SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the Thirteen Weeks Ended ~~October~~July 24, ~~2004~~2005

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

For the transition period from ___________ to ___________

Commission File Number: 0-28930

ROADHOUSE GRILL, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida		65-0367604
(State or Other Jurisdiction ofIncorporation or Organization)		(I.R.S. Employer Identification No.)
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2703-A GATEWAY DRIVE, POMPANO BEACH, FL 33069

(Address of Principal Executive Offices and Zip Code)

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

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


Title of Each Class		Name of Each Exchange on Which Registered

NONE		NOT APPLICABLE

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

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

(Title of Class)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X ]~~ x No o ~~[ ]~~

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

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

~~The~~Indicate ~~number~~by ofcheck ~~shares~~mark ofwhether the registrant’s ~~common~~is ~~stock~~a ~~outstanding~~shell company (as defined in Rule 12b-2 of ~~December 7,~~the ~~2004~~Exchange ~~was 29,220,663~~Act). Yes o No x

The number of shares of the registrant’s common stock outstanding as of September 7, 2005 was 29,220,663.

DOCUMENTS INCORPORATED BY REFERENCE

None.

FORMTable 10-Q THIRTEENof WEEKS ENDED OCTOBER 24, 2004 Contents

FORM 10-Q
THIRTEEN WEEKS ENDED JULY 24, 2005

INDEX

	Page		~~Page~~
PART 1	FINANCIAL INFORMATION
PART 1 FINANCIAL INFORMATION
Item 1.	Financial Statements:
Item 1. Financial Statements:
	Condensed Consolidated Balance Sheets as of October 24, 2004 (unaudited) and April 25, 2004			4
Condensed Consolidated Balance Sheets as of July 24, 2005 (unaudited) and April 24, 2005		4
	Condensed Consolidated Statements of Operations for the Thirteen and Twenty Six Weeks Ended October 24, 2004 and October 26, 2003 (unaudited)			5
Condensed Consolidated Statements of Operations for the Thirteen Weeks Ended July 24, 2005 and July 25, 2004 (unaudited)		5
	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Twenty Six Weeks Ended October 24, 2004 (unaudited)			6
Condensed Consolidated Statement of Shareholders’ Equity for the Thirteen Weeks Ended July 24, 2005 (unaudited)		6
	Condensed Consolidated Statements of Cash Flows for the Twenty Six Weeks Ended October 24, 2004 and October 26, 2003 (unaudited)			7
Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended July 24, 2005 and July 25, 2004 (unaudited)		7
Notes to Condensed Consolidated Financial Statements	~~Notes to Condensed Consolidated Financial Statements~~	8		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk			32
Item 3. Quantitative and Qualitative Disclosures about Market Risk		32
Item 4.	Controls and Procedures			32
Item 4. Controls and Procedures		33
PART II	OTHER INFORMATION
PART II OTHER INFORMATION
Item 1.	Legal Proceedings			34
Item 1. Legal Proceedings		34
Item 2.	Changes in Securities and Use of Proceeds			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3.	Defaults Upon Senior Securities			34
Item 3. Defaults Upon Senior Securities		34
Item 4.	Submission of Matters to a Vote of Security Holders			34
Item 4. Submission of Matters to a Vote of Security Holders		34
Item 5.	Other Information			34
Item 5. Other Information		34
Item 6.	Exhibits and Reports on Form 8-K			35
Item 6. Exhibits		35
SIGNATURES		36		36
Section 302 Certification of CEO
CERTIFICATION OF CEO PURSUANT TO SECTION 302
Section 302 Certification of CFO
CERTIFICATION OF CFO PURSUANT TO SECTION 302
Section 906 Certification of CEO
CERTIFICATION OF CEO PURSUANT TO SECTION 906
Section 906 Certification of CFO
CERTIFICATION OF CFO PURSUANT TO SECTION 906

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ROADHOUSE GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

~~OCTOBER~~JULY 24, ~~2004~~2005 and APRIL 2524, ~~2004~~2005 (Dollars in thousands, except per share data)

(Dollars in thousands, except per share data)


	July 24, 2005			April 24, 2005
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	322		$	810
Accounts receivable, net of allowance for doubtful accounts of $211 and $205 at July 24, 2005 and April 24, 2005, respectively		292			970
Inventory		1,034			1,048
Prepaid expenses		959			1,062

Total current assets		2,607			3,890
Property & equipment, net of accumulated depreciation of $53,124 and $52,804 at July 24, 2005 and April 24, 2005, respectively		23,635			24,593
Asset held for sale		465			465
Intangible assets, net of accumulated amortization of $872 and $861 at July 24, 2005 and April 24, 2005, respectively		1,790			1,801
Other assets		950			965

Total assets	$	29,447		$	31,714


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	5,879		$	5,443
Accrued expenses		6,782			6,093
Unearned revenue		1,735			2,044
Current portion of long-term debt		2,288			2,259
Current portion of capital lease obligations		1,172			1,325

Total current liabilities		17,856			17,164
Long-term debt		2,755			3,338
Capital lease obligations		3,008			3,275
Long-term portion of unearned revenue		1,980			2,207
Non-current deferred rent		3,439			3,344

Total liabilities		29,038			29,328

Shareholders’ equity:
Common stock $0.03 par value. Authorized 35,000,000 shares; issued and outstanding 29,220,663 shares		877			877
Additional paid-in capital		55,991			55,972
Accumulated deficit		(56,459	)		(54,463	)

Total shareholders’ equity		409			2,386

Total liabilities and shareholders’ equity	$	29,447		$	31,714

	October 24, 2004			April 25, 2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,328		$	1,181
Accounts receivable, net of allowance for doubtful accounts of $185 and $178 at October 24, 2004 and April 25, 2004, respectively		245			257
Income tax receivable		—			69
Inventory		1,006			1,024
Prepaid expenses		1,296			1,273
Total current assets		3,875			3,804
Property & equipment, net of accumulated depreciation of $51,318 and $54,221 at October 24, 2004 and April 25, 2004, respectively		29,076			49,512
Asset held for sale		800			800
Intangible assets, net of accumulated amortization of $838 and $816 at October 24, 2004 and April 25, 2004, respectively		1,824			1,846
Other assets		910			1,352
Total assets	$	36,485		$	57,314
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	3,344		$	4,557
Accrued expenses		6,800			6,710
Restructuring accrual		157			159
Unearned revenue		1,986			863
Current portion of long-term debt		2,211			4,448
Current portion of capital lease obligations		1,640			1,119
Total current liabilities		16,138			17,856
Long-term debt		4,481			28,218
Capital lease obligations		3,794			4,279
Long-term portion of unearned revenue		2,606			225
Other non-current liabilities		2,176			1,928
Total liabilities		29,195			52,506
Shareholders’ equity:
Common stock $0.03 par value. Authorized 35,000,000 shares; issued and outstanding 29,220,663 shares		877			877
Additional paid-in capital		55,972			55,953
Accumulated deficit		(49,559	)		(52,022	)
Total shareholders’ equity		7,290			4,808
Total liabilities and shareholders’ equity	$	36,485		$	57,314

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

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~4

4 Table of Contents

~~Table~~ROADHOUSE ofGRILL, ~~Contents~~INC.

~~ROADHOUSE~~CONDENSED ~~GRILL,~~CONSOLIDATED ~~INC.~~ STATEMENTS OF OPERATIONS

~~CONDENSED~~FOR ~~CONSOLIDATED~~THE ~~STATEMENTS~~THIRTEEN OFWEEKS ~~OPERATIONS~~ENDED JULY 24, 2005 AND JULY 25, 2004 (Unaudited, dollars in thousands, except per share data)

FOR THE THIRTEEN AND TWENTY SIX WEEKS ENDED OCTOBER 24, 2004 AND OCTOBER 26, 2003


	July 24, 2005			July 25, 2004
Total revenues	$	31,480		$	32,871

Restaurant operating expenses:

Cost of restaurant sales:

Food and beverage		10,799			11,874

Labor and benefits		10,772			10,703

Occupancy and other		8,301			8,535


Total cost of restaurant sales		29,872			31,112

Depreciation and amortization		1,414			1,600

General and administrative expenses		1,992			1,653


Total operating expenses		33,278			34,365


Operating loss		(1,798	)		(1,494	)

Other expense:

Gain (loss) on sale/disposal of fixed assets		30			(3	)

Interest expense, net		(228	)		(707	)


Total other expense		(198	)		(710	)


Loss before income taxes		(1,996	)		(2,204	)

Income tax benefit		—			—


Net loss		($1,996	)		($2,204	)


Basic earnings per share:

Net loss		($0.07	)		($0.08	)


Diluted earnings per share:

Net loss		($0.07	)		($0.08	)


Weighted average common shares outstanding		29,220,663			29,220,663


Weighted average common shares and share equivalents
outstanding – assuming dilution		29,220,663			29,220,663

~~(Unaudited,~~The ~~dollars~~accompanying innotes ~~thousands,~~are ~~except~~an ~~per~~integral ~~share~~part ~~data)~~of these condensed consolidated financial statements.

	Thirteen Weeks Ended						Twenty Six Weeks Ended
	October 24, 2004			October 26, 2003			October 24, 2004			October 26, 2003
Total revenues	$	30,409		$	33,395		$	63,280		$	69,620
Operating expenses:
Cost of restaurant sales:
Food and beverage		10,816			11,686			22,690			24,582
Labor and benefits		10,176			10,885			20,879			22,679
Occupancy and other		8,370			8,574			16,905			16,733
Pre-opening expenses		—			1			—			120
Total cost of restaurant sales		29,362			31,146			60,474			64,114
Depreciation and amortization		1,418			1,816			3,018			3,624
General and administrative expenses		1,598			1,629			3,251			3,301
Restructuring charge		—			(96	)		—			(96	)
Total operating expenses		32,378			34,495			66,743			70,943
Operating loss		(1,969	)		(1,100	)		(3,463	)		(1,323	)
Other income (expense):
(Loss) gain on sale/disposal of fixed assets		(5	)		50			(8	)		44
Gain on extinguishment of debt		7,102			—			7,102			—
Interest expense, net		(461	)		(827	)		(1,168	)		(1,670	)
Total other income (expense)		6,636			(777	)		5,926			(1,626	)
Income (loss) before income taxes		4,667			(1,877	)		2,463			(2,949	)
Income tax		—			—			—			—
Net income (loss)	$	4,667		$	(1,877	)	$	2,463		$	(2,949	)
Basic net income (loss) per common share:
Net income	$	0.16		$	(0.06	)	$	0.08		$	(0.10	)
Diluted net income (loss) per common share:
Net income (loss)	$	0.16		$	(0.06	)	$	0.08		$	(0.10	)
Weighted average common shares outstanding		29,220,663			29,220,663			29,220,663			29,220,663
Weighted average common shares and share equivalents outstanding — assuming dilution		29,220,663			29,220,663			29,220,663			29,220,663

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

5ROADHOUSE GRILL, INC.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENT OF SHAREHOLDERS’ EQUITY

~~ROADHOUSE~~FOR ~~GRILL~~THE THIRTEEN WEEKS ENDED JULY 24, ~~INC.~~2005 (Unaudited, dollars in thousands, except share data)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Common Stock				Additional
					Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance April 24, 2005		29,220,663	$	877	$	55,972	$	(54,463	)	$	2,386

Net loss		—		—		—		(1,996	)		(1,996	)

Vesting of stock options		—		—		19		—			19


Balance July 24, 2005		29,220,663	$	877	$	55,991	$	(56,459	)	$	409

~~FOR~~The ~~THE~~accompanying ~~TWENTY~~notes ~~SIX~~are ~~WEEKS~~an ~~ENDED~~integral ~~OCTOBER~~part ~~24,~~of ~~2004~~these condensed consolidated financial statements.

~~(Unaudited, dollars in thousands, except share data)~~6

	Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance April 25, 2004		29,220,663	$	877	$	55,953	$	(52,022	)	$	4,808
Net income		—		—		—		2,463			2,463
Vesting of stock options		—		—		19		—			19
Balance October 24, 2004		29,220,663	$	877	$	55,972	$	(49,559	)	$	7,290

~~The~~ROADHOUSE ~~accompanying~~GRILL, ~~notes are an integral part of these condensed consolidated financial statements~~INC.

6 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~Table~~FOR ofTHE ~~Contents~~THIRTEEN WEEKS ENDED JULY 24, 2005 AND JULY 25, 2004 (Unaudited, dollars in thousands)

ROADHOUSE GRILL, INC.


	July 24, 2005			July 25, 2004
Cash flows from operating activities:
Net loss	$	(1,996	)	$	(2,204	)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization		1,414			1,600
Stock option expense		19			19
Net gain (loss) on sale/disposal of fixed assets		(30	)		3
Cash used for reorganization items		—			(4	)

Changes in assets and liabilities:
Decrease in accounts receivable		678			60
Decrease in inventory		14			14
Decrease in prepaid expenses		103			69
Decrease (increase) in other assets		14			(186	)
Increase (decrease) in accounts payable		436			(107	)
(Decrease) increase in unearned revenue		(536	)		1,369
Increase in accrued expenses		786			1,006

Net cash provided by operating activities		902			1,639


Cash flows from investing activities:
Purchases of property and equipment		(345	)		(260	)

Net cash used in investing activities		(345	)		(260	)

Cash flows from financing activities:
Repayment of long-term debt		(554	)		(1,008	)
Payments on capital lease obligations		(491	)		(290	)

Net cash used in financing activities		(1,045	)		(1,298	)

(Decrease) increase in cash and cash equivalents		(488	)		81
Cash and cash equivalents at beginning of period		810			1,181

Cash and cash equivalents at end of period	$	322		$	1,262


Supplementary disclosures:

Interest paid	$	252		$	663


Income taxes paid	$	64		$	—

~~CONDENSED~~The ~~CONSOLIDATED~~accompanying ~~STATEMENTS~~notes OFare ~~CASH~~an ~~FLOWS~~integral part of these condensed consolidated financial statements.

~~FOR THE TWENTY SIX WEEKS ENDED OCTOBER 24, 2004 AND OCTOBER 26, 2003~~7

(Unaudited,Table dollarsof in thousands)Contents

	October 24, 2004			October 26, 2003
Cash flows from operating activities:
Net income (loss)	$	2,463		$	(2,949	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		3,018			3,624
Restructuring charges		—			(96	)
Stock option expense		19			—
Net loss (gain) on sale/disposal of fixed assets		8			(44	)
Gain on extinguishment of debt		(7,102	)		—
Cash used for reorganization items		(6	)		(120	)
Changes in assets and liabilities:
Decrease in accounts receivable		12			21
Decrease in income tax receivable		69			663
Decrease in inventory		18			101
(Increase) decrease in prepaid expenses		(23	)		657
Increase in other assets		(83	)		(58	)
(Decrease) increase in accounts payable		(1,213	)		115
Decrease in restructuring accrual		(2	)		(44	)
Increase in unearned revenue		1,950			676
Increase (decrease) in accrued expenses		261			(511	)
Net cash (used in) provided by operating activities		(611	)		2,035
Cash flows from investing activities:
Net proceeds from sales of property and equipment		20,574			626
Purchases of property and equipment		(616	)		(1,121	)
Net cash provided by (used in) investing activities		19,958			(495	)
Cash flows from financing activities:
Repayment of long-term debt		(18,444	)		(2,703	)
Payments on capital lease obligations		(756	)		(754	)
Net cash used in financing activities		(19,200	)		(3,457	)
Increase (decrease) in cash and cash equivalents		147			(1,917	)
Cash and cash equivalents at beginning of period		1,181			2,956
Cash and cash equivalents at end of period	$	1,328		$	1,039
Supplementary disclosures:
Interest paid	$	1,049		$	1,668
Income taxes paid	$	—		$	25

ROADHOUSE GRILL, INC.

~~The~~NOTES ~~accompanying~~TO ~~notes~~CONDENSED ~~are~~CONSOLIDATED anFINANCIAL ~~integral part of these condensed consolidated financial statements.~~ STATEMENTS

7(1) BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

~~Table~~ Roadhouse Grill, Inc. (the “Company”) was incorporated under the laws of ~~Contents~~the state of Florida in 1992. The principal business of the Company is the operation of full service specialty restaurants. The Company has also granted franchises and licenses to operate restaurants under the “Roadhouse Grill” name. The Company opened its first restaurant in Pembroke Pines, Florida (a city in the greater Ft. Lauderdale area) in 1993. As of July 24, 2005, there were 67 Company-owned Roadhouse Grill restaurants, 33 of which are located in Florida and the balance of which are located in Alabama, Arkansas, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio and South Carolina. During both the thirteen weeks ended July 24, 2005 and subsequent to July 24, 2005, one restaurant was closed upon the termination of the related lease. In addition, subsequent to July 24, 2005, two additional restaurants were closed while the properties are marketed for sale. Although there can be no assurance, the leases related to these two properties will terminate upon the sale of the respective properties. The Company closed these four restaurants because they were underperforming from a financial standpoint and the Company determined that it would be better to focus its management time and attention and its available resources on its better performing restaurants. Finally, in August 2005 two of the Company’s restaurants were heavily damaged or destroyed in Hurricane Katrina.

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

~~NOTES~~ The TOaccompanying ~~CONDENSED~~consolidated ~~CONSOLIDATED~~financial ~~FINANCIAL~~statements ~~STATEMENTS~~include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

The Company’s ability to meet its operating expenses as they come due, including its ability to service its debt and pay its capital and operating lease obligations, is dependent on the Company’s meeting its 2006 business plan, of which there can be no assurance. In that regard, the Company recently obtained a loan from its majority shareholder (1Note 11) ~~BASIS~~ OFand ~~PRESENTATION~~collected ~~AND~~the ~~DESCRIPTION~~proceeds of OFan ~~BUSINESS~~outstanding insurance claim (Note 10). The Company is also in the process of selling a closed property in an effort to raise additional working capital. Assuming that the Company meets all material respects of its 2006 business plan, management believes that the Company will have sufficient working capital to meet its obligations during the 2006 fiscal year. Factors that could cause the Company to not meet its business plan could include unforeseen events such as material food cost increases, significant decreases in customer volume, hurricanes or other unforeseen factors. However, if cash generated from operations is insufficient to fund the Company’s financial commitments and working capital requirements, of which there can be no assurance, the Company will have to obtain additional capital from debt or equity financing sources. There can be no assurance that additional debt and/or equity financing will be available on terms acceptable to the Company, or at all. In the event that the Company in unable to secure additional needed financing, it would likely have a material adverse effect upon the Company’s business, results of operations or financial condition.

~~Roadhouse Grill, Inc. (the “Company”) was incorporated under the laws of~~8 the state of Florida in 1992. The principal business of the Company is the operation of full service specialty restaurants. The Company has also granted franchises and licenses to operate restaurants under the “Roadhouse Grill” name. The Company opened its first restaurant in Pembroke Pines, Florida (the greater Ft. Lauderdale area) in 1993. As of October 24, 2004, there were 69 company-owned Roadhouse Grill restaurants, 34 of which are located in Florida and the balance of which are located in Alabama, Arkansas, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio and South Carolina.

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

~~The~~(2) SUMMARY ~~accompanying~~OF ~~condensed~~SIGNIFICANT ~~consolidated~~ACCOUNTING ~~financial statements include the~~POLICIES ~~accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.~~

~~(2)~~ See the Company’s Annual Report on Form 10-K for the fifty-two weeks ended April ~~SUMMARY~~24, OF2005 ~~SIGNIFICANT~~for a ~~ACCOUNTING~~summary ~~POLICIES~~of significant accounting policies.

~~See the Company’s Annual Report on Form 10-K for the fifty-two weeks ended April~~(3) ~~25, 2004 for a summary of significant accounting policies.~~LIQUIDITY

~~(3)~~ The Company’s material financial commitments relate principally to its working capital requirements in connection with the operation of its business and its obligations to make operating and capital lease and term loan payments. As of July ~~LIQUIDITY~~24, 2005, total minimum payments required under the Company’s note and lease obligations in 2006, including interest thereon, were $15.5 million (see the discussion below regarding the Company’s total contractual cash obligations). In addition, capital requirements relating to the opening of new restaurants have in the past been (and may in the future be) significant.

The Company’s ~~material~~did ~~financial~~not ~~commitments~~open ~~relate~~any ~~principally~~new torestaurants ~~its working~~during ~~capital~~the ~~requirements~~thirteen ~~and~~weeks ~~its~~ended ~~obligations~~July 24, to2005 ~~make~~or July 25, ~~operating~~2004. ~~and~~The ~~capital lease~~Company ~~and~~does ~~term~~not ~~loan~~currently ~~payments.~~have Asany ofadditional ~~October 24,~~Company-owned ~~2004,~~restaurants ~~total~~under development ~~minimum~~for ~~annual payments~~fiscal ~~required~~year ~~under~~2006 ~~the~~or ~~Company’s~~planned ~~note~~for ~~and~~the ~~lease~~future. ~~obligations~~At this time, ~~including~~it is expected that ~~interest~~incremental ~~thereon,~~capital ~~were~~from ~~$16.7 million~~debt ~~(see~~or ~~the~~equity ~~discussion~~sources ~~below~~will ~~regarding~~be ~~the Company’s~~needed ~~total~~to ~~contractual~~open ~~cash~~new ~~obligations)~~restaurants. InShould such ~~addition,~~ capital ~~requirements~~ ~~relating~~be tounavailable, the ~~opening~~Company ofwill ~~new~~not ~~restaurants~~be ~~have~~able into ~~the~~open ~~past~~additional ~~been (and~~restaurants ~~may~~ in the future ~~be) significant~~.

~~The~~On ~~Company did not open any new restaurants during the thirteen weeks ended October~~August 246, 2004., ~~The~~the Company ~~opened~~closed ~~one~~a ~~new~~transaction ~~restaurant~~with ~~during~~Sovereign ~~the fiscal~~Roadhouse ~~year ended April 25~~LLC, ~~2004 at~~ a ~~total cost of approximately $1.8 million,~~ ~~$0.4 million of which was expended during the fiscal year ended April 25, 2004. The Company does not currently have any additional Company~~wholly-owned ~~restaurants under~~subsidiary ~~development~~of ~~for~~Sovereign ~~fiscal~~Investment ~~year~~Company ~~2005. At this time~~(“Sovereign”), itinvolving isthe ~~expected~~sale ~~that the~~and ~~cash~~leaseback ~~required~~of to11 ~~develop~~restaurant ~~new~~properties ~~restaurants~~that ~~beyond~~were ~~fiscal~~previously ~~2005, if any, will be funded from operations~~owned. ~~Should~~See ~~cash~~Note ~~from~~9 ~~operations be insufficient~~ for ~~future~~information ~~expansion,~~regarding ~~and additional capital through debt and equity sources be unavailable, there can be no assurance that~~ the ~~Company~~sale/leaseback ~~will be able to open additional restaurants~~transaction.

During the thirteen weeks ended ~~October~~July 24, ~~2004~~2005, the Company’s primary ~~sources~~ source of working capital ~~were~~was the receipt of proceeds ~~from~~of ~~the~~an ~~sale~~insurance ~~and~~claim ~~leaseback~~related ofto ~~eleven~~hurricanes which occurred in ~~locations~~August and September 2004 (see ~~discussion~~Note ~~below~~10). ~~and~~Subsequent to July 24, 2005, the Company also received a loan from its majority shareholder to support its operations. (See Note 411),.

8 The Company has experienced significant cash flow problems in the past and may suffer from cash flow problems in the future. The Company believes that its ability to generate sufficient cash from operations to meet its obligations is dependent upon, among other things, demand for its products, a continued commitment to providing an excellent dining experience for its customers, the development and implementation of successful marketing strategies, the cost levels of its various food products, and its continuing efforts to reduce its operating costs. For further information regarding the Company’s liquidity, see Note 1.

~~Table~~ The Company implemented revenue enhancement programs including the implementation of ~~Contents~~a new menu with enhanced menu items during fiscal 2005. In addition, the Company has taken, and continues to take, steps to control its costs. There can be no assurance that these initiatives will be effective in generating profits or producing sufficient cash flows to fund operating requirements, including debt repayments and lease obligations. In addition, if

~~cash provided by operations and proceeds from the sale of food and beverage credits (see Note~~ 9~~). During the~~ fifty-two weeks ended April 25, 2004, the Company also collected $0.6 million in federal income tax refunds. Further, the Company filed for approximately $0.1 million in additional federal and state income tax refunds during fiscal year 2004. These additional tax refunds were collected during the thirteen weeks ended October 24, 2004.

OnTable August 6, 2004, the Company closed a transaction with Sovereign Roadhouse LLC, a wholly-owned subsidiary of Sovereign Investment Company, (“Sovereign”), involving the sale and leaseback of eleven restaurant properties that were previously owned. The sale price for the eleven properties was $21.8 million. The Company used $18.3 million of the net proceeds from the property sale to pay expenses related to the transaction and to repay $24.6 million of secured debt, which was repaid at a discount (resulting in a gain on extinguishment of debt of $7.1 million). The remaining net proceeds from the sale of approximately $3.5 million are being used for working capital (see Note 4 for information regarding the sale/leaseback transaction). Contents

~~The~~operating ~~Company~~results ~~has~~do ~~experienced~~not ~~significant~~improve ~~cash flow problems~~ in the ~~past~~near ~~and may~~term ~~suffer~~as ~~from~~a ~~cash~~result ~~flow~~of ~~problems in~~ the ~~future.~~recent ~~The~~changes ~~Company believes~~ that ~~its~~ ~~ability to generate cash from operations is dependent upon, among other~~have ~~things,~~been ~~demand~~implemented ~~for~~and ~~its products, a continued commitment to providing an excellent dining experience for its customers,~~ the ~~development~~introduction ~~and implementation~~ of ~~successful marketing strategies,~~ the ~~cost~~new ~~levels of its various food products~~menus, ~~and~~then ~~its continuing efforts to reduce its operating costs. The Company implemented revenue enhancement programs including~~ the ~~implementation~~ ~~of a new menu with enhanced menu items in June 2003. The~~ Company ~~also~~may ~~has~~be ~~taken,~~required ~~and continues~~ to ~~take, steps to control its costs.~~ ~~There~~recognize ~~can~~additional beimpairment nocharges ~~assurance~~related ~~that these initiatives will be effective in generating profits or producing sufficient cash flows~~ to ~~fund~~certain ~~operating requirements,~~long-lived ~~including debt repayments and lease obligations~~assets.

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

9 The following table summarizes the Company’s future contractual cash obligations for the remainder of fiscal 2006, each of the next four fiscal years and thereafter as of July 24, 2005 (dollars in thousands). Operating lease commitments include estimated common area maintenance expenses.


	2006		2007		2008		2009		2010		Thereafter		Total
Long term debt:
Principal	$	1,705	$	2,375	$	939	$	17	$	7	$	—	$	5,043
Interest		172		128		20		1		—		—		321

Total		1,877		2,503		959		18		7		—		5,364

Capital lease debt:
Principal		902		1,119		423		341		342		1,053		4,180
Interest		211		230		198		168		135		223		1,165

Total		1,113		1,349		621		509		477		1,276		5,345

Operating leases		8,222		10,069		9,627		9,063		8,525		79,366		124,872

Other commitments		388		205		140		142		168		—		1,043

Total	$	11,600	$	14,126	$	11,347	$	9,732	$	9,177	$	80,642	$	136,624

The ~~following~~obligations ~~table~~described ~~summarizes~~above ~~the~~do ~~Company’s~~not ~~future~~include ~~contractual cash obligations for~~ the ~~remainder of fiscal year 2005~~$1,250,000 ~~each~~loan ofthat the ~~next~~Company ~~four fiscal~~obtained ~~years~~from ~~and~~its ~~thereafter~~majority asshareholder ofin ~~October~~August ~~24,~~2005. ~~2004~~This ~~(dollars~~debt inis ~~thousands)~~due ~~(see~~on ~~Note~~May 15, ~~5 for~~2006 ~~further~~or ~~information~~earlier ~~regarding~~upon ~~these obligations). Operating lease~~a ~~commitments~~change ~~include~~of ~~estimated~~control ~~common~~of ~~area~~the ~~maintenance expenses~~Company.

	2005		2006		2007		2008		2009		Thereafter		Total
Long term debt:
Principal	$	1,096	$	2,259	$	2,075	$	1,239	$	17	$	6	$	6,692
Interest		163		243		128		20		1		—		555
Total		1,259		2,502		2,203		1,259		18		6		7,247
Capital lease debt:
Principal		1,140		1,054		1,105		404		339		1,392		5,434
Interest		168		290		229		198		168		358		1,411
Total		1,308		1,344		1,334		602		507		1,750		6,845
Operating leases		5,765		10,833		9,958		9,421		8,835		75,779		120,591
Other commitments		347		442		74		—		—		—		863
Total	$	8,679	$	15,121	$	13,569	$	11,282	$	9,360	$	77,535	$	135,546

Other commitments represent minimum amounts due to certain vendors under contractual agreements. Amounts reflected above could change as additional commitments may be made,

~~Other commitments represent minimum amounts due to certain vendors under~~10 contractual agreements. Amounts reflected above could change as additional commitments may be made, cancellation provisions may be exercised by the Company or by its creditors, or agreements may be modified as warranted by changes in business or operational needs. Amounts due under long term debt agreements may be accelerated to the extent the Company realizes excess cash flow as described in Note 5. As described above and in Note 4, on August 6, 2004, the Company executed a sale and leaseback of eleven of its restaurant properties. As a result of this transaction, the Company’s minimum annual note and lease obligations have been reduced by approximately $1.7 million for each of fiscal years 2005 through 2009 and total obligations thereafter have increased by approximately $33.8 million.

(4) ASSETTable SALE/LEASEBACK of Contents

Oncancellation ~~August 6,~~provisions ~~2004,~~may ~~the~~be ~~Company~~exercised ~~closed~~by athe ~~transaction~~Company ~~with~~or ~~Sovereign Roadhouse~~by ~~LLC,~~its ~~a wholly-owned subsidiary of Sovereign~~creditors, ~~involving~~or ~~the sale and leaseback of eleven restaurant properties that were previously owned. The sale price for the eleven properties was $21.8 million. The properties are being leased under lease~~ agreements ~~that extend for 20 years and include four~~ ~~five-year~~may ~~renewal~~be ~~options.~~modified ~~The~~as ~~Company~~warranted ~~used~~by ~~approximately~~changes ~~$18.3 million of the net proceeds from the sale to pay expenses related to the transaction and to repay $24.6 million of secured debt, which was repaid at a discount (resulting~~ in abusiness ~~gain~~or onoperational ~~extinguishment of debt of $7~~needs.~~1 million). The net gain from the~~ ~~debt repayment is reflected in the Company’s Condensed Consolidated Statement of Operations for the thirteen weeks ended October 24,~~

10(4) LONG-TERM DEBT

~~Table~~ As of ~~Contents~~July 24, 2005 and April 24, 2005, the Company’s long-term debt was comprised of the following items (amounts in thousands):

2004. The Company also realized a gain on the sale of the properties of approximately $1.7 million, which is recorded as unearned revenue in the accompanying Condensed Consolidated Balance Sheet and will be recorded as a reduction of occupancy and other expense over the life of the leases. The remaining net proceeds from the sale of approximately $3.5 million are being used for working capital.


	July 24, 2005				April 24, 2005
	Non-				Non-
	Current		Current		Current		Current
	Portion		Portion		Portion		Portion
Unsecured note due various entities affiliated with CNL bearing interest at 5%. Monthly payments of $58 are due through October 2007.	$	540	$	635	$	702	$	627


Unsecured note due Corsair Special Situations Fund (a member of the Company’s Board of Directors is affiliated with the Corsair Special Situations Fund) bearing interest at 5%. Monthly payments of $104 are due through October 2007.		1,509		1,141		1,799		1,127

Other unsecured notes due various parties bearing interest at 5%. Notes are due through 2009. Current monthly payments are $40.		706		512		837		505


Total long-term debt	$	2,755	$	2,288	$	3,338	$	2,259

~~(5) LONG-TERM~~ The ~~DEBT~~debt agreements resulting from the Company’s 2002 bankruptcy proceedings may require prepayments of principal to the extent the Company generates excess cash flow from operations, as defined in the agreements.

~~As of October~~(5) ~~24,~~COMMITMENTS ~~2004,~~AND ~~the Company’s long-term debt was comprised of the~~CONTINGENCIES ~~following items (amounts in thousands):~~

	Non-current		Current
	Portion		Portion
Unsecured note due various entities affiliated with CNL bearing interest at 5%. Monthly payments of $58 are due through October 2007.	$	1,019	$	612
Unsecured note due Corsair Special Situations Fund (a member of the Company’s Board of Directors is affiliated with the Corsair Special Situations Fund) bearing interest at 5%. Monthly payments of $104 are due through October 2007.		2,370		1,099
Other unsecured notes due various parties bearing interest at 5%. Monthly payments of $40 are due through September 2009.		1,092		500
Total long-term debt	$	4,481	$	2,211

GUARANTOR OF EQUIPMENT LEASES

The ~~carrying~~Company ~~amount~~is ofthe ~~property~~guarantor ~~and~~of equipment ~~and~~leases ~~asset~~for ~~held~~three ~~for~~restaurants ~~sale~~that ~~used~~are owned by one asof ~~collateral~~its ~~was~~franchisees, ~~zero~~Roadhouse ~~and~~West ~~approximately~~G.P., ~~$47~~two of which are currently closed.~~4 million~~ atIn ~~October 24~~addition, ~~2004~~the Company ~~and~~believes that other parties have also guaranteed these obligations. Roadhouse West G.P. is ~~April~~currently in a Chapter ~~25,~~7 ~~2004,~~liquidation. ~~respectively~~The leases are collateralized by the leased equipment and certain leasehold improvements. The Company cannot predict the outcome of the proceeding but

~~The debt agreements resulting from the Company’s 2002 bankruptcy~~11 ~~proceedings may require prepayments of principal to the extent the Company generates excess cash flow from operations, as defined in the agreements.~~

OnTable August 6, 2004, the Company executed a sale and leaseback transaction involving eleven of the restaurant properties that were previously owned. The net proceeds of the transaction were used, in part, to repay $24.6 million of debt, including all of the debt previously owed to Finova Capital Corporation and U. S. Mortgage LLC. See further discussion at Note 4. Contents

11believes that any potential liability will be mitigated by the collateral described above and, accordingly, the Company has recorded no reserve for any possible obligations that may arise relating to these proceedings.

~~Table~~OTHER ~~of Contents~~AGREEMENTS

~~(6) COMMITMENTS~~ The ~~AND~~Company ~~CONTINGENCIES~~is a party to various agreements relating to services performed at its restaurants. Such agreements are generally for periods of one year or less and none of these agreements, individually, require payments that would be material to the Company’s financial position or results of operations.

~~CLASS ACTION SUIT AND SEC INFORMAL INVESTIGATION~~OTHER

OnThe ~~April 10,~~Company ~~2002,~~is a ~~purported~~party ~~class~~to ~~action~~certain ~~complaint~~legal ~~alleging~~proceedings ~~violations of~~arising ~~federal securities laws was filed~~ in the ~~United~~ordinary ~~States~~course ~~District Court for the Southern District~~ of ~~Florida against the Company, the then chairman of the~~ ~~Company’s board of directors, and the Company’s president and chief executive officer~~business. ~~This~~While ~~action~~it ~~(the~~is ~~“Action”)~~not ~~was~~possible ~~styled: Sears v. Roadhouse Grill, Inc, et al., Case No. 02-CV-60493. On April 4, 2003, the court heard arguments on a motion~~ to ~~dismiss~~predict ~~and~~or ~~dismissed~~determine the ~~amended~~outcome ~~class~~of ~~action~~any ~~complaint.~~of ~~The~~these ~~plaintiffs filed a second amended class action complaint on May 5~~proceedings, ~~2003 naming only~~ the ~~individual~~Company ~~defendants~~does ~~and~~ not ~~the~~believe ~~Company.~~that ~~The~~any ~~individual~~liability ~~defendants filed~~resulting afrom ~~motion~~these toproceedings ~~dismiss the second amended class action complaint on June 4,~~will ~~2003,~~have toa ~~which~~material ~~plaintiffs~~adverse ~~responded.~~effect ~~The court heard oral arguments~~ on the ~~matter~~ onCompany’s ~~October 30,~~financial 2003 and in March 2004 the second amended class action complaint was dismissed. No further actions have occurred in regards to this matter since the second amended class action complaint was dismissed andposition, ~~as such,~~results ~~the~~of ~~Company~~operations ~~believes~~or ~~that it will have no liability in regard to this~~its ~~matter~~business.

~~GUARANTOR~~(6) CERTAIN OFRELATIONSHIPS ~~EQUIPMENT~~AND ~~LEASES~~RELATED TRANSACTIONS

~~The~~Please ~~Company~~see is the ~~guarantor~~Notes ofto ~~equipment~~Consolidated ~~leases~~Financial ~~for~~Statements ~~three~~in ~~restaurants that are owned by one of its franchisees, Roadhouse West G.P., two of which are currently closed. In addition,~~ the Company’s ~~believes~~Form ~~that~~10-K ~~other~~for ~~parties have~~the ~~also~~fiscal ~~guaranteed~~year ~~these~~ended ~~obligations. Roadhouse West G.P. is currently in default of the payment terms of the operating leases, and recently filed a petition under Chapter~~April 1124, ~~which~~2005 ~~has~~for ~~now been converted into~~ a ~~Chapter 7~~full ~~proceeding. The~~discussion ~~balance~~ of the ~~remaining lease payments due was approximately $1.0 million as of October 24, 2004. The leases are collateralized by the leased equipment and certain leasehold improvements. The~~ Company’s ~~cannot~~related ~~predict~~party the outcome of the proceedings but believes that any potential liability will be mitigated by the factors described above and, accordingly, has provided no reserve for any possible obligations that may arise relating to these proceedingstransactions.

~~OTHER~~(7) NET ~~AGREEMENTS~~LOSS PER COMMON SHARE (“EPS”)

~~The~~Basic ~~Company~~net isearnings aper ~~party~~share toequals ~~various~~net ~~agreements~~earnings ~~relating~~divided toby ~~services~~the weighted average shares ~~performed~~outstanding atduring ~~its~~the ~~restaurants~~year. ~~Such~~The ~~agreements~~computation ~~are~~of ~~generally~~diluted ~~for~~net ~~periods~~earnings ofper ~~one~~share includes dilutive ~~year~~common orstock ~~less~~equivalents ~~and~~in ~~none~~the ofweighted ~~these~~average ~~agreements,~~shares ~~individually,~~outstanding. ~~require~~The ~~payments~~reconciliation ~~that~~between ~~would~~the becomputations ~~material~~is toas ~~the~~follows ~~Company’s~~(dollars ~~financial~~in ~~position~~thousands, orexcept ~~results~~per ofshare ~~operations.~~data):

OTHER


	Thirteen Weeks Ended July 24, 2005
	Net Loss			Shares		Amount
BASIC EPS

Net loss available
to common shareholders	$	(1,996	)		29,220,663	$	(0.07	)

EFFECT OF DILUTIVE SECURITIES
Stock options		—			—		—


DILUTED EPS	$	(1,996	)		29,220,663	$	(0.07	)

~~The Company is a party to certain legal proceedings arising in the~~12 ordinary course of business. While it is not possible to predict or determine the outcome of any of these proceedings, the Company does not believe that any liability resulting from these proceedings will have a material adverse effect on the Company’s financial position, results of operations or its business.

12 Table of Contents

~~Table~~ Options to purchase 1,305,000 shares of ~~Contents~~common stock at a weighted average exercise price of $0.36 per share were outstanding during the thirteen weeks ended July 24, 2005, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

(7) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


	Thirteen Weeks Ended July 25, 2004
	Net Loss			Shares		Amount
BASIC EPS

Net loss available
to common shareholders	$	(2,204	)		29,220,663	$	(0.08	)


EFFECT OF DILUTIVE SECURITIES
Stock options		—			—		—


DILUTED EPS	$	(2,204	)		29,220,663	$	(0.08	)

~~Please~~Options ~~see~~to ~~the~~purchase ~~Notes~~1,395,000 toshares ~~Consolidated~~of ~~Financial~~common ~~Statements~~stock inat ~~the~~a ~~Company’s~~weighted average exercise ~~Form~~price ~~10-K~~of ~~for~~$0.36 per share were outstanding during the ~~fiscal~~thirteen ~~year~~weeks ended ~~April~~July 25, 2004, ~~for~~but awere not ~~full~~included ~~discussion~~in the computation of diluted EPS because the ~~Company~~ options’s ~~related~~exercise ~~party~~price ~~transactions~~was greater than the average market price of the common shares.

(8) ~~NET~~ADVANCE ~~INCOME~~SALE ~~(LOSS) PER~~OF ~~COMMON~~FOOD ~~SHARE~~AND ~~(“EPS”)~~BEVERAGE CREDITS

~~Basic~~In ~~net~~June 2003, ~~income~~the ~~(loss) per~~Company ~~common~~entered ~~share~~into ~~equals~~an ~~net~~agreement ~~income~~with a loyalty and rewards company (~~loss) divided~~the by“Rewards Company”) involving the ~~weighted~~discounted ~~average~~advance ~~shares~~sale ~~outstanding~~of ~~during~~food ~~the~~and ~~period.~~beverage ~~The~~credits ~~computation~~to be used at its restaurants. As part of ~~diluted~~the ~~net~~agreement, ~~loss~~during ~~per~~fiscal ~~share~~2004, ~~includes~~the ~~dilutive~~Company ~~common~~received ~~stock~~$2.3 million ~~equivalents~~in exchange for the credits, which was recorded in the Consolidated Balance Sheet as ~~weighted~~unearned ~~average~~revenue. ~~shares~~The ~~outstanding~~Company’s liability under the agreement is secured by a lien on certain equipment. The ~~reconciliation~~amount ~~between~~of the discount provided to the Rewards Company relating to the sale of ~~computations~~food and beverage credits is recognized as ~~follows~~advertising expense (~~dollars~~which is included in ~~thousands~~occupancy and other) in the Consolidated Statement of Operations as the credits are used at the restaurants. Throughout the term of the agreement, ~~except~~the ~~per~~Company and the Rewards Company share ~~data):~~in the proceeds of credit card transactions resulting from use of the credits by members of the Rewards Company. As of July 24, 2005, all food and beverage credits sold to the Rewards Company under the original agreement have been used. In June 2004, the Company renewed the agreement with the Rewards Company. Under the current agreement, the Company received $3.0 million in exchange for the sale of additional food and beverage credits. As of July 24, 2005 and April 24, 2005, the unearned revenue related to this program was $1.6 million and $1.9 million, respectively.

	Thirteen Weeks Ended						Twenty Six Weeks Ended
	October 24, 2004						October 24, 2004
	Net Income		Shares		Amount		Net Income		Shares		Amount
BASIC EPS
Net income available to common shareholders	$	4,667		29,220,663	$	0.16	$	2,463		29,220,663	$	0.08
EFFECT OF DILUTIVE SECURITIES
Stock options		—		—		—		—		—		—
DILUTED EPS	$	4,667		29,220,663	$	0.16	$	2,463		29,220,663	$	0.08

OptionsTable to purchase 1,395,000 shares of common stock at a weighted average exercise price of $0.36 per share were outstanding during the thirteen and twenty six weeks ended October 24, 2004, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares. Contents

	Thirteen Weeks Ended								Twenty Six Weeks Ended
	October 26, 2003								October 26, 2003
	Net Loss			Shares		Amount			Net Loss			Shares		Amount
BASIC EPS
Net loss available to common shareholders	$	(1,877	)		29,220,663	$	(0.06	)	$	(2,949	)		29,220,663	$	(0.10	)
EFFECT OF DILLUTIVE SECURITIES
Stock options		—			—		—			—			—		—
DILUTED EPS	$	(1,877	)		29,220,663	$	(0.06	)	$	(2,949	)		29,220,663	$	(0.10	)

(9) ASSET SALE/LEASEBACK

13 On August 6, 2004, the Company closed a transaction with Sovereign involving the sale and leaseback of 11 restaurant properties that were previously owned. The sale price for the 11 properties was $21.8 million. The properties are being leased under lease agreements that extend for 20 years and include four five-year renewal options. The Company used approximately $18.3 million of the net proceeds from the sale to repay $24.6 million of secured debt, which was repaid at a discount (resulting in a gain on extinguishment of debt of $7.1 million), and to pay expenses related to the sale/leaseback transaction. The net gain from the debt repayment was reflected in the Consolidated Statement of Operations for the fiscal year ended April 24, 2005. The Company also realized a gain on the sale of the properties of approximately $1.7 million, which is recorded as unearned revenue in the Condensed Consolidated Balance Sheet as of July 24, 2005 and will be recorded as a reduction of occupancy and other expense over the life of the leases. The remaining net proceeds from the sale of approximately $3.5 million were used for general corporate purposes.

~~Table~~(10) IMPACT ofOF ~~Contents~~2004 HURRICANES

NoIn ~~options~~August toand ~~purchase~~September 2004, ~~shares~~a number of ~~common~~the ~~stock~~Company’s restaurants were ~~outstanding~~impacted ~~during~~by Hurricanes Charley, Frances, Ivan and Jeanne, which initially hit the state of Florida and also ~~thirteen~~impacted certain other southern states. The hurricanes caused damage to several of the Company’s properties and ~~twenty~~resulted in the temporary closure of a number of its restaurants. The hurricanes also impacted customers during the six weeks over which the storms hit, with their focus being on the progress of the storms (and where they might hit) and not on normal living, including casual dining. It is not possible to measure the full impact of the hurricanes and their effect on customers who were preparing for storms, restoring damaged property and recovering financially from storm related costs. However, in total, the Company lost an aggregate of 192 days of restaurant sales due to restaurant closures resulting from the hurricanes during the thirteen weeks ended October 2624, ~~2003~~2004. The total decline in sales from the prior year for those days impacted by the hurricanes was approximately $1.3 million. Also, as a result of the hurricanes, the Company incurred losses including property damage, lost profits from restaurant closures, lost food product, and additional expense regarding cleanup and other items. The Company filed insurance claims under its property insurance policy for these losses. In July 2005, the Company received $0.6 million in full settlement of these insurance claims. These receipts were reported in total revenues in the amount of $0.4 million and as a reduction of property and equipment in the amount of $0.2 million during the fifty-two weeks ended April 24, 2005 and as accounts receivable in the Consolidated Balance Sheet as of April 24, 2005.

(911) ~~ADVANCE~~SUBSEQUENT ~~SALE OF FOOD AND BEVERAGE CREDITS~~EVENTS

In ~~June~~August ~~2003~~2005, the Company entered into ana loan agreement with ~~a loyalty and rewards company (the “Rewards Company”) involving the discounted advance sale of food and beverage credits to be used at~~ its ~~restaurants.~~majority ~~As part of the agreement~~shareholder, ~~during fiscal 2004, the Company received $2.3 million in exchange~~under ~~for the credits,~~ which ~~was recorded in~~ the ~~Condensed Consolidated Balance Sheet as unearned revenue. The amount of the discount provided to the Rewards~~ Company ~~relating~~has toborrowed the sale of food and beverage credits is recognized as advertising expense (which is included in occupancy and other) in the Condensed Consolidated Statement of Operations as the credits are used at the restaurants. Throughout the term of the agreement, the Company and the Rewards Company share in the proceeds of credit card transactions resulting from use of the credits by members of the Rewards Company. As of October 24, 2004, all food and beverage credits sold to the Rewards Company under the original agreement have been used. In June 2004, the Company renewed the agreement with the Rewards Company. Under the current agreement, the Company expects to receive $~~3.0 million in exchange for the sale of additional food and beverage credits, of which $~~1.525 million. ~~was~~Borrowings ~~received~~under ~~upon execution of~~ the ~~renewed~~ agreement, ~~$1.0 million~~bear ~~was~~interest ~~received~~at ~~during the thirteen weeks ended October~~10% ~~24, 2004~~ and ~~$0.5 million~~are ~~is expected~~ to be ~~received~~repaid inupon ~~fiscal~~certain ~~year~~events ~~2006.~~or ~~As of~~transactions ~~October 24,~~including ~~2004~~a ~~and~~change ~~April 25, 2004, the unearned revenue related to this~~of ~~program was $2.2 million and $0.4 million, respectively.~~

~~(10) IMPACT OF HURRICANES~~14

InTable August and September 2004, a number of the Company’s restaurants were impacted by Hurricanes Charley, Frances, Ivan and Jeanne which initially hit the state of Florida and also impacted certain other southern states. The hurricanes caused damage to certain of the Company’s properties and resulted in the temporary closure of a number of the Company’s restaurants. The hurricanes also impacted customers during the six weeks over which the storms hit, with their focus being on the storms (and where they might hit) and not on normal living, including casual dining. It is not possible to measure the full impact of the hurricanes and their effect on customers who were preparing for storms, restoring damaged property and recovering financially from storm related costs. However, in total, the Company lost an aggregate of 192 days of restaurant sales due to restaurant closures resulting from the hurricanes during the thirteen weeks ended October 24, 2004. The total decline in sales from the prior year for those days impacted by the hurricanes was approximately $1.3 million. Excluding these days for those restaurants that were impacted by the hurricanes, same restaurant sales for the thirteen weeks ended October 24, 2004 were 3.8% less than the comparable period in fiscal 2004. Also, as a result of these hurricanes, the Company incurred losses including property damage, lost profits from restaurant closures, lost food product, and additional expense regarding cleanup and other items. The Company has filed insurance claims under its property insurance policy for these losses. The insurance policy includes deductibles, which will be applied to each hurricane. These insurance claims are currently being processed. As of the date of this filing, the net amount of proceeds that will ultimately be received from the Company’s insurance carrier has not been determined. Contents

14control of the Company. Any remaining outstanding borrowings must be repaid on May 15, 2006. The loan is secured by a lien on substantially all of the assets of the Company.

~~Table~~ On August 24 and 25, 2005, Hurricane Katrina hit South Florida. The storm thereafter hit the Southeast Gulf Coast region on August 29, 2005. None of ~~Contents~~the Company’s South Florida restaurants were heavily damaged in the storm, and all South Florida restaurants that were temporarily closed due to the hurricane have reopened. The Company has seven restaurants in Mississippi, Louisiana and Alabama. Of these restaurants, two restaurants located in Biloxi, Mississippi and Marrero (New Orleans), Louisiana, were heavily damaged in the storm and have not reopened. In regards to the Biloxi location, it appears that this restaurant was destroyed in the storm and will be a total loss. At this time, the Company cannot determine when or if it will be in a position to reopen the Biloxi and Marrero restaurants. Other than these two restaurants, all of the Company’s other restaurants in the gulf coast region had varying degrees of damage from the storm. However, all of these other restaurants have now reopened. Through September 7, 2005, an aggregate of 50 full or partial days of sales were lost in the Company’s South Florida and Gulf Coast restaurants. The Company intends to file insurance claims with respect to its losses, including claims for business interruption. At this time, the Company is unable to determine the amount of any insurance recoveries with respect to its Hurricane Katrina losses. Notwithstanding, the impact of Hurricane Katrina, including the loss of restaurant operating profits from the two stores (Biloxi and Marrero) that were heavily damaged as a result of Hurricane Katrina, is not expected to materially impact the Company’s financial position or results of operations in future periods.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~15

IMPACTTable OFof HURRICANES Contents

InITEM August and September 2004, a number of the Company’s restaurants were impacted by Hurricanes Charley, Frances, Ivan and Jeanne which initially hit the state of Florida and also impacted certain other southern states2. ~~The hurricanes caused damage to certain of the Company~~MANAGEMENT’sS ~~properties~~DISCUSSION ~~and~~AND ~~resulted~~ANALYSIS ~~in the~~OF ~~temporary~~FINANCIAL ~~closure~~CONDITION ofAND aRESULTS ~~number~~OF ~~of the Company’s restaurants. The hurricanes~~OPERATIONS also impacted customers during the six weeks over which the storms hit, with their focus being on the storms (and where they might hit) and not on normal living, including casual dining. It is not possible to measure the full impact of the hurricanes and their effect on customers who were preparing for storms, restoring damaged property and recovering financially from storm related costs. However, in total, the Company lost an aggregate of 192 days of restaurant sales due to restaurant closures resulting from the hurricanes during the thirteen weeks ended October 24, 2004. The total decline in sales from the prior year for those days impacted by the hurricanes was approximately $1.3 million. Excluding these days for those restaurants that were impacted by the hurricanes, same restaurant sales for the thirteen weeks ended October 24, 2004 were 3.8% less than the comparable period in fiscal 2004. Also, as a result of these hurricanes, the Company incurred losses including property damage, lost profits from restaurant closures, lost food product, and additional expense regarding cleanup and other items. The Company has filed insurance claims under its property insurance policy for these losses. The insurance policy includes deductibles, which will be applied to each hurricane. These insurance claims are currently being processed. As of the date of this filing, the net amount of proceeds that will ultimately be received from the Company’s insurance carrier has not been determined.

FORWARD LOOKING STATEMENTS

This report contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Statements preceded by, followed by, or that include the ~~words~~ words “believes,” “expects,” “anticipates,” or similar expressions are generally considered to be forward-looking statements. Specifically, this report contains forward-looking statements regarding, among other matters, our strategies, plans, objectives, expectations, future market position, operations, cash flow, margins, revenue, profitability, restaurant-level economics, liquidity and capital resources.

Forward looking statements contained in this report are not guarantees of future performance and involve certain risks, uncertainties and assumptions, all of which are difficult to predict. We wish to caution readers that certain important factors have affected in the past and may affect in the future our actual results, and such factors could cause actual results to differ significantly from those expressed or implied in any forward looking statement contained in this report. Important factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements in this report include, but are not limited to, the following:

15 • Our having sufficient working capital to meet our future operating and capital requirements; • Our ability to comply with the terms of our debt instruments, operating leases, capital leases and vendor contracts; • Our ability to increase our sales and manage our labor costs, food costs, other restaurant costs and corporate expenses, and our ability to operate our business on a cash flow positive and profitable basis; • Our ability to acquire an adequate supply of food products at acceptable prices, and events that affect the availability and pricing of food products (such as instances of mad cow disease); • Our ability to recruit, train and retain qualified management personnel and to obtain a sufficient number of qualified restaurant employees; • Trends in consumer preferences, tastes and eating habits and competition for consumer dollars, both from restaurants similar to our restaurants and from restaurants generally; • The level of competition from restaurants that operate in the markets in which we operate; • U. S. domestic economic conditions and the impact of international conflicts on domestic economic conditions; • The impact of seasonality on our business resulting from having 32 of our 64 current Company-owned restaurants in Florida;

~~Table of Contents~~16

•Table Our having sufficient working capital to meet our future operating and capital requirements; • Our ability to comply with the terms of our debt instruments, operating leases and capital leases; • Our ability to increase our sales and manage our labor costs, food costs, other restaurant costs and corporate expenses, and our ability to operate our business on a cash flow positive and profitable basis; • Our ability to acquire an adequate supply of food products at acceptable prices, and events that affect the availability and pricing of food products (such as instances of mad cow disease); • Our ability to recruit, train and retain qualified management personnel and to obtain a sufficient number of qualified restaurant employees; • Trends in consumer preferences, tastes and eating habits and competition for consumer dollars, both from restaurants similar to our restaurants and from restaurants generally; • The level of competition from restaurants that operate in the markets in which we operate; • U. S. domestic economic conditions and the impact of international conflicts on domestic economic conditions; • The impact of seasonality on our business, resulting from having 34 of our 69 Company-owned restaurants in Florida; • Our exposure to the impact of hurricanes and other tropical storms as a result of the heavy concentration of our restaurants in the southeastern United States; • Our ability to maintain financial and accounting controls, management controls, and adequate reporting systems and procedures; • Increases in interest rates; • The future relisting of our common stock on a recognized securities market and the development of a market for our common stock; • Our ability to develop our restaurant concept and business beyond our existing configuration of restaurants, including the availability of financing to support future growth, our ability to find suitable locations for new restaurants and the costs associated with opening new restaurants; and • To the extent that we decide to further franchise our restaurant concept, our ability to locate suitable franchisees in markets which we do not serve (both nationally and internationally) and the ability of those franchisees to develop, open and successfully operate restaurants in those markets.Contents

~~The~~• ~~forward~~Our ~~looking~~exposure ~~statements~~to ~~contained~~the inimpact ~~this~~of ~~report~~hurricanes ~~reflect~~and other tropical storms as a result of the heavy concentration of our ~~current~~ ~~view~~restaurants ~~about~~in ~~future~~the ~~events~~southeastern ~~and~~United ~~are~~States; ~~subject~~• Our ability to ~~risks,~~maintain ~~uncertainties~~financial and ~~assumptions.~~ ~~The~~accounting ~~important~~controls, ~~factors~~management ~~described above~~controls, asand ~~well~~adequate asreporting ~~the~~systems ~~factors described~~and ~~elsewhere~~procedures; • Increases in ~~this~~interest ~~report,~~rates; ~~could~~• ~~cause~~The future relisting of our common stock on a recognized securities market and the ~~assumptions~~development ~~underlying~~of a market for our ~~forward~~ ~~looking~~common ~~statements~~stock; • Our ability to bedevelop ~~incorrect~~our restaurant concept and ~~thereby~~business ~~cause~~beyond our ~~actual~~existing ~~results to~~configuration ~~differ~~of ~~materially~~restaurants, ~~from~~including ~~those~~the ~~expressed~~availability inof orfinancing ~~implied~~to bysupport future growth, our ~~forward~~ability ~~looking statements.~~to Wefind ~~undertake~~suitable nolocations ~~obligation~~for tonew ~~revise~~restaurants ~~any~~and ofthe costs associated with opening new restaurants; and • To the ~~forward~~extent ~~looking statements~~that ~~contained~~we indecide ~~this~~to ~~report,~~further ~~which~~franchise ~~speak~~our ~~only~~restaurant asconcept, ofour ~~the~~ability ~~date~~to ~~hereof. Readers~~locate ofsuitable ~~this~~franchisees ~~report~~in ~~are~~markets ~~therefore~~that ~~cautioned~~we do not serve (both nationally and internationally) and the ability of those franchisees to ~~place~~develop, ~~undue~~open ~~reliance~~and ~~on these~~successfully ~~forward~~operate ~~looking~~restaurants ~~statements~~in those markets.

16 The forward looking statements contained in this report reflect our current view about future events and are subject to risks, uncertainties and assumptions. The important factors described above, as well as the factors described elsewhere in this report and in our Annual Report on Form 10-K for fiscal 2005 (the “Form 10-K”), could cause the assumptions underlying our forward looking statements to be incorrect and thereby cause our actual results to differ materially from those expressed in or implied by our forward looking statements. We undertake no obligation to revise any of the forward looking statements contained in this report, which speak only as of the date hereof. Readers of this report are therefore cautioned not to place undue reliance on these forward looking statements.

~~Table of Contents~~GENERAL

~~GENERAL~~ We operate, franchise and license high-quality, full-service casual dining restaurants under the name “Roadhouse Grill.” As of July 24, 2005, there were 67 Company-owned Roadhouse Grill restaurants, 33 of which are located in Florida and the balance of which are located in Alabama, Arkansas, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio, and South Carolina. Subsequent to July 24, 2005, one restaurant was closed upon the termination of the related lease. In addition, subsequent to July 24, 2005, two additional restaurants were closed and remain closed while the properties are marketed for sale. Although there can be no assurance, we expect that the leases related to these properties will terminate upon the sale of the respective properties. We also have 12 franchised or licensed restaurants. Finally, in August 2005, two of our restaurants were heavily damaged or destroyed in Hurricane Katrina.

WeDuring ~~operate,~~the ~~franchise~~last ~~and~~few ~~license~~years, ~~high-quality~~our ~~full-service~~business ~~casual~~has ~~dining restaurants~~been ~~under~~hampered ~~the~~by ~~name~~heavy ~~“Roadhouse~~debt ~~Grill.”~~and Asshortages of working ~~October 24,~~capital ~~2004,~~to ~~there were~~operate 69our ~~company-owned~~business. ~~Roadhouse~~We ~~Grill~~have ~~restaurants,~~also 34experienced ofa ~~which~~continuing ~~are~~decline ~~located~~ in ~~Florida~~restaurant ~~and~~sales ~~the~~due ~~balance~~to, ofamong ~~which~~other ~~are located in Alabama~~issues, ~~Arkansas,~~our ~~Georgia, Louisiana,~~lack ~~Mississippi,~~of ~~New~~resources ~~York,~~to ~~North~~adequately ~~Carolina,~~market ~~Ohio~~our restaurants, ~~and~~competition ~~South~~in ~~Carolina.~~the ~~We also~~markets ~~have~~where 11we ~~franchised~~operate ~~or licensed restaurants.~~and

~~During the last few years, our restaurant business has been hampered by~~17 heavy debt, which caused, in part, our 2002 Chapter 11 proceeding. We have also been unable to increase restaurant sales due to economic conditions, our lack of funding to adequately market our restaurants and a very competitive restaurant market. Further, we have experienced food cost increases arising from adverse market conditions, only a portion of which we have been able to pass on to our customers. All of these factors have caused us to report significant net losses during the last few years.

DuringTable the last year, we have revamped our menu, made additional investments in the recruiting and training of our restaurant managers and directors of operations, entered into a long-term program with a loyalty and rewards company that we believe will help to market our restaurants, taken steps to reduce our costs and attempted to pass a portion of the increased food costs on to our customers, all in an effort to return our company to profitability. There can be no assurance that these efforts will produce their desired results. Contents

~~SALE/LEASEBACK~~economic conditions generally. Further, we have experienced substantial food cost increases, primarily driven by higher beef prices, only a portion of which we have been able to pass on to our customers. All of these factors have caused us to report significant net losses from operations during the last few years and had a material negative impact on our working capital and cash position.

OnDuring ~~August 6, 2004,~~ the ~~Company~~last ~~closed~~year, awe ~~transaction~~have ~~with~~implemented ~~Sovereign Roadhouse~~new ~~LLC~~menus, including a ~~wholly-owned~~new ~~subsidiary~~main ofmenu ~~Sovereign,~~and ~~involving~~a ~~the~~new ~~sale and~~kids’ ~~leaseback~~menu, ofcontinued ~~eleven~~to ~~restaurant~~make ~~properties~~additional ~~that~~investments ~~were~~in ~~previously owned. The sale price for~~ the ~~eleven~~recruiting ~~properties was $21.8 million. The properties are being leased under lease agreements that extend for 20 years~~ and ~~include~~training ~~four five-year renewal options. The Company used approximately $18.3 million~~ of ~~the~~our restaurant ~~net~~managers ~~proceeds from the sale to pay expenses related to the transaction~~ and ~~to repay~~directors ~~$24.6 million~~ of ~~secured debt~~operations, ~~which~~implemented ~~was~~new ~~repaid~~incentive atprograms afor ~~discount~~our ~~(resulting~~restaurant inemployees aand ~~gain~~directors ~~on extinguishment~~ of ~~debt~~operations, oftaken ~~$7.1 million).~~steps ~~The~~to ~~net~~reduce ~~gain~~our ~~from~~costs ~~the debt~~and ~~repayment~~attempted isto ~~reflected~~pass ~~in the Company’s accompanying Condensed~~a ~~Consolidated~~portion ~~Statement~~ of ~~Operations for~~ the ~~thirteen~~increased ~~weeks~~food ~~ended~~costs ~~October 24, 2004.~~on ~~The~~to ~~Company~~our ~~also~~customers. ~~realized~~All aof ~~gain~~these onchanges ~~the~~are ~~sale~~part of ~~the properties of~~an ~~approximately~~ongoing ~~$1.7 million,~~effort ~~which~~to isreturn ~~recorded~~our ascompany ~~unearned~~to ~~revenue~~profitability. inThere ~~the accompanying~~can ~~Condensed~~be ~~Consolidated~~no ~~Balance~~assurance ~~Sheet~~that ~~and~~we will ~~be recorded as a~~ ~~reduction~~become ofprofitable ~~occupancy~~in ~~and other expense over~~ the ~~life of the leases~~future. ~~The~~ ~~remaining net proceeds from the sale of approximately $3.5 million are being used for working capital.~~

~~OVERVIEW~~ENGAGEMENT OF INVESTMENT BANKING FIRM

~~Our~~On ~~revenues~~April 25, ~~are~~2005, ~~derived~~we ~~primarily~~engaged ~~from~~ the ~~sale~~investment banking firm of ~~food~~J. ~~and~~H. ~~beverages~~Chapman, L.L.C. to ~~During~~explore ~~each~~strategic ofalternatives for the ~~thirteen~~Company. ~~weeks~~J. ~~ended~~H. ~~October 24~~Chapman, ~~2004~~which ~~and~~was ~~October 26,~~founded ~~2003, restaurant~~in ~~sales~~1982 ~~generated~~and ~~from~~is headquartered ~~lunch~~in ~~and~~Rosemont, ~~dinner~~Illinois, ~~amounted~~is tothe ~~approximately~~leading ~~27% and~~investment ~~73%~~banking offirm ~~restaurant~~specializing ~~sales,~~in ~~respectively~~the food industry. ~~Restaurant~~With ~~sales~~the assistance of ~~food~~J. ~~and beverages~~H. ~~accounted~~Chapman, ~~for~~we ~~approximately~~are ~~91%~~exploring ~~and~~potential ~~9%,~~strategic options ~~respectively,~~that ofmay ~~total restaurant~~be ~~sales~~available into ~~each~~us. ofHowever, ~~the~~to ~~second~~date, ~~fiscal~~no ~~quarters~~agreements ofhave ~~2005~~been ~~and 2004~~executed. ~~Franchise and~~

17RECENT EVENTS

~~Table~~ In August 2005, we borrowed $1,250,000 from our majority shareholder. The loan bears interest at 10% and is required to be repaid upon certain events or transactions including a change of control ~~Contents~~of the Company. Any remaining outstanding borrowings must be repaid on May 15, 2006. The loan is secured by a lien on substantially all of our assets.

~~management~~ On ~~fees~~August 24 ~~during~~and 25, 2005, Hurricane Katrina hit South Florida. The storm thereafter hit the Southeast ~~thirteen~~Gulf ~~weeks~~Coast ~~ended~~region ~~October~~on August 2429, ~~2004~~2005. None of our South Florida restaurants were heavily damaged in the storm, and all South Florida restaurants that were temporarily closed due to the ~~October 26~~hurricane have reopened. We have seven restaurants in Mississippi, ~~2003~~Louisiana ~~accounted~~and ~~for~~Alabama. ~~less~~Of these restaurants, two restaurants located in Biloxi, Mississippi and Marrero (New Orleans), Louisiana, were heavily damaged in the storm and have not reopened. In regards to the Biloxi location, it appears this restaurant was destroyed in the storm and will be a total loss. At this time, we cannot determine when or if we will be in a position to reopen the Biloxi and Marrero restaurants. Other than 1%these two restaurants, all of our ~~revenues~~other restaurants in the Gulf Coast region had varying degrees of damage from the storm. However, all of these other restaurants have now reopened. Through September 7, 2005, an aggregate of 50 full or partial days of sales were lost in our South Florida and gulf coast restaurants. We intend to file insurance claims with

~~Restaurant operating expenses include food and beverage, labor, direct~~18 operating and occupancy costs. Direct operating costs consist primarily of costs of expendable supplies, marketing and advertising expense, maintenance, utilities and restaurant general and administrative expenses. Occupancy costs include rent, real estate and personal property taxes and property insurance. Certain elements of our restaurant operating expenses, including direct operating and occupancy costs and to a lesser extent labor costs, are relatively fixed.

OfTable our 69 currently operating company-owned restaurants, one was opened in June 2003. Further, we closed one restaurant as of July 27, 2003 in conjunction with the sale of the related leasehold and we sold a second restaurant in April 2004. No additional company-owned restaurants are currently expected to be opened in fiscal year 2005. Contents

~~CRITICAL~~respect ~~ACCOUNTING~~to ~~POLICIES~~our Hurricane Katrina losses, including claims for business interruption. At this time, we are unable to determine the amount of any insurance recoveries with respect to our hurricane losses. Notwithstanding, the impact of Hurricane Katrina, including the loss of restaurant operating profits from the two stores (Biloxi and Marrero) that were heavily damaged as a result of Hurricane Katrina, is not expected to materially impact our financial position or results of operations in future periods.

~~Our accounting policies are more fully described in our Annual Report on~~OVERVIEW Form 10-K for the fifty-two weeks ended April 25, 2004. As disclosed therein, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements.

~~PROPERTY~~ Our ~~AND~~revenues ~~EQUIPMENT~~are derived primarily from the sale of food and beverages. Restaurant sales generated from lunch and dinner amounted to approximately 27% and 73%, respectively, of restaurant sales during each of the thirteen-week periods ended July 24, 2005 and July 25, 2004. Restaurant sales of food and beverages accounted for approximately 91% and 9%, respectively, of total restaurant sales in each of the first fiscal quarters of 2006 and 2005. Franchise and management fees during the thirteen weeks ended July 24, 2005 and July 25, 2004 accounted for less than 1% of our revenues.

WeRestaurant ~~account~~operating ~~for~~expenses ~~long-lived~~include ~~assets~~food inand ~~accordance~~beverage, ~~with SFAS No. 144~~labor, ~~“Accounting~~ ~~for~~direct ~~the~~operating ~~Impairment~~and ~~or Disposal of Long-Lived Assets”. This~~occupancy ~~statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable~~costs. WeDirect ~~regularly~~operating ~~review~~costs ~~the~~consist ~~performance~~primarily of ~~our individual~~costs ~~restaurants to identify possible under performing operations that should be assessed for possible impairments~~ of ~~long-lived~~expendable ~~assets. In that regard~~supplies, wemarketing ~~recorded significant impairment charges during fiscal 2004~~ and ~~depending~~advertising onexpense, ~~the success of our efforts to increase sales~~maintenance, weutilities ~~may~~and ~~take additional~~restaurant ~~charges~~general inand ~~the~~administrative ~~future if our sales at several of our restaurants do~~expenses. ~~not~~Occupancy ~~increase~~costs toinclude ~~forecasted levels in future periods. As part of this analysis~~rent, ~~management~~ ~~considers~~real ~~factors~~estate ~~that~~and ~~have~~personal inproperty ~~the~~taxes ~~past~~ and ~~may~~property ~~continue in the future to impact operating results~~insurance. ~~Recoverability of assets to be held and~~ ~~used~~Certain iselements ~~measured by a comparison~~ of ~~the~~our ~~carrying~~restaurant ~~amount~~operating ~~of an asset to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired~~expenses, ~~the~~including ~~impairment~~direct tooperating beand ~~recognized is measured by~~occupancy ~~the~~costs ~~amount~~and ~~by which the carrying amount of the assets exceeds fair value of the assets. Assets~~ to bea ~~disposed~~lesser ofextent ~~are~~labor ~~reported at the lower of the carrying amount or fair value less~~ costs, toare ~~sell~~relatively fixed.

18 Of the 67 Company-owned restaurants operating as of July 24, 2005, the most recent was opened in June 2003. One restaurant was closed during the thirteen weeks ended July 24, 2005 and one was closed subsequent to the end of the fiscal quarter in conjunction with the termination of the related leases. In addition, subsequent to July 24, 2005, two additional restaurants were closed and remain closed while the properties are marketed for sale. Although there can be no assurance, we expect that the leases related to these properties will terminate upon the sale of the respective properties. We closed these four restaurants because they were underperforming from a financial standpoint and we determined that it would be better to focus our management time and attention and our available resources on our better performing restaurants. We also have 12 franchised or licensed restaurants. No additional Company-owned restaurants are currently expected to open in fiscal year 2006.

~~Table~~CRITICAL ofACCOUNTING ~~Contents~~POLICIES

~~INTANGIBLE~~ Our ~~ASSETS~~accounting policies are more fully described in our Form 10-K. As disclosed therein, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such

~~We account for intangible assets in accordance with SFAS No. 142,~~19 “Goodwill and Other Intangible Assets”. As of October 24, 2004, we had unamortized goodwill in the amount of $1.5 million and unamortized identifiable intangible assets in the amount of $0.3 million. In accordance with SFAS No. 142, goodwill, which relates to the prior acquisition of two individual restaurant operations, is subject to an annual impairment test based on its fair value and no amortization of goodwill is recorded. As of October 24, 2004, the date on which we completed our last annual goodwill impairment test, we determined that we had no impairment of goodwill. We will continue to assess the value of our goodwill in future periods in accordance with applicable accounting rules. Other intangible assets, which have been determined to have a finite life, are being amortized over their useful lives.

USETable OFof ESTIMATES Contents

~~The~~differences ~~preparation~~may ofbe ~~the~~material ~~Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management~~ to ~~make estimates and assumptions that affect~~ the ~~reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the~~ financial statements ~~and the reported amounts of revenues and expenses during the reporting period~~. ~~Actual~~Management ~~results could~~believes ~~differ materially from those estimates. Amounts reported in our Condensed Consolidated Financial Statements that are based, in part, on~~ the ~~use~~following ofcritical ~~estimates~~accounting ~~include~~policies ~~reserves~~affect ~~relating to~~ the ~~collectibility~~significant ofjudgments ~~accounts receivable, insurance reserves relating to claim costs required to be funded by us, the recoverability of deposits~~ and ~~other~~estimates ~~prepaid~~used ~~items,~~in ~~estimated accrued property taxes and other accrued liabilities for which actual invoices have not yet been received and~~ the ~~liability for unredeemed gift certificates and gift~~preparation ~~cards. Various assumptions and other factors underlie the determination~~ of ~~these~~ ~~significant~~our ~~estimates.~~Condensed ~~The~~Consolidated ~~process~~Financial of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniquesStatements. ~~We constantly re-evaluate these significant factors and~~ ~~make adjustments to estimates where facts and circumstances dictate.~~

WePROPERTY ~~believe~~AND ~~that the assumptions and other factors used to determine these~~EQUIPMENT estimates are reasonable and that, with the exception of insurance reserves relating to claim costs required to be funded by us, changes in these assumptions would not have a material impact on our financial position or results of operations. In regard to insurance reserves, recorded liabilities are based upon an estimate of the total amount that may be paid to settle claims required to be funded by us and incurred through the balance sheet date, including consideration of amounts paid-to-date in relation to the individual claims, an analysis of the loss development on all reported claims, potential legal or other related costs and any stop loss limits applicable under our insurance policies. Such reserves are subject to change based upon any development that occurs in relation to the outstanding claims subsequent to the preparation of the Condensed Consolidated Balance Sheet. As of both October 24, 2004 and October 26, 2003, total recorded insurance reserves were $1.6 million, which are included in accrued expenses on the accompanying balance sheet.

InWe ~~addition~~account for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We regularly review the performance of our individual restaurants to identify possible under performing operations that should be assessed for possible impairments of long-lived assets. In that regard, we recorded significant impairment charges during fiscal 2005 and depending on the success of our efforts to increase sales, ~~restructuring~~we may take additional charges, ~~and~~in the future if our sales at several of our restaurants do not increase to ~~restructuring~~forecasted ~~accrual~~levels ~~are~~in ~~primarily~~future ~~based~~periods. onAs ~~estimates~~part of this analysis, management considers factors that have in the ~~market~~past ~~value~~and may continue in the future to impact operating results. Recoverability of assets ofto ~~which~~be weheld ~~plan~~and toused ~~dispose~~is ~~and~~measured by a comparison of the carrying amount of an asset to the future net cash flows ~~estimated~~ expected to be ~~realized~~generated ~~relating~~by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets ~~that~~exceeds fair value of the assets. Assets to be disposed of are ~~anticipated~~reported at the lower of the carrying amount or fair value less costs to sell.

19INTANGIBLE ASSETS

~~Table~~ We account for intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”. As of ~~Contents~~July 24, 2005, we had unamortized goodwill in the amount of $1.5 million and unamortized identifiable intangible assets in the amount of $0.4 million. In accordance with SFAS No. 142, goodwill, which relates to the prior acquisition of two individual restaurant operations, is subject to an annual impairment test based on its fair value and no amortization of goodwill is recorded. As of October 25, 2004, the date on which we completed our last annual goodwill impairment test, we determined that we had no impairment of goodwill. We will continue to assess the value of our goodwill in fiscal 2006 and future periods in accordance with applicable accounting rules. Other intangible assets, which have been determined to have a finite life, are being amortized over their useful lives.

toUSE beOF ~~utilized in our operations in the future or expenditures estimated to be~~ESTIMATES used to settle the outstanding obligations. Such estimates are also affected by the time interval required to dispose of assets to be sold. The assumptions used, particularly in regard to estimates of future cash flows to be realized relating to impaired or potentially impaired assets, are critical in assessing a potential impairment and, if any, estimating the amount of the impairment. These assumptions require consideration and projection of future trends in key operating ratios and the timing and impact of possible changes in operations relating to specific assets. Changes in these assumptions could have a material impact on the timing and amount of possible asset impairments and therefore on our results of operations.

20 The preparation of the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Amounts reported in our Condensed Consolidated Financial Statements that are based, in part, on

~~Table of Contents~~20

RESULTSTable OFof OPERATIONS Contents

~~The~~the ~~following~~use ~~table~~of ~~sets~~estimates ~~forth~~include ~~for~~reserves relating to the ~~periods~~collectibility ~~indicated~~of ~~the~~accounts ~~percentage~~receivable, ~~relationship~~insurance reserves relating to ~~total~~claim ~~revenues~~costs required to be funded by us, the recoverability of deposits ~~certain~~and ~~statements~~other prepaid items, estimated accrued property taxes and other accrued liabilities for which actual invoices have not yet been received and the liability for unredeemed gift certificates and gift cards. Various assumptions and other factors underlie the determination of these ~~operations~~significant ~~data~~estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. We constantly re-evaluate these significant factors and make adjustments to estimates where facts and circumstances dictate.

	Thirteen Weeks Ended						Twenty Six Weeks Ended
	October 24,			October 26,			October 24,			October 26,
	2004			2003			2004			2003
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of restaurant sales:
Food and beverage		35.6			35.0			35.9			35.3
Labor and benefits		33.5			32.6			33.0			32.6
Occupancy and other		27.5			25.7			26.7			24.1
Pre-opening expenses		—			—			—			—
Total cost of restaurant sales		96.6			93.3			95.6			92.0
Depreciation and amortization		4.7			5.4			4.8			5.2
General and administrative expenses		5.3			4.8			5.1			4.7
Restructuring charge		—			(0.3	)		—			(0.1	)
Total operating expenses		106.6			103.2			105.5			101.8
Operating loss		(6.6	)		(3.2	)		(5.5	)		(1.8	)
Other income (expense):
Loss (gain) on sale/disposal of fixed Assets		—			(0.1	)		—			—
Gain on extinguishment of debt		23.4			—			11.2			—
Interest expense, net		(1.5	)		(2.5	)		(1.8	)		(2.4	)
Total other income (expense)		21.9			(2.4	)		9.4			(2.4	)
Income (loss) before income taxes		15.3			(5.6	)		3.9			(4.2	)
Income tax		—			—			—			—
Net income (loss)		15.3	%		(5.6	)%		3.9	%		(4.2	)%

We believe that the assumptions and other factors used to determine these estimates are reasonable and that, with the exception of insurance reserves relating to claim costs required to be funded by us, changes in these assumptions would not have a material impact on our financial position or results of operations. In regard to insurance reserves, recorded liabilities are based upon an estimate of the total amount that may be paid to settle claims required to be funded by us and incurred through the balance sheet date, including consideration of amounts paid-to-date in relation to the individual claims, an analysis of the loss development on all reported claims, potential legal or other related costs and any stop loss limits applicable under our insurance policies. Such reserves are subject to change based upon any development that occurs in relation to the outstanding claims subsequent to the preparation of the Condensed Consolidated Balance Sheet. As of July 24, 2005 and July 25, 2004 total recorded insurance reserves were $1.5 million and $1.8 million, respectively, which are included in accrued expenses on the accompanying balance sheet.

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

~~Table of Contents~~21

TheTable followingof table sets forth for the periods indicated certain restaurant data: Contents

~~RESTAURANT~~RESULTS ~~DATA:~~OF OPERATIONS

	Thirteen Weeks Ended				Twenty Six Weeks Ended
	October 24,		October 26,		October 24,		October 26,
	2004		2003		2004		2003
Company-owned restaurants:
Beginning of period		69		70		69		70
Opened		—		—		—		1
Closed		—		—		—		(1	)
End of period		69		70		69		70
Franchised and licensed restaurants:
Beginning of period		11		10		11		9
Opened		—		—		—		1
Closed		—		—		—		—
End of period		11		10		11		10
Total restaurants:
Beginning of period		80		80		80		79
Opened		—		—		—		2
Closed		—		—		—		(1	)
End of period		80		80		80		80

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

22STATEMENTS OF OPERATIONS DATA:


	Thirteen Weeks Ended
	July 24, 2005			July 25, 2004
Total revenues		100.0	%		100.0	%
Cost of restaurant sales:
Food and beverage		34.3			36.1
Labor and benefits		34.2			32.6
Occupancy and other		26.5			25.9
Pre-opening expenses		—			—

Total cost of restaurant sales		95.0			94.6

Depreciation and amortization		4.5			4.9
General and administrative expenses		6.3			5.0

Total operating expenses		105.8			104.5


Operating loss		(5.8	)		(4.5	)

Total other expense		(0.6	)		(2.2	)

Loss before taxes		(6.4	)		(6.7	)

Income tax		—			—

Net loss		(6.4	)%		(6.7	)%

~~THIRTEEN WEEKS ENDED OCTOBER 24, 2004 (“FISCAL YEAR 2005 SECOND QUARTER”)~~22 ~~COMPARED TO THE THIRTEEN WEEKS ENDED OCTOBER 26, 2003 (“FISCAL YEAR 2004 SECOND QUARTER”)~~

TotalTable revenues. Total revenues decreased $3.0 million, or 9.1%, from $33.4 million for Fiscal Year 2004 Second Quarter to $30.4 million for Fiscal Year 2005 Second Quarter. This decrease is primarily attributable to lost revenues resulting from the hurricanes (estimated to be approximately $1.3 million), a reduction in sales generally at comparable restaurants (including sales indirectly lost due to the impact of the hurricanes on customer dining habits during the six weeks over which the four storms occurred) and the closing of two restaurants in July 2003 and April 2004 as a result of the sale of the related property interests. For the same reasons, sales at comparable restaurants for Fiscal Year 2005 Second Quarter decreased 7.7% compared with sales for Fiscal Year 2004 Second Quarter. Removing the estimated impact of the hurricanes, same restaurant sales for the thirteen weeks ended October 24, 2004 were 3.8% below those for the comparable period in fiscal 2004. This decrease results from a reduction in customer headcount, partially offset by an increase in check average resulting from the menu price changes implemented in October 2003 and May 2004 as discussed below. Management believes that the decrease in headcount is also attributable to increased competition from new restaurants in many of the markets in which our restaurants operate and the impact of our financial condition and lack of working capital on our ability to invest in our restaurants and engage in expanded marketing initiatives. A restaurant is considered comparable after its first 18 months of operation. Sales from restaurants closed in fiscal year 2004 were $0.3 million in Fiscal Year 2004 Second Quarter. The Company did not open or close any Company-owned restaurants during Fiscal Year 2005 Second Quarter. Contents

~~Food~~The ~~and~~following ~~beverage.~~table ~~Food~~sets ~~and~~forth ~~beverage costs decreased $0.9 million, or 7.7%, to $10.8 million~~ for Fiscal Year 2005 Second Quarter from $11.7 million for Fiscal Year 2004 Second Quarter. As a percentage of revenues, food and beverage costs increased by 0.6% to 35.6% for Fiscal Year 2005 Second Quarter from 35.0% for Fiscal Year 2004 Second Quarter. The decrease in dollars is attributable to the ~~reduction~~periods inindicated revenues. The increase as a percentage of revenues is primarily attributable to increases in beef, dairy and produce prices. During October 2003, in response to the continued increased beef prices, we modified our menu pricing on certain ~~items.~~restaurant ~~This increase averaged approximately 3% based on the sales mix at the time of the increase~~data. ~~We also~~ implemented changes in our menu, including price changes on certain items, in May 2004 that represented an additional average price increase of approximately 3% based on the sales mix at the time of the increase. In addition, we have attempted to reduce our overall food costs by featuring lower food cost, generally non-beef, menu items in our advertising materials and through commitments to purchase meat products at fixed prices in certain instances in which market conditions appear to indicate an expected rise in prices. Management cannot project the period over which the existing prices will continue to exist and when or if food costs will decline (as a percentage of revenues) to the historic levels that previously existed. However, although there can be no assurances, we will continue to evaluate and implement changes designed to reduce food costs.

~~Labor~~RESTAURANT ~~and benefits. Labor and benefits costs decreased $0.7 million, or~~DATA: 6.4%, to $10.2 million for Fiscal Year 2005 Second Quarter from $10.9 million for Fiscal Year 2004 Second Quarter. As a percentage of revenues, labor and benefits costs increased to 33.5% for Fiscal Year


	Thirteen Weeks Ended
	July 24, 2005			July 25, 2004
Company-owned restaurants:
Beginning of period		68			69
Opened		—			—
Closed		(1	)		—

End of period		67			69


Franchised and licensed restaurants:
Beginning of period		12			11
Opened		—			—
Closed		—			—

End of period		12			11


Total restaurants:
Beginning of period		80			80
Opened		—			—
Closed		(1	)		—

End of period		79			80

~~Table of Contents~~23

2005Table Second Quarter from 32.6% for Fiscal Year 2004 Second Quarter. The increase as a percentage of revenues is due to the impact of the decline in revenues and the fixed nature of a significant portion of labor and benefits. Contents

~~Occupancy~~THIRTEEN ~~and~~WEEKS ~~other.~~ENDED ~~Occupancy~~JULY ~~and other costs decreased $0.2 million~~24, ~~or 2.3%, to $8.4 million for Fiscal Year~~ 2005 ~~Second~~(“FISCAL ~~Quarter~~YEAR ~~from~~2006 ~~$8.6 million~~FIRST ~~for Fiscal~~QUARTER”) ~~Year~~COMPARED ~~2004~~TO ~~Second~~THE ~~Quarter. As a percentage of revenues, occupancy and~~THIRTEEN ~~other~~WEEKS ~~was~~ENDED ~~27.5%~~JULY ~~for Fiscal Year 2005 Second Quarter versus~~ 25~~.7%~~, ~~for Fiscal Year~~ 2004 ~~Second~~(“FISCAL ~~Quarter.~~YEAR ~~The decrease in dollars is primarily attributable to a decrease in marketing expense, offset to some extent by increased rent as a result of the sale/leaseback of 11 properties during the Fiscal Year~~ 2005 ~~Second~~ ~~Quarter.~~FIRST Marketing expense for Fiscal Year 2005 Second Quarter was $0.5 million, compared to $1.0 million for Fiscal Year 2004 Second Quarter. The increase as a percentage of revenues is primarily attributable to the relatively fixed nature of certain occupancy and other costs, including rent and property taxes, compared to reduced revenues. See “OutlookQUARTER” ~~below for a~~) ~~discussion of future occupancy costs as a result of the recently completed sale/leaseback of 11 properties.~~

~~Depreciation~~Total ~~and amortization~~revenues. ~~Depreciation~~Total ~~and~~revenues ~~amortization expense~~ decreased $01.4 million, or 224.23%, tofrom $132.49 million for ~~the~~ Fiscal Year 2005 ~~Second~~ First Quarter ~~from~~to $131.85 million for ~~the~~ Fiscal Year ~~2004~~2006 ~~Second~~First Quarter. AsThis adecrease is ~~percentage~~primarily ofattributable ~~revenues,~~to ~~depreciation~~a reduction in sales at comparable restaurants and ~~amortization~~the ~~expense~~closing ~~decreased~~of 0a restaurant in March 2005 upon the expiration of the related lease.7% toSales at comparable restaurants ~~4.7%~~for ~~from~~Fiscal 5Year 2006 First Quarter decreased 3.43% ~~during~~compared ~~these~~with ~~periods~~sales for Fiscal Year 2005 First Quarter. ~~The~~This decrease results from a reduction in customer headcount, ~~both~~partially offset by an increase in ~~dollars~~check ~~and~~average asresulting aprimarily from the menu price changes described below that were ~~percentage~~implemented ofin ~~revenues,~~March 2005. Management believes that the decrease in headcount is ~~due~~primarily attributable to ~~certain~~increased ~~equipment~~competition ~~becoming~~from ~~fully~~new ~~depreciated during~~restaurants in many of the ~~period,~~markets in which our restaurants operate and the ~~sale~~impact of our financial condition and ~~leaseback~~lack of 12working ~~properties~~capital ~~including~~on ~~the~~our ~~corporate~~ability ~~headquarters~~to ~~building~~invest ~~during~~in ~~these~~our ~~periods,~~restaurants and ~~asset~~engage ~~impairments recorded~~ in ~~fiscal~~necessary ~~year~~marketing ~~2004~~initiatives. ~~that~~A ~~reduced~~restaurant is ~~the~~considered ~~carrying~~comparable ~~value~~after its first 18 months of ~~our~~operation. ~~property~~Sales from the restaurant closed ~~and~~in ~~equipment,~~March 2005 ~~offset~~were to$0.3 million ~~some~~in ~~extent~~the byFiscal ~~depreciation~~Year of2005 ~~additional~~First ~~assets purchased~~Quarter.

~~General~~Food and ~~administrative~~beverage. ~~General~~Food and ~~administrative~~beverage costs ~~were~~decreased $1.6 1 million, ~~for~~or ~~both~~9.2%, ~~the~~to $10.8 million for Fiscal Year ~~2005~~2006 ~~and~~First ~~2004~~Quarter, ~~Second~~from ~~Quarters~~$11.9 million for Fiscal Year 2005 First Quarter. As a percentage of revenues, ~~general~~food and ~~administrative~~beverage costs ~~increased~~decreased 0by 1.58% ~~from 4~~to 34.83% for Fiscal Year ~~2004~~2006 First ~~Second~~ Quarter tofrom 536.31% for Fiscal Year 2005 ~~Second~~ First Quarter. The ~~increase~~decrease in dollars was impacted by the reduction in revenue. The decrease as a percentage of revenues is primarily attributable to the ~~result~~impact of changes in our main menu that were implemented in March 2005. The updated main menu included changes in certain plate presentations and recipes as well as both the introduction of ~~relatively~~selected ~~fixed~~new ~~nature~~menu offerings and the elimination of ~~general~~certain items from the previous menu that did not generate sufficient sales volume. The menu also included a price increase of approximately 2% based on the current sales mix. In addition, we attempted to reduce our overall food costs by featuring lower food cost, generally non-beef, menu items in our new menu and ~~administrative~~advertising materials. Management will continue to evaluate and implement changes designed to reduce overall food costs. ~~compared~~However, there can be no assurances that such initiatives will continue to ~~reduced~~be ~~revenues~~effective in reducing our food costs.

~~Gain~~Labor onand ~~extinguishment of debt~~benefits. ~~During~~Labor ~~the~~and ~~thirteen~~benefits ~~weeks~~costs ~~ended~~increased ~~October 24~~$0.1 million, ~~2004~~or 0.9%, weto ~~recognized~~$10.8 million afor Fiscal Year 2006 First Quarter, from $710.17 million ~~gain~~for ~~relating~~Fiscal toYear ~~the~~2005 ~~repayment~~First Quarter. As a percentage of ~~debt~~revenues, labor and benefits costs increased to 34.2% for Fiscal Year 2006 First atQuarter from 32.6% for Fiscal Year 2005 First Quarter. The increase in both dollars and as a percentage ~~discounted~~of ~~amount~~revenues ~~resulting~~is ~~from~~primarily attributable to the ~~use~~impact of achanges ~~portion~~in ofminimum wage implemented in the ~~net~~state ~~proceeds~~of Florida in May 2005 and increases in costs associated with our group health insurance plan, partially offset by a reduction in workers’ compensation costs. The increase as a percentage of revenues is also attributable to the ~~sale/leaseback~~decline in revenues and the fixed nature of 11a ~~properties.~~significant ~~See~~portion ~~further~~of ~~discussion~~our ~~above~~labor and benefits.

~~Interest expense, net. Total interest expense decreased $0.3 million, or~~24 37.5%, to $0.5 million for Fiscal Year 2005 Second Quarter from $0.8 million for Fiscal Year 2004 Second Quarter. The decrease was primarily due to the reduction in outstanding debt resulting from debt payments made between these periods, including the early payment of debt from the proceeds of the sale/leaseback transaction.

IncomeTable taxes. We did not recognize a tax liability relating to the operating income for Fiscal Year 2005 Second Quarter due to the existence of federal and state income tax loss carryforwards. We did not recognize a tax benefit relating to the operating loss for Fiscal Year Contents

24 Occupancy and other. Occupancy and other costs decreased $0.2 million, or 2.4%, to $8.3 million for Fiscal Year 2006 First Quarter, from $8.5 million for Fiscal Year 2005 First Quarter. As a percentage of revenues, occupancy and other was 26.5% for Fiscal Year 2006 First Quarter compared to 25.9% for Fiscal Year 2005 First Quarter. The decrease in dollars is attributable to reduced marketing expense and costs associated with equipment operating leases that expired during these periods, partially offset by increased rent expense resulting from the sale and leaseback transaction completed in August 2004 and increased utilities expense. The increase as a percentage of revenues is primarily attributable to the relatively fixed nature of certain occupancy and other costs, including rent and property taxes, compared to reduced revenues. Marketing expense for Fiscal Year 2006 First Quarter was $0.6 million, compared to $1.0 million for Fiscal Year 2005 First Quarter.

~~Table~~ Depreciation and amortization. Depreciation and amortization expense decreased $0.2 million, or 12.5%, to $1.4 million for the Fiscal Year 2006 First Quarter, from $1.6 million for the Fiscal Year 2005 First Quarter. As a percentage of ~~Contents~~revenues, depreciation and amortization expense decreased 0.4% to 4.5% from 4.9% during these periods. The decrease, both in dollars and as a percentage of revenues, is due to certain equipment becoming fully depreciated during the period, the sale and leaseback transaction of the 11 properties in August 2004, and asset impairments recorded in fiscal year 2005 that reduced the carrying value of our property and equipment, offset to some extent by depreciation of additional assets purchased.

~~2004~~ General ~~Second~~and ~~Quarter~~administrative. ~~because~~General ~~management~~and ~~believes~~administrative ~~that~~costs itincreased is$0.3 million, ~~not~~or 17.6%, ~~likely~~to ~~that~~$2.0 million ~~all~~for the Fiscal Year 2006 First Quarter, from $1.7 million for the Fiscal Year 2005 First Quarter. As a percentage of ~~our~~revenues, ~~deferred~~general ~~tax~~and ~~assets~~administrative ~~will~~costs beincreased 1.3% ~~realized~~from in5.0% ~~the~~for ~~future~~Fiscal Year 2005 First Quarter to 6.3% for Fiscal Year 2006 First Quarter. The increase in dollars is primarily due to increased investments in field management personnel and bank fees. The increase as a percentage of revenues is the result of the relatively fixed nature of general and administrative costs compared to reduced revenues.

~~TWENTY~~ Interest ~~SIX~~expense, ~~WEEKS~~net. ~~ENDED~~Total ~~OCTOBER~~interest 24expense decreased $0.5 million, ~~2004~~or ~~(“FISCAL~~71.4%, ~~YEAR~~to ~~2005~~$0.2 million ~~FIRST~~for ~~AND~~Fiscal ~~SECOND~~Year 2006 First Quarter, from $0.7 million for Fiscal Year 2005 First Quarter. ~~QUARTERS”)~~The ~~COMPARED~~decrease TOwas ~~THE~~primarily ~~TWENTY~~due ~~SIX~~to ~~WEEKS~~the ~~ENDED~~reduction ~~OCTOBER~~in ~~26,~~outstanding ~~2003~~debt ~~(“FISCAL~~resulting from debt payments ~~YEAR~~made ~~2004~~between ~~FIRST~~these ~~AND~~periods, ~~SECOND~~including ~~QUARTERS”)~~the early payment of debt from the proceeds of the August 2004 sale/leaseback transaction.

~~Total~~Income ~~revenues~~taxes. ~~Total~~We ~~revenues~~did ~~decreased~~not ~~$6.3 million,~~recognize or 9.1%, from $69.6 million for Fiscal Year 2004 First and Second Quarters to $63.3 million for Fiscal Year 2005 First and Second Quarters. This decrease is primarily attributable to the lost revenues resulting from the hurricanes (estimated to be approximately $1.3 million), a ~~reduction~~tax inbenefit ~~sales~~relating ~~generally at comparable restaurants (including sales indirectly lost due~~ to the ~~impact~~operating ofloss ~~the hurricanes~~for ~~on customer dining habits during the six weeks over which the four~~either ~~storms occurred) and~~ the ~~closing of two restaurants in July 2003 and April 2004 as a result of the sale of the related property interests. For the same reasons, sales at comparable restaurants for~~ Fiscal Year ~~2005~~2006 First ~~and~~Quarter ~~Second Quarters~~or ~~decreased 7.5% compared with sales for~~ Fiscal Year ~~2004~~2005 First ~~and Second~~Quarter ~~Quarters.~~because ~~Removing~~management ~~the~~does ~~estimated impact of the hurricanes, same~~not ~~restaurant~~believe sales for the twenty six weeks ended October 24, 2004 were 5.6% below those for the comparable period in fiscal 2004. This decrease results from a reduction in customer headcount, partially offset by an increase in check average resulting from the menu price changes implemented in October 2003 and May 2004 as discussed below. Management believes that ~~the~~it ~~decrease in headcount~~ is ~~also~~more ~~attributable~~likely tothan ~~increased~~not ~~competition~~that ~~from new restaurants in many of the markets in which~~ our ~~restaurants~~deferred ~~operate~~tax ~~and~~assets ~~the~~will ~~impact~~be ofrealized ~~our financial condition and lack of working capital on our ability to invest~~ in our restaurants and engage in expanded marketing initiatives. A restaurant is considered comparable after its first 18 months of operation. Sales from restaurants closed in fiscal year 2004 were $0.9 million in the ~~Fiscal Year~~ ~~2004 First and Second Quarters~~future. ~~The Company did not open or close any Company-~~ ~~owned restaurants during the Fiscal Year 2005 First and Second Quarters.~~

~~Food and beverage. Food and beverage costs decreased $1.9 million, or~~25 7.7%, to $22.7 million for Fiscal Year 2005 First and Second Quarters from $24.6 million for Fiscal Year 2004 First and Second Quarters. As a percentage of revenues, food and beverage costs increased by 0.6% to 35.9% for Fiscal Year 2005 First and Second Quarters from 35.3% for Fiscal Year 2004 First and Second Quarters. The decrease in dollars is attributable to the reduction in revenues. The increase as a percentage of revenues is primarily attributable to increases in beef, dairy and produce prices. During October 2003, in response to the continued increased beef prices, we modified our menu pricing on certain items. This increase averaged approximately 3% based on the sales mix at the time of the increase. We also implemented changes in our menu, including price changes on certain items, in May 2004 that represented an additional average price increase of approximately 3% based on the sales mix at the time of the increase. In addition, we attempted to reduce our overall food costs by featuring lower food cost, generally non-beef, menu items in our advertising materials and through commitments to purchase meat products at fixed prices in certain instances in which market conditions appear to indicate an expected rise in prices. Management cannot project the period over which the existing prices will continue to exist and when or if food costs will decline (as a percentage of revenues) to the historic levels that previously existed. However, although there can be no assurances, we will continue to evaluate and implement changes designed to reduce food costs.

25 Table of Contents

~~Table of Contents~~OUTLOOK

~~Labor~~The ~~and~~following ~~benefits.~~discussion ~~Labor~~of ~~and~~our ~~benefits~~full ~~costs~~year ~~decreased~~fiscal ~~$1.8 million,~~2006 ~~or 7.9%,~~operating toresults ~~$20.9 million~~that ~~for~~are ~~Fiscal~~not historical ~~Year~~statements ~~2005~~constitute ~~First~~forward-looking ~~and~~statements ~~Second~~within ~~Quarters~~the ~~from $22.7 million~~meaning ~~for~~of ~~Fiscal~~the ~~Year~~Private Securities ~~2004~~Litigation ~~First~~Reform ~~and~~Act ~~Second~~of ~~Quarters~~1995. AsOur aforward-looking ~~percentage of~~statements ~~revenues,~~are ~~labor~~subject to risks and uncertainties ~~benefits~~that ~~costs~~could ~~increased~~cause ~~0.4%~~actual results to ~~33.0%~~differ ~~for~~materially ~~Fiscal~~from ~~Year~~those stated or implied in ~~2005~~these ~~First~~forward-looking statements. Please refer to our Form 10-K and ~~Second~~to ~~Quarters~~the ~~from~~factors ~~32.6%~~described in this report for ~~Fiscal~~further ~~Year~~discussion ~~2004~~on ~~First~~forward-looking statements and ~~Second Quarters.~~the ~~The~~risks ~~increase~~and asother afactors that ~~percentage~~could ofprevent ~~revenues~~us isfrom ~~due~~achieving toour goals and cause the ~~impact~~assumptions ofunderlying the ~~decline~~forward-looking instatements ~~revenues~~ and the ~~fixed~~actual ~~nature~~results ofto adiffer ~~significant~~materially ~~portion~~from ofthose ~~labor~~expressed ~~and~~in or ~~benefits~~implied by those forward-looking statements.

~~Occupancy~~Fiscal ~~and~~2006 ~~other~~revenue. ~~Occupancy~~As ~~and~~discussed ~~other~~above, ~~costs~~no ~~increased~~new ~~$0.2 million,~~restaurants orare currently being developed for 1fiscal 2006.~~2%,~~ toAll ~~$16.9 million~~64 ~~for~~of ~~Fiscal~~our ~~Year~~restaurants ~~2005~~will ~~First~~qualify ~~and~~as ~~Second~~comparable ~~Quarters~~restaurants ~~from $16~~during fiscal 2006.~~7 million~~ As ~~for~~discussed ~~Fiscal~~above, ~~Year~~fiscal ~~2004~~2005 ~~First~~revenues ~~and~~were ~~Second~~significantly ~~Quarters.~~adversely Asimpacted aby ~~percentage~~four hurricanes that occurred in certain of ~~revenues~~the markets in which we operate, ~~occupancy~~particularly ~~and~~the ~~other~~state ~~was~~of 26Florida.7% Excluding ~~for~~the ~~Fiscal~~estimated ~~Year~~effects of the hurricanes on fiscal 2005, ~~First~~sales ~~and~~from comparable restaurants ~~Second~~declined ~~Quarters~~4.9% ~~compared~~during tothe 24fiscal year.1% ~~for~~Management ~~Fiscal~~intended ~~Year~~to ~~2004~~use ~~First~~a ~~and~~portion ~~Second~~of the net proceeds ~~Quarters.~~received ~~The~~from ~~increase,~~the ~~both~~August 2004 sale/leaseback of 11 properties to invest in ~~dollars~~additional ~~and~~marketing asfor its arestaurants, ~~percentage~~in ofan effort to improve future revenues. However, isthe financial impact of the ~~primarily~~hurricanes ~~attributable~~as well as the continued decline in sales required us to ~~increased~~use ~~rent~~these asnet aproceeds, ~~result~~after debt ofpayments, for working capital purposes. Following the sale/leaseback, management has ~~offset~~developed toand ~~some~~implemented ~~extent~~certain byprograms, ~~reductions~~including ina ~~insurance~~new ~~expense.~~local ~~The~~restaurant ~~increase~~marketing asprogram, a ~~percentage~~modified ofincentive ~~revenues~~compensation isprogram ~~further~~for ~~impacted~~our byemployees and changes in the ~~relatively~~hiring ~~fixed~~and ~~nature~~training of restaurant employees. In addition, management developed a new menu insert that included the introduction of certain ~~occupancy~~new menu items. Management has also developed a new kids’ menu and ~~other~~main menu ~~costs,~~with ~~including~~enhanced ~~rent~~features and ~~property~~new ~~taxes~~menu items, ~~compared~~which were introduced in our restaurants in toFebruary ~~reduced~~and ~~revenues~~March 2005, respectively. ~~See~~While ~~“Outlook”~~management ~~below~~has ~~for~~seen acertain ~~discussion~~improvements ofin ~~future~~our operations ~~occupancy~~from these new programs, including improved traffic in our restaurants, higher average ~~costs~~checks, lower employee turnover and improved store execution, there can be no assurance as ato whether these changes will ultimately result ofin increased sales or profitability. Based on the above, ~~recently~~management ~~completed~~currently ~~sale/leaseback~~expects that the negative same restaurant sales trend it has experienced in recent years will improve and that total fiscal 2006 revenues may increase slightly over fiscal 2005, exclusive of 11the ~~properties~~impact of any restaurant closed during the fiscal year. Notwithstanding, the impact of hurricanes, including Hurricane Katrina, may adversely affect fiscal 2006 sales and management’s current expectations with respect to fiscal 2006 sales.

~~Depreciation~~Management ~~and~~believes ~~amortization.~~that ~~Depreciation~~identifying ~~and~~opportunities ~~amortization expense decreased $0.6 million, or 16.7%,~~ to ~~$3.0 million~~expand ~~for~~our ~~the~~operations ~~Fiscal~~in ~~Year~~relation ~~2005~~to ~~First~~franchised ~~and~~restaurants ~~Second~~represents ~~Quarters~~a ~~from~~growth ~~$3.6 million~~opportunity ~~for the Fiscal Year 2004 First~~ and ~~Second~~ ~~Quarters.~~would Asrequire asignificantly ~~percentage of revenues, depreciation and amortization~~lower ~~expense~~capital ~~decreased~~resources ~~0.4%~~from tous ~~4.8%~~than ~~from~~the ~~5.2%~~expansion ~~during~~of ~~these~~Company-owned ~~periods~~restaurants. ~~The decrease~~However, these ~~both~~initiatives inare ~~dollars~~not ~~and~~expected asto agenerate ~~percentage~~significant ofrevenue ~~revenues,~~or isoperating ~~due~~profit toduring ~~certain equipment~~fiscal ~~becoming~~2006. ~~fully depreciated during the period~~Accordingly, ~~the~~revenue ~~sale~~anticipated ~~and~~to ~~leaseback~~be ofgenerated 12from ~~properties~~royalty ~~including~~fees ~~the corporate headquarters building during these periods,~~ and ~~asset~~other ~~impairments~~income ~~recorded~~is inexpected ~~fiscal~~to ~~year~~be ~~2004~~less ~~that~~than ~~reduced~~1% ~~the carrying value~~ of ~~our~~total ~~property~~revenues ~~and~~in ~~equipment,~~fiscal ~~offset to some extent by depreciation of additional assets purchased~~2006.

~~General and administrative. General and administrative costs were $3.3~~26 million for both the Fiscal Year 2005 and 2004 First and Second Quarters. As a percentage of revenues, general and administrative costs increased 0.4% from 4.7% for Fiscal Year 2004 First and Second Quarters to 5.1% for Fiscal Year 2005 First and Second Quarters. The increase as a percentage of revenues is the result of the relatively fixed nature of general and administrative costs compared to reduced revenues.

GainTable on extinguishment of debt. During the twenty six weeks ended October 24, 2004, we recognized a $7.1 million gain relating to the repayment of debt at a discounted amount resulting from the use of a portion of the net proceeds of the sale/leaseback of 11 properties. See further discussion above. Contents

~~Interest~~Food ~~expense,~~and ~~net~~beverage costs. ~~Total~~Similar ~~interest~~to ~~expense~~many ~~decreased~~competing ~~$0.5 million~~restaurant concepts, orwe experienced a ~~29.4%~~significant increase in food and beverage costs during fiscal 2004, towhich $1continued into fiscal 2005.~~2 million~~ ~~for~~This ~~Fiscal~~increase ~~Year~~was ~~2005~~primarily ~~First~~caused by the instances of Mad Cow Disease that were reported in Canada and ~~Second~~the ~~Quarters~~United ~~from~~States $1in 2003, which caused a significant increase in meat and dairy costs.7 ~~million~~Management ~~for~~has ~~Fiscal~~taken ~~Year~~actions ~~2004~~in ~~First~~an attempt to reduce the impact of these events, including enhancing our menu, in part, to promote certain non-meat menu items, implementing menu price increases, negotiating arrangements to purchase certain meat products at fixed rates during fiscal 2005 and ~~Second~~targeting ~~Quarters~~certain marketing initiatives in an attempt to change our sales mix and increase sales of lower cost food items. ~~The~~In ~~decrease~~addition, ~~was~~in March 2005, we introduced a new main menu into our ~~primarily~~restaurants ~~due~~that included changes in menu offerings and plate presentations that are expected to result ~~the~~in a reduction in ~~outstanding~~food ~~debt~~costs. ~~resulting~~Management ~~from~~is ~~debt~~also ~~payments~~continuing its initiatives to further ~~made~~reduce ~~between~~food ~~these~~costs ~~periods,~~as ~~including~~described above. Management cannot predict the ~~early~~duration ~~payment~~of these cost increases or further impacts that may occur as a result of ~~debt~~these ~~from~~events. ~~the~~However, it is presently ~~proceeds~~anticipated that food and beverage costs for fiscal 2006 will decline by approximately 2% of revenues ~~the~~as ~~sale/leaseback~~compared ~~transaction~~to fiscal 2005.

26 Labor and benefits. We experienced a decrease in labor and benefits costs in fiscal 2004 as a percent of revenues as compared to fiscal 2003. This decrease resulted from improved management of hourly labor, a decrease in the cost of providing medical benefits to employees due to plan design changes implemented in June 2003 and a decrease in the cost of workers’ compensation insurance due to a change to a guaranteed cost insurance program in January 2003 as compared to the significant claims incurred in fiscal 2003 under the previous self funded program. However, due to the decline in revenues during fiscal 2005 as compared to fiscal 2004 and the generally fixed nature of labor and benefits, these costs increased slightly to 32.4% of revenues in fiscal 2005 from 32.3% of revenues in fiscal 2004. This increase has been partially offset by further reductions in workers’ compensation and group health insurance expense. Management currently expects labor and benefit costs as a percentage of revenues to increase approximately 1% of revenues in fiscal 2006 compared to fiscal 2005 due primarily to the impact of recent amendments to minimum wage regulations in certain of the states in which we operate (Florida and New York), changes in the compensation paid to restaurant employees and a slight increase in workers’ compensation insurance costs.

~~Table~~ Occupancy and other. As a result primarily of ~~Contents~~the sale and leaseback transaction entered into in August 2004 as discussed above, we will incur additional rent expense in fiscal 2006 of approximately $1.0 million compared to fiscal 2005. Partially offsetting this increase will be reduced costs incurred as a result of the expected conversion of certain equipment leases from operating leases to capital leases upon the expiration of the original lease terms. Due primarily to these factors, management expects occupancy and other expenses in fiscal 2006 to remain relatively consistent with fiscal 2005.

~~Income taxes. We did not recognize a tax liability relating to the~~27 operating income for Fiscal Year 2005 First and Second Quarters due to the existence of federal and state income tax loss carryforwards. We did not recognize a tax benefit relating to the operating loss for Fiscal Year 2004 First and Second Quarters because management believes that it is not likely that all of our deferred tax assets will be realized in the future.

OUTLOOK Table of Contents

~~The following discussion of our future operating results that are not historical statements constitute forward~~Pre-~~looking~~opening ~~statements~~expenses. ~~within~~As ~~the~~discussed ~~meaning of~~above, ~~the~~no ~~Private~~new ~~Securities~~restaurant ~~Litigation~~openings ~~Reform Act of 1995. Our forward-looking statements~~ are ~~subject~~currently ~~to risks and uncertainties that could cause actual~~planned ~~results to differ materially from those stated or implied in the forward-looking statement. Please refer to Pages 4 and 7 of our Annual Report on Form 10-K~~ for ~~the~~ fiscal ~~year~~2006. ~~ended~~As ~~April 25,~~a ~~2004~~result, ~~as well as to the other disclosures contained in the Annual Report on Form 10~~pre-Kopening ~~and~~expenses inare ~~this~~not ~~Form~~anticipated 10-Q, for further discussion on forward-looking statements and the risks and other factors that could prevent us from achieving our goals and cause the assumptions underlying the forward-looking statements and the actual results to ~~differ~~ ~~materially~~be ~~from~~significant ~~those expressed~~ in ~~or implied by those forward-looking~~fiscal ~~statements~~2006.

AsDepreciation ofand ~~the~~amortization. ~~date~~Management ofcurrently ~~this~~expects ~~Quarterly~~that ~~Report~~total ondepreciation ~~Form 10-Q, the economy has~~and ~~shown~~amortization ~~recent~~expense ~~signs~~will ofcontinue ~~strengthening,~~to ~~however~~decline ~~concerns~~in ~~still~~fiscal ~~exist~~2006 as compared to ~~the strength~~fiscal of2005 ~~consumer spending~~ due to the sale ~~economic~~and ~~downturn~~leaseback ~~and~~transaction ~~world~~entered ~~events, including~~into ~~terrorism~~in ~~and~~August 2004, the ~~conflict~~impairment inof ~~the~~assets ~~Middle~~at ~~East.~~the ~~Our~~end ~~revenue~~of ~~projections~~fiscal ~~assume~~2005 ~~that~~and ~~current~~the ~~spending~~volume ~~trends~~of doassets ~~not~~that ~~worsen~~have ~~during~~or ~~fiscal 2005.~~will ~~Actual~~become ~~results~~fully indepreciated during fiscal 2005 ~~could vary significantly as a result of~~ ~~changes in consumer spending~~ and ~~the~~fiscal ~~economy in general~~2006.

~~Fiscal~~General 2005 revenue. As discussed above, no additional new restaurants are currently being developed for fiscal 2005. The existing 69 Company-owned restaurants will qualify as comparable restaurants during fiscal 2005. As discussed above, fiscal 2005 revenues have been significantly adversely impacted by hurricanes that occurred in certain of the markets in which we operate, particularly the state of Florida. Excluding the estimated effects of the hurricanes on the second quarter of fiscal 2005, sales from comparable restaurants declined during the first and ~~second~~administrative ~~quarters of fiscal 2005 compared to the first and second quarters of fiscal 2004 by 7~~expenses.2% ~~and 3.8%, respectively.~~ Management ~~intended~~currently toexpects use a portion of the net proceeds received from the sale/leaseback transaction to invest in additional marketing for its restaurants, in an effort to improve future revenues. However, the financial impact of the hurricanes as well as the continued decline in sales has required the Company to use a portion of these proceeds for working capital purposes. Following the sale/leaseback, management has developed and implemented certain programs including a new local restaurant marketing program, a modified incentive compensation program for its employees and changes in the hiring and training of restaurant employees. In addition, management developed a new menu insert that ~~included~~general ~~the introduction of certain new menu items. While management believes that these new programs~~ and ~~changes~~administrative ~~will~~expenses ~~improve its operations, there can be no assurance as to whether or how quickly these changes~~ will ~~improve~~remain ~~revenues.~~relatively ~~Based~~consistent onin ~~the above, management currently expects sales at comparable restaurants for the remainder of~~ fiscal ~~2005~~2006 ~~to decrease as~~ compared to ~~the prior~~ fiscal ~~year~~2005.

27 Asset impairment. We recorded asset impairment charges of $1.8 million and $1.0 million in fiscal 2005 and 2004, respectively. The accounting for long-lived assets requires us to estimate future net cash flows to be generated by the asset (in this case our restaurants). If certain restaurants do not perform as expected, we may be required to take additional asset impairment charges, although at present no such charges are expected.

~~Table~~ Interest ofexpense, ~~Contents~~net. Based on the current debt and capital lease obligations outstanding and the significant debt payments made in fiscal 2005 including the payments made in connection with the sale and leaseback transaction, we presently anticipate that interest expense will decrease significantly in fiscal 2006 compared to fiscal 2005 and will total approximately $0.2 million per quarter in fiscal 2006.

~~Management~~Income ~~believes~~tax ~~that~~(benefit) expense. ~~identifying~~Due ~~opportunities~~ to ~~expand~~the ~~its operations~~existence inof ~~relation~~federal toand ~~franchised~~state ~~restaurants~~income ~~represents~~tax ~~a growth~~loss ~~opportunity~~carryforwards, ~~and~~we ~~would~~do ~~require~~not ~~significantly~~currently ~~lower~~anticipate ~~capital~~that ~~resources~~any ~~from~~significant ~~us than~~income ~~the~~tax ~~expansion~~expense ofor ~~Company-owned~~benefits will ~~restaurants.~~be ~~However,~~recorded ~~these~~or ~~initiatives are~~realized ~~not~~in ~~expected~~fiscal to2006. ~~generate~~We ~~significant~~have ~~revenue~~fully orreserved ~~operating~~all ~~profit~~of ~~during fiscal~~our ~~2005.~~tax ~~Accordingly,~~loss carryforwards ~~revenue~~because ~~anticipated~~we todo benot ~~generated~~believe ~~from~~that ~~royalty fees~~it ~~and~~is ~~other~~more ~~income~~likely isthan ~~expected~~not tothat beour ~~less~~deferred ~~than~~tax assets 1%will ofbe ~~total~~realized ~~revenues~~ in ~~fiscal~~ ~~2005~~the future.

~~Food~~LIQUIDITY ~~and~~AND ~~beverage~~CAPITAL ~~costs. Similar to many competing restaurant concepts,~~RESOURCES we experienced a significant increase in food and beverage costs during fiscal 2004, which has continued into fiscal 2005. This increase was primarily caused by the instances of Mad Cow Disease that were reported in Canada and the United States in 2003, which has had a significant negative impact on meat and dairy costs. Management has taken actions in an attempt to reduce the impact of these events including enhancing its menu, in part, to promote certain non-meat menu items, implementing a menu price increase in October 2003 and May 2004, negotiating arrangements to purchase certain meat products at fixed rates during fiscal 2005 and targeting certain marketing initiatives in an attempt to change our sales mix and increase sales of lower cost food items. Management cannot predict the duration of these cost increases or further impacts that may occur as a result of these events. However, it is presently anticipated that food and beverage costs will remain consistent with fiscal 2004 and may increase slightly in fiscal 2005.

~~Labor~~Our ~~and~~material ~~benefits.~~financial Wecommitments ~~experienced~~relate aprincipally ~~decrease~~to inour ~~labor~~working ~~and~~capital ~~benefits~~requirements ~~costs~~and inour ~~fiscal~~obligations ~~2004 as a percent of revenues as compared~~ to ~~fiscal~~make ~~2003.~~operating ~~This decrease~~and ~~resulted~~capital ~~from~~lease ~~improved~~and ~~management~~term ofloan ~~hourly~~payments ~~labor,~~in aaccordance ~~decrease~~with in the ~~cost~~terms of ~~providing~~our ~~medical~~agreements. ~~benefits~~See toNote ~~employees~~4 ~~due~~ to ~~plan design changes implemented in June 2003 and a decrease in~~ the ~~cost~~Condensed ofConsolidated ~~workers’~~Financial ~~compensation insurance~~Statements ~~due~~for to a ~~change to a guaranteed cost insurance program in January~~ ~~2003~~description asof ~~compared~~our tocurrent ~~the~~outstanding ~~significant~~debt ~~claims incurred in fiscal 2003 under the previous self funded program~~obligations. ~~However,~~As ~~due to the decline in revenues during the first two quarters~~ of ~~fiscal 2005 as compared to fiscal 2004 and the generally fixed nature of labor and benefits, these costs have increased slightly during the twenty six weeks ended October~~July 24, ~~2004~~2005, astotal ~~a percentage of~~minimum ~~revenues.~~payments ~~Management~~required ~~currently~~under ~~expects~~our ~~labor~~note and ~~benefit~~lease ~~costs~~obligations ~~as a percentage of revenues to increase slightly~~ in ~~fiscal~~2006, ~~2005~~including ~~compared~~interest tothereon, ~~fiscal 2004 due~~were ~~primarily to the decline in revenues~~$15.5 million.

~~Occupancy~~The ~~and~~following ~~other.~~table Assummarizes aour ~~result~~future ofcontractual ~~the~~cash ~~sale~~obligations ~~and~~for ~~leaseback transaction entered into in August 2004 (see Note 4 to~~ the ~~Condensed~~remainder ~~Consolidated Financial~~of ~~Statements), we will incur additional rent expense in~~ fiscal ~~2005~~2006, ~~of approximately~~each ~~$2.2 million. Partially offsetting this increase will be reduced costs as a result~~ of the ~~expected~~next ~~conversion~~four ~~of certain equipment leases from operating leases to capital leases in~~ fiscal ~~2005.~~years ~~Due to these factors,~~ and ~~the~~thereafter ~~fixed~~as ~~nature~~ of ~~certain occupancy and other expenses~~July 24, ~~management~~ ~~presently~~2005 ~~expects~~(dollars ~~occupancy and other expenses as a percentage of~~in ~~revenues~~thousands). toOperating ~~increase~~lease ~~approximately~~commitments ~~two~~include ~~percent~~estimated incommon ~~fiscal~~area ~~2005~~maintenance ~~compared to fiscal 2004~~expenses.

~~Pre-opening expenses. As discussed above, no additional new restaurant~~28 ~~openings are currently planned for fiscal 2005. As a result, pre-opening expenses are not anticipated to be significant in fiscal 2005.~~

DepreciationTable andof amortization. Management currently expects that total depreciation and amortization expense will decline in fiscal 2005 as compared to fiscal 2004 due to the sale and Contents


	2006		2007		2008		2009		2010		Thereafter		Total
Long term debt:
Principal	$	1,705	$	2,375	$	939	$	17	$	7	$	—	$	5,043
Interest		172		128		20		1		—		—		321

Total		1,877		2,503		959		18		7		—		5,364

Capital lease debt:
Principal		902		1,119		423		341		342		1,053		4,180
Interest		211		230		198		168		135		223		1,165

Total		1,113		1,349		621		509		477		1,276		5,345

Operating leases		8,222		10,069		9,627		9,063		8,525		79,366		124,872

Other commitments		388		205		140		142		168		—		1,043

Total	$	11,600	$	14,126	$	11,347	$	9,732	$	9,177	$	80,642	$	136,624

~~Table~~ Other ofcommitments ~~Contents~~represent minimum amounts due to certain vendors under contractual agreements. Amounts reflected above could change as additional commitments may be made, cancellation provisions may be exercised by us or by our creditors, or agreements may be modified as warranted by changes in business or operational needs.

~~leaseback~~ During ~~transaction~~the ~~entered~~thirteen ~~into~~weeks inended ~~August~~July ~~2004~~24, ~~and~~2005, ~~due~~our toprimary ~~the~~source ~~volume~~ of working capital was ~~assets~~insurance ~~that~~proceeds ~~have~~from orour ~~will~~summer ~~become~~2004 ~~fully~~hurricane ~~depreciated~~claims ~~during~~(see ~~fiscal~~Note ~~2004~~10 ~~and~~of ~~fiscal~~Notes to our Condensed ~~2005~~Consolidated Financial Statements).

~~General~~On ~~and~~August 6, ~~administrative~~2004, ~~expenses.~~we ~~General~~entered ~~and~~into ~~administrative~~a ~~expenses~~sale/leaseback for 11 restaurant properties with ~~have~~Sovereign. ~~declined~~The ~~over~~sale price for the ~~last~~11 ~~two~~properties ~~years~~was ~~due~~$21.8 million. toThe ~~cost~~properties ~~control~~have ~~initiatives~~been leased back under lease agreements that extend for 20 years and ainclude four five-year renewal ~~reduction~~options. inWe ~~legal~~used ~~and~~approximately ~~professional~~$18.3 million ~~expenses~~of the net proceeds from the sale to repay approximately $24.6 million ~~Also~~of secured debt, ~~during~~which ~~fiscal~~was ~~2004,~~repaid ~~we made~~at ~~additional~~a ~~investments~~discount (resulting in ~~training~~a ~~for~~gain on ~~our~~extinguishment ~~restaurant~~of ~~managers~~debt of approximately $7.1 million) and into ~~our~~pay transaction expenses ~~regional~~relating ~~supervisors~~to inthe ~~order~~sale/leaseback. toThe ~~improve~~net gain from the ~~oversight~~debt ofrepayment ~~restaurant~~is ~~operations~~reflected in our ~~and~~consolidated ~~enhance~~statement of operations for the ~~effectiveness~~fiscal ofyear ~~operational~~ended ~~improvements~~April 24, 2005. AsWe aalso ~~result of~~realized ~~these~~a ~~continued~~gain ~~investments~~on asthe ~~well~~sale asof the ~~increase~~properties inof ~~rent~~approximately ~~expense~~$1.7 million, towhich beis recorded as ~~incurred~~unearned revenue in ~~fiscal~~the ~~2005~~consolidated ~~resulting~~balance ~~from~~sheet ~~the~~as ~~transaction~~of ~~executed~~July 24, in2005 ~~December 2003~~and ~~relating~~is tobeing ~~the~~recorded ~~sale~~as a reduction of occupancy and ~~leaseback~~other expense over the life of the ~~corporate~~leases. ~~headquarters~~The ~~building,~~remaining net ~~management~~proceeds ~~currently~~from ~~expects~~the ~~that~~sale ~~our~~of ~~general~~approximately ~~and~~$3.5 million ~~administrative~~were ~~expenses~~used ~~will~~for general corporate purposes, ~~increase~~including ~~slightly~~working ~~compared~~capital to ~~fiscal~~meet ~~2004~~our ordinary course expenses.

~~Total other expense. Based on the current debt and capital lease~~29 obligations outstanding, the significant debt payments made in fiscal 2004, and the debt payments made in connection with the recent sale and leaseback transaction, we presently anticipate that total other expense excluding the gain recognized on extinguishment of debt in the second quarter of fiscal 2005, which is primarily comprised of interest expense, will decrease significantly in fiscal 2005 and will total approximately $1.5 million in fiscal 2005.

IncomeTable tax (benefit) expense. Due to the existence of federal and state income tax loss carryforwards, we do not currently anticipate that any significant income tax expense or benefits will be recorded or realized in fiscal 2005. Contents

~~LIQUIDITY~~ In ~~AND~~August 2005, ~~CAPITAL~~we ~~RESOURCES~~borrowed $1,250,000 from our majority shareholder. The loan bears interest at the rate of 10% per annum and is secured by a lien on all of our assets. The loan is due on May 15, 2006, or earlier upon a change of control of the Company. We are using the proceeds of the loan for working capital in our business. (See Note 11 of Notes to our Condensed Consolidated Financial Statements.) Such debt is not included in the table above since it was incurred subsequent to July 24, 2005.

~~Our~~We ~~material~~expect ~~financial~~that ~~commitments~~our ~~relate~~primary ~~principally~~source toof ~~our~~ working capital ~~requirements~~for ~~and~~future ~~our~~periods ~~obligations~~will tobe ~~make~~cash ~~operating and capital lease~~flow ~~and~~from ~~term~~operations, ~~loan~~proceeds ~~payments~~from ~~in accordance with~~ the ~~terms~~sale of ~~our agreements (see Note 3 to the Condensed Consolidated Financial Statements for~~ a ~~description~~closed ofproperty, ~~our current~~possible ~~outstanding~~additional debt and/or equity ~~capital~~financing and ~~operating~~possible ~~lease~~advance ~~obligations).~~sales As of ~~October 24,~~ ~~2004,~~additional ~~total~~food ~~minimum annual payments required under our note~~ and ~~lease~~ ~~obligations,~~beverage ~~including interest thereon, were $16~~credits.~~7 million.~~

~~During~~We have experienced significant cash flow problems in the ~~twenty~~past. ~~six~~We ~~weeks~~believe ~~ended~~that ~~October 24~~our ability to generate cash from operations is dependent upon, ~~2004~~among other things, demand for our products, ~~primary~~a ~~sources~~continued ~~of working~~commitment ~~capital~~to ~~were~~providing ~~proceeds~~an ofexcellent ~~the~~dining ~~sale/leaseback~~experience offor 11our ~~properties~~customers, ~~cash~~ ~~provided~~the bydevelopment ~~operations~~ and ~~proceeds~~implementation ~~from~~of successful marketing strategies, the ~~sale~~cost levels of our various food products, and ~~beverage~~our ~~credits (see~~continuing ~~Note~~efforts 9 to ~~the~~reduce ~~Condensed~~our ~~Consolidated~~operating ~~Financial Statements)~~costs. During ~~the~~fiscal ~~fifty-two~~2005, ~~weeks~~we ~~ended~~implemented ~~April 25,~~revenue ~~2004,~~enhancement weprograms ~~also~~including ~~collected~~the ~~$0.6 million~~implementation inof ~~federal~~a new menu ~~income~~with ~~tax~~enhanced ~~refunds~~menu items. ~~Further~~In addition, we ~~filed~~have ~~for~~taken, ~~approximately~~and $0continue to take, steps to control our costs.~~1 million~~ There can be no assurance that these initiatives will be effective in generating ~~additional~~profits ~~federal~~or ~~and~~producing ~~state~~sufficient ~~income~~cash ~~tax~~flows ~~refunds~~to infund ~~fiscal~~operating ~~year~~requirements, ~~2004~~including debt repayments and lease obligations. In addition, ~~which~~if weoperating results do not improve in the near ~~collected~~term ~~during~~as a result of the ~~twenty~~recent ~~six~~changes ~~weeks~~that ~~ended~~have ~~October 24~~occurred and the introduction of the new menus, then ~~2004~~we may be required to recognize additional impairment charges related to certain long-lived assets (and such charges may be significant).

OnWe ~~August 6,~~require ~~2004,~~significant weworking ~~closed~~capital ato ~~transaction~~operate ~~with~~our ~~Sovereign~~business. ~~Roadhouse~~Although ~~LLC,~~there acan be no ~~wholly-owned~~assurance, ~~subsidiary~~if ofwe ~~Sovereign~~meet ~~Investment~~our ~~Company~~business ~~(“Sovereign”)~~plan in all material respects, we expect to have sufficient ~~involving~~working ~~the~~capital ~~sale~~to ~~and~~meet ~~leaseback~~our ofobligations ~~eleven~~during ~~restaurant~~fiscal ~~properties~~2006. Factors that ~~were~~could cause us to not ~~previously~~meet ~~owned.~~our ~~The~~business ~~sale~~plan ~~price~~could ~~for~~include ~~the~~unforeseen ~~eleven~~events ~~properties~~such ~~was~~as ~~$21~~material food cost increases, significant decreases in customer volume, hurricanes or other unforeseen factors.~~8 million.~~ However, if ~~The~~cash ~~properties~~generated ~~are~~from ~~being~~our ~~leased~~operations ~~under~~and ~~lease~~other ~~agreements~~possible ~~that~~sources ~~extend~~described ~~for~~above ~~20 years~~are insufficient to fund our financial commitments and ~~include~~working ~~four~~capital ~~five-year~~requirements, ~~renewal~~of ~~options.~~which Wethere ~~used~~can ~~approximately~~be ~~$18.3~~no ~~million~~assurance, ofwe ~~the~~will ~~net~~have ~~proceeds~~to obtain additional capital from ~~the~~debt ~~property~~or ~~sale~~equity tofinancing ~~pay~~sources. There ~~expenses~~can ~~related~~be tono assurance that additional debt and/or equity financing will be available on terms acceptable to us, or at all. In the ~~transaction~~event ~~and~~we are unable to ~~repay~~secure needed additional financing, it would likely have a material adverse effect upon our business, results of operations or financial condition.

2930

~~$24.6 million~~SUMMARY ofOF ~~secured~~CASH ~~debt, which was repaid at a discount (resulting~~FLOWS in a gain on extinguishment of debt of $7.1 million). The net gain from the debt repayment is reflected in our Condensed Consolidated Statement of Operations for the thirteen weeks ended October 24, 2004. We also realized a gain on the sale of the properties of approximately $1.7 million, which is recorded as unearned revenue in the accompanying Condensed Consolidated Balance Sheet and will be recorded as a reduction of occupancy and other expense over the life of the leases. The remaining net proceeds from the sale of approximately $3.5 million are being used for working capital.

WeCash ~~expect~~provided ~~that~~by ~~our~~operating activities during the thirteen weeks ended July 24, 2005 was $0.9 million, compared with $1.6 million provided by operating activities during the thirteen weeks ended July 25, 2004. The primary source of ~~working~~cash ~~capital~~ for ~~future~~the ~~periods~~thirteen weeks ended July 24, ~~will~~2005 bewas cash ~~flow~~generated from operations and from the collection of insurance proceeds from the hurricane claim. See Note 10 of Notes to Condensed Consolidated Financial Statements. The primary sources of cash for the thirteen weeks ended July 25, ~~additional~~2004 were the net income generated from operations excluding non-cash expenses such as depreciation and amortization and cash received from the advance ~~sales~~sale of food and beverage credits under the program with the loyalty and ~~possible~~rewards ~~additional~~company. ~~debt~~The primary use of cash during each of the thirteen weeks ended July 24, 2005 and~~/or~~ ~~equity~~July 25, ~~financing~~2004 was cash used to support operations.

WeCash ~~have~~used ~~experienced~~in ~~significant~~investing ~~cash~~activities ~~flow~~was ~~problems in the past~~$0.3 million ~~We believe~~during ~~that~~each our ability to generate cash from operations is dependent upon, among other things, demand for our products, a continued commitment to providing an excellent dining experience for our customers, the development and implementation of ~~successful marketing strategies,~~ the ~~cost~~thirteen-week ~~levels of our~~periods ~~various~~ended ~~food products~~July 24, ~~and~~2005 ~~our continuing efforts to reduce our operating costs. We implemented revenue enhancement programs including the implementation of a new menu with enhanced menu items in June 2003~~ and ~~menu price increases in October~~July ~~2003~~25, ~~and May~~ 2004. WeCash ~~also~~used ~~have taken, and continue to take, steps to control our costs. There can be no assurance that these initiatives will be effective~~ in ~~generating~~investing ~~profits~~activities orduring ~~producing~~each ~~sufficient~~period ~~cash~~consisted ~~flows~~of topurchases ~~fund~~of ~~operating~~property ~~requirements, including debt repayments~~ and ~~lease obligations~~equipment.

~~Capital~~Cash ~~requirements~~used ~~relating~~in tofinancing ~~the~~activities ~~implementation~~during ofthe ~~our~~thirteen ~~business~~weeks ~~plan have~~ended ~~been~~July 24, ~~and~~2005 ~~will~~was ~~continue to be significant~~$1. ~~If cash generated from our~~0 ~~operations and other possible sources described above are insufficient to fund our financial commitments and working capital requirements (including amounts required to support future growth)~~million, wecompared ~~will have~~ to ~~obtain additional financing~~$1.3 million ~~There~~used ~~can~~in ~~be no assurance that additional debt and/or equity~~ financing ~~will~~activities beduring ~~available~~the onthirteen ~~terms~~weeks ~~acceptable~~ended ~~to us~~July 25, ~~or at all~~2004. InCash ~~the~~used ~~event we~~in ~~are~~financing ~~unable~~activities toin ~~secure~~each ~~needed~~period ~~additional~~consisted ~~financing,~~of werepayments ~~may~~of ~~have~~long toterm ~~significantly~~debt ~~curtail~~and ~~our~~capital ~~operations~~lease ~~or forgo growth opportunities~~obligations.

WeCAPITAL ~~did not open any new restaurants during the twenty six weeks ended~~EXPENDITURES October 24, 2004. We opened one new restaurant in fiscal year 2004 at a total cost of approximately $1.8 million, of which $1.4 million was expended prior to April 27, 2003 and $0.4 million was expended in fiscal year 2004. We do not currently have any additional new restaurants under development for fiscal year 2005. At this time, it is expected that the cash required to develop new restaurants beyond fiscal 2005, if any, will be funded from operations. Should cash from operations be insufficient for future expansion and additional capital through debt and equity sources be unavailable, there can be no assurance that we will be able to open additional restaurants. Capital requirements relating to the opening of new restaurants have in the past and, to the extent we elect to open new restaurants, may in the future be significant.

30 We did not open any new restaurants during the thirteen weeks ended July 24, 2005 or July 25, 2004. We do not currently have any additional Company-owned restaurants under development for fiscal year 2006 or planned for the future. At this time, it is expected that incremental capital from debt or equity sources would be needed to open new restaurants. Should cash from operations be insufficient for future expansion and additional capital through debt and equity sources be unavailable, we will not be able to open additional restaurants.

~~Table~~SEASONALITY ofAND ~~Contents~~QUARTERLY RESULTS

~~SUMMARY~~ Our OFoperating ~~CASH~~results ~~FLOWS~~fluctuate seasonally because of our geographic concentration. Of the 64 restaurants currently owned and operated by us, 32 are located in generally residential or light commercial areas in Florida. Our restaurant sales generally increase from November through April, the peak period of the Florida tourism season, and generally decrease from May through October. In addition, because of our present geographic concentration, our results of operations may be materially adversely affected by a decline in tourism in Florida, downturns in Florida’s economy or by

~~Cash used in operating activities during the twenty six weeks ended~~31 October 24, 2004 was $0.6 million, compared with $2.0 million provided by operating activities during the twenty six weeks ended October 26, 2003. The primary use of cash during the twenty six weeks ended October 24, 2004 was payment of accounts payable. The primary sources of cash for each period were the net cash generated from operations and cash received from the advance sale of food and beverage credits under the program with the loyalty and rewards company as well as collection of income tax refunds during the twenty six weeks ended October 26, 2003.

CashTable provided by investing activities during the twenty six weeks ended October 24, 2004 was $20.0 million, compared to $0.5 million used in investing activities during the twenty six weeks ended October 26, 2003. Sources of cash provided by investing activities during each period consisted of proceeds from sales of property and equipment. Cash used by investing activities during each period consisted of purchases of property, plant and equipment. Contents

~~Cash~~hurricanes ~~used~~or inother ~~financing~~adverse ~~activities~~weather ~~during~~conditions ~~the~~in ~~twenty~~Florida. ~~six~~To ~~weeks~~offset ~~ended October 24,~~this ~~2004~~seasonal ~~was~~trend ~~$19.2 million,~~and ~~compared~~to attempt to ~~$3.5 million~~reduce ~~used~~the ~~during~~decline ~~the twenty~~in ~~six~~sales ~~weeks~~during ~~ended~~the ~~October 26~~off-season, ~~2003.~~we ~~Cash~~run ~~used~~special inpromotions ~~financing~~for ~~activities in~~our ~~each~~customers, ~~period~~incentive ~~consisted~~contests offor ~~repayments~~our ofemployees ~~long term debt~~ and ~~capital~~otherwise ~~lease obligations,~~focus ~~including~~marketing ~~early~~initiatives ~~debt payments from proceeds of the sale/leaseback~~to ~~transaction~~increasing sales during ~~the~~these ~~twenty six weeks ended October 24, 2004~~periods.

~~CAPITAL~~ In ~~EXPENDITURES~~addition to seasonality, our quarterly and annual operating results and comparable unit sales may fluctuate significantly as a result of a variety of factors, including the factors described above in Forward Looking Statements.

~~The~~IMPACT ~~Company~~OF ~~did not open any new restaurants during the twenty six weeks~~INFLATION ended October 24, 2004. The Company opened one new restaurant during the fiscal year ended April 25, 2004 at a total cost of approximately $1.8 million, of which $0.4 million was expended during the fiscal year ended April 25, 2004. The Company does not currently have any additional Company-owned restaurants under development for fiscal year 2005. At this time, it is expected that the cash required to develop new restaurants beyond fiscal 2005, if any, will be funded from operations. Should cash from operations be insufficient for future expansion, and additional capital through debt and equity sources be unavailable, there can be no assurance that the Company will be able to open additional restaurants.

~~SEASONALITY~~ The ~~AND~~primary ~~QUARTERLY~~inflationary ~~RESULTS~~factors affecting our operations include food, beverage and labor costs. Labor costs are affected by changes in the labor market generally and, because many of our employees are paid at federal and state established minimum wage levels, changes in such wage laws affect our labor costs. In that regard, the Florida Constitution and state regulations of New York were recently amended to increase the minimum wage payable to Florida and New York employees. These changes in New York and Florida were effective in January and May, 2005, respectively. Management believes that the impact of changes in the minimum wage laws will be offset by other changes in our operations, as described in the Form 10-K and in this report.

~~Our~~In ~~operating~~addition, ~~results~~most ~~fluctuate seasonally because~~ of our ~~geographic concentration.~~real Ofproperty ~~the~~leases 69require ~~restaurants~~us ~~currently~~to ~~owned~~pay ~~and~~taxes, ~~operated by us~~maintenance, 34repairs ~~are~~and ~~located~~utilities, inand ~~generally~~these ~~residential~~costs orare ~~light~~subject ~~commercial~~to ~~areas~~inflationary ~~in Florida~~pressures. ~~Our restaurant~~We ~~sales~~believe ~~generally~~that ~~increase from November through April~~inflation rates, ~~the~~which ~~peak period~~have ofbeen ~~the~~low ~~Florida~~in ~~tourism~~recent ~~season~~periods, ~~and~~have ~~generally~~not ~~decrease~~had ~~from~~a ~~May~~significant ~~through October.~~impact Inon ~~addition, because of~~ our ~~present~~food ~~geographic concentration, our~~and ~~results~~labor ofcosts. ~~operations~~There ~~may~~is beno ~~materially~~assurance ~~adversely~~that ~~affected~~low byinflation arates ~~decline~~will ~~in tourism~~continue ~~in Florida, downturns in Florida’s economy~~ or bythat ~~hurricanes~~we orwill ~~other~~have ~~adverse~~the ~~weather~~ability ~~conditions in Florida. To offset this seasonal trend and~~ to ~~attempt~~ tocontrol ~~reduce~~costs ~~the decline~~ in ~~sales during~~ the ~~off-season, we run special promotions for our customers, incentive contests for our employees and otherwise focus marketing initiatives to increasing sales during these periods~~future.

31ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Table~~ We do not currently use, and have not historically used, derivative financial instruments to hedge against such market interest rate risk. Changes in market interest rates, either increasing or decreasing rates by up to ten percent, would have no material impact on our results of ~~Contents~~operations.

InCertain ~~addition~~of tothe ~~seasonality,~~food ~~our~~products ~~quarterly~~purchased ~~and~~by ~~annual~~us ~~operating~~are ~~results~~affected by commodity pricing and are, ~~comparable~~therefore, ~~unit~~subject ~~sales~~to unpredictable price volatility. These commodities are generally purchased based upon market prices established with vendors. The purchase arrangement may ~~fluctuate~~contain contractual ~~significantly~~features asthat alimit ~~result~~the ofprice apaid ~~variety~~by ofestablishing certain floors and caps. We do ~~factors,~~not ~~including~~use financial instruments to hedge commodity prices because our purchase arrangements help control the ~~factors~~ultimate ~~described~~cost ~~above~~paid. Extreme changes in ~~Forward~~commodity ~~Looking~~prices ~~Statements~~and/or long-term changes could adversely affect us. However, changes in commodity prices would ultimately affect our competitors as well as us. We expect that in most cases increased commodity prices could be passed

~~IMPACT OF INFLATION~~32

TheTable primary inflationary factors affecting our operations include food, beverage and labor costs. Labor costs are affected by changes in the labor market generally and, because many of our employees are paid at federal and state established minimum wage levels, changes in such wage laws affect our labor costs. In addition, most of our leases require us to pay taxes, maintenance, repairs and utilities, and these costs are subject to inflationary pressures. We believe that inflation rates, which have been low in recent periods, have not had a significant impact on our food and labor costs. There is no assurance that low inflation rates will continue or that we will have the ability to control costs in the future. Contents

~~ITEM~~through 3to our consumers via increases in menu prices. ~~QUANTITATIVE~~From ~~AND~~time ~~QUALITATIVE~~to ~~DISCLOSURE~~time, ~~ABOUT~~competitive circumstances ~~MARKET~~could ~~RISK~~limit menu price flexibility, and in those cases margins would be negatively impacted by increased commodity prices.

WeITEM ~~do not currently use, and have not historically used, derivative financial instruments to hedge against such market interest rate risk~~4. ~~Changes in~~CONTROLS ~~market~~AND ~~interest rates, either increasing or decreasing rates by up to ten~~PROCEDURES ~~percent, would have no material impact on our results of operations.~~

~~Certain~~We ofcarried ~~the~~out ~~food~~an ~~products~~evaluation, ~~purchased~~under bythe ussupervision ~~are~~and ~~affected~~with bythe ~~commodity pricing~~participation ~~and~~of ~~are~~our management, ~~therefore,~~including ~~subject~~our toChief ~~unpredictable~~Executive ~~price~~Officer ~~volatility.~~and ~~These commodities~~Chief ~~are~~Financial ~~generally~~Officer, ~~purchased~~of ~~based~~the ~~upon~~effectiveness of ~~market~~the ~~prices~~design ~~established~~and ~~with vendors.~~operation ~~The~~of ~~purchase~~our ~~arrangement~~disclosure ~~may~~controls ~~contain~~and ~~contractual~~procedures ~~features~~pursuant ~~that~~to ~~limit~~Securities ~~the~~Exchange ~~price~~Act ~~paid~~Rules 13a-15(b) ~~by establishing certain floors~~ and ~~caps~~15d-15(c). WeBased doupon ~~not~~that ~~use financial~~evaluation, ~~instruments~~our toChief ~~hedge~~Executive Officer ~~commodity~~and ~~prices~~Chief ~~because~~Financial ~~our~~Officer ~~purchase arrangements~~have ~~help~~concluded ~~control~~that, ~~the~~as ~~ultimate~~of ~~cost~~July 24, ~~paid.~~2005, ~~Extreme~~our ~~changes in commodity~~disclosure ~~prices~~controls and~~/or~~ ~~long-term~~procedures ~~changes~~were ~~could~~effective ~~adversely~~in ~~affect~~timely ~~us.~~alerting ~~However,~~them ~~changes~~to ~~in commodity~~material ~~prices~~information ~~would~~relating ~~ultimately~~to us ~~affect~~(including our ~~competitors~~consolidated assubsidiaries) ~~well~~required asto ~~us.~~be ~~We expect~~included ~~that~~ in ~~most~~this ~~cases~~report. ~~increased~~There ~~commodity~~were ~~prices~~no changes ~~could~~in ~~be passed through to~~ our ~~consumers~~procedures ~~via~~during ~~increases~~the inthirteen ~~menu~~weeks ~~prices.~~ended ~~From time to time~~July 24, ~~competitive circumstances~~2005 ~~could~~that ~~limit~~have ~~menu price flexibility~~materially affected, ~~and~~or inare ~~those~~reasonably ~~cases~~likely ~~margins would~~to bematerially ~~negatively~~affect, ~~impacted~~our byinternal ~~increased~~control ~~commodity~~over ~~prices~~financial reporting.

~~This market risk discussion contains forward-looking statements. Actual~~33 ~~results may differ materially from the discussion based upon general market conditions and changes in domestic and global financial markets.~~

ITEMTable 4.of CONTROLS AND PROCEDURESContents

WePART ~~carried~~II ~~out~~OTHER ~~an evaluation, under the supervision and with the~~INFORMATION participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act Rules 13a-15(b) and 15d-15(c). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of October 24, 2004, our

32ITEM 1. LEGAL PROCEEDINGS

~~Table~~ We are a party to certain legal proceedings arising in the ordinary course of ~~Contents~~business. While it is not possible to predict or determine the outcome of any of these proceedings, we do not believe that any liability resulting from these proceedings will have a material adverse effect on our financial position, results of operations or business.

~~disclosure~~ITEM ~~controls and procedures were effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in this report~~2. ~~There~~UNREGISTERED ~~were~~SALES noOF ~~changes~~EQUITY ~~in our~~SECURITIES ~~procedures~~AND ~~during~~USE ~~the~~OF ~~thirteen weeks ended October 24, 2004 that have~~PROCEEDS ~~materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~

33 There were no changes in securities during the thirteen weeks ended July 24, 2005.

~~Table~~ITEM of3. ~~Contents~~DEFAULTS UPON SENIOR SECURITIES

~~PART~~ There IIwere ~~OTHER~~no ~~INFORMATION~~defaults upon senior securities during the thirteen weeks ended July 24, 2005.

ITEM 14. ~~LEGAL~~SUBMISSION ~~PROCEEDINGS~~OF MATTERS TO A VOTE OF SECURITY HOLDERS

WeNo ~~are~~actions awere ~~party~~submitted to ~~certain~~a ~~legal~~vote ~~proceedings arising in the ordinary course~~ of ~~business.~~our ~~While~~shareholders itduring ~~is not possible to predict or determine~~ the ~~outcome~~first ~~of any~~quarter of ~~these proceedings, we do not believe that any liability resulting from~~fiscal ~~these proceedings will have a material adverse effect on our financial position, results of operations or business~~2006. ~~See Note 6 to the Condensed~~ ~~Consolidated Financial Statements.~~

ITEM 25. ~~UNREGISTERED~~OTHER ~~SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~INFORMATION

None.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~34

None. Table of Contents

ITEM 46. ~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~EXHIBITS

~~None~~(a) Exhibits.

ITEM 5. OTHER INFORMATION


Exhibit Number		Description


31.1		Certification by Chief Executive Officer under Section 302 of Sarbanes-Oxley.

31.2		Certification by Chief Financial Officer under Section 302 of Sarbanes-Oxley.

32.1		Certification by Chief Executive Officer under Section 906 of Sarbanes-Oxley.

32.2		Certification by Chief Financial Officer under Section 906 of Sarbanes-Oxley.

~~None.~~35

34 Table of Contents

~~Table of Contents~~SIGNATURES

~~ITEM~~ Pursuant 6.to ~~EXHIBITS~~the ~~AND~~requirements ~~REPORTS~~of ONSection 13 ~~FORM~~or ~~8-K~~15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 7th day of September, 2005.

~~(a)~~ROADHOUSE ~~Exhibits~~GRILL, INC. By: /s/ Michael C. Brant Michael C. Brant Executive Vice President of Finance and Chief Financial Officer (Principal Financial Officer)

Exhibit
Number		Description
31.1		Certification by Chief Executive Officer under Section 302 of Sarbanes-Oxley.
31.2		Certification by Chief Financial Officer under Section 302 of Sarbanes-Oxley.
32.1		Certification by Chief Executive Officer under Section 906 of Sarbanes-Oxley
32.2		Certification by Chief Financial Officer under Section 906 of Sarbanes-Oxley

(b) Reports on Form 8-K. None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 7th day of December, 2004.

ROADHOUSE GRILL, INC. By: /s/ Michael C. Brant Michael C. Brant Executive Vice President of Finance and Chief Financial Officer (Principal Financial Officer)

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