UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~September 146, 2005 Commission file number 000-22753

FOX & HOUND RESTAURANT GROUP

(Exact Name of Registrant as Specified in its Charter)


Delaware		52-2016614

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1551 North Waterfront Parkway
Suite 310
Wichita, Kansas 67206
(Address of principal executive offices) (Zip code)

(316) 634-0505
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes No o No

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at ~~July~~October 2117, 2005
Common Stock, $.01 par value		10,~~016~~029,~~250~~307 shares

FOX & HOUND RESTAURANT GROUP

Index

	Page
	Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at June 14, 2005 and December 28, 2004		2
Condensed Consolidated Balance Sheets at September 6, 2005 and December 28, 2004		2
Condensed Consolidated Income Statements for the twelve weeks ended June 14, 2005 and June 15, 2004		3
Condensed Consolidated Statements of Operations for the twelve weeks ended September 6, 2005 and September 7, 2004		3
Condensed Consolidated Income Statements for the twenty-four weeks ended June 14, 2005 and June 15, 2004		4
Condensed Consolidated Statements of Operations for the thirty-six weeks ended September 6, 2005 and September 7, 2004		4
Condensed Consolidated Statements of Cash Flows for the twenty-four weeks ended June 14, 2005 and June 15, 2004		5
Condensed Consolidated Statements of Cash Flows for the thirty-six weeks ended September 6, 2005 and September 7, 2004		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3. Quantitative and Qualitative Disclosures About Market Risk		13
Item 4. Procedures and Controls		13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Stockholders		14
Item 5. Other Information		14
Item 6. Exhibits and Reports on Form 8-K		14
Item 6. Exhibits		14
Certificate of Incorporation of Registrant
Certification by Steven M. Johnson - Section 302
Amendment to Certificate of Incorporation of Registrant
Certification by James K. Zielke - Section 302
Amendment to Certificate of Incorporation of Registrant
Certification by Steven M. Johnson - Section 906
Amendment to 1997 Incentive and Non-Qualified Stock Option Plan
Certification by James K. Zielke - Section 906
Amendment to 1997 Directors Stock Option Plan
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

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FOX & HOUND RESTAURANT GROUP

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

	June 14,2005		December 28, 2004
	September 6, 2005		December 28, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	~~644~~1,007	$	812
Inventories		2,~~571~~659		2,486
Prepaid income taxes		—		97
Prepaid insurance		1,~~266~~013		1,705
Prepaid rent		~~579~~814		1,088
Other current assets		~~839~~1,102		717
Total current assets		56,~~899~~595		6,905
Property and equipment:
Land		600		600
Buildings		703		703
Leasehold improvements		6871,~~951~~256		59,807
Equipment		3233,~~904~~681		30,597
Furniture and fixtures		910,~~702~~461		9,150
Property under capital leases		918		918
		113,778		101,775
		117,619		101,775
Less accumulated depreciation and amortization		3739,~~631~~987		33,394
		76,147		68,381
		77,632		68,381
Other assets:
Goodwill, net of accumulated amortization		3,661		3,661
Liquor licenses, net		1,~~196~~262		1,256
Other assets		~~166~~167		364
Total other assets		5,~~023~~090		5,281
Total assets	$	8789,~~069~~317	$	80,567
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of obligation under capital leases	$	8	$	8
Accounts payable		53,~~321~~260		2,906
Checks outstanding in excess of cash balance		~~584~~2,378		3,247
Sales tax payable		1,~~621~~552		1,257
Accrued payroll		1,~~744~~707		1,626
Accrued payroll taxes		~~1,012~~842		806
Accrued income taxes		2,~~236~~793		—
Deferred income taxes		~~340~~141		~~797~~798
Other accrued liabilities		3,~~018~~205		2,~~494~~493
Total current liabilities		15,~~884~~886		13,141
Notes payable		24,~~510~~633		3,680
Obligations under capital leases, net of current portion		~~885~~883		889
Deferred taxes		1,~~876~~543		1,830
Deferred revenue		2288		—
Accrued rent		8,~~341~~441		7,938
Stockholders’ equity:
Preferred stock		—		—
Common stock		100		99
Additional paid-in capital		29,~~714~~850		29,306
Retained earnings		27,~~737~~893		23,684
Total stockholders’ equity		57,~~551~~843		53,089
Total liabilities and stockholders’ equity	$	8789,~~069~~317	$	80,567

See accompanying notes.

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FOX & HOUND RESTAURANT GROUP

Condensed Consolidated Income Statements

(in thousands, except per share information)

(Unaudited)

	Twelve			Twelve
	Twelve weeks			Twelve weeks
	weeks ended			weeks ended
	ended			ended
	June 14,2005			June 15,2004
	September 6, 2005			September 7, 2004
				(restated)
Sales:
Food and beverage	$	3334,~~752~~684		$	29,~~021~~414
Entertainment and other		2,~~090~~054			2,~~120~~047
Total net sales		3536,~~842~~738			31,~~141~~461
Costs and expenses:
Costs of sales		910,~~699~~116			8,~~616~~697
Restaurant operating expenses		1921,~~945~~702			1618,~~995~~519
Depreciation and amortization		2,~~163~~365			1,~~802~~930
Preopening costs		~~560~~293			~~638~~558
Asset impairment		—			2,523
Restaurant costs and expenses		34,476			29,704
Restaurant costs and expenses		32,367			30,574
Restaurant operating income		2,262			1,757
Restaurant operating income		3,475			567
General and administrative expenses		1,965			1,523
General and administrative expenses		2,007			1,749
Income (loss) from operations		297			234
Gain on disposal of assets		25			—
Income (loss) from operations		1,493			(1,182	)
Other income (expense):
Other income		15			—
Interest expense		(73	)		(76	)
Interest expense		(33	)		(44	)
Income before income taxes		224			158
Income (loss) before income taxes		1,475			(1,226	)
Provision for income taxes		68			48
Provision for income taxes		410			(371	)
Net income		156			110
Net income (loss)		1,065			(855	)
Basic earnings per share	$	0.02		$	0.01
Basic earnings (loss) per share	$	0.11			($0.09	)
Diluted earnings per share	$	0.01		$	0.01
Diluted earnings (loss) per share	$	0.10			($0.09	)

See accompanying notes.

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FOX & HOUND RESTAURANT GROUP

Condensed Consolidated Income Statements

(in thousands, except per share information)

(Unaudited)

	Twenty-four			Twenty-four
	Thirty-six weeks			Thirty-six weeks
	weeks ended			weeks ended
	ended			ended
	June 14,2005			June 15,2004
	September 6, 2005			September 7, 2004
				(restated)
Sales:
Food and beverage	$	70105,~~826~~510		$	6089,~~442~~856
Entertainment and other		46,~~371~~425			46,~~546~~593
Total net sales		75111,~~197~~935			6496,~~988~~449
Costs and expenses:
Costs of sales		2030,~~101~~217			1726,~~732~~429
Restaurant operating expenses		3961,~~949~~651			3352,~~978~~497
Depreciation and amortization		46,~~259~~624			35,~~537~~467
Preopening costs		~~953~~1,246			1,~~070~~628
Asset impairment		—			2,523
Restaurant costs and expenses		6599,~~262~~738			5888,~~840~~544
Restaurant operating income		912,~~935~~197			67,~~148~~905
General and administrative expenses		45,~~025~~990			35,~~494~~017
Gain on disposal of assets		25			—
Income from operations		56,~~935~~232			2,~~654~~888
Other income (expense):
Other income		15			3
Interest expense		(82155	)		(96172	)
Income before income taxes		56,~~868~~092			2,~~561~~719
Provision for income taxes		1,~~815~~883			~~775~~823
Net income		4,~~053~~209			1,~~786~~896
Basic earnings per share	$	0.4142		$	0.1819
Diluted earnings per share	$	0.3940		$	0.1718

See accompanying notes.

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FOX & HOUND RESTAURANT GROUP

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Twenty-four			Twenty-four
	Thirty-six weeks			Thirty-six weeks
	weeks ended			weeks ended
	ended September			ended September
	June 14,2005			June 15,2004
	6, 2005			7, 2004
				(restated)
Cash flows from operating activities:
Net income	$	4,~~053~~209		$	1,~~786~~896
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment		—			2,523
Gain on disposal of assets		(25	)		—
Depreciation and amortization		46,~~311~~703			35,~~582~~536
Deferred income taxes		(~~411~~944	)		(~~1,124~~62	)
Net change in operating assets and liabilities:
Change in operating assets		~~1,151~~692			~~790~~426
Change in operating liabilities		23,~~181~~647			1,~~820~~883
Net cash provided by operating activities		1114,~~260~~282			912,~~377~~202
Cash flows from investing activities:
Purchases of property and equipment		(1015,~~565~~338	)		(1016,~~962~~397	)
Advances to developer		—			297
Purchases of liquor licenses		—(100	)		(~~571~~596	)
Proceeds from disposal of assets		25			—
Net cash used in investing activities		(1015,~~540~~413	)		(1116,~~236~~696	)
Cash flows from financing activities:
Proceeds from revolving note payable to bank		2134,~~415~~733			1830,~~975~~920
Payments of revolving note payable to bank		(2233,~~585~~780	)		(1726,~~650~~275	)
Payments under capital lease obligations		(46	)		(46	)
Proceeds from exercise of stock options		~~286~~379			~~379~~410
Net cash provided by (used in) financing activities		(888	)		1,700
Net cash provided by financing activities		1,326			5,049
Net decrease in cash and cash equivalents		(168	)		(159	)
Net increase in cash and cash equivalents		195			555
Cash and cash equivalents at beginning of period		812			813
Cash and cash equivalents at end of period	$	~~644~~1,007		$	~~654~~1,368
Supplemental disclosure of cash flow information:
Cash paid for interest		96200			40123
Cash paid for income taxes, net of refunds received		(230	)		(109	)
Income tax refunds, net of payments		229			729
Supplemental disclosure of non cash activity:
Additions to property and equipment in accounts payable		~~430~~512			~~(383~~13	)
Tax benefit related to stock options exercised		~~123~~166			~~128~~250

See accompanying notes.

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FOX & HOUND RESTAURANT GROUP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

1. Basis of Presentation and Description of Business

The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements in its 2004 Form 10-K. The results of the twelve weeks ~~and twenty-four weeks~~ ended ~~June~~September 146, 2005 are not necessarily indicative of the results to be expected for the full year ending December 27, 2005.

2. Restatement of Financial Statements

Following a review of lease accounting and leasehold amortization polices, we determined that it was appropriate to adjust certain of our prior financial statements. As a result, we have restated all of our historical consolidated financial statements for periods prior to the fourth quarter of 2004. Historically, when accounting for leases with renewal options, we recorded rent expense on a straight-line basis over the initial non-cancelable lease term, with the term commencing on the initial date of the lease agreement. We also used only the initial non-cancelable lease term in the determination of capital leases. We amortized our leasehold improvements and other long-lived assets on those properties over a period that included both the initial non-cancelable lease term and all option periods provided for in the lease (or the useful life of the assets, if shorter). Additionally, tenant allowances received from the lessor were recorded as a reduction of the related leasehold improvements. We now have restated our financial statements to recognize rent expense on a straight-line basis over the expected lease term, including cancelable option periods where failure to exercise such options would result in an economic penalty, not to exceed fifteen years (unless the initial lease term is in excess of fifteen years). The expected lease term, including cancelable option periods where failure to exercise such options would result in an economic penalty, not to exceed fifteen years (unless the initial lease term is in excess of fifteen years), is also being utilized in the determination of capital leases. Additionally, the estimated useful life of leasehold improvements for amortization purposes was reduced from twenty years to fifteen years, or the remaining life of the lease, whichever is less. The lease term commences on the date when we have full access to the property. Lease expenses from the date we have full access to the property to the completion of construction are capitalized as leasehold improvements. Tenant allowances are being recorded as accrued rent when received and included as a reduction in the straight-line rent calculation described above. We also had one lease reclassified from operating to capital as a result of these adjustments.

The impact of these adjustments on the condensed consolidated income statements and cash flows for the periods ended ~~June~~September 147, ~~2005~~2004 is shown in the tables below. The Restatement decreased ~~reported~~ reported diluted net earnings per share by $0.0402 for the twelve weeks ended ~~June~~September 157, 2004 and $0.0406 for the ~~twenty~~ thirty-~~four~~six weeks ended ~~June~~September 157, 2004. The Restatement did not have any impact on our previously reported cash balances, sales or same-restaurant sales or on our compliance with any covenant under our credit facility or other debt instruments.

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Net Income Adjustments Related to Restatement ~~(in thousands, except per share data)~~

	Twelve weeks ended June 15, 2004									Twenty-four weeks ended June 15, 2004
	As
	Reported			Adjustments			As Restated			As Reported		Adjustments			As Restated
Restaurant operating expenses	$	16,998		$	(3	)	$	16,995		$	33,970	$	8		$	33,978
Depreciation and amortization		1,554			248			1,802			3,058		479			3,537
Impairment		2,365			158			2,523			2,365		158			2,523
Restaurant costs and expenses		30,171			403			30,574			58,195		645			58,840
Restaurant operating income		970			(403	)		567			6,793		(645	)		6,148
Income (loss) from operations		(779	)		(403	)		(1,182	)		3,299		(645	)		2,654
Interest expense		27			17			44			62		34			96
Income (loss) before income taxes		(806	)		(420	)		(1,226	)		3,240		(679	)		2,561
Income taxes		(290	)		(81	)		(371	)		1,082		(307	)		775
Net income (loss)		(516	)		(339	)		(855	)		2,158		(372	)		1,786
Basic net earnings (loss) per share		(0.05	)		(0.04	)		(0.09	)		0.22		(0.04	)		0.18
Diluted net earnings (loss) per share		(0.05	)		(0.04	)		(0.09	)		0.21		(0.04	)		0.17

(in thousands, except per share data)

Cash Flow Adjustments Related to Restatement (in thousands, except per share data)


	Twelve weeks ended September 7, 2004							Thirty-six weeks ended September 7, 2004
	As Reported		Adjustments			As Restated		As Reported		Adjustments			As Restated

Restaurant operating expenses	$	18,495	$	24		$	18,519	$	52,465	$	32		$	52,497
Depreciation and amortization		1,662		268			1,930		4,720		747			5,467
Impairment		—		—			—		2,365		158			2,523
Restaurant costs and expenses		29,412		292			29,704		87,607		937			88,544
Restaurant operating income		2,049		(292	)		1,757		8,842		(937	)		7,905
Income (loss) from operations		526		(292	)		234		3,825		(937	)		2,888
Interest expense		59		17			76		121		51			172
Income (loss) before income taxes		467		(309	)		158		3,707		(988	)		2,719
Income taxes		145		(97	)		48		1,227		(404	)		823
Net income (loss)		322		(212	)		110		2,480		(584	)		1,896
Basic net earnings (loss) per share		0.03		(0.02	)		0.01		0.25		(0.06	)		0.19
Diluted net earnings (loss) per share		0.03		(0.02	)		0.01		0.24		(0.06	)		0.18

	Twenty-four weeks ended June 15, 2004
	As Reported			Adjustments			As Restated
Net cash provided by operating activities	$	7,114		$	2,263		$	9,377
Net cash used in investing activities		(8,977	)		(2,259	)		(11,236	)
Net cash provided by financing activities		1,704			(4	)		1,700

Cash Flow Adjustments Related to Restatement

(in thousands, except per share data)


	Thirty-six weeks ended September 7, 2004
	As Reported			Adjustments			As Restated
Net cash provided by operating activities
Net cash provided by operating activities	$	10,125		$	2,077		$	12,202
Net cash used in investing activities		(14,627	)		(2,069	)		(16,696	)
Net cash provided by financing activities		5,057			(8	)		5,049

3. Accounting for Stock-Based Compensation

In accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, the Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company’s common stock at the grant date over the amount the employee must pay for the stock. The Company’s policy is to grant stock options with grant prices equal to the fair value of the Company’s common stock at the date of grant. Proceeds from the exercise of common stock options issued to officers, directors and key employees under the Company’s stock option plans are credited to common stock to the extent of par value and to additional paid-in capital for the excess.

Pro forma information regarding net income and earnings per share is required by Statement No. 123, which also requires the information be determined as if the Company has accounted for its employee stock options granted under the fair value of that Statement. The fair value method for these options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate ranging from 2.9% to 5.3%; no dividend yields; volatility factor ranging from 0.281 to 0.853; and a weighted-average expected life of the option of 5 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

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subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option’s vesting period. The Company’s pro forma information is as follows:

	Twelve Weeks Ended						~~Twenty~~Thirty-~~four~~six Weeks Ended
	June 14,			June 15,			June 14,		June 15,
	September 6,			September 7,			September 6,		September 7,
	2005			2004			2005		2004
Net income (loss), as reported	$	1,065		$	(855	)	$	4,053	$	1,786
				(restated)					(restated)
Pro forma stock-based employee compensation cost, net of tax		154			155			326		318
Net income, as reported	$	156		$	110		$	4,209	$	1,896
Pro forma net income (loss)	$	911		$	(1,010	)	$	3,727	$	1,468
Pro forma stock-based employee compensation cost, net of tax		159			145			484		463
Pro forma net income (loss)	$	(3	)	$	(35	)	$	3,725	$	1,433
Earnings per share:
Basic, as reported	$	0.1102		$	(0.0901	)	$	0.4142	$	0.1819
Basic, pro forma		0.0900			(0.1000	)		0.37		0.1514
Diluted, as reported		0.1001			(0.0901	)		0.3940		0.1718
Diluted, pro forma		0.0900			(0.1000	)		0.36		0.14
Weighted average fair value of options granted during the period	$	~~4.45~~—		$	5.3345		$	4.52	$	5.1719

43. Stock Options

During the twelve week period ended ~~June~~September 146, 2005, ~~the Company granted to certain key employees stock~~ options ~~for 17,000 shares of Common Stock at a weighted-average exercise price of $11.41 per share and options~~ to purchase 1721,~~025~~732 shares were exercised at a weighted-average exercise price of $54.9832 per share pursuant to its 1997 Incentive and Nonqualified Stock Option ~~Plan.~~ Options to purchase 60,000 shares were granted at a weighted-average exercise price of $10.95 per share and options to purchase 12,611 shares were exercised at a weighted-average exercise price of $5.69 per share pursuant to its 1997 Directors Stock Option Plan.

54. Earnings Per Share

Basic earnings per share amounts are computed based on the weighted average number of shares actually outstanding. The number of weighted ~~averaged~~average shares outstanding for the twelve week periods ended ~~June~~September 146, 2005 and ~~June~~September 157, 2004 were 910,~~996~~017,~~628~~922 and 9,~~888~~909,~~512~~473, respectively; ~~the~~ the number of weighted average shares outstanding for the ~~twenty~~thirty-~~four~~six week periods ended ~~June 14~~September 6, 2005 and ~~June~~September 157, 2004 were 9,~~978~~991,~~937~~932 and 9,~~869~~882,~~512~~832, respectively.

Diluted earnings per share are computed similar to basic earnings per share except that the weighted average shares outsanding are increased to include additional shares for the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and the proceeds from such exercises were used to acquire common shares at an average price during the reporting period. The number of shares resulting from this computation of diluted earnings per share for the twelve weeks ended ~~June 14,~~September 6, 2005 and ~~June~~September 157, 2004 were 10,~~420~~482,~~190~~551 and 10,~~487~~369,~~462~~314, respectively, and for the ~~twenty~~thirty-~~four week~~six week periods ended ~~June~~September 146, 2005 and ~~June~~September 157, 2004 were 10,~~397~~425,~~248~~683 and 10,~~465~~432,~~002~~922, respectively.

5. Subsequent Events

On October 4, 2005, the Company announced that it had signed a letter of intent with Levine Leichtman Capital Partners (“LLCP”) for the acquisition of all of the Company’s outstanding common stock for an all cash price of $14.00 per share, other than shares held by certain stockholders and members of management. The buyer would be a newly formed affiliate of LLCP in which certain executive officers and other members of senior management of the Company would participate as equity holders. As part of the transaction, the participating stockholders and members of management would be required to vote their shares of Company stock in favor of the transaction with LLCP and to exchange their shares of Company stock and options for stock and options of the continuing company after the transaction.

The Board of Directors of the Company created a Special Committee of independent directors to consider the proposal. The Special Committee unanimously approved the letter of intent and recommended its approval by the

- 8 -

~~Item~~Board 2of Directors. ~~Management’s~~The ~~Discussion~~proposed ~~and~~transaction ~~Anaysis~~is subject to successful completion of ~~Financial~~due ~~Condition~~diligence and ~~Results~~execution of ~~Operations~~mutually agreed upon definitive agreements. The closing of the transaction would be subject to the buyer obtaining financing for the transaction, stockholder approval and other customary closing conditions. There can be no assurance that definitive agreements can or will be signed or that a transaction can or will be completed.

~~General~~ The Board of Directors unanimously approved the Company entering into the letter of intent, which has an exclusivity agreement with LLCP that extends through January 31, 2006. The Company has agreed not to solicit alternative transactions but may respond to certain unsolicited proposals and may terminate the exclusivity agreement prior to January 31, 2006 upon receipt of a superior proposal for an alternative transaction. Under certain circumstances, if the Company terminates the exclusivity agreement for a superior proposal or the Company enters into an agreement with respect to an alternative transaction before May 1, 2006, the Company will be required to pay LLCP a fee of $5 million. In addition, the Company has agreed to reimburse LLCP for its expenses in certain circumstances.

~~The~~On ~~following~~October 4, ~~discussion~~2005, Primavera Investors, LLC (“Primavera”) filed a Class Action Complaint (the “Complaint”) against the Company, its Board of Directors, and ~~analysis~~LLCP. ~~should~~The beComplaint ~~read~~alleges that the transaction contemplated in ~~conjunction~~the ~~with~~public disclosure of the ~~Financial~~letter of intent would injure the ~~Statements~~plaintiffs. In the Complaint, Primavera seeks to preliminarily and ~~Notes~~permanently ~~thereto~~enjoin ~~included~~the defendants ~~elsewhere~~from engaging in ~~this~~the ~~Form~~transaction ~~10-Q.~~proposed by the Letter of Intent, obtain an award for the damages to the Company’s public stockholders, require the defendants to account for profits or special benefits, and award the plaintiffs their costs and attorneys’ fees.

~~As of June~~Item 14, 2005, the Company owned and operated 80 restaurants under the Fox and Hound Smokehouse & Tavern, Fox and Hound English Pub & Grille, and Fox and Hound Pub & Grille (“Fox and Hound”), Bailey’s Smokehouse & Tavern, Bailey’s Sports Grille and Bailey’s Pub & Grille (“Bailey’s”) brand names2. ~~The Company~~Management’s ~~restaurants~~Discussion ~~offer a broad menu of mid-priced appetizers, entrees,~~ and ~~desserts~~Anaysis ~~served in generous portions. In addition, each location features a full-service bar and offers a wide selection~~ of ~~major~~Financial ~~domestic,~~Condition ~~imported~~ and ~~specialty~~Results ~~beers. Each restaurant emphasizes a high energy environment with multiple billiard tables and satellite and cable coverage~~ of ~~a variety of sporting events and music videos. In addition to our food, the~~ ~~Company believes that customers are attracted to the elegant yet comfortable atmosphere of dark~~Operations wood interiors, polished brass, embroidered chairs and booths, and etched glass. The Fox and Hound and Bailey’s restaurants share identical design and operational principles and menus. As of June 14, 2005, the Company owned and operated 61 Fox and Hound restaurants and 19 Bailey’s restaurants located in Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Louisiana, Michigan, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. As of June 15, 2004, the Company owned and operated 52 Fox and Hound restaurants and 17 Bailey’s restaurants.

~~The components of the Company’s net sales are food and non-alcoholic beverages, alcoholic~~General beverages, and entertainment and other (principally billiard table rental fees). For the twelve weeks ended June 14, 2005, food and non-alcoholic beverages were 37.1% of total sales, alcoholic beverages were 57.1% of total sales and entertainment and other were 5.8% of total sales. For the twelve weeks ended June 15, 2004, food and non-alcoholic beverages were 35.3% of total sales, alcoholic beverages were 57.9% of total sales and entertainment and other were 6.8% of total sales.

The ~~components~~following ofdiscussion ~~the~~and ~~Company’s~~analysis ~~cost~~should ofbe ~~sales~~read ~~primarily~~in ~~include~~conjunction ~~direct~~with ~~costs~~the ~~of food,~~Financial ~~non-alcoholic~~Statements ~~beverages~~ and ~~alcoholic~~Notes ~~beverages.~~thereto ~~These~~included ~~costs~~elsewhere ~~are generally variable and will fluctuate with changes~~ in ~~sales~~this ~~volume~~Form ~~and sales mix~~10-Q.

~~Components~~As of ~~restaurant~~September 6, ~~operating~~2005, ~~expenses~~the ~~include~~Company ~~operating~~owned ~~payroll~~and operated 82 restaurants under the Fox and ~~fringe~~Hound Smokehouse ~~benefits~~& Tavern, Fox and Hound English Pub & Grille, and Fox and Hound Pub & Grille (“Fox and ~~occupancy~~Hound”), ~~maintenance~~Bailey’s Smokehouse & Tavern, Bailey’s Sports Grille and ~~utilities.~~Bailey’s ~~All~~Pub ~~but~~& ~~one~~Grille (“Bailey’s”) ofbrand ~~the~~names. The Company’s ~~locations~~restaurants ~~are~~offer ~~leased~~a broad menu of mid-priced appetizers, entrees, and desserts served in generous portions. In addition, each location features a ~~provide~~full-service ~~for~~bar and offers a ~~minimum~~wide ~~annual~~selection ~~rent~~of major domestic, imported and specialty beers. Each restaurant emphasizes a high energy environment with ~~some~~multiple ~~leases~~billiard ~~calling~~tables ~~for~~and ~~additional~~satellite ~~rent~~and cable ~~based~~coverage onof ~~sales~~a variety of sporting events and music videos. In addition to our food, the ~~volume~~Company atbelieves that customers are attracted to the ~~particular~~elegant ~~location~~yet incomfortable ~~excess~~atmosphere of ~~specified~~dark wood ~~minimum~~interiors, ~~sales~~polished ~~levels~~brass, embroidered chairs and booths, and etched glass. The Fox and Hound and Bailey’s restaurants share identical operational principles. As of September 6, 2005, the Company owned and operated 62 Fox and Hound restaurants and 20 Bailey’s restaurants located in Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. As of September 7, 2004, the Company owned and operated 55 Fox and Hound restaurants and 17 Bailey’s restaurants.

~~Depreciation~~The components of the Company’s net sales are food and ~~amortization~~non-alcoholic ~~costs~~beverages, ~~primarily~~alcoholic beverages, ~~include~~and ~~depreciation~~entertainment and ~~amortization~~other (principally billiard table rental fees). For the twelve weeks ended September 6, 2005, food and non-alcoholic beverages were 37.9% of ~~capital~~total sales, ~~expenditures~~alcoholic ~~for~~beverages ~~restaurants~~were 56.4% of total sales and entertainment and other were 5.7% of total sales. For the twelve weeks ended September 7, 2004, food and non-alcoholic beverages were 37.9% of total sales, alcoholic beverages were 55.6% of total sales and entertainment and other were 6.5% of total sales.

~~Preopening~~The ~~costs~~components of the Company’s cost of sales primarily include ~~labor~~direct costs, ~~costs~~ of ~~hiring~~food, non-alcoholic beverages and ~~training~~alcoholic ~~personnel~~beverages. ~~and~~These ~~certain~~costs ~~other~~are generally variable and will ~~costs~~fluctuate ~~relating~~with tochanges ~~opening~~in ~~new~~sales ~~restaurants~~volume and sales mix.

~~General~~Components ~~and~~of ~~administrative~~restaurant operating expenses include ~~all~~operating ~~corporate~~payroll and ~~administrative~~fringe ~~functions~~benefits, ~~that~~and ~~support~~occupancy, ~~existing~~maintenance ~~operations~~ and ~~provide~~utilities. anAll ~~infrastructure~~but toone ~~support~~of ~~future~~the ~~growth.~~Company’s ~~Management, supervisory~~locations are leased and provide ~~staff~~for ~~salaries,~~a ~~employee~~minimum ~~benefits,~~annual ~~travel~~rent, ~~information~~with ~~systems,~~some ~~training,~~leases ~~rent~~calling ~~and office~~for ~~supplies~~additional asrent ~~well~~based ason ~~accounting~~sales volume ~~services~~at ~~fees~~the ~~are~~particular ~~major~~location ~~items~~in excess of ~~costs~~specified inminimum ~~this~~sales ~~category~~levels.

InDepreciation ~~calculating~~and ~~comparable~~amortization ~~restaurant~~costs ~~sales,~~primarily ~~the~~include ~~Company~~depreciation ~~includes~~and aamortization ~~restaurant~~of ~~in the~~capital ~~comparable~~expenditures ~~restaurant base after it has been in operation~~ for ~~18 full months. As of June 14, 2005, there were 63~~ restaurants ~~in the comparable restaurant base~~. ~~Annualized average weekly sales are~~ ~~computed by dividing net sales during the period by the number of store operating weeks and multiplying the result by 52.~~

~~Results~~- of9 ~~Operations~~-

TheTable following table sets forth for the periods indicated (i) the percentages which certain items included in the Condensed Consolidated Statement of Operations bear to net sales, and (ii) other selected operating data. The Company operates on a 52 or 53 week fiscal year ending the last Tuesday in December. Fiscal years 2004 and 2005 each consists of 52 weeks. Fiscal quarters consist of three accounting periods of 12 weeks each and a final period of 16 or 17 weeks. Contents

Preopening -costs 9include -labor costs, costs of hiring and training personnel and certain other costs relating to opening new restaurants.

~~Table~~ General and administrative expenses include all corporate and administrative functions that support existing operations and provide an infrastructure to support future growth. Management, supervisory and staff salaries, employee benefits, travel, information systems, training, rent and office supplies as well as accounting services fees are major items of ~~Contents~~costs in this category.

	Twelve Weeks Ended						Twenty-four Weeks Ended
	June 14,			June 15,			June 14,			June 15,
	2005			2004			2005			2004
				(restated)						(restated)
Operating Statement Data:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Costs of sales		27.1			27.7			26.7			27.3
Restaurant operating expenses		55.6			54.6			53.1			52.3
Depreciation and amortization		6.0			5.8			5.7			5.4
Preopening costs		1.6			2.0			1.3			1.6
Asset impairment		—			8.1			—			3.9
Restaurant costs and expenses		90.3			98.2			86.8			90.5
Restaurant operating income		9.7			1.8			13.2			9.5
General and administrative expenses		5.6			5.6			5.3			5.4
Gain on disposal of assets		0.1			—			—			—
Income (loss) from operations		4.2			(3.8	)		7.9			4.1
Interest expense		0.1			0.1			0.1			0.1
Income (loss) before income taxes		4.1			(3.9	)		7.8			4.0
Income tax expense (benefit)		1.1			(1.2	)		2.4			1.2
Net income (loss)		3.0	%		(2.7	)%		5.4	%		2.8	%
Restaurant Operating Data (dollars in thousands):
Annualized average weekly sales per location	$	1,995		$	2,019		$	2,124		$	2,137
Number of restaurants at end of the period		80			69			80			69

In calculating comparable restaurant sales, the Company includes a restaurant in the comparable restaurant base after it has been in operation for 18 full months. As of September 6, 2005, there were 65 restaurants in the comparable restaurant base. Annualized average weekly sales are computed by dividing net sales during the period by the number of store operating weeks and multiplying the result by 52.

~~Twelve~~ In ~~Weeks~~calculating ~~Ended~~the ~~June 14,~~increase ~~2005~~or ~~Compared~~decrease toin ~~Twelve~~expenses ~~Weeks~~as ~~Ended~~a ~~June 15~~percent of sales, ~~2004~~each basis point represents a 0.01% change in the expense as a percent of sales.

~~Net~~Results sales increased $4,701,000 (15.1%) for the twelve weeks ended June 14, 2005 to $35,842,000 from $31,141,000 for the twelve weeks ended June 15, 2004. This increase was due to a 16.6% increase in store weeks (934 versus 802) as a result of ~~eleven restaurants opened since June 15,~~Operations ~~2004 offset by a 1.2% decrease in annualized average weekly sales per location. Comparable restaurant sales decreased 0.9% for the quarter ended June 14, 2005.~~

~~Costs~~The offollowing ~~sales~~table ~~increased~~sets ~~$1,083,000~~forth ~~(12.6%)~~ for the ~~twelve~~periods ~~weeks~~indicated ~~ended June~~(i) ~~14,~~the ~~2005~~percentages towhich certain ~~$9,699,000~~items ~~from~~included ~~$8,616,000~~ in the ~~twelve~~Condensed ~~weeks~~Consolidated ~~ended~~Statement ~~June 15,~~of ~~2004~~Operations bear to net sales, and ~~decreased~~(ii) other asselected operating data. The Company operates on a ~~percentage of~~52 ~~sales~~or to53 week ~~27.1%~~fiscal ~~from~~year 27ending the last Tuesday in December.~~7%.~~ ~~This~~Fiscal ~~decrease~~years as2004 aand ~~percentage~~2005 ofeach ~~sales~~consists isof ~~principally~~52 weeks. ~~attributable~~Fiscal quarters toconsist of three accounting periods of 12 weeks each and a ~~decrease~~final inperiod ~~promotional~~of ~~activities~~16 or 17 weeks.

Restaurant operating expenses increased $2,950,000 (17.4%) for the twelve weeks ended June 14, 2005 to $19,945,000 from $16,995,000 in the twelve weeks ended June 15, 2004, and increased as a percentage of net sales to 55.6% from 54.6%. This increase as a percentage of sales was attributable to an increase in hourly labor, advertising expense and occupancy costs offset by a decrease in health and workers comp insurance costs.


	Twelve Weeks Ended						Thirty-six weeks Ended
				September 7,						September 7,
	September 6,			2004			September 6,			2004
	2005			(restated)			2005			(restated)
Operating Statement Data:
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Costs of sales		27.5			27.6			27.0			27.4
Restaurant operating expenses		59.1			58.9			55.1			54.4
Depreciation and amortization		6.4			6.1			5.9			5.7
Preopening costs		0.8			1.8			1.1			1.7
Asset impairment		—			—			—			2.6

Restaurant costs and expenses		93.8			94.4			89.1			91.8


Restaurant operating income		6.2			5.6			10.9			8.2
General and administrative expenses		5.4			4.9			5.3			5.2
Loss on disposal of assets		—			—			—			—

Income from operations		0.8			0.7			5.6			3.0
Interest expense		0.2			0.2			0.1			0.2

Income before income taxes		0.6			0.5			5.5			2.8
Income tax expense (benefit)		0.2			0.2			1.7			0.8

Net income		0.4	%		0.3	%		3.8	%		2.0	%

Restaurant Operating Data (dollars in thousands):
Annualized average weekly sales per location	$	1,945		$	1,920		$	2,062		$	2,061
Number of restaurants at end of the period		82			72			82			72

~~Depreciation~~Twelve ~~and~~Weeks ~~amortization~~Ended ~~increased $361,000 (20.0%) for the twelve weeks ended June~~September 146, 2005 toCompared ~~$2,163,000 from $1,802,000 in the twelve weeks ended June 15, 2004, and increased as a percentage of sales~~ to ~~6.0%~~Twelve ~~from~~Weeks ~~5.8%.~~Ended ~~This increase in expense as a percentage of sales is due to additional depreciation on eleven restaurants opened since June~~September 157, 2004 ~~offset by lower~~ ~~depreciation on assets impaired in the second quarter of fiscal 2004 as well as assets which became fully depreciated in the past year.~~

~~Preopening~~Net ~~costs~~sales ~~decreased~~increased $785,277,000 (1216.28%) for the twelve weeks ended ~~June~~September 146, 2005 to $~~560~~36,738,000 from $~~638~~31,461,000 infor the twelve weeks ended ~~June~~September 157, 2004. ~~These~~This ~~costs~~increase ~~are~~was ~~attributable to~~due ~~three~~to ~~units~~a ~~that~~15.3% ~~opened~~increase ~~during~~in ~~the~~store ~~twelve~~ weeks ~~ended~~(982 ~~June~~versus 852) as a result of ten restaurants opened since September 147, ~~2005~~2004 and ~~partial~~a ~~preopening~~1.3% ~~expenses for~~increase ~~two~~in ~~restaurants~~annualized ~~which~~average ~~have~~weekly ~~yet~~sales toper ~~open~~location. ~~Three~~Comparable restaurant ~~restaurants~~sales ~~were~~increased ~~opened~~0.5% infor the ~~twelve~~quarter ~~weeks~~ ended ~~June~~September 156, ~~2004~~2005.

The provision for asset impairment of $2,523,000 for the twelve weeks ended June 15, 2004, reflects the charges made for the write down of restaurant assets related to two underperforming units. We periodically review our long-~~lived~~ ~~assets~~10 ~~that are held and used in our restaurant~~- ~~operations for indications of impairment. As of June 14, 2005, we have no plans to close either of these units.~~

GeneralTable andof administrative expenses increased $258,000 (14.8%) for the twelve weeks ended June 14, 2005 to $2,007,000 from $1,749,000 in the twelve weeks ended June 15, 2004, due to an increase in corporate infrastucture Contents

Costs -of sales increased $1,419,000 (16.3%) for the twelve weeks ended September 6, 2005 to $10,116,000 -from $8,697,000 in the twelve weeks ended September 7, 2004, and decreased as a percentage of sales to 27.5% from 27.6%. This decrease as a percentage of sales is principally attributable to a decrease in food costs as a percent of food sales due to a price increase taken in the first quarter of 2005 offset by a slight increase in food sales mix and an increase in promotional activities.

~~Table~~ Restaurant operating expenses increased $3,183,000 (17.2%) for the twelve weeks ended September 6, 2005 to $21,702,000 from $18,519,000 in the twelve weeks ended September 7, 2004, and increased as a percentage of ~~Contents~~net sales to 59.1% from 58.9%. This increase as a percentage of sales is principally attributable to an increase in advertising expense of 19 basis points, an increase in building maintenance of 29 basis points, an increase in utilities of 26 basis points, partially offset by a benefit of 60 basis points in management labor.

Depreciation and amortization increased $435,000 (22.6%) for the twelve weeks ended September 6, 2005 to ~~support~~$2,365,000 from $1,930,000 in the ~~Company’s~~twelve ~~expansion.~~weeks ~~General~~ended September 7, 2004, and ~~administrative~~increased ~~expenses~~ as a percentage of ~~net~~ sales ~~remained~~to ~~at 5~~6.4% from 6.1%. This increase in expense as a percentage of sales is due to additional depreciation on ten restaurants opened since September 7, 2004.

~~Gain~~Preopening oncosts ~~disposal~~decreased of$265,000 ~~assets~~(47.5%) ~~was~~for the twelve weeks ended September 6, 2005 to $25293,000 ~~for~~from $558,000 in the twelve weeks ended ~~June~~September 147, ~~2005~~2004. ~~The~~This ~~gain~~decrease is attributable ~~reflects~~to two units that opened during the ~~disposal~~twelve ofweeks aended ~~liquor~~September 6, ~~license~~2005 ~~from~~and apartial ~~restaurant~~preopening expenses for five restaurants which ~~was~~have ~~closed~~yet to open. Three restaurants were opened in ~~2002~~the twelve weeks ended September 7, 2004. Preopening expense for the twelve weeks ended September 7, 2004 included partial preopening expenses for five units that had not yet opened.

~~Interest~~General ~~expense~~and ~~was~~administrative expenses increased $33442,000 (29.0%) for the twelve weeks ended ~~June~~ September 146, 2005 ~~and~~to $441,965,000 ~~for~~from $1,523,000 in the twelve weeks ended ~~June~~September 157, 2004., ~~This~~and increased ~~decrease~~as ~~is due to~~ a ~~lower~~percent ~~average~~of ~~balance~~sales ~~applicable~~ to ~~the~~ ~~revolving~~5.4% ~~note~~from ~~payable~~4.9%. inThis ~~the~~increase ~~current~~was ~~fiscal~~due ~~year~~to ~~compared~~an ~~with~~increase ~~the prior fiscal year partially~~in ~~offset~~corporate byinfrastructure ato ~~higher~~support ~~interest~~the ~~rate~~Company’s expansion.

~~The~~Interest ~~effective~~expense ~~income tax rate~~ was ~~27.8%~~$73,000 for the twelve weeks ended ~~June~~September 146, 2005 and ~~30.3%~~$76,000 for ~~the~~ the twelve weeks ended ~~June~~September 157, 2004. ~~This~~There ~~decrease~~was ~~is due to~~ a ~~change~~decrease in the ~~full~~average ~~year~~balance ~~projected~~applicable to ~~effective~~the ~~tax~~revolving ~~rate~~note ~~from~~payable ~~32.0%~~in at the ~~end~~current offiscal year compared with the ~~first~~prior ~~quarter~~fiscal ofyear ~~2005~~which towas offset ~~30.9%~~by ata ~~the~~higher ~~end~~average ofinterest rate on the ~~second~~ ~~quarter~~revolving ofnote ~~2005~~payable.

~~Twenty-four~~ The ~~Weeks~~effective ~~Ended~~income ~~June~~tax rate was 30.4% for the twelve weeks ended September 146, 2005 ~~Compared~~and to30.4% for ~~Twenty-four~~the ~~Weeks~~twelve ~~Ended~~weeks ~~June~~ended September 157, 2004.

~~Net sales increased $10,209,000 (15.7%) for the twenty~~Thirty-~~four~~six weeks ~~ended~~Ended ~~June~~September 146, 2005 Compared to ~~$75,197,000~~ ~~from $64,988,000 for the twenty~~Thirty-~~four~~six weeks ~~ended~~Ended ~~June~~September 157, 2004~~. This~~ increase was due to a 16.5% increase in store weeks (1,841 versus 1,581) as a result of eleven restaurants opened since June 15, 2004 offset by a 0.6% decrease in annualized average weekly sales per location. Comparable restaurant sales decreased 0.1% for the twenty-four weeks ended June 14, 2005.

~~Costs~~Net of sales increased $215,~~369~~486,000 (1316.41%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 146, 2005 to $20111,~~101~~935,000 from $1796,~~732~~449,000 infor the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004,. ~~and~~This ~~decreased~~increase ~~as a~~was ~~percentage~~due ~~of sales~~ to 26a 16.70% ~~from~~increase ~~27.3%.~~in store ~~This~~weeks ~~decrease~~(2,823 versus 2,433) as a ~~percentage~~result of ~~sales~~ten isrestaurants ~~principally~~opened since September 7, 2004. ~~attributable~~Comparable torestaurant asales ~~decrease~~increased in0.1% ~~promotional~~for ~~activities~~the thirty-six weeks ended September 6, 2005.

~~Restaurant~~Costs ~~operating~~of ~~expenses~~sales increased $53,~~971~~788,000 (1714.63%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~ September 146, 2005 to $3930,~~949~~217,000 from $3326,~~978~~429,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004, and ~~increased~~ decreased as a percentage of ~~net~~ sales to 5327.10% from 5227.34%. This ~~increase~~decrease as a percentage of sales ~~was~~ is principally attributable to ana decrease in food costs as a percent of food sales due to a price increase taken in ~~hourly~~the ~~labor~~first quarter of 2005 and ~~occupancy~~a ~~costs~~decrease in promotional activities partially offset by a ~~decrease~~slight increase in ~~health and~~food ~~workers~~sales ~~comp insurance costs~~mix.

~~Depreciation~~Restaurant ~~and~~operating ~~amortization~~expenses increased $~~722~~9,154,000 (2017.4%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~ 14September 6, 2005 to $461,~~259~~651,000 from $352,~~537~~497,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004, and increased as a percentage of net sales to 555.71% from 554.4%. This increase ~~in expense~~ as a percentage of sales is ~~due~~ principally attributable to ~~additional~~increases ~~depreciation~~in onadvertising ~~eleven~~expense ~~restaurants~~(18 ~~opened~~basis ~~since~~points), ~~June 15~~building and equipment maintenance (22 basis points), ~~2004~~utilities ~~offset~~(17 bybasis ~~lower depreciation~~points), onoccupancy ~~assets~~costs ~~impaired~~(21 inbasis points), ~~the~~hourly ~~second~~labor ~~quarter~~(20 ofbasis ~~fiscal~~points), ~~2004~~partially asoffset ~~well~~by asdecreases ~~assets~~in ~~which~~management ~~became~~labor (21 ~~fully~~basis ~~depreciated~~points) inand ~~the~~employment ~~past~~taxes ~~year~~and benefits (33 basis points).

~~Preopening~~Depreciation ~~costs~~and ~~decreased~~amortization increased $~~117~~1,157,000 (1021.92%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~ September 146, 2005 to $~~953~~6,624,000 from $15,~~070~~467,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004., and ~~These~~increased ~~costs~~as ~~are attributable~~a topercentage ~~five~~of ~~units~~sales ~~that~~to ~~opened~~5.9% ~~during~~from ~~the~~5.7%. ~~twenty-four~~This ~~weeks~~increase ~~ended~~in ~~June 14,~~depreciation ~~2005~~expense ~~and partial~~is ~~preopening~~due ~~expenses~~to ~~for~~additional ~~two~~depreciation ~~restaurants~~on ~~which~~ten ~~have yet to open. Five~~ restaurants ~~were~~ opened ~~in the~~since ~~twenty-four weeks ended June~~September 157, 2004.

~~The~~Preopening ~~provision~~costs ~~for~~decreased ~~asset impairment of~~ $2382,~~523,~~000 (23.5%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 156, 2005 ~~2004~~to $1,246,000 ~~reflects~~from ~~the~~$1,628,000 ~~charges~~in ~~made~~the ~~for~~thirty-six ~~the~~weeks ~~write~~ended ~~down~~September 7, of2004. ~~restaurant~~These ~~assets~~costs ~~related~~are attributable to ~~two underperforming~~seven units. Wethat ~~periodically~~opened ~~review~~during ~~our~~the ~~long~~thirty-~~lived~~six ~~assets~~weeks ~~that~~ended ~~are~~September 6, ~~held~~2005 and ~~used in our~~ ~~restaurant~~partial ~~operations~~preopening expenses for ~~indications~~five ofrestaurants ~~impairment.~~which Ashave ofyet ~~June 14,~~to ~~2005,~~open. weNine ~~have~~restaurants nowere opened ~~plans~~in ~~to close~~the ~~either~~thirty-six ofweeks ~~these~~ended ~~units~~September 7, 2004.

~~General and administrative expenses increased $531,000 (15.2%) for the twenty~~-~~four~~ ~~weeks~~11 ~~ended June 14, 2005 to $4,025,000 from $3,494,000 in the twenty~~-~~four weeks ended June 15, 2004, due to an~~ increase in corporate infrastucture to support the Company’s expansion. General and administrative costs as a percentage of sales decreased from 5.4% for the twenty-four weeks ended June 15, 2004 to 5.3% for the twenty-four weeks ended June 14, 2005.

GainTable on disposal of assets was $25,000 for the twenty-four weeks ended June 14, 2005. The gain reflects the disposal of a liquor license from a restaurant which was closed in 2002. Contents

~~Interest~~The ~~expense~~provision ~~was~~for asset impairment of $822,523,000 for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 147, 2004, ~~2005~~reflects ~~and~~the ~~$96,000~~charges made for the write down of restaurant assets related to two ~~twenty-four~~underperforming ~~weeks~~units ~~ended~~in ~~June 15,~~the second quarter of fiscal 2004. ~~This~~We ~~decrease~~periodically isreview ~~due~~our tolong-lived assets athat ~~lower~~are ~~average~~held ~~balance~~and ~~applicable to~~used ~~the~~in ~~revolving~~our ~~note~~restaurant ~~payable~~operations infor ~~the~~indications ~~current~~of ~~fiscal~~impairment. ~~year~~As ~~compared~~of September 6, ~~with~~2005, ~~the~~we ~~prior~~have ~~fiscal~~no ~~year partially~~plans ~~offset~~to byclose aeither ~~higher~~of ~~interest~~these ~~rate~~units.

~~The~~General ~~effective~~and ~~income~~administrative ~~tax~~expenses ~~rate~~increased ~~was~~$973,000 30(19.94%) for the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~ September 146, 2005 ~~and 30.3%~~to ~~for~~$5,990,000 from $5,017,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004. ~~This~~and increased ~~increase is due primarily~~ to ~~the~~5.3% ~~impact of~~as ~~the~~a ~~credit~~percentage ~~for social security taxes paid on tips in excess~~ of ~~minimum~~sales ~~wage~~from ~~relative to the amount of income before taxes~~5.2%.

~~Quarterly~~ Gain ~~Fluctuations~~on disposal of assets was $25,000 ~~Seasonality~~for ~~and~~the ~~Inflation~~thirty-six weeks ended September 6, 2005. The gain reflects the disposal of a state liquor license.

~~The~~Interest ~~timing~~expense ofwas ~~new~~$155,000 ~~unit~~for ~~openings~~the ~~will~~thirty-six ~~result~~weeks inended ~~significant~~September 6, ~~fluctuations~~2005 inand ~~quarterly~~$172,000 for ~~results~~the thirty-six weeks ended September 7, 2004. ~~The~~ ~~Company~~This ~~expects~~decrease ~~seasonality~~is todue ~~continue~~mainly to be a ~~factor~~lower inaverage balance ~~the~~applicable ~~results~~to ofthe ~~its~~revolving ~~business~~note payable in the ~~future~~ ~~due~~current tofiscal ~~expected~~year ~~lower~~compared ~~second~~with ~~and~~the ~~third~~prior fiscal ~~quarter~~year ~~revenues~~partially ~~due~~offset toby ~~the~~a ~~summer~~lower ~~season.~~average ~~The primary~~interest ~~inflationary~~rate ~~factors~~in ~~affecting~~ the ~~Company’s~~current fiscal year.

The effective income tax rate was 30.9% for the thirty-six 11weeks ended September 6, 2005 and 30.3% for the thirty-six weeks ended September 7, 2004.

~~Table~~Quarterly ofFluctuations, ~~Contents~~Seasonality and Inflation

The timing of new unit openings will result in significant fluctuations in quarterly results. The Company expects seasonality to continue to be a factor in the results of its business in the future due to expected lower second and third quarter revenues due to the summer season. The primary inflationary factors affecting the Company’s operations include food, liquor, ~~and~~ labor costs and utilities. A large number of the Company’s restaurant personnel are tipped employees who are paid at the federal subminimum wage level; therefore, future subminimum wage changes will have a significant effect on labor costs. Historically, inflation has not had a material impact on operating margins. As costs of food and labor have increased, the Company has previously been able to offset these increases through economies of scale, improved operating procedures and menu price changes. However, during fiscal 2004, the Company has experienced significant increases in certain commodity prices above historical levels which has negatively impacted ~~our~~ costs of food and operating margins. Additionally, competitive pressures may limit the Company’s ability to fully recover cost increases with the implementation of menu price increases. To the extent that wethe ~~experience~~Company continues to experience significant increases in commodity prices, it may have a material negative impact on operating margins.

Liquidity and Capital Resources

As is customary in the restaurant industry, the Company operates with negative working capital. Negative working capital increased $3,~~749~~055,000 to $9,~~985~~291,000 as of ~~June~~September 146, 2005 from $6,236,000 as of December 28, 2004. This increase is attributable to the costs of purchasing property and equipment in excess of cash provided by operations and net proceeds from the line of credit. Cash ~~decreased~~increased $~~168~~195,000 to $~~644~~1,007,000 at ~~June~~September 146, 2005 compared to the balance of $812,000 at December 28, 2004. The Company does not have significant receivables or inventory and ~~receives~~ receives trade credit based upon negotiated terms in purchasing food and supplies. Because funds ~~available~~ available from cash sales are not needed immediately to pay for food and supplies, or to finance inventory, they may be considered as a source of financing for noncurrent capital expenditures.

On September 1, 1998 the Company entered into a loan agreement with Intrust Bank, N.A. (the “Line of Credit”) which provides for a line of credit of $20,000,000 subject to certain limitations based on earnings before interest, taxes, depreciation and amortization of the past fifty-two weeks and the amount of capital lease obligations on personal property. The Line of Credit is secured by substantially all of the Company’s assets. The Line of Credit requires monthly payments of interest only until November 1, 2006, at which time equal monthly installments of principal and interest are required as necessary to fully amortize the outstanding indebtedness plus ~~future~~ future interest over a period of four years. Interest is accrued at 1/2% below the prime rate as ~~published~~ published in The Wall Street Journal. As of ~~June~~September 146, 2005 the Company had borrowed $24,~~510~~633,000 under the Line of Credit. The Company is in compliance with all debt covenants.

Cash flows from operations were $1114,~~260~~282,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 146, 2005 compared to $912,~~377~~202,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004. Purchases of property and equipment were $1015,~~565~~338,000 in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 146, 2005 compared to $1016,~~962~~397,000 in in the ~~twenty~~thirty-~~four~~six weeks ended ~~June~~September 157, 2004. ~~Net~~Repayment ~~payments~~of onadvances ~~the~~made ~~revolving note payable~~ to ~~bank was $1,170,000 for~~ the ~~twenty-four~~developer ~~week~~of two ~~period ending June 14, 2005 compared~~ build-to-suit ~~net~~locations ~~proceeds~~were of $1297,~~325,~~000 ~~for~~in the ~~twenty~~thirty-~~four~~six weeks ~~ending~~ended ~~June~~September 157, 2004. AtNet proceeds ~~June 14,~~from ~~2005,~~ the ~~Company~~revolving ~~had $644,000~~note inpayable ~~cash~~to ~~and~~bank ~~cash~~was ~~equivalents.~~$953,000

~~The Company intends to open ten to twelve new locations in fiscal year 2005 and twelve to~~-12- fifteen new locations in fiscal year 2006. At June 14, 2005, five units had been opened in fiscal 2005, three units were under construction, contracts had been executed on three additional sites, and lease negotiations had begun on six additional sites. The Company is currently evaluating locations in markets familiar to its management team. However, the number of locations actually opened and the timing thereof may vary depending upon the ability of the Company to locate suitable sites and negotiate favorable leases. The Company expects to expend approximately $20.0 to $25.0 million to open new locations over the next twelve months.

TheTable Company believes the funds available from the Line of Credit and its cash flow from operations will be sufficient to satisfy its working capital and capital expenditure requirements for at least the next twelve months. There can be no assurance, however, that changes in the Company’s operating plans, the acceleration or modification of the Company’s expansion plans, lower than anticipated revenues, increased expenses, stock repurchases, potential acquisitions or other events will not cause the Company to seek additional financing sooner than anticipated, prevent the Company from achieving the goals of its expansion strategy or prevent any newly opened locations from operating profitably. There can be no assurance that additional financing will be available on terms acceptable to the Company or at all. Contents

~~Forward~~for ~~Looking~~the ~~Statements~~thirty-six week period ending September 6, 2005 compared to $4,645,000 for the thirty-six weeks ending September 7, 2004. At September 6, 2005, the Company had $1,007,000 in cash and cash equivalents.

~~This~~The ~~report~~Company ~~contains~~intends ~~certain~~to ~~forward-looking~~open ~~statements~~eleven ~~within~~new ~~the~~locations ~~meaning~~in offiscal ~~Section~~year 2005. At September ~~27A~~6, of2005, ~~the~~seven ~~Securities~~units ~~Act~~had ofbeen ~~1933,~~opened asin ~~amended~~fiscal 2005, three units were under construction and ~~Section 21E~~leases ofhad ~~the~~been executed ~~Securities~~on ~~Exchange~~five ~~Act~~additional ofsites. ~~1934,~~The ~~as amended,~~Company ~~which~~is ~~are~~currently ~~intended~~evaluating locations in markets familiar to beits ~~covered~~management byteam. However, the ~~safe~~number ~~harbors~~of ~~created~~locations ~~thereby.~~actually ~~Although~~opened and the ~~Company~~timing ~~believes~~thereof ~~that~~may vary depending upon the ~~assumptions~~ability ~~underlying~~of the Company to locate suitable sites and negotiate favorable leases.

The -Company 12believes -the funds available from the Line of Credit and its cash flow from operations will be sufficient to satisfy its working capital and capital expenditure requirements for at least the next twelve months. There can be no assurance, however, that changes in the Company’s operating plans, the acceleration or modification of the Company’s expansion plans, lower than anticipated revenues, increased expenses, stock repurchases, potential acquisitions or other events will not cause the Company to seek additional financing sooner than anticipated, prevent the Company from achieving the goals of its expansion strategy or prevent any newly opened locations from operating profitably. There can be no assurance that additional financing will be available on terms acceptable to the Company or at all.

~~Table~~Forward ofLooking ~~Contents~~Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. Our actual results may differ materially from the forward-looking statements contained herein. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to, potential increases in food, alcohol, labor, and other operating costs, changes in competition, the inability to find suitable new locations, changes in consumer preferences or spending patterns, changes in demographic trends, the effectiveness of our operating and growth initiatives and promotional efforts, and changes in government regulation. Further information about the factors that might affect the Company’s financial and other results are included in the Company’s 10-K, filed with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company’s Line of Credit has a variable rate which is directly affected by changes in U.S. interest rates. The average interest rate of the Line of Credit was 5.2372% for the twelve weeks ended ~~June~~September 146, 2005. The interest rate at ~~June~~September 146, 2005 was 56.5000%. On ~~July~~October 1, 2005 the ~~rate~~ rate increased to 56.7525%. The following table presents the quantitative interest rate risks at ~~June~~ September 146, 2005:

	Principal Amount by Expected Maturity
	(In thousands)
																					Fair
																There-					Value
(dollars in thousands)	2005			2006			2007			2008			2009			after			Total		9/6/~~14/~~05
Variable rate debt	$	—		$	94172		$	~~582~~1,067		$	~~615~~1,133		$	~~650~~1,203		$	~~569~~1,058		$	24,~~510~~633	$	24,~~510~~633
Average Interest Rate— 1/2% below prime		56.7500	%		56.7500	%		56.7500	%		56.7500	%		56.7500	%		56.7500	%

Item 4. Procedures and Controls

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and ~~Chief Financial Officer, of the effectiveness of the design~~ and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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~~PART~~Chief IIFinancial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. ~~OTHER~~Based ~~INFORMATION~~upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

~~Item 4~~PART II. ~~Submission~~OTHER ~~of Matters to a Vote of Stockholders~~INFORMATION

~~On May~~Item ~~17, 2005, the Company held its Annual Meeting of Stockholders (the “Meeting”)~~5. AtOther ~~the~~Information Meeting, the stockholders re-elected Steven M. Johnson, Gary M. Judd, and John D. Harkey, Jr. to the Board of Directors to serve until the 2008 Annual Meeting of Stockholders and until their successors have been duly elected and qualified. As to the re-elected Directors, there were 6,553,037 votes “For” and 2,882,723 votes “Withheld” for Steven M. Johnson, 6,551,037 votes “For” and 2,884,723 votes “Withheld” for Gary M. Judd, and 9,016,671 votes “For” and 419,089 votes “Withheld” for John D. Harkey, Jr. The continuing directors and the expiration of their current terms as directors are as follows:

James K. Zielke			2006
C. Wells Hall III			2006
E. Gene Street			2006
Dennis L. Thompson			2007
James T. Morton			2007
Nester R. Weigand, Jr.			2007

The Company has adopted a new Nominating Committee Charter, available in the “Investors” section of the Company’s website at www.fhrg.com, and has appointed a Nominating Committee consisting of C. Wells Hall, III, E. Gene Street, John D. Harkey, Jr., James, T. Morton, and Nestor R. Weigand, Jr. Stockholders wishing to recommend a director candidate to serve on the Board of Directors may do so by providing advance written notice to the Company, which will be forwarded to the Nominating Committee. Notices should be sent to James K. Zielke, Secretary, Total Entertainment Restaurant Corp., 1551 N. Waterfront Parkway, Suite 310, Wichita, Kansas 67206. The notice must set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the nominating stockholder is a stockholder of record of the Company’s stock entitled to vote at such meeting, including setting forth the number and class of all shares of each class of capital stock of the Company beneficially owned by the nominating stockholder, and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been

~~The stockholders also ratified the appointment of KPMG LLP as the Company’s independent~~-14- ~~auditors for the year ending December 27, 2005. As to the ratification of auditors, there were 8,148,454 votes “For,” 1,282,406 votes “Against,” and 4,900 votes “Abstained.”~~

TheTable stockholders also approved an amendment to the Company’s 1997 Director’s Stock Option Plan to approve an increase in authorized shares reserved for issuance pursuant to the Plan from 400,000 shares to 500,000 shares of common stock. As to the amendment, there were 6,421,192 votes “For”, 564,818 votes “Against”, 306,064 votes “Abstained”, and 2,143,686 votes “Broker Non Vote.” Contents

~~The~~nominated, ~~stockholders~~or ~~also~~intended ~~approved~~to anbe ~~amendment~~nominated, toby the ~~Company’s~~Board ~~1997~~of ~~Incentive~~Directors; and ~~Non-Qualified Option~~(e) the ~~Plan~~signed toconsent ~~approve~~of each annominee ~~increase in authorized shares reserved for issuance pursuant~~ to ~~the~~serve ~~Plan from~~as ~~2,000,000~~a ~~shares~~director ~~to 2,500,000 shares~~ of ~~common stock. As to~~ the ~~amendment,~~Company ~~there~~if ~~were 5,619,150~~so ~~votes “For”, 1,367,071 votes “Against”, 305,853 votes “Abstained”, and 2,143,686 votes “Broker Non Vote~~elected.”

~~The stockholders also approved an amendment to the Company’s amended Certificate of Incorporation to change the Company’s corporate name to “Fox & Hound Restaurant Group~~Item 6.” ~~As to the~~Exhibits ~~amendment, there were 9,433,350 votes “For”, 1,390 votes “Against”, 1,020 votes “Abstained”, and 1,000 votes “Broker Non Vote.”~~

~~Item 6.~~ Exhibits ~~and Reports on Form 8-K~~

~~Exhibits~~ Exhibit 31.1 — Certification by Steven M. Johnson pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 331.12 –— ~~Certificate~~Certification by James K. Zielke pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of ~~Incorporation~~the Sarbanes-Oxley Act of ~~Registrant~~2002.

Exhibit 332.1 — Certification by Steven M.1 –Johnson ~~First~~pursuant ~~Amendment~~to Rule 13a-14(b) and 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to ~~Certificate~~Section 906 of ~~Incorporation~~the Sarbanes-Oxley Act of ~~Registrant~~2002.

Exhibit 332.1.2 –— ~~Second~~Certification ~~Amendment~~by James K. Zielke pursuant to ~~Certificate~~Rule 13a-14(b) and 15d-14(b) 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of ~~Incorporation~~the Sarbanes-Oxley Act of ~~Registrant~~2002.

~~Exhibit 10.1 – Third Amendment to 1997 Incentive and Non~~-~~Qualified Stock Option Plan of Fox &~~15- ~~Hound Restaurant Group~~

Exhibit 10.2Table – Fourth Amendment to 1997 Directors Stock Option Plan of Fox & Hound Restaurant Group Contents

~~Exhibit 31.1~~FOX —& ~~Certification~~HOUND byRESTAURANT ~~Steven M. Johnson pursuant to Rule 13a-14(a) or 15d-14(a), as~~GROUP ~~adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~Exhibit 31.2 — Certification by James K. Zielke pursuant to Rule 13a-14(a) or 15d-14(a), as~~SIGNATURES ~~adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~Exhibit 32.1~~Pursuant —to ~~Certification~~the byrequirements ~~Steven~~of M.the ~~Johnson~~Securities ~~pursuant~~Exchange toAct ~~Rule 13a-14(b)~~of or1934, ~~15d-14(b)~~the ~~and~~registrant has duly 18caused ~~U.S.C.~~this ~~Section 1350,~~report asto ~~adopted~~be ~~pursuant~~signed toin ~~Section 906~~its ofbehalf by the ~~Sarbanes-Oxley~~undersigned ~~Act~~thereunto ofduly ~~2002~~authorized.

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				Fox & Hound Restaurant Group
				(Registrant)

Date October 17, 2005				/s/ James K. Zielke

				James K. Zielke
				Chief Financial Officer,
				Secretary and Treasurer
				(Duly Authorized Officer)

~~Table of Contents~~-16-

Exhibit 32.2 — Certification by James K. Zielke pursuant to Rule 13a-14(b) or 15d-14(b) 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Reports on Form 8-K

A Current Report on Form 8-K (Item 5) dated April 12, 2005, reporting the filing of Exhibit 99.1-Press release of Fox & Hound Restaurant Group

A Current Report on Form 8-K (Item 12) dated April 14, 2005, reporting the filing of Exhibit 99.1-Press release of Fox & Hound Restaurant Group

A Current Report on Form 8-K (Item 5) dated May 20, 2005, reporting the filing of Exhibit 99.1-Press release of Fox & Hound Restaurant Group

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FOX & HOUND RESTAURANT GROUP

SIGNATURES

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

				Fox & Hound Restaurant Group
				(Registrant)
Date July 25, 2005				/s/ James K. Zielke
				James K. Zielke
				Chief Financial Officer,
				Secretary and Treasurer
				(Duly Authorized Officer)

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