and the Combination Stock Option and Share Award Plan (the ‘‘2002 Plan’’), pursuant to which it grants equity awards to eligible persons. The following table gives information about those plans.

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	(a)		(b)			(c)
Plan category	Number securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options warrant and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		1,210,000		$	.75		300,000
Equity compensation plans not approved by security holders		0			0		0
Total		1,210,000		$	.75		300,000

The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of June 29, 2006 by (i) each person who is known by the Company to own beneficially more than five percent of the outstanding shares of Common Stock, (ii) each current director and nominee for director of the Company, (iii) each of the Named Executive Officers listed in the Summary Compensation Table below, and (iv) all current directors, nominees and executive officers of the Company, as a group. Except where otherwise indicated, this information is based upon information provided to the Company by the named person.


Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership⁽¹⁾⁽²⁾		Percentage of Outstanding Shares
George R. Chapdelaine⁽³⁾ c/o Boston Restaurant Associates, Inc. 999 Broadway Saugus, MA 01906		960,390	13.1%
Anthony Buccieri⁽⁹⁾ c/o Boston Restaurant Associates, Inc. 999 Broadway, Suite 400 Saugus, MA 01906		70,100	1.0%
Hugh Devine⁽⁴⁾ Devine & Pearson Crown Colony Park 300 Congress Street Quincy, MA 02169		110,000	1.5%
Edward P. Grace III⁽⁸⁾ Grace Venture Partners Sun Trust Center, suite 1850 200 South Orange Avenue Orlando, FL 32801		243,547	3.4%
Roger Lipton ⁽⁵⁾⁽⁶⁾ 983 Park Avenue New York, NY 10028		80,000	1.1%
John P. Polcari, Jr. ⁽⁵⁾⁽⁷⁾ c/o Boston Restaurant Associates, Inc. 999 Broadway Saugus, MA 01906		1,061,568	14.7%

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Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership⁽¹⁾⁽²⁾		Percentage of Outstanding Shares
Fran V. Ross ⁽⁹⁾ c/o Boston Restaurant Associates, Inc. 999 Broadway, suite 400 Saugus, MA 01906		89,901	1.3%
Peter E. Salas^(10)(11) Dolphin Asset Management Corp. 129 East 17^th Street New York, NY 10003		3,302,811	44.0%
Robert C. Taft ⁽¹²⁾ Caffino 3130 Crow Canyon Park Place, Suite 120 San Ramon, CA 94583		230,573	3.2%
Jordan Index Fund, Lp. ⁽¹³⁾ 1876 Woodhollow Lane, Apt. 306 Maryland Heights, MO 63043		903,186	11.7%
All directors, and executive officers as a group (9 persons) ⁽¹⁴⁾		6,098,890	75.8%


*	Less than one percent


(1)	Unless otherwise indicated in other footnotes, to the knowledge of the Company, all persons listed have sole voting and investment power with respect to shares of Common Stock, except to the extent shared with spouses under applicable law.


(2)	In computing the number of shares beneficially owned and the percentage of ownership of that person, shares of Common Stock subject to options or warrants exercisable within 60 days after the date of the information in the table are deemed outstanding. However, such shares are not deemed outstanding for the purpose of computing percentage ownership of any other person.


(3)	Based upon information contained in a Schedule 13G Amendment as filed with the Securities and Exchange Commission on January 24, 2006. Includes 230,000 shares issuable pursuant to stock options.


(4)	Includes 110,000 shares issuable pursuant to stock options.


(5)	Includes 80,000 shares issuable pursuant to stock options.


(6)	Based upon information contained in a Schedule 13D, Amendment 3, as filed with the Securities and Exchange Commission on October 17, 2005.

(7)

Based upon information contained in a Schedule 13G Amendment as filed with the Securities and Exchange Commission on January 24, 2006. Includes 123,658 shares issued to Lucille Salhany and Mr. Polcari jointly with rights of survivorship and 12,741 shares held by Ms. Salhany for the benefit of certain family members. Includes 30,000 shares issuable pursuant to stock options, 25,000 shares issuable pursuant to stock warrants and 58,823 shares of Preferred Stock issued to Ms. Salhany.


(8)	Includes 100,000 shares issuable pursuant to stock options and 117,647 shares issuable pursuant to convertible Preferred Stock.


(9)	Includes 65,000 shares issuable pursuant to stock options.


(10)	Based upon information contained in a Schedule 13D, as amended, as filed with the Securities and Exchange Commission on March 24, 2006.


(11)	Includes 470,588 shares issuable pursuant to convertible Preferred Stock.

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(12)	Based on information provided by Mr. Taft does not include 77,800 shares held by relatives of Mr. Taft for which he disclaims any beneficial ownership, however 100,000 shares issuable pursuant to stock options and 29,411 shares issuable pursuant to convertible preferred stock are included.


(13)	Based upon information contained in a Schedule 13G as filed with the Securities and Exchange Commission on February 13, 1998. Includes 500,000 shares issuable pursuant to currently exercisable warrants.


(14)	Includes 879,800 shares issuable pursuant to stock options and 617,646 shares issuable pursuant to convertible Preferred Stock.

On March 17, 2006, the Company entered into an Agreement and Plan of Merger (the ‘‘Merger Agreement’’) by and among the Company, Dolphin Direct Equity Partners, LP (‘‘Dolphin’’) and Braidol Acquisition Corp., (‘‘Braidol’’) a wholly-owned subsidiary of Dolphin (‘‘Sub’’), whereby Braidol Sub will merge (the ‘‘Merger’’) with and into the Company with the Company surviving the Merger. Under the terms of the Merger Agreement, the common stockholders of the Company, would be entitled to receive an amount equal to $0.70, without interest, per share of common stock. Under the terms of the Merger Agreement, the preferred stockholders of the Company would be entitled to receive a liquidation preference as set forth in the certificate of designation for the preferred stock, without interest, as well as the product of the number of shares of common stock that such shares of preferred stock are convertible in to immediately prior to the merger and $.70, without interest. The consummation of the Merger is subject to customary closing conditions, including the approval of the stockholders of the Company. In addition, the consummation of the Merger is subject to the condition that certain transaction costs incurred by the Company not exceed $625,000. The Company has determined that it is unlikely that the Company will satisfy this condition and has sought a waiver from Dolphin. As of June 29, 2006, the Company has not received that waiver.

In any event, the Company is required to pay certain of Dolphin’s expenses. Under certain circumstances, if the Merger is not completed, the Company is required to pay a termination fee of up to $325,000 less any expenses it has paid for the benefit of Dolphin and its affliates. As of the date hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P. hold a 40.3%beneficial interest in the Company’s common stock. Peter Salas, a member of the Company’s Board of Directors, is President of Dolphin Asset Management Corp. an affiliate of Dolphin, and its related companies.


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Subordinated Debentures

The Company had subordinated debentures outstanding at April 30, 2006 consisted of convertible subordinated debentures in the amount of $1,450,000 bearing interest at 8% through 31 December, 1997; 10% through 31 December, 1998; 12% through 31 December 1999; and 14% through 2011, equivalent to a blended rate of approximately 13.2% annually, payable semi-annually and convertible into the Company’s Common Stock at a conversion rate of $1.25 per share. The Company can redeem the convertible debentures under certain conditions. The debentures are due 31 December 2011. Mr. Lipton, a member of the Board of Directors of the Company, received a fee equal to 5% of the proceeds as compensation for services in connection with this transaction in fiscal 1997.

Preferred Stock

On January 20, 2005, the Company sold 1,147,056 shares of our Series A Preferred Stock,
$.01 par value per share, to 11 accredited investors in a private transaction pursuant to subscription agreements between each such investor and the Company. Each share of Series A Preferred Stock may be converted at any time at the option of the holder of such share into one share of the Company’s Common Stock, $.01 par value per share. The investors paid $0.85 per share, for aggregate gross proceeds of $975,000.

The Company agreed pursuant to a rights agreement between the Company and the investors to use commercially reasonable efforts to (i) register the resale of the shares of Common Stock issuable

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upon the conversion of the shares of Series A Preferred Stock upon demand of a sufficient number of the holders of the Series A Preferred Stock and (ii) include such shares of Common Stock in any registration statement for the benefit of the Company or any third party upon request of a sufficient number of the holders of the Series A Preferred Stock.

The Company sold the shares of Series A Preferred Stock pursuant to certain exemptions from registration provided by Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. Directors of the Company, together with their affiliates, purchased 617,646 shares of this stock (117,647 shares by Mr. Grace, 470,588 shares by affiliates of Mr. Salas and 29,411 shares by Mr. Taft).

Merger Agreement

On March 17, 2006, the Company entered into an Agreement and Plan of Merger (the ‘‘Merger Agreement’’) by and among the Company, Dolphin Direct Equity Partners, LP (‘‘Dolphin’’) and Braidol Acquisition Corp., (‘‘Braidol’’) a wholly-owned subsidiary of Dolphin (‘‘Sub’’), whereby Braidol Sub will merge (the ‘‘Merger’’) with and into the Company with the Company surviving the Merger. Under the terms of the Merger Agreement, the common stockholders of the Company, would be entitled to receive an amount equal to $0.70, without interest, per share of common stock. Under the terms of the Merger Agreement, the preferred stockholders of the Company would be entitled to receive a liquidation preference as set forth in the certificate of designation for the preferred stock, without interest, as well as the product of the number of shares of common stock that such shares of preferred stock are convertible in to immediately prior to the merger and $.70, without interest. The consummation of the Merger is subject to customary closing conditions, including the approval of the stockholders of the Company. In addition, the consummation of the Merger is subject to the condition that certain transaction costs incurred by the Company not exceed $625,000. The Company has determined that it is unlikely that the Company will satisfy this condition and has sought a waiver from Dolphin. As of June 29, 2006, the Company has not received that waiver.

Stockholder Notes

Currently the Company has two notes with a stockholder who is a relative of John Polcari, one of the Company’s directors, with current liabilities of $7,000 and long term liabilities of $76,000. The notes bear interest at 7.18% and 8% per year and mature on January, 2017.


ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

As noted, the Audit Committee appointed BDO Seidman, LLP as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending April 30, 2006. BDO Seidman, LLP has audited the Company’s financial statements annually since 1994, and has served either the Company or its predecessor as independent public accountants for more than 19 years. The Audit Committee believes it is desirable and in the best interest of the Company to continue employment of that firm.

Audit Fees. BDO Seidman, LLP billed the Company an aggregate of $141,319 and $132,625 for the fiscal years ended April 30, 2006 and April 24, 2005, respectively, for professional services rendered by BDO Seidman, LLP in connection with its audit of the Company’s financial statements, its review of the Company’s quarterly reports on Form 10-Q, and services normally provided in connection with statutory or regulatory filings or engagements.

Audit Related Fees. BDO Seidman, LLP billed the Company an aggregate of $0 and $9,735 in the fiscal years ended April 30, 2006 and April 24, 2005, respectively, for professional services rendered by BDO Seidman, LLP for assurance and related services reasonably related to the performance of an audit or review.

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Tax Fees. BDO Seidman, LLP billed the Company $52,525 and $28,225 for the fiscal years ended April 30, 2006 and April 24, 2005, respectively for tax compliance, tax advice and tax planning.

All Other Fees. BDO Seidman, LLP did not bill the Company for professional services not otherwise described above in the fiscal years ended April 30, 2006 and April 24, 2005, respectively.

Commencing January 1, 2003, in each case where approval was sought for the provision of non-audit services, the Audit Committee considered whether the independent auditors’ provision of such services to the Company is compatible with maintaining the auditors’ independence and determined that they were.

Audit Committee Policy on Pre-Approval of Services of Independent Auditors

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services.

Audit Committee Report

Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting. Management has represented to the Audit Committee that the Company’s consolidated financial statements for the fiscal year ended April 30, 2006 were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee has reviewed and discussed the consolidated financial statements with management and separately with the independent accountants. The Audit Committee also reviewed with the independent auditors the accounting policies and practices critical to the Company’s financial statements, the alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, the ramifications of each alternative, and the independent auditors’ preferred treatment. It also reviewed the material written communications between management and the independent auditors.

The Company’s independent auditors provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Independence Standards Board Standard No. 1 requires auditors annually to disclose in writing all relationships that in the auditor’s professional opinion may reasonably be thought to bear on independence, to confirm their independence and to engage in a discussion of independence. The Audit Committee also reviewed with the independent auditors the SEC rules with respect to independence of auditors. The audit committee received from the Company’s auditors written communication of the matters required by Statement on Auditing Standards No. 61 and discussed these matters with the Company’s auditors.

The Audit Committee assumed the responsibility for pre-approval of the performance of all audit and non-audit services by its independent auditors effective January 1, 2003. In each case where approval was sought for the provision of non-audit services after that date, the Audit Committee considered whether the independent auditors’ provisions of such services to the Company is compatible with maintaining the auditors’ independence, and determined that they were compatible.

Based on the above review and procedures, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements for fiscal year April 30, 2006 be included in the Company’s Annual Report on Form 10-K for that fiscal year. Further, the Audit Committee has appointed BDO Seidman, LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending April 29, 2007.

AUDIT COMMITTEE; Hugh Devine, Edward P. Grace III, Robert C. Taft

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PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)	FINANCIAL STATEMENTS AND SCHEDULES


	(1)	Financial Statements listed under Part II, Item 8


	(2)	Financial Statement Schedules have been omitted because the required information is not applicable or required, or because the required information is shown either in the Financial Statements or the notes thereto.

EXHIBITS


Exhibit Number				Reference Number
	2	.01	Agreement and Plan of Merger dated March 17, 2006	M-2(i)
	3	.01	Amended Certificate of Incorporation of the Registrant	D-3.01*
	3	.02	Amended By-Laws of the Registrant	A-3(b)*
	3	.03	Designation of Preferred Stock	K-3.02*
	4	.01	Description of Stock (contained in the Amended Certificate of Incorporation of the Registrant, filed as Exhibit 3.01).	D-4.01*
	4	.02	Form of Certificate evidencing shares of Common Stock	C-4(b)*
	10	.01	Loan Agreement between Boston Restaurant Associates, Inc. and Commerce Bank & Trust Company dated April 30, 2002	G-6(a)(i)
	10	.02	Note from Boston Restaurant Associates, Inc. to Commerce Bank & Trust Company dated April 30, 2002	G-6(a)(ii)
	10	.03	Security Agreement between Boston Restaurant Associates, Inc. and Commerce Bank & Trust Company dated April 30, 2002	G-6(a)(iii)
	10	.04	Form of Indemnification Agreement with each of the directors and certain officers of the Registrant	A-10(bb)*
	10	.05	Incentive Stock Option Plan**	B- I 0(h)*
	10	.06	2002 Combination Stock Option and Share Award Plan**	F-10(h)*
	10	.07	Charter of the Audit Committee of Boston Restaurant Associates, Inc., as adopted December 6, 2002 as amended March 5, 2004	E-99
	10	.08	Second Allonge to Loan Agreement between Boston Restaurant Associates, herewith Inc. and Commerce Bank & Trust Company dated February 13, 2004	I-6(2)(i)*
	10	.09	First Allonges to Notes from Boston Restaurant Associates, Inc. to Commerce Bank & Trust Company dated February 13, 2004	I-6(a)(ii)*
	10	.10	Stock Purchase Warrant issued by Boston Restaurant Associates, Inc. in favor of Commerce Bank & Trust Company dated February 13, 2004	I-6a(iii)*
	10	.11	Employment agreement between Boston Restaurant Associates, Inc. and George R. Chapdelaine dated April 23, 2004**	I-99*
	10	.12	Stock Option Agreement	J-10(h)*

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Exhibit Number				Reference Number
	10	.13	Loan Agreement between Boston Restaurant Associates, Inc. and Commerce Bank & Trust Company dated April 21, 2005	Filed Herewith
	10	.14	Loan Agreement between Boston Restaurant Associates, Inc. and Commerce Bank & Trust Company dated April 21, 2005	Filed Herewith
	10	.15	Mortgage in favor of Commerce Bank & Trust Company dated April 21, 2005	L-6(a)(iii)
	10	.16	Security Agreement between Boston Restaurant Associates, Inc. and Commerce Bank & Trust Company dated April 21, 2005	Filed Herewith
	14	.01	Code of Ethics	H-14*
	21	.01	Subsidiaries of the Registrant	A-21*
	23	.01	Consent of BDO Seidman, LLP	Filed herewith
	31	.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
	31	.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
	32	.01	Certifications of Chief Executive Officer and Chief Financial Officer to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith


*	In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as amended, reference is made to the documents previously filed with the Securities and Exchange Commission, which documents are hereby incorporated by reference.


**	Management Contract or Compensatory Plan or Arrangement.


A	Incorporated by reference to the Company’s Registration Statement on Form SB-2 (Registration No. 33-81068). The number set forth herein is the number of the Exhibit in said registration statement.


B	Incorporated by reference to the Company’s proxy statement on Schedule 14A as filed with the SEC on July 12, 1994. The number set forth herein is the number of the Exhibit in said registration statement.


C	Incorporated by reference to the Company’s annual report on Form 10-K for the year ended April 30, 1994. The number set forth herein is the number of the Exhibit in said annual report.


D	Incorporated by reference to the Company’s annual report on Form 10-KSB for the year ended April 25, 1999. The number set forth herein is the number of the Exhibit in said annual report.


E	Incorporated by reference to the Company’s quarterly report on Form 10-QSB for period ending January, 2001. The number set forth herein is the number of the Exhibit in said quarterly report.


F	Incorporate by reference to the Company’s annual report on Form 10-K for the year ended April 28, 2002. The number set forth herein is the number of the Exhibit in said annual report.


G	Incorporated by reference to the Company’s quarterly report on Form 10-Q for period ended July 28, 2002. The number set forth herein is the number of the Exhibit in said quarterly report.


H	Incorporated by reference to the Company’s quarterly report on Form 10-Q for period ended January 25, 2004. The number set forth herein is the number of the Exhibit in said quarterly report.

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I	Incorporated by reference to the Company’s annual report on Form 10-K for period ended April 25, 2004. The number set forth herein is the number of the Exhibit in said annual report.


J	Incorporated by reference to the Company’s current report on Form 8-K dated September 16, 2004. The number set forth herein in the number of the Exhibit in said schedule.


K	Incorporated by reference to the Company’s current report on Form 8-K dated January 21, 2005. The number set forth herein in the number of the Exhibit in said schedule.


L	Incorporated by reference to the Company’s annual Report on From 10-K for period ended April 24, 2005. The number set forth herein in the number of the Exhibit in said schedule.


M	Incorporated by reference to the Company’s current report on From 8-K dated March 17, 2006.

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Signatures

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


SIGNATURES	TITLE	DATE

/s/ George R. Chapdelaine	Chief Executive Officer, President and Director (principal executive officer)	June 29, 2006

George R. Chapdelaine

/s/ Fran V. Ross	Chief Financial Officer	June 29, 2006

Fran V. Ross

/s/ Robert Fabrizio	Chief Accounting Officer	June 29, 2006

Robert Fabrizio

/s/ Hugh Devine	Director	June 29, 2006

Hugh Devine

/s/ Edward P. Grace, III	Director	June 29, 2006

Edward P. Grace, III

/s/ Roger Lipton	Director	June 29, 2006

Roger Lipton

/s/ John P. Polcari, Jr.	Director	June 29, 2006

John P. Polcari, Jr.

/s/ Robert C. Taft	Director	June 29, 2006

Robert C. Taft

F-1

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Boston Restaurant Associates, Inc.

We have audited the accompanying consolidated balance sheets of Boston Restaurant Associates, Inc. and subsidiaries as of April 30, 2006 and April 24, 2005, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended April 30, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Boston Restaurant Associates, Inc. and subsidiaries at April 30, 2006 and April 24, 2005, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2006, in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP

Boston, Massachusetts
June 14, 2006

F-2

Table of Contents

Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Balance Sheets


	April 30, 2006			April 24, 2005
Assets (Note 5)
Current:
Cash and cash equivalents		$	811,517		$	687,207
Accounts receivable			127,370			111,404
Inventories (Note 1)			474,167			460,745
Prepaid expenses and other			213,465			161,529
Current assets of discontinued operations (Note 13)			—			164,597
Total current assets			1,626,519			1,585,482
Property and equipment (Notes 9 and 13):
Building			512,500			512,500
Leasehold improvements			6,935,321			6,651,396
Equipment, furniture and fixtures			4,700,528			4,567,460
			12,148,349			11,731,356
Less accumulated depreciation and amortization			8,838,098			7,598,139
Net property and equipment			3,310,251			4,133,217
Other assets, net (Note 2)			1,000,265			443,495
Goodwill (Note 3)			453,643			453,643
Noncurrent assets of discontinued operations (Note 13)			—			125,464
Total Assets		$	6,390,678		$	6,741,301

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-3

Table of Contents

Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Balance Sheets


	April 30, 2006				April 24, 2005
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable		$	997,659			$	715,021
Accrued expenses (Note 4)			1,422,477				1,606,671
Current maturities (Notes 5, 6 and 9):
Long-term debt			374,754				353,396
Notes payable – stockholder			6,736				6,420
Obligations under capital leases			—				31,152
Current liabilities of discontinued operations (Note 13)			—				211,335
Total current liabilities			2,801,626				2,923,995
Long-term obligations:
Long-term debt, less current maturities (Note 5)			1,579,291				1,946,604
Notes payable – stockholder, less current maturities (Note 6)			75,695				82,430
Deferred rent (Note 9)			351,559				367,206
Subordinated debentures (Notes 7 and 10)			1,450,000				1,450,000
Other long-term liabilities (Note 9)			77,095				135,046
Total liabilities			6,335,266				6,905,281
Commitments and contingencies (Notes 9 and 10)
Stockholders’ equity (deficit) (Notes 7 and 10):
Preferred stock, $.01 par value, 10,000,000 shares authorized; 1,147,056 shares issued and outstanding at April 30, 2006 and April 24, 2005 (liquidation preference of $974,998 plus accrued and unpaid dividends)			946,278				946,278
Common stock, $.01 par value 25,000,000 shares authorized; issued 7,060,170 shares; outstanding 7,035,170 shares as of April 30, 2006 and April 24, 2005			70,602				70,602
Additional paid-in capital			10,960,396				10,960,396
Accumulated deficit			(11,897,172	)			(12,116,564	)
			80,104				(139,288	)
Less: treasury stock, 25,000 shares at cost as of April 30, 2006 and April 24, 2005			(24,692	)			(24,692	)
Total stockholder’s equity (deficit)			55,412				(163,980	)
Total liabilities and stockholders’ equity (deficit)		$	6,390,678			$	6,741,301

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-4

Table of Contents

Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Statements of Operations


Years ended	April 30, 2006				April 24, 2005				April 25, 2004
Revenues:
Restaurant sales		$	23,535,406			$	22,628,783			$	19,466,386
Franchise fees (Note 9)			—				269				16,600
Total revenues			23,535,406				22,629,052				19,482,986
Costs and expenses:
Cost of food, beverages and liquor			4,477,172				4,628,052				3,769,034
Other operating expenses			14,735,338				13,912,348				12,044,045
General and administrative			2,484,226				2,450,578				2,738,690
Depreciation and amortization			981,549				976,686				930,272
Pre-opening costs			312				93,196				77,140
Litigation and settlement credits (Note 9)			(28,805	)			(98,259	)			(246,228	)
Charge for asset impairment			306,787				—				—
Total costs and expenses			22,956,579				21,962,601				19,312,953
Operating income			578,827				666,451				170,033
Interest expense, net of interest income of $17,316, $2,905 and $2,890 and in 2006, 2005 and 2004, respectively			(372,941	)			(475,132	)			(493,200	)
Other Income, net			21,936				8,418				221,630
Income (loss) from continuing operations			227,822				199,737				(101,537	)
Discontinued Operations (Note 13):
Loss from operations			(61,568	)			(643,667	)			(3,335,741	)
Gain from disposal of discontinued operations			132,004				15,215				—
Income (loss) from discontinued operations			70,436				(628,452	)			(3,335,741	)
Net Income (loss)			298,258				(428,715	)			(3,437,278	)
Less: preferred stock dividends			(78,866	)			(20,583	)			—
Income (loss) available to common shareholders		$	219,392			$	(449,298	)		$	(3,437,278	)
Income (loss) per share of common stock (Basic and Diluted) (Note 12)
Continuing Operations		$	.02			$	.03			$	(.01	)
Discontinued Operations			.01				(.09	)			(.48	)
Income (loss) available to common shareholders		$	.03			$	(.06	)		$	(.49	)

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-5

Table of Contents

Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Statement of Stockholders' Equity (Deficit)


	Preferred Stock $.01 Par Value					Common Stock $.01 Par Value						Additional Paid-in Capital			Accumulated Deficit				Treasury Stock							Total Stockholders’ Equity (Deficit)
	Shares		Amount			Shares			Amount			Additional Paid-in Capital			Accumulated Deficit				Shares			Amount				Total Stockholders’ Equity (Deficit)
Balance, April 27, 2003		—		$	—		$	7,060,170		$	70,602		$	10,922,636		$	(8,229,988	)		$	25,000		$	(24,692	)		$	2,738,558
Issuance of warrants in exchange for bank waiver		—			—			—			—			29,999			—				—			—				29,999
Net loss for the year		—			—			—			—			—			(3,437,278	)			—			—				(3,437,278	)
Balance, April 25, 2004								7,060,170			70,602			10,952,635			(11,667,266	)			25,000			(24,692	)			(668,721	)
Issuance of warrants		—			—			—			—			7,761			—				—			—				7,761
Issuance of Preferred Stock net of issuance costs of $29,000		1,147,056			946,278			—			—			—			—				—			—				946,278
Preferred Stock Dividends		—			—			—			—			—			(20,583	)			—			—				(20,583	)
Net loss for the year		—			—			—			—			—			(428,715	)			—			—				(428,715	)
Balance, April 24, 2005		1,147,056			946,278			7,060,170			70,062			10,960,396			(12,116,564	)			25,000			(24,692	)			(163,980	)
Preferred Stock Dividends		—			—			—			—			—			(78,866	)			—			—				(78,866	)
Net income for the year		—			—			—			—			—			298,258				—			—				298,258
Balance, April 30, 2006		1,147,056		$	946,278		$	7,060,170		$	70,062		$	10,960,396		$	(11,897,172	)			25,000		$	(24,692	)		$	55,412

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-6

Table of Contents

Boston Restaurant Associates, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows


Years ended	April 30, 2006				April 24, 2005				April 25, 2004
Cash flows from operating activities:
Income (loss) from operations (Note 11)		$	227,822			$	199,737			$	(101,537	)
Income (loss) from discontinued operations			70,436				(628,452	)			(3,335,741	)
Net Income (loss)			298,258				(428,715	)			(3,437,278	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Gain (loss) from disposal of discontinued operations			(132,004	)			—				—
Depreciation and amortization			981,549				1,102,927				1,231,399
Litigation and settlement credits			(28,805	)			(98,259	)			(246,228	)
Warrants in consideration of loan agreement			—				7,761				29,999
Charge for asset impairment			306,787				—				2,162,584
Changes in operating assets and liabilities:
Accounts receivable			13,061				29,544				(32,852	)
Inventories			122,148				139,595				(194,880	)
Prepaid expenses and other			(51,936	)			32,774				(29,693	)
Other assets			(561,398	)			(20,330	)			(18,429	)
Accounts payable			216,014				(276,824	)			478,399
Accrued expenses			(324,139	)			314,034				96,960
Deferred rent			(15,647	)			(134,263	)			105,198
Other long-term liabilities			(29,146	)			(17,711	)			(9,454	)
Net cash provided by operating activities			794,742				650,533				135,725
Cash flows from investing activities
Capital expenditures			(416,992	)			(801,883	)			(3,040,138	)
Proceeds from sale of assets of discontinued operations			213,718				552,332				—
Net cash used for investing activities			(203,274	)			(249,551	)			(3,040,138	)
Cash flows from financing activities:
Repayments of long-term debt			(345,955	)			(3,383,158	)			(384,348	)
Repayments of capital lease obligations			(31,152	)			(222,535	)			(195,366	)
Repayments of stockholder loans			(6,419	)			(6,114	)			(5,820	)
Repayments of subordinated convertible debentures			—				—				—
Proceeds from preferred stock net of Issuance costs of $29,000							946,278				—
Payments of preferred dividends			(83,632	)			—				—
Proceeds from issuance of long-term debt			—				2,300,000				3,035,000
Net cash provided by (used for) financing activities			(467,158	)			(365,529	)			2,449,466
Net increase (decrease) in cash and cash Equivalents			124,310


Consolidated financial statements:
Report of Independent Registered Public Accounting Firm			F-2
Balance sheets as of April 30, 2006 and April 24, 2005			F-3 to F-4
Statements of operations for each of the three years in the period ended April 30, 2006			F-5
Statements of stockholders’ equity (deficit) for each of the three years in the period ended April 30, 2006			F-6
Statements of cash flows for each of the three years in the period ended April 30, 2006			F-7
Summary of accounting policies			F-8 to F-14
Notes to consolidated financial statements			F-15 to F-32

BOSTON RESTAURANT ASSOCIATES, INC.

/s/ George R. Chapdelaine

Date: June 29, 2006

George R. Chapdelaine, President

BOSTON RESTAURANT ASSOCIATES INC 10-K