UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Thirteen Weeks Ended ~~January~~July 2230, 2006


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 of Incorporation or Organization)		(I.R.S. Employer Identification No.)


Florida (State or Other Jurisdiction of Incorporation or Organization)		65-0367604 (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

~~Registrant’s~~ Indicate ~~telephone~~by ~~number,~~check ~~including~~mark ~~area~~whether ~~code~~the registrant: (~~954~~1) ~~957-2600~~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 o No þ

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)

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

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 ~~þ No~~ 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 þ

The number of shares of the registrant’s common stock outstanding as of ~~June~~May 1929, ~~2006~~2007 was 29,220,663.

DOCUMENTS INCORPORATED BY REFERENCE

None.

FORM 10-Q THIRTEEN WEEKS ENDED ~~JANUARY~~JULY 2230, 2006

INDEX

	Page
PART I FINANCIAL INFORMATION
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of January 22, 2006 (unaudited) and April 24, 2005		3
Condensed balance sheets as of July 30, 2006 (unaudited) and April 30, 2006		2
Condensed Consolidated Statements of Operations for the Thirteen and Thirty Nine Weeks Ended January 22, 2006 and January 23, 2005 (unaudited)		4
Condensed statements of operations for the thirteen weeks ended July 30, 2006 and July 24, 2005 (unaudited)		4
Condensed Consolidated Statement of Shareholders’ Equity for the Thirty Nine Weeks Ended January 22, 2006 (unaudited)		6
Condensed statement of shareholders’ equity (deficiency) for the thirteen weeks ended July 30, 2006 (unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Thirty Nine Weeks Ended January 22, 2006 and January 23, 2005 (unaudited)		7
Condensed statements of cash flows for the thirteen weeks ended July 30, 2006 and July 24, 2005 (unaudited)		6
Notes to Condensed Consolidated Financial Statements		8
Notes to condensed financial statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1820
Item 3. Quantitative and Qualitative Disclosures about Market Risk		3629
Item 4. Controls and Procedures		3629
PART II OTHER INFORMATION
Item 1. Legal Proceedings		3731
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 1A. Risk Factors		31
Item 3. Defaults Upon Senior Securities		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 4. Submission of Matters to a Vote of Security Holders		37
Item 3. Defaults Upon Senior Securities		31
Item 5. Other Information		37
Item 4. Submission of Matters to a Vote of Security Holders		31
Item 6. Exhibits		38
Item 5. Other Information		31
SIGNATURES		39
Item 6. Exhibits		31
First Amendment to Loan Agreement
SIGNATURES		32
Third Amendment to Line of Credit Promissory Note
Section 302 Chief Executive Officer Certification
Demand Promissory Note
Section 302 Chief Financial Officer Certification
Second Amendment to Stock Warrant Certificate
Section 906 Chief Executive Officer Certification
Section 302 Chief Executive Officer Certification
Section 906 Chief Financial Officer Certification
Section 302 Chief Financial Officer Certification
EX-31.1 Section 302 Certification of CEO
Section 906 Chief Executive Officer Certification
EX-31.2 Section 302 Certification of CFO
Section 906 Chief Financial Officer Certification
EX-32.1 Section 906 Certification of CEO
EX-32.2 Section 906 Certification of CFO

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ROADHOUSE GRILL, INC.

CONDENSED ~~CONSOLIDATED~~ BALANCE SHEETS ~~JANUARY 22, 2006 and APRIL 24, 2005 (Dollars in thousands, except per share data)~~

	January 22, 2006			April 24, 2005
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	714		$	810
Accounts receivable, net of allowance for doubtful accounts of $225 and $205 at January 22, 2006 and April 24, 2005, respectively		982			970
Inventory		967			1,048
Prepaid expenses		705			1,062
Total current assets		3,368			3,890
Property & equipment, net of accumulated depreciation of $52,844 and $52,804 at January 22, 2006 and April 24, 2005, respectively		20,699			24,593
Asset held for sale		—			465
Intangible assets, net of accumulated amortization of $775 and $861 at January 22, 2006 and April 24, 2005, respectively		1,647			1,801
Other assets		1,366			965
Total assets	$	27,080		$	31,714
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	7,405		$	5,443
Accrued expenses		8,790			6,093
Unearned revenue		1,419			2,044
Current portion of long-term debt		5,642			2,259
Current portion of capital lease obligations		1,331			1,325
Total current liabilities		24,587			17,164
Long-term debt		1,592			3,338
Capital lease obligations		2,484			3,275
Long-term portion of unearned revenue		1,669			2,207
Non-current deferred rent		3,312			3,344
Total liabilities		33,644			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		(63,432	)		(54,463	)
Total shareholders’ equity		(6,564	)		2,386
Total liabilities and shareholders’ equity	$	27,080		$	31,714

JULY 30, 2006 AND APRIL 30, 2006

~~The~~($ ~~accompanying~~in ~~notes are an integral part of these condensed consolidated financial statements.~~ thousands)


			April 30,
	July 30, 2006		2006
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	563	$	66
Accounts receivable, net of allowance for doubtful accounts		355		662
Accounts receivable due from majority shareholder		91		88
Income tax receivable		8		8
Inventory		850		963
Prepaid expenses		789		709
Current assets of discontinued operations		—		15

Total current assets		2,656		2,511
Property and equipment, net of accumulated depreciation		18,108		19,193
Intangible assets, net of accumulated amortization		108		113
Goodwill		1,527		1,527
Capitalized transaction costs		773		702
Other assets		645		621
Non-current assets of discontinued operations		431		441

Total assets	$	24,248	$	25,108


Liabilities and Shareholders’ Equity (Deficiency)

Current liabilities:
Accounts payable	$	9,270	$	6,948
Accrued expenses — payroll		3,126		3,992
Accrued expenses — taxes		2,392		1,975
Accrued expenses — other		3,011		2,699
Unearned revenue		417		762
Current portion of long-term debt		785		902
Note payable to majority shareholders		6,484		4,231
Other current debt due to related party		1,586		1,281
Current portion of capital lease obligations		204		380
Current liabilities of discontinued operations		1,929		2,018

Total current liabilities		29,204		25,188
Long-term debt		101		205
Long-term debt due to related party		309		614
Capital lease obligations		1,997		1,963
Long-term portion of unearned revenue		1,619		1,644
Non-current deferred rent		3,428		3,426
Non-current liabilities of discontinued operations		149		366

Total liabilities	$	36,807	$	33,406


				April 30,
	July 30, 2006			2006
	(Unaudited)
Subsequent events, commitments and contingencies:

Shareholders equity (deficiency)
Common stock, par value $0.03 per share, authorized 35,000,000 shares; issued and outstanding 29,220,663 shares		877			877
Additional paid-in capital		57,079			56,009
Accumulated deficit		(70,515	)		(65,184	)

Total shareholders’ equity (deficiency)		(12,559	)		(8,298	)

Total liabilities and shareholders’ equity (deficiency)	$	24,248		$	25,108

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

ROADHOUSE GRILL, INC.

CONDENSED ~~CONSOLIDATED~~ STATEMENTS OF OPERATIONS

FOR THE THIRTEEN ~~AND THIRTY NINE~~ WEEKS ENDED ~~JANUARY~~JULY 2230, 2006 AND ~~JANUARY~~JULY 2324, 2005

(Unaudited, ~~dollars~~$ in thousands, except ~~per~~ share data)

	Thirteen Weeks Ended						~~Thirty Nine Weeks Ended~~
	January 22, 2006			January 23, 2005			January 22, 2006			January 23, 2005
	July 30,			July 24,
Total revenues	$	27,566		$	28,874		$	83,373		$	87,507
	2006			2005
Restaurant operating expenses:
Total revenues	$	25,312		$	29,346
Cost of restaurant sales:
Restaurant operating expenses:
Food and beverage		98,~~050~~694			10,~~434~~064			~~27,963~~			~~31,390~~
Labor and benefits		9,~~475~~674			9,~~786~~842			~~28,660~~			~~28,771~~
Occupancy and other		7,~~671~~333			7,~~278~~382			~~22,753~~			~~22,180~~
Total cost of restaurant sales		2625,~~196~~701			27,~~498~~288			~~79,376~~			~~82,341~~
Depreciation and amortization		1,~~378~~326			1,~~568~~343			~~4,076~~			~~4,407~~
General and administrative expenses		12,~~807~~005			1,~~666~~992			~~5,662~~			~~4,917~~
Asset Impairment		602			157			602			157
Total operating expenses		29,032			30,623
Total operating expenses		29,983			30,889			89,716			91,822
Operating loss		(3,720	)		(1,277	)
Operating loss		(2,417	)		(2,015	)		(6,343	)		(4,315	)
Other expense:
Other (expense) income:
Loss on sale/disposal of fixed assets		(16	)		(4	)
Loss on sale/disposal of fixed assets		(3	)		(9	)		(14	)		(16	)
Charge for Berjaya warrant		(1,070	)		—
Gain on extinguishment of debt		—			—			—			7,102
Interest expense, net		(332	)		(196	)
Interest expense, net		(348	)		(188	)		(887	)		(1,356	)
Total other expense		(1,418	)		(200	)
Total other (expense) income		(351	)		(197	)		(901	)		5,730
Loss before income taxes		(5,138	)		(1,477	)
(Loss) income from continuing operations before income taxes		(2,768	)		(2,212	)		(7,244	)		1,415
Income tax benefit		—			—
Income tax benefit		—			—			—			—
Net loss from continuing operations		(5,138	)		(1,477	)
(Loss) income from continuing operations		(2,768	)		(2,212	)		(7,244	)		1,415
Discontinued operations:
Discontinued operations:
Loss from operations of discontinued restaurants		(173	)		(553	)
Loss from operations of discontinued restaurants (less applicable income taxes of $0)		(165	)		(666	)		(941	)		(1,830	)
(Loss) gain from disposal of discontinued restaurants		(20	)		34
Loss on disposal of discontinued restaurants, including provision of $100 for operating losses during phase-out period (less applicable income taxes of $0)		(256	)		—			(784	)		—
Loss from discontinued operations		(193	)		(519	)
Net loss	$	(35,~~189~~331	)	$	(21,~~878~~996	)	$	~~(8,969~~	)	$	~~(415~~	)
Basic and diluted loss per share:
Net loss from continuing operations	$	(0.17	)	$	(0.05	)
Net loss from discontinued operations		(0.01	)		(0.02	)
Net loss	$	(0.18	)	$	(0.07	)
Weighted average common shares outstanding, basic and diluted		29,220,663			29,220,663

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

	Thirteen Weeks Ended						Thirty Nine Weeks Ended
	January 22, 2006			January 23, 2005			January 22, 2006			January 23, 2005
Basic earnings per share:
Net (loss) income from continuing operations	$	(0.09	)	$	(0.08	)	$	(0.25	)	$	0.05
Net loss from discontinued operations	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.06	)
Net loss	$	(0.11	)	$	(0.10	)	$	(0.31	)	$	(0.01	)
Diluted earnings per share:
Net (loss) income from continuing operations	$	(0.09	)	$	(0.08	)	$	(0.25	)	$	0.05
Net loss from discontinued operations	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.06	)
Net loss	$	(0.11	)	$	(0.10	)	$	(0.31	)	$	(0.01	)
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

ROADHOUSE GRILL, INC.

~~The~~CONDENSED ~~accompanying~~STATEMENT ~~notes~~OF ~~are~~SHAREHOLDERS’ anEQUITY ~~integral part of these condensed consolidated financial statements.~~ (DEFICIENCY)

FOR THE THIRTEEN WEEKS ENDED JULY 30, 2006

(Unaudited, $ in thousands, except share data)


					Additional
	Common Stock				Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance April 30, 2006		29,220,663	$	877	$	56,009	$	(65,184	)	$	(8,298	)
Net loss		—		—		—		(5,331	)		(5,331	)
Charge for Berjaya warrant		—		—		1,070		—			1,070

Balance July 30, 2006		29,220,663	$	877	$	57,079	$	(70,515	)	$	(12,559	)

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

ROADHOUSE GRILL, INC.

CONDENSED ~~CONSOLIDATED~~STATEMENTS ~~STATEMENT~~ OF ~~SHAREHOLDERS’~~CASH ~~EQUITY~~FLOWS FOR THE THIRTEEN WEEKS ENDED JULY 30, 2006 AND JULY 24, 2005 (Unaudited, $ in thousands)

FOR THE THIRTY NINE WEEKS ENDED JANUARY 22, 2006


	Thirteen Weeks Ended
	July 30, 2006			July 24, 2005
Cash flows from operating activities:
Net loss	$	(5,331	)	$	(1,996	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss from discontinued operations		193			519
Depreciation and amortization		1,326			1.343
Stock option expense		—			19
Charge for Berjaya Warrant		1,070			—
Net loss on sale/disposal of fixed assets		16			4
Provision for bad debt		9			6

Change in assets and liabilities:
Decrease in accounts receivable		298			676
Increase in accounts receivable, shareholder		(3	)		(5	)
Decrease in inventory		113			3
(Increase) decrease in prepaid expenses		(80	)		110
Decrease (increase) in other assets		(24	)		93
Increase in accounts payable		2,322			436
Decrease in unearned revenue		(370	)		(524	)
Increase (decrease) in accrued expenses		(135	)		830

Net cash provided by (used in) continuing operating activities		(596	)		1,514


Cash flows from investing activities:
Purchases of property and equipment		(252	)		(345	)

Net cash used in continuing investing activities		(252	)		(345	)


Cash flows from financing activities:
Capitalized merger cost		(71	)		(31	)
Loans from shareholder		2,253			—
Repayment of long-term debt		(221	)		(210	)
Repayment of related party long term debt		—			(276	)
Payments on capital lease obligations		(142	)		(184	)

Net cash provided by (used in) continuing financing activities		1,819			(701	)


Cash flows from discontinued operations:
Net cash used in operating activities		(269	)		(325	)
Net cash used in investing activities		—			—
Net cash used in financing activities		(205	)		(631	)

Net cash used in discontinued operations		(474	)		(956	)


Increase (decrease) in cash and cash equivalents		497			(488	)
Cash and cash equivalents at beginning of period		66			810

Cash and cash equivalents at end of period	$	563		$	322


Supplementary disclosures:
Interest paid	$	353		$	252

Income taxes paid	$	—		$	64

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

	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		—		—		—		(8,969	)		(8,969	)
Vesting of stock options		—		—		19		—			19
Balance January 22, 2006		29,220,663	$	877	$	55,991	$	(63,432	)	$	(6,564	)

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

ROADHOUSE GRILL, INC.

~~CONDENSED~~NOTES ~~CONSOLIDATED~~TO ~~STATEMENTS~~CONDENSED OFFINANCIAL ~~CASH FLOWS~~STATEMENTS

~~FOR~~JULY ~~THE THIRTY NINE WEEKS ENDED JANUARY 22~~30, 2006 ~~AND JANUARY 23, 2005~~

(~~Unaudited,~~1) BASIS ~~dollars~~OF inPRESENTATION ~~thousands)~~AND DESCRIPTION OF BUSINESS

	January 22, 2006			January 23, 2005
Cash flows from operating activities:
Net (loss) income	$	(8,969	)	$	(415	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,168			4,684
Asset impairment		602			157
Stock option expense		19			19
Net loss on sale/disposal of fixed assets		14			16
Net loss on disposal of discontinued operations		784			—
Bad debt expense		20			—
Gain on extinguishment of debt		—			(7,102	)
Cash used for reorganization items		—			(6	)
Changes in assets and liabilities:
Increase in accounts receivable		(12	)		(45	)
Decrease in income tax receivable		—			69
Decrease (increase) in inventory		81			(72	)
Decrease in prepaid expenses		357			266
Increase in other assets		(174	)		(92	)
Increase (decrease) in accounts payable		1,956			(862	)
Decrease in restructuring accrual		—			(3	)
(Decrease) increase in unearned revenue		(1,163	)		2,283
Increase in accrued expenses		2,663			1,133
Net cash provided by operating activities		346			230
Cash flows from investing activities:
Net proceeds from sales of property and equipment		1			20,574
Purchases of property and equipment		(915	)		(852	)
Net cash (used in) provided by investing activities		(914	)		19,722
Cash flows from financing activities:
Borrowings under debt agreements		4,020			—
Repayment of long-term debt		(2,383	)		(18,992	)
Payments on capital lease obligations		(1,165	)		(1,297	)
Net cash provided by (used in) financing activities		472			(20,289	)
(Decrease) in cash and cash equivalents		(96	)		(337	)
Cash and cash equivalents at beginning of period		810			1,181
Cash and cash equivalents at end of period	$	714		$	844
Supplementary disclosures:
Interest paid	$	844		$	1,266
Income taxes paid	$	75		$	7

Roadhouse Grill, Inc. (the “Company”) was incorporated under the laws of 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 July 30, 2006, there were 59 company-owned Roadhouse Grill restaurants, 31 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. At May 29, 2007, the Company operated 56 restaurants (28 in Florida), having closed three restaurants subsequent to July 30, 2006 upon the termination of the related leases.

The ~~accompanying~~financial ~~notes~~information included herein is unaudited, except the balance sheet as of April 30, 2006, which has been derived from our audited financial statements as of April 30, 2006. Such information includes all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for an ~~integral~~entire ~~part~~year. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of ~~these~~America have been condensed ~~consolidated~~or omitted in this Form 10-Q pursuant to certain rules and regulations of the Securities and Exchange Commission. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended April 30, 2006 (the “2006 Form 10-K”).

During the fiscal year ended April 30, 2006, the Company closed seven 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. During the fiscal year ended April 30, 2006, the Company had committed to a formal plan for disposal of these restaurants. In addition, one restaurant located in Biloxi, Mississippi was destroyed by Hurricane Katrina. As a result of this formal plan for disposal of restaurants, and the decision not to rebuild the restaurant that was destroyed by Hurricane Katrina, the Company has adopted discontinued operations accounting treatment for these restaurants, which requires separation of financial results for such discontinued operations from those of the remaining continuing operations. Information regarding revenues from discontinued operations is as follows (in thousands):


Thirteen weeks ended July 30, 2006	$	78
Thirteen weeks ended July 24, 2005		2,134

Information regarding assets and liabilities from discontinued operations is as follows (in thousands):


	July 30, 2006		April 30, 2006
Assets	$	431	$	456
Liabilities		2,078		2,384

On April 6, 2007, the Company entered into an agreement with Duffy’s Holdings, Inc. pursuant to which Duffy’s will acquire all of the outstanding common stock of the Company in a series of transactions. As part of the transaction, Duffy’s will (at closing) infuse $11 million into the Company (see Note 17).

The 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. The Company has no subsidiaries. Certain amounts in the Fiscal Year 2006 financial statements have been reclassified to conform to the Fiscal Year 2007 presentation.

The Company reported net losses in Fiscal Years 2006, 2005, and 2004 and has continued to incur net losses in Fiscal Year 2007. The Company has also experienced cash flow constraints over the last few years and as a result has not always been timely in its payments due to

~~ROADHOUSE~~creditors, including ~~GRILL~~taxing authorities. The Company is also currently in default with respect to the $8.1 million in senior debt that is due to its majority shareholder (see Notes 7, ~~INC~~16, and 17). Among the obligations that have not been timely paid are certain payroll and sales tax obligations, and the Company’s failure to pay such obligations on a timely basis has caused it to incur substantial penalty and interest charges with respect to such tax obligations.

~~NOTES~~ If TOthe ~~CONDENSED~~transaction ~~CONSOLIDATED~~with ~~FINANCIAL~~Duffy’s ~~STATEMENTS~~closes, Duffy’s will infuse $11 million into the Company, a portion of which will be used to satisfy certain past due obligations to taxing authorities. The closing of the transaction with Duffy’s will also reduce the amount of borrowings due to the Company’s majority shareholder and will recast the terms of the debt due to the Company’s majority shareholder such that the debt will no longer be in default.

~~(1) BASIS~~ If OFthe ~~PRESENTATION~~Company ~~AND~~is ~~DESCRIPTION~~unable OFto ~~BUSINESS~~complete the transactions contemplated by the agreement with Duffy’s, it will seek to secure additional financing from its majority shareholder or other sources. In that regard, the Company’s majority shareholder is not obligated to provide any additional financing to the Company and has not indicated its willingness to do so. The Company’s inability to obtain such additional financing would likely have a material adverse effect on the Company’s business, results of operations and financial condition, and the Company could be forced to curtail operations. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern (see Note 3).

~~Roadhouse Grill, Inc.~~ (~~the “Company”~~2) was incorporated under the laws of 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 including to entities in Italy, Brazil and Malaysia. The Company opened its first restaurant in Pembroke Pines, Florida (a city in the greater Ft. Lauderdale area) in 1993. As of January ~~22,~~SUMMARY ~~2006,~~OF ~~there~~SIGNIFICANT ~~were~~ACCOUNTING ~~60 Company-owned Roadhouse Grill restaurants, 31 of which are~~POLICIES 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 each of the thirteen weeks ended January 22, 2006 and October 23, 2005, two restaurants were closed upon the termination of the related leases. Two additional restaurants were closed during the thirteen weeks ended October 23, 2005 while the properties were 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 six restaurants, as well as another unit during fiscal 2006, 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, during the thirty nine weeks ended January 22, 2006, one of the Company’s restaurants located in Biloxi, Mississippi was destroyed by Hurricane Katrina. Subsequent to January 22, 2006, one additional restaurant was closed in conjunction with the expiration of the related lease.

AsSee ~~discussed~~Note ~~above,~~2 ~~the~~of ~~Company~~Notes ~~committed~~ to aFinancial ~~formal~~Statements ~~plan~~in ~~for disposal of seven of its restaurants during~~ the ~~thirty~~Company’s ~~nine weeks ended January 22,~~ 2006. Additionally, the Company has determined that it will not rebuild the restaurant that was destroyed by Hurricane Katrina and exited one additional location upon the expiration of the related lease in MarchForm ~~2005.~~10-K Asfor a ~~result,~~ ~~the~~summary ~~Company has adopted discontinued operations accounting treatment for these nine restaurants, which requires separation~~ of ~~financial~~significant ~~results for such discontinued operations from those of the remaining continuing operations. In conjunction with such~~ accounting ~~treatment, the Company has recorded a charge of $0~~policies.~~8 million during the thirty nine weeks ended January 22, 2006~~ relating to the estimated loss on disposal of these restaurants. Revenues for these restaurants were $0.4 million and $3.3 million for the thirteen and thirty nine weeks ended January 22, 2006, respectively.

~~The~~(3) GOING ~~Company~~CONCERN ~~operates on a fifty-two or fifty-three week fiscal year. Each fiscal quarter~~CONSIDERATIONS ~~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.~~

The ~~accompanying~~Company’s ~~consolidated~~material financial ~~statements~~commitments ~~include~~relate principally to its working capital requirements in connection with the ~~accounts~~operation of ~~the~~its ~~Company~~business and its obligations to make operating ~~wholly-owned~~and ~~subsidiaries~~capital lease and term loan payments. ~~All~~As ~~significant~~of ~~intercompany~~July 30, ~~transactions~~2006, total minimum payments required under the Company’s note and ~~balances~~lease obligations in 2007, including interest thereon, were $17.2 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 ~~eliminated~~(and may in the future be) significant.

During the thirteen weeks ended July 30, 2006, the Company’s primary sources of working capital were cash provided by operations and loans from the Company’s principal shareholders. Subsequent to July 30, 2006, the Company’s primary source of working capital was borrowings from its principal shareholders and loans secured by its credit card receivables (see Notes 16 and 17).

The following table summarizes the Company’s future contractual cash obligations for the balance of fiscal 2007 and each of the next four fiscal years and thereafter as of July 30, 2006 (dollars in thousands) (see Notes 5, 6, and 7 for further information regarding these obligations). Operating lease commitments include estimated common area maintenance expenses.

On November 17, 2005, the Company entered into a merger agreement (the “Merger”) with Steakhouse Partners, Inc. (“Steakhouse”). The Merger was subject, among other matters, to the obtaining by Steakhouse of financing sufficient to complete the transaction. However, Steakhouse was not able to obtain the financing necessary to complete the Merger and, as a result, on March 14, 2006 the Company terminated the Merger. On March 15, 2006, the Company announced that its Board of Directors would continue to explore strategic options that might be available and that the Company continues to have the financial support of its principal shareholders, including the Berjaya Group. In that regard, the Company continues to be advised with respect to its strategic planning process by the investment banking firm of J. H. Chapman Group, L.L.C.


	2007		2008		2009		2010		2011		Thereafter		Total
Total debt:

Principal	$	8,359	$	1,236	$	17	$	7	$	—	$	—	$	9,619
Interest		553		19		1		—		—		—		573

Total debt		8,912		1,255		18		7		—		—		10,192

Capital lease debt:

Principal		988		430		341		343		316		752		3,170
Interest		223		198		168		134		98		125		946

Total capital lease debt		1,211		628		509		477		414		877		4,116

Operating leases		6,856		8,957		8,438		7,967		7,645		62,514		102,377
Other commitments		205		140		142		168		—		—		655

Total	$	17,184	$	10,980	$	9,107	$	8,619	$	8,059	$	63,391	$	117,340

~~The~~Other ~~Company’s~~commitments ~~ability~~represent tominimum ~~meet~~amounts ~~its operating expenses as they come~~ due, ~~including its ability~~ to ~~service~~certain ~~its~~vendors ~~debt~~under ~~and~~contractual agreements. ~~pay its capital and operating lease obligations~~Further, ~~is dependent on~~ the Company’s ~~ability~~currently toowes ~~obtain~~substantial ~~additional~~payroll ~~financing~~and assales ~~well~~taxes, ~~as its ability to meet its business plan~~including ~~for~~applicable ~~fiscal~~penalties ~~2006~~ and ~~beyond, of which there can be no assurance~~interest. ~~In that regard~~Additionally, ~~the~~if ~~Company recently obtained loans from two principal shareholders (Note 11). If~~ the ~~Company~~transaction iswith ~~unable~~Duffy’s, ~~to secure additional required financing from its principal shareholders~~ or ~~other~~another ~~sources and/or successfully complete a financing or~~ sale transaction, ~~in its investment banking process~~closes, ~~it will likely have a material adverse effect upon~~ the Company’s ~~business,~~will ~~results~~become ofobligated ~~operations~~under orcertain ~~financial~~Severance ~~condition~~ Agreements and the Special ~~Company~~Incentive ~~could~~Compensation ~~be forced to cease operations~~Plan.

~~(2) SUMMARY~~ Amounts OFreflected ~~SIGNIFICANT~~above ~~ACCOUNTING~~could ~~POLICIES~~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.

~~See the Company’s Annual Report on Form 10-K for the fifty-two weeks ended April~~(4) ~~24,~~PROPERTY ~~2005~~AND ~~for~~EQUIPMENT ~~a summary of significant accounting policies.~~

Property and equipment, net consists of the following (3dollars in thousands) ~~LIQUIDITY~~:

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 January 22, 2006, total minimum payments required under the Company’s note and lease obligations in 2006, including interest thereon, were $14.6 million (see the discussion below regarding the Company’s total contractual cash obligations).


							Estimated
	July 30, 2006			April 30, 2006			Useful Lives
Building	$	3,508		$	3,508		20 years
Furniture and Equipment		28,386			28,278		3-7 years
Leasehold improvements		42,060			41,962		7-20 years

		73,954			73,748

Less: accumulated depreciation		(55,415	)		(54,122	)

	$	18,539		$	19,626

OnThe ~~August 6,~~following ~~2004,~~sets ~~the~~forth ~~Company~~property ~~closed~~and aequipment, ~~transaction~~net ~~with~~at ~~Sovereign Roadhouse LLC~~July 30, ~~a wholly-owned~~2006 ~~subsidiary~~and ~~of Sovereign Investment Company (“Sovereign”)~~April 30, ~~involving the sale and~~2006, ~~leaseback~~broken ofout 11between ~~restaurant~~continuing ~~properties~~operations ~~that~~and ~~were~~discontinued ~~previously~~operations ~~owned.~~(in ~~See Note 9 for information~~thousands): ~~regarding the sale/leaseback transaction.~~

During the thirteen weeks ended January 22, 2006, the Company’s primary sources of working capital were loans from its principal shareholders to support its operations and proceeds from insurance claims. (See Notes 11 and 12).


	July 30, 2006		April 30, 2006
Continuing operations	$	18,108	$	19,193
Discontinued operations		431		433

	$	18,539	$	19,626

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~~ Included ~~for~~in ~~its~~property ~~products,~~and aequipment ~~continued~~are ~~commitment~~buildings toand ~~providing~~equipment anunder ~~excellent~~capital ~~dining~~leases of ~~experience~~$9.7 million ~~for~~and ~~its~~$9.7 million ~~customers~~at July 30, ~~the~~2006 ~~development~~ and ~~implementation of successful marketing strategies~~April 30, ~~the cost levels of its various food products~~2006, ~~and~~respectively. ~~its~~The ~~continuing~~Company ~~efforts~~did not tocapitalize ~~reduce~~any ~~its operating~~interest costs. ~~For~~during ~~further~~the ~~information~~first ~~regarding~~quarter ~~the~~of ~~Company’s~~Fiscal ~~liquidity,~~Year ~~see~~2007 ~~Note~~or 1Fiscal Year 2006.

As(5) CAPITAL ~~discussed above, the Company is currently exploring strategic alternatives that may be~~LEASES available. However, in order to continue to meet its obligations, the Company will need an infusion of debt or equity capital. The failure of the Company to obtain the working capital required to fund its continuing operations will likely have a material adverse effect on the Company’s future financial position and/or results of operations and could result in the curtailment of operations.

The following ~~table~~is ~~summarizes~~a ~~the~~schedule ~~Company’s~~of future ~~contractual~~minimum ~~cash~~lease ~~obligations~~payments ~~for~~required ~~the remainder~~in of fiscal ~~2006,~~2007 ~~each~~and ofin ~~the~~future ~~next four~~ fiscal years ~~and~~under ~~thereafter~~capital asleases as of ~~January~~July 2230, 2006 (dollars in thousands)~~. Operating lease commitments include estimated common area maintenance~~: ~~expenses.~~

	2006			2007		2008		2009		2010		Thereafter		Total
2007	$	1,211
Long term debt:
2008		628
Principal	$	3,903		$	2,369	$	939	$	16	$	7	$	—	$	7,234
2009		509
Interest		198			128		19		1		—		—		465
2010		477
Total		4,101			2,497		958		17		7		—		7,580
2011		414
Capital lease debt:
Thereafter		877
Principal		384			1,266		429		341		343		1,052		3,815
Total minimum lease payments		4,116
Interest		67			230		198		168		135		223		1,021
Less: amount representing interest at varying rates ranging from 5 percent to 16 percent		(946	)
Total		451			1,496		627		509		478		1,275		4,836
Present value of net minimum capital lease payments		3,170
Operating leases		2,409			8,974		8,595		8,077		7,605		69,721		105,381
Less: current portion of capital lease obligations		(1,091	)
Other commitments		158			285		140		142		168		—		893
Present value of minimum capital lease obligations excluding current portion	$	2,079
Total	$	7,119		$	13,252	$	10,320	$	8,745	$	8,258	$	70,996	$	118,690

~~Other~~The ~~commitments~~following ~~represent~~sets ~~minimum~~forth ~~amounts~~capital ~~due~~lease toobligations ~~certain vendors under contractual agreements. Amounts reflected above could change~~ as ~~additional~~of ~~commitments may be made~~July 30, ~~cancellation~~ ~~provisions~~2006 ~~may~~broken beout ~~exercised by the Company or by its creditors, or agreements may be~~between ~~modified~~continuing asoperations ~~warranted~~and bydiscontinued ~~changes~~operations (in ~~business or operational needs.~~thousands):


	Current		Non-Current
	Portion		Portion
Continuing operations	$	204	$	1,997
Discontinued operations		887		82

Total	$	1,091	$	2,079

During the first fiscal quarters of 2007 and 2006, upon the expiration of various equipment operating leases, the Company elected to purchase the equipment under the lease through a continuation of lease payments for a specified period.

(6) OPERATING LEASES

The Company is a party to various operating lease agreements relating to the rental of land and buildings and equipment at many of its restaurants. Such agreements range in terms of up to 20 years and generally provide the Company the option to renew for additional periods. The agreements generally also require significant penalties to be paid in the event the lease is terminated prior to its expiration. The following is a schedule of future minimum lease payments required in fiscal 2007 and in future fiscal years under operating leases that have remaining non-cancelable lease terms in excess of one year as of July 30, 2006 (dollars in thousands):

(4) LONG-TERM DEBT


2007	$	6,856
2008		8,957
2009		8,438
2010		7,967
2011		7,645
Thereafter		62,514

Total minimum lease payments		102,377

AsThe oftotal ~~January~~rent expense for operating leases was $2.4 22million and $2.8 million for the thirteen weeks ended July 30, 2006 and ~~April~~July 24, 2005, ~~the~~respectively. The Company’s ~~long-term~~leased ~~debt~~a ~~was~~portion of ~~comprised~~its corporate headquarters and recorded rental income in the amount of $0.04 million for the ~~following~~thirteen ~~items~~weeks ~~(amounts~~ended inJuly 24, ~~thousands):~~2005. The Company did not record rental income during the thirteen weeks ended July 30, 2006.

	January 22, 2006				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.	$	210	$	651	$	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.		916		1,170		1,799		1,127
Other unsecured notes due various parties bearing interest at 5%. Notes are due through 2009. Current monthly payments are $40.		466		490		837		505
Unsecured demand note due to Ayman Sabi (President and Chief Executive Officer) bearing interest at 10%.		—		120		—		—
Secured note due Berjaya Group (Cayman) Limited (majority shareholder), bearing interest at 10%. Full payment is due upon certain events including a change of control of the Company.		—		3,211		—		—
Total long-term debt	$	1,592	$	5,642	$	3,338	$	2,259

(7) LONG-TERM DEBT

~~During~~As ~~the~~of ~~thirty nine weeks ended January~~July 2230, 2006, ~~the Company entered into an amended~~ and ~~restated~~ ~~loan agreement with its principal shareholder, Berjaya Group (Cayman) Limited. As of January~~April 2230, 2006, the Company’s ~~had~~long-term ~~borrowed~~debt ~~$3.2 million from Berjaya, which represents the full amount available under the loan agreement. In March 2006, the loan agreement~~ was ~~amended~~comprised ~~to provide for additional borrowings~~ of ~~up to $0.8 million, thereby increasing~~ the ~~total amount of the~~ ~~loan~~following toitems up(amounts ~~to $4.0 million. In May 2006, the loan agreement was further amended to allow for an additional $800,000~~ in ~~borrowings, thereby increasing the total amount of the loan to up to $4.8~~thousands): million. Presently, the full amount of the loan has been borrowed and is outstanding. The loan matures on June 30, 2006, at which time all accrued interest is required to be paid. Outstanding principal borrowings are payable upon certain events or transactions


	July 30, 2006						April 30, 2006
	Non-Current			Current			Non-Current			Current
	Portion			Portion			Portion			Portion
Long term debt:
Unsecured note due to various entities affiliated with CNL bearing interest at 5%. Monthly payments of $58 are due through October 2007	$	—		$	540		$	43		$	659
Other unsecured notes due to various parties bearing interest at 5%. Notes are due through 2009. Current monthly payments are $40		168			532			303			526

Total long-term debt		168			1,072			346			1,185
Less: debt from discontinued operations		(67	)		(287	)		(141	)		(283	)

Total long term debt from continuing operations	$	101		$	785		$	205		$	902


Notes payable to shareholders:
Unsecured demand notes due to Ayman Sabi (President and Chief Executive Officer) bearing interest at 10%	$	—		$	220		$	—		$	220
Secured note due to the Berjaya Group (Cayman) Limited (majority shareholder), bearing interest at 10%. Full payment is due upon certain events, including a change in control of the Company (currently in default)		—			6,264			—			4,011

Total notes payable to shareholders	$	—		$	6,484		$	—		$	4,231

including a change of control of the Company. See further discussion at Note 11. In addition, in September 2005, the Company borrowed $120,000 from its President and Chief Executive Officer. In May 2006, the Company borrowed an additional $104,000. These loans bear interest at 10% per annum and are repayable on demand.


	July 30, 2006				April 30, 2006
	Non-Current		Current		Non-Current		Current
	Portion		Portion		Portion		Portion
Due to related party:
Unsecured note due to 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	$	309	$	1,586	$	614	$	1,281

Total due to related party	$	309	$	1,586	$	614	$	1,281

The ~~debt~~carrying ~~agreements~~amount ~~resulting~~of ~~from~~property ~~the~~and ~~Company’s~~equipment ~~2002~~used ~~bankruptcy~~as ~~proceedings may require~~collateral ~~prepayments~~for oflong-term ~~principal~~debt towas ~~the~~approximately ~~extent~~$18.5 million ~~the~~and ~~Company~~$19.6 million ~~generates~~at ~~excess~~July 30, ~~cash~~2006 ~~flow~~and ~~from operations~~April 30, as ~~defined~~2006, ~~in the agreements~~respectively.

(58) ~~COMMITMENTS~~STOCK ~~AND~~OPTION ~~CONTINGENCIES~~PLANS

~~GUARANTOR~~ Effective OFJanuary 28, ~~EQUIPMENT~~2003, ~~LEASES~~the Company adopted the 2003 Stock Option Plan (the “2003 Plan”). The 2003 Plan provides for the Company to grant up to 1,500,000 options to purchase shares of common stock to officers, directors, key employees and independent contractors and consultants. The 2003 Plan is administered by the Compensation Committee of the Board of Directors. Options may be granted at an exercise price equal to the fair market value at the date of grant, however not less than $0.36 per share, and may have a term of up to ten years. During fiscal year 2004, the Company granted ten-year options to purchase 1,395,000 shares of common stock to various officers and key employees with an exercise price of $0.36 per share. The options vested one third on April 28th of each of 2004, 2005 and 2006. As of July 30, 2006, 1,095,000 options were outstanding under the 2003 Plan.

~~The~~No ~~Company~~stock isoptions ~~the~~were ~~guarantor~~granted ofor ~~equipment~~exercised ~~leases~~during ~~for three restaurants that are owned by one of its franchisees, Roadhouse West G.P., two of which are currently closed. In addition,~~ the ~~Company~~ ~~believes~~thirteen ~~that~~weeks ~~other~~ended ~~parties have also guaranteed these obligations. Roadhouse West G.P. is currently in a Chapter~~July 730, ~~liquidation.~~2006 ~~The~~or ~~leases are collateralized by~~ the ~~leased~~thirteen ~~equipment~~weeks ~~and certain~~ended ~~leasehold improvements. The Company cannot predict the outcome of the proceeding but believes that any potential liability will be mitigated by the collateral described above and~~July 24, ~~accordingly,~~ ~~the Company has recorded no reserve for any possible obligations that may arise relating to these proceedings~~2005.

~~OTHER~~ Stock ~~AGREEMENTS~~option activity during the thirteen weeks ended July 30, 2006 was as follows:

The Company 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.


				Weighted Average
	Total Options			Exercise Price
Outstanding at April 30, 2006		1,295,000		$	0.36
Granted		—			—
Exercised		—			—
Forfeited		(200,000	)		0.36
Expired		—			—

Outstanding at July 30, 2006		1,095,000		$	0.36


Options exercisable at July 30, 2006		1,095,000		$	0.36

~~OTHER~~ The weighted average remaining contractual terms of stock options outstanding and stock options exercisable at July 30, 2006 was 7.3 years. The aggregate intrinsic value of options outstanding and stock options exercisable at July 30, 2006 was zero.

~~The~~In ~~Company~~December 2004, isthe aFASB ~~party~~issued toSFAS ~~certain~~No. 123R, ~~legal~~“Share ~~proceedings~~Based ~~arising~~Payment”. inThis ~~the~~statement ~~ordinary~~is ~~course~~a revision of ~~business.~~ ~~While~~SFAS itNo. 123, is“Accounting ~~not~~for ~~possible~~Stock toBased ~~predict~~Compensation”, orsupersedes ~~determine~~Accounting Principles ~~the~~Board ~~outcome~~(“APB”) ofOpinion ~~any of these proceedings~~No. 25, ~~the~~“Accounting ~~Company~~for ~~does~~Stock ~~not~~Issued ~~believe~~to ~~that~~Employees” ~~any~~and ~~liability~~amends SFAS ~~resulting~~No. 95, ~~from~~“Statement ~~any~~ of ~~these~~Cash ~~proceedings~~Flows.” ~~will have~~The astatement ~~material~~eliminates ~~adverse effect on~~ the ~~Company’s~~alternative ~~financial~~to ~~position,~~use ~~results~~the ~~of operations or its~~intrinsic ~~business.~~

(6) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Please see Notes 4 and 11 and the Notes to Consolidated Financial Statements in the Company’s Form 10-K for the fiscal year ended April 24, 2005 for a full discussion of the Company’s related party transactions.

~~(7)~~value method of accounting that was provided in SFAS No. ~~NET~~123, ~~LOSS~~which ~~PER~~generally ~~COMMON~~resulted ~~SHARE~~in ~~(“EPS”)~~no compensation expense recorded in financial statements related to the issuance of equity awards to employees. The statement also requires that the cost resulting from all share based payment transactions be recognized in the financial statements. It establishes fair value as the measurement objective in accounting for share based payment arrangements and generally requires all companies to apply a fair value based measurement method in accounting for share based payment transactions with employees.

~~Basic~~The ~~net~~Company ~~earnings~~adopted ~~per~~SFAS ~~share~~No. 123R ~~equals~~effective ~~net~~May 1, ~~earnings~~2006, ~~divided~~using bya ~~the~~modified ~~weighted~~version ~~average shares~~of ~~outstanding~~prospective ~~during~~application in accordance with the ~~year~~statement. ~~The~~This ~~computation~~application ofrequires ~~diluted~~the ~~net~~Company ~~earnings~~to record ~~per~~compensation ~~share~~expense ~~includes~~for ~~dilutive common~~all ~~stock~~awards ~~equivalents~~granted into ~~the~~employees ~~weighted~~and ~~average~~directors ~~shares~~after ~~outstanding.~~the ~~The~~adoption date ~~reconciliation~~and ~~between~~ for the ~~computations~~unvested isportion asof ~~follows~~awards ~~(dollars~~that inare ~~thousands,~~outstanding ~~except~~at ~~per~~the ~~share~~date ~~data):~~of adoption.

	Thirteen Weeks Ended								Thirty Nine Weeks Ended
	January 22, 2006								January 22, 2006
	Net Loss			Shares		Amount			Net Loss			Shares		Amount
BASIC EPS:
Net loss available to common shareholders from continuing operations	$	(2,768	)		29,220,663	$	(0.09	)	$	(7,244	)		29,220,663	$	(0.25	)
Net loss available to common shareholders from discontinued operations		(421	)		29,220,663		(0.02	)		(1,725	)		29,220,663		(0.06	)
Net loss available to common shareholders		(3,189	)		29,220,663		(0.11	)		(8,969	)		29,220,663		(0.31	)
DILUTED EPS:
From continuing operations		(2,768	)		29,220,663		(0.09	)		(7,244	)		29,220,663		(0.25	)
From discontinued operations		(421	)		29,220,663		(0.02	)		(1,725	)		29,220,663		(0.06	)
Net loss		(3,189	)		29,220,663		(0.11	)		(8,969	)		29,220,663		(0.31	)

The Company had no unvested stock options as of April 30, 2006 and granted no stock options in the thirteen weeks ended July 30, 2006, so there is no impact of SFAS No. 123R on the Company’s condensed financial statements for the thirteen weeks ended July 30, 2006. In accordance with the modified prospective transaction method, the Company’s financial statements for prior periods have not been restated to reflect and do not include the impact of SFAS No. 123R.

~~Options to purchase 1,295,000 shares of common stock at a weighted average exercise price of $0.36 per share were outstanding during the thirteen and thirty nine weeks ended January~~(9) ~~22, 2006,~~SELF-FUNDED ~~but were not included in the computation of diluted EPS because the options’ exercise price~~INSURANCE ~~was greater than the average market price of the common shares.~~

The Company maintains insurance to cover the potential liabilities associated with a number of the risks that the Company may encounter in its business operations. These include property and flood coverage, auto, workers’ compensation, general liability and umbrella, directors and officers liability, employers practice liability and crime insurance. Many of the policies, such as property, flood and directors and officers liability include deductibles ranging from $100,000 to $125,000 per claim. In relation to workers’ compensation, prior to calendar 2003 the Company was effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $300,000 per claim and on an aggregate basis. Since calendar 2003, the Company has had fixed cost coverage for workers’ compensation. For employer’s practice liability and general liability coverage, the Company is effectively self-insured up to varying self-insurance retention limits set on an individual claim basis ranging up to $150,000 per claim and on an aggregate basis. The Company is also essentially self-insured in regards to the medical insurance benefits that it provides to its managers and certain other employees. These employees who elect to receive medical insurance benefits are required to contribute a portion of the cost of providing the insurance benefits. Total insurance costs incurred by the Company during the thirteen weeks ended July 30, 2006 and July 24, 2005 were $1.4 million and $0.7 million, respectively.

(10) COMMITMENTS AND CONTINGENCIES

GUARANTOR OF EQUIPMENT LEASES

The Company was a guarantor of equipment leases for three restaurants that were owned by one of its franchisees, Roadhouse West G.P. All of these restaurants are currently closed. In addition, the Company believes that other parties had guaranteed these obligations. Roadhouse West G.P. has been liquidated under Chapter 7 of the U.S. Bankruptcy Code and no claim was made against the Company in such proceedings with respect to the Company’s guarantees. The Company believes that currently it has no liability with respect to these guarantees and accordingly has not recorded any reserve relating to these guarantees.

OTHER AGREEMENTS

The Company is a party to various agreements relating to services performed at its restaurants.

	Thirteen Weeks Ended							Thirty Nine Weeks Ended
	January 23, 2005							January 23, 2005
	Net Income			Shares	Amount			Net Income			Shares	Amount
BASIC EPS:
Net (loss) income available to common shareholders from continuing operations	$	(2,212	)	29,220,663	$	(0.08	)	$	1,415		29,220,663	$	0.05
Net loss available to common shareholders from discontinued operations		(666	)	29,220,663		(0.02	)		(1,830	)	29,220,663		(0.06	)
Net loss available to common shareholders		(2,878	)	29,220,663		(0.10	)		(415	)	29,220,663		(0.01	)
DILUTED EPS:
From continuing operations		(2,212	)	29,220,663		(0.08	)		1,415		29,220,663		0.05
From discontinued operations		(666	)	29,220,663		(0.02	)		(1,830	)	29,220,663		(0.06	)
Net loss		(2,878	)	29,220,663		(0.10	)		(415	)	29,220,663		(0.01	)

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.

~~Options to purchase 1,395,000 shares of common stock at a weighted average exercise price~~OTHER of $0.36 per share were outstanding during the thirteen and thirty nine weeks ended January 23, 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.

~~(8) ADVANCE~~ The ~~SALE~~Company OFis ~~FOOD~~a ~~AND~~party ~~BEVERAGE~~to ~~CREDITS~~certain legal proceedings arising in the 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.

~~In June 2003, the Company entered into an agreement with a loyalty and rewards company~~ (~~the “Rewards Company”~~11) EMPLOYEE involving the discounted advance sale of food and beverage credits to be used at its restaurants. As part of the agreement, during fiscal 2004, the Company received $2.3 million in exchange for the credits, which was recorded in the Consolidated Balance Sheet as unearned revenue. The Company’s liability under the agreement is secured by a lien on certain equipment. The amount of the discount provided to the Rewards Company relating to the sale of food and beverage credits is recognized as advertising expense 401(~~which is included in occupancy and other~~k) inPLAN ~~the~~AND ~~Consolidated~~SUPPLEMENTAL ~~Statement~~EXECUTIVE ofRETIREMENT ~~Operations as the credits are used at the restaurants.~~PLAN 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 January 22, 2006, all food and beverage credits sold to

The Company maintains a plan to provide mid-level employees with an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). As an alternative to providing highly compensated employees with participation in the 401(k) plan, which would have required the Company to extend plan benefits to a broader group of employees, the Company also maintains a Key Employee Secured Benefit Plan (the “KESBP”). This plan replaced a Supplemental Executive Retirement Plan (“SERP”) that was in place until January 2005.

The 401(k) plan permits participants to contribute, on a pre-tax basis, a percentage of compensation but not in excess of the maximum level allowed by the Code. The Company will match 10% of up to the first six percent contributed by each employee. The cost recognized by the Company for matching contributions for fiscal years 2006, 2005 and 2004 was less than $0.1 million each year.

The Company has recently filed its amended Form 5500 for its 401(k) plan for calendar year 2004, including the required audited financial statements. The Company filed its Form 5500 for calendar year 2005 through the Department of Labor Delinquent Filer Voluntary Compliance Program. It has also recently filed its Form 5500 for calendar year 2006, including the required audited financial statement. Further, while Form 5500s were filed for the 401(k) plan for calendar years 2000 to 2003, the audited financial statements required to accompany such filings were never obtained and cannot be obtained without unreasonable effort and expense. However, while penalties and interests may, by law, be assessed relating to such matters, the Company does not anticipate that any substantial amounts will be payable under these circumstances, and no amounts have been reserved on the Company’s financial statements for any such payments.

The KESBP (as well as the prior SERP) permits participants to contribute a maximum of 15% of annual compensation. The Company will match 100% up to the first 10% of annual compensation contributed. The cost recognized by the Company for matching contributions for Fiscal Years 2006, 2005 and 2004 was approximately $0.1 million for each of these years.

(12) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Please see Note 16 of Notes to Financial Statements in the 2006 Form 10-K for a description of the Company’s related party transactions.

~~the Rewards Company under the original agreement have been used. In June~~(13) ~~2004,~~NET ~~the Company~~LOSS ~~renewed~~PER ~~the~~COMMON ~~agreement~~SHARE ~~with the Rewards Company. Under the current agreement, the Company~~(“EPS”) received $3.0 million in exchange for the sale of additional food and beverage credits. As of January 22, 2006 and April 24, 2005, the unearned revenue related to this program was $0.9 million and $1.9 million, respectively.

Basic net earnings per share equals net earnings divided by the weighted average shares outstanding during the year. The computation of diluted net earnings per share includes dilutive common stock equivalents in the weighted average shares outstanding. The reconciliation between the computations is as follows (~~9) ASSET~~dollars ~~SALE/LEASEBACK~~in thousands, except per share data):

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 January 22, 2006 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.


	Thirteen weeks ended
	July 30, 2006
	Net Loss			Shares		Amount
BASIC EPS

Net loss available to common shareholders from continuing operations	$	(5,138	)		29,220,663	$	(0.17	)
Net loss available to common shareholders from discontinued operations		(193	)		29,220,663		(0.01	)

Net loss available to common shareholders	$	(5,331	)		29,220,663	$	(0.18	)


EFFECT OF DILUTIVE SECURITIES

Stock options and warrants		—			—		—

DILUTED EPS

Net loss available to common shareholders from continuing operations	$	(5,138	)		29,220,663	$	(0.17	)
Net loss available to common shareholders from discontinued operations		(193	)		29,220,663		(0.01	)

Net loss available to common shareholders	$	(5,331	)		29,220,663	$	(0.18	)

~~(10)~~ Options to purchase 1,095,000 shares of common stock at a weighted average exercise price of $0.36 per share and warrants to purchase 4,474,337 shares of common stock at a weighted average exercise price of $0.001 per share were outstanding during the thirteen weeks ending July ~~IMPACT~~30, OF2006, ~~2004~~but ~~HURRICANES~~were not included in the computation of diluted EPS because they are antidilutive.

In 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 several of the Company’s properties and 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 24, 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.

(11) LOANS FROM RELATED PARTIES


	Thirteen weeks ended
	July 24, 2005
	Net Loss			Shares		Amount
BASIC EPS

Net loss available to common shareholders from continuing operations	$	(1,477	)		29,220,663	$	(0.05	)
Net loss available to common shareholders from discontinued operations		(519	)		29,220,663		(0.02	)

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


EFFECT OF DILUTIVE SECURITIES

Stock options		—			—		—

DILUTED EPS

Net loss available to common shareholders from continuing operations	$	(1,477	)		29,220,663	$	(0.05	)
Net loss available to common shareholders from discontinued operations		(519	)		29,220,663		(0.02	)

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

InOptions ~~August 2005,~~to ~~the~~purchase ~~Company entered into a loan agreement with its principal shareholder, under which the Company has borrowed $~~1~~.25 million. In October 2005~~,305,000 ~~the~~shares ~~Company~~of ~~entered~~common ~~into~~stock ~~an amended~~at ~~and~~a ~~restated~~weighted ~~loan~~average ~~agreement~~exercise ~~with its principal shareholder under which the Company has~~price ~~borrowed~~of ~~an additional~~ $2.0 ~~million~~.36 Inper ~~each~~share ofwere ~~March~~outstanding ~~and~~during ~~May 2006,~~ the ~~loan~~thirteen ~~agreement~~weeks ~~was amended,~~ending ~~thereby allowing the Company to borrow~~July 24, ~~in the aggregate~~2005, anbut ~~additional~~were ~~$1.6 million. The~~not ~~total~~included ~~amount~~in ~~currently outstanding under~~ the ~~amended~~computation ~~loan~~of ~~agreement~~diluted isEPS ~~$4.8 million.~~because Nothey ~~additional amounts~~ are ~~presently available for further borrowing under the loan agreement~~antidilutive. ~~Proceeds have been~~ used for working capital. Borrowings under the agreement bear interest at 10% and are to be repaid upon certain events or transactions including a change of control of the Company. The loan is secured by a lien on substantially all of the assets of the Company.

~~In addition, as part of its agreement to make the loan in October 2005, the majority shareholder received a common stock purchase warrant~~ (~~the “Warrant”~~14) to purchase, for nominal consideration, 4,474,337 shares of the Company’s authorized but unissued common stock (the “Shares”). Under the terms of the warrant, as amended, the majority shareholder has the right to purchase the Shares on or after July 1,ADVANCE ~~2006.~~SALE ~~The~~OF ~~Warrant~~FOOD ~~will~~AND beBEVERAGE ~~canceled if a change in control~~CREDITS occurs prior to that date. For accounting purposes, no value has been assigned to the warrants at date of grant due to the fact that the warrants are not currently exercisable and are expected to be canceled if a financing or sale transaction is completed.

InThe ~~September 2005, the~~ Company’s ~~President~~has ~~and~~in ~~Chief~~the ~~Executive~~past ~~Officer~~entered ~~loaned~~into ~~the~~agreements ~~Company $120,000,~~with ~~which~~a ~~was~~loyalty ~~used~~and ~~for~~rewards ~~working~~company involving ~~capital.~~the Indiscounted ~~May 2006,~~advance ansale ~~additional~~of ~~$104,000~~food ~~was~~and ~~loaned~~beverage credits to ~~the~~ ~~Company.~~be ~~This~~used ~~loan~~at isits ~~evidenced~~restaurants. As byof aJuly 30, ~~demand~~2006 ~~promissory~~and ~~note~~April 30, ~~bears~~2006, ~~interest~~the atunearned revenue ~~the~~related ~~rate~~to ofthis ~~10% per~~program ~~annum~~was $0.05 million and is$0.4 million, ~~unsecured~~respectively.

(1215) IMPACT OF 2005 HURRICANES

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 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 had seven restaurants in Mississippi, Louisiana and Alabama. Of these restaurants, one restaurant located in Biloxi, Mississippi, was destroyed by by the storm and was a total loss. The Company does not intend to reopen this restaurant. All of ~~the~~ 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. Excluding Biloxi, an aggregate of 80 full or partial days of sales were lost in the Company’s South Florida and Gulf Coast restaurants, representing approximately $0.3 million in lost sales based on prior year sales for these days. ~~The Company has filed insurance claims with respect to its losses,~~ ~~including claims for business interruption.~~ In the aggregate, as of ~~January~~July 2230, 2006 the Company ~~has~~had received $0.45 million in proceeds as a partial settlement on its Hurricane Katrina insurance claim, which has been recorded as an offset to the loss on the carrying value of the assets impacted by the hurricane. ~~The~~While ~~remaining~~additional ~~carrying~~insurance ~~value~~claims ofare ~~these~~pending ~~assets~~with ofrespect to ~~$0.1 million~~the ~~has~~Biloxi ~~been~~restaurant, there can be no assurance that any ~~reclassified~~additional inamounts ~~the~~will be received with respect to such claims.

~~accompanying~~ On ~~Condensed~~October 24, ~~Consolidated~~2005, ~~Balance~~Hurricane ~~Sheet~~Wilma ashit ofSouth ~~January 22~~Florida, ~~2006~~which asresulted in the temporary ~~accounts~~closure ~~receivable~~of ~~based~~thirteen onof the ~~recovery~~Company’s ofrestaurants. ~~this~~The ~~amount~~Company’s South Florida restaurants had varying degrees of damage from ~~additional~~the ~~insurance~~storm. ~~proceeds~~However, all of these restaurants have now reopened. An ~~subsequent~~aggregate toof ~~January 22~~145 full or partial days of sales were lost in the Company’s South Florida restaurants, ~~2006~~representing approximately $0.6 million Atin ~~this~~lost ~~time~~sales based on prior year sales for these days. In addition, the Company’s iscorporate ~~unable~~office towas ~~determine~~closed for an eight-day period. In the ~~amount~~aggregate, as of ~~any~~ ~~additional~~April 30, ~~insurance~~2006 ~~recoveries~~the inCompany ~~excess~~has ofreceived ~~such~~$0.3 million ~~receivable~~in ~~with~~proceeds ~~respect~~as tofull settlement on its Hurricane Wilma insurance claim, which has been ~~Katrina~~recorded ~~losses~~as an offset to the loss on the carrying value of the assets impacted by the hurricane.

~~On October~~(16) ~~24,~~LOANS ~~2005,~~FROM ~~Hurricane~~RELATED ~~Wilma hit South Florida, which resulted in the temporary~~PARTIES closure of thirteen of the Company’s restaurants. The Company’s South Florida restaurants had varying degrees of damage from the storm. However, all of these restaurants have now reopened. An aggregate of 145 full or partial days of sales were lost in the Company’s South Florida restaurants, representing approximately $0.6 million in lost sales based on prior year sales for these days. In addition, the Company’s corporate office was closed for an eight-day period. The Company is in the process of filing insurance claims with respect to its losses, including claims for business interruption. In the aggregate, as of January 22, 2006 the Company has received $0.1 million in proceeds as a partial settlement on its Hurricane Wilma insurance claim, which has been recorded as an offset to the carrying value of the assets impacted by the hurricane. The remaining carrying value of these assets of $0.2 million has been reclassified in the accompanying Condensed Consolidated Balance Sheet as of January 22, 2006 as accounts receivable and was collected as an additional partial settlement subsequent to January 22, 2006. At this time, the Company is unable to determine the amount of any additional insurance recoveries in excess of such receivable with respect to its Hurricane Wilma losses.

~~(13)~~ In August ~~ASSET~~2005, ~~HELD~~the ~~FOR~~Company ~~SALE~~entered into a loan agreement with its principal shareholder, under which the Company originally borrowed $1.25 million. In October 2005, the Company entered into an amended and restated loan agreement with its principal shareholder under which the Company has borrowed an additional $2.0 million. In each of March and May 2006, the loan agreement was amended, thereby allowing the Company to borrow, in the aggregate, an additional $1.6 million. Additional amounts were borrowed in July 2006, and the total amount outstanding as of May 29, 2007 is approximately $8.1 million, including accrued but unpaid interest, all of which is in default and currently due. Proceeds were used for working capital in the Company’s business. Borrowings under the agreement bear interest at 10% and are to be repaid upon certain events or transactions including a change of control of the Company. The loan is secured by a lien on substantially all of the assets of the Company.

~~During~~In ~~the~~addition, ~~thirteen~~as ~~weeks~~part ~~ended~~of ~~January 22,~~its ~~2006,~~agreement ~~the~~to ~~Company~~make ~~sold~~the ~~its~~loan ~~closed~~in ~~property~~October 2005, inthe majority ~~Columbia,~~shareholder ~~South~~received ~~Carolina,~~a ~~which~~common ~~was~~stock ~~recorded~~purchase aswarrant an(the ~~asset~~“ ~~held~~Berjaya Warrant”) to purchase, for nominal ~~sale~~consideration, in4,474,337 shares of the ~~accompanying Condensed~~Company’s ~~Consolidated~~authorized ~~Balance~~but ~~Sheet.~~unissued ~~The~~common ~~net~~stock ~~proceeds~~(the “Shares”). ~~from~~Under the ~~sale~~terms of ~~$0.4 million~~the ~~were~~Berjaya ~~used~~Warrant, ~~to repay~~as ~~debt~~amended, ~~owed~~the majority shareholder has the right to purchase the ~~Company’s~~Shares ~~principal~~on ~~shareholder~~or after July 1, 2006. NoThe ~~gain~~Warrant orwould ~~loss~~have ~~was~~been ~~recognized~~cancelled onif ~~the~~a ~~transaction~~change in control occurred prior to that date. For accounting purposes, ~~since~~no value was assigned to the ~~carrying~~Berjaya ~~value~~Warrant ofbecause ~~such~~it ~~property~~was not exercisable on the ~~Company’s~~date ~~books~~of grant and ~~records~~ was ~~equal~~ expected to ~~the~~be ~~net~~cancelled ~~proceeds~~if a ~~from~~financing ~~the~~or sale transaction was completed. During the first quarter of fiscal 2007, ~~after~~the ~~recording~~Company recorded a charge ofaggregating $621,070,000, ~~during~~which is the ~~thirteen~~fair ~~weeks ended~~value ~~October 23,~~of ~~2005~~the toBerjaya ~~adjust~~Warrant on the ~~carrying~~date ~~value~~it first became exercisable. The Berjaya Warrant is expected to ~~estimated~~be ~~net~~cancelled ~~realizable~~upon ~~value~~the closing of the transaction with Duffy’s (see Note 17).

In September 2005, the Company’s President and Chief Executive Officer loaned the Company $120,000, which was used for working capital. In May 2006, an additional $100,000 was loaned to the Company. This loan is evidenced by a demand promissory note, bears interest at the rate of 10% per annum and is unsecured.

(17) SUBSEQUENT EVENTS

Agreement with Duffy’s

On April 6, 2007, Duffy’s Holdings, Inc., a Florida corporation (“Duffy’s”), RHG Acquisition Corporation, a Florida corporation and a wholly-owned subsidiary of Duffy’s (“Buyer”), the Company, Berjaya Group (Cayman) Limited, a corporation organized under the laws of the Cayman Islands (“Berjaya Cayman”), Prime Gaming Philippines, Inc., a corporation organized under the laws of the Philippines (“Prime”, and, together with Berjaya Cayman, “Berjaya”), Tonto Capital Partners, GP, a general partnership organized in the State of Delaware (“Tonto”) and controlled by Ayman Sabi (“Sabi”),

~~ITEM~~the 2Company’s President and CEO, and Steven Saterbo, an individual (“Saterbo”) (Berjaya, Tonto, and Saterbo are collectively referred to herein as the “Selling Shareholders”) entered into an Agreement (the “Agreement”) pursuant to which Buyer will purchase from the Selling Shareholders an aggregate of 24,996,342 shares (the “Shares”) of Company’s outstanding common stock, constituting 85.5% ~~MANAGEMENT~~of Company’Ss ~~DISCUSSION~~outstanding ~~AND~~common ~~ANALYSIS~~stock OF(the ~~FINANCIAL~~“Stock ~~CONDITION~~Purchase”). ~~AND~~Duffy’s ~~RESULTS~~has OFguaranteed ~~OPERATIONS~~the obligations of the Buyer under the terms of the Agreement.

~~FORWARD~~ Pursuant ~~LOOKING~~to ~~STATEMENTS~~the Agreement, Buyer will purchase the Shares from the Selling Shareholders for $0.32 per share, or an aggregate of $7,998,829, which will consist of $1,000,000 of cash and a promissory note in the principal amount of $6,998,829 (the “Selling Shareholder Note”). The cash portion and the portion of the consideration payable to the Selling Shareholders that is represented by the Selling Shareholder Note is subject to certain additions or reductions, as more particularly set forth in the Agreement. Further, the Selling Shareholders will be entitled to receive additional consideration under certain circumstances (all as more particularly set forth in the Agreement), provided, however, that the Selling Shareholders will receive no more than $0.46 per share for their shares under any circumstances.

~~This~~The ~~report~~Selling ~~contains~~Shareholder ~~“forward~~Note ~~looking~~will ~~statements”~~be ~~within~~an ~~the~~unsecured ~~meaning~~obligation ~~of the Private Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs, projections, future plans~~ and ~~strategies,~~will ~~anticipated~~bear ~~events~~interest orat ~~trends and similar expressions concerning matters that are not historical facts. Statements preceded by, followed by, or that include~~ the ~~words~~ ~~“believes,”~~rate ~~“expects,”~~of ~~“anticipates,”~~8% orper ~~similar~~annum. ~~expressions~~Interest ~~are~~will ~~generally considered to~~ be ~~forward-looking~~ ~~statements.~~payable ~~Specifically~~quarterly, ~~this~~and ~~report~~principal ~~contains~~will ~~forward-looking~~be ~~statements regarding,~~due ~~among~~on ~~other~~the ~~matters, our strategies, plans, objectives, expectations, future market~~date ~~position,~~that ~~operations,~~is ~~cash~~two ~~flow,~~years ~~margins,~~after ~~revenue,~~the ~~profitability,~~closing ~~restaurant-level~~of ~~economics, liquidity~~the ~~and~~Stock ~~capital resources~~Purchase.

~~Forward~~In ~~looking~~connection ~~statements~~with ~~contained~~the inStock ~~this~~Purchase, ~~report~~Berjaya ~~are~~Cayman, ~~not~~which ~~guarantees~~is ofcurrently ~~future~~a ~~performance~~senior lender to Company and ~~involve~~was ~~certain~~owed ~~risks,~~approximately ~~uncertainties~~$8.1 million ~~and~~at ~~assumptions~~February 25, ~~all~~2007, ofincluding ~~which~~accrued ~~are~~but ~~difficult~~unpaid interest to(the ~~predict. We~~“Berjaya ~~wish~~Loan”), tohas ~~caution~~agreed ~~readers~~to ~~that~~modify ~~certain~~its ~~important~~loans ~~factors~~(the ~~have~~“Berjaya ~~affected~~Loan inRestructuring”). Under the ~~past~~Agreement, ~~and~~at ~~may affect in~~ the ~~future~~closing ~~our~~of ~~actual~~the ~~results,~~Stock ~~and~~Purchase ~~such~~the ~~factors~~Berjaya ~~could~~Loan ~~cause~~will ~~actual~~be ~~results~~reduced to ~~differ~~an ~~significantly~~amount ~~from~~that ~~those~~when ~~expressed~~added orto ~~implied~~Company’s inoutstanding ~~any~~debt ~~forward~~will ~~looking~~not ~~statement~~exceed ~~contained~~$10 million, inall ~~this~~as more ~~report.~~particularly ~~Important~~set ~~factors~~forth ~~that~~in ~~could~~the ~~cause~~Agreement. ~~actual~~Had ~~results~~the toclosing ~~differ~~of ~~materially~~the ~~from~~Stock ~~those expressed~~Purchase ortaken ~~implied~~place byon February 25, 2007, the ~~forward~~Berjaya ~~looking~~Loan ~~statements~~would inhave ~~this~~been ~~report~~reduced ~~include, but are not limited~~ to, ~~the~~approximately ~~following:~~$4,143,000.

• The ~~Our~~restructured ~~ability~~Berjaya toLoan ~~effectively~~will ~~complete~~be ~~the~~an ~~investment~~unsecured ~~banking~~loan ~~process~~ and ~~identify~~will ~~suitable~~bear ~~financing~~interest orat sale strategic options for our Company; • Our having sufficient working capital to meet our future operating and capital requirements; • Our ability to obtain additional debt and/or equity capital to meet our working capital requirements; • Our ability to comply with the ~~terms~~rate of 8% ~~our~~per ~~debt~~annum. ~~instruments,~~For ~~operating~~the ~~leases,~~first ~~capital~~two ~~leases and vendor contracts; • Our ability to increase our sales and manage our labor costs~~years, ~~food~~interest ~~costs,~~will ~~other~~be ~~restaurant~~payable ~~costs~~quarterly. ~~and corporate expenses~~Thereafter, ~~and~~for ~~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~~three years, ~~and events that affect~~ the ~~availability~~principal ~~and pricing of food products~~ (~~such~~along aswith ~~instances~~accrued ofbut ~~mad~~unpaid ~~cow disease~~interest); •will ~~Our~~be ~~ability~~paid toin ~~recruit,~~12 ~~train~~consecutive quarterly ~~and~~payments. ~~retain~~Pursuant ~~qualified management personnel and~~ to ~~obtain~~the ~~a sufficient number of qualified restaurant employees; • Trends in consumer preferences~~Agreement, ~~tastes~~Berjaya ~~and~~Cayman ~~eating~~will ~~habits~~also ~~and~~be ~~competition~~entitled ~~for consumer dollars, both from restaurants similar~~ to ~~our~~additional consideration ~~restaurants and from restaurants generally; • The level~~ of ~~competition~~up ~~from~~to ~~restaurants~~approximately ~~that~~$500,000 ~~operate~~under incertain ~~the markets in which we operate;~~circumstances.

Further, as part of the Stock Purchase, the Company will transfer to Berjaya Cayman certain Company trademarks and intellectual property for the Asia/Pacific region (excluding Australia and New Zealand) and the Middle East (the “Berjaya IP Transfer”). The parties have agreed that the purchase price for these assets will be $2 million, and that such purchase price will be funded from a portion of the senior debt that Berjaya Cayman is agreeing to forgive as part of the Stock Purchase.

The closing of the Stock Purchase, including the Berjaya Loan Restructuring and the Berjaya IP Transfer, is subject to various closing conditions, all as more particularly set forth in the Agreement, including the Company filing certain delinquent annual and quarterly filings with the U.S. Securities and Exchange Commission (“SEC”) and thereafter Company filing a Form 15 with the SEC deregistering the Company’s common stock under the Securities Exchange Act of 1934. The Company is eligible to deregister by filing a Form 15 because it has fewer than 300 holders of record of its common stock.

Additionally, at the closing of the Stock Purchase, Buyer will infuse $11 million into Company, $9 million of which shall be infused as an equity contribution and $2 million of which shall be infused as a loan. These funds will be used by the Company to pay certain delinquent obligations of the Company due to taxing authorities, to fund costs relating to the transactions contemplated by the Agreement and to

•fund U.the S.cash ~~domestic~~required ~~economic~~to ~~conditions~~purchase ~~and~~ the ~~impact~~shares of ~~international~~common ~~conflicts~~stock ~~on domestic economic conditions; • The impact of seasonality on our business resulting from having 31 of our 59 current Company-~~owned ~~restaurants~~by ~~in Florida; • Our exposure to~~ the ~~impact~~Company ofminority shareholders ~~hurricanes and other tropical storms as a result of~~ (the ~~heavy~~“Minority ~~concentration of our restaurants in the southeastern United States; • Our ability to maintain financial and accounting controls~~Shareholders”), ~~management~~who ~~controls,~~together ~~and~~own ~~adequate~~approximately ~~reporting~~14.5% ~~systems~~of ~~and procedures; • Increases in interest rates; and • To~~ the ~~extent~~Company’s outstanding ~~that~~common ~~we decide to further franchise our restaurant concept~~stock, ~~our~~as ~~ability~~more toparticularly ~~locate~~described ~~suitable franchisees in markets that we do not serve (both nationally and internationally) and the ability of those franchisees to develop, open and successfully operate restaurants in those markets~~below.

~~The~~Further, ~~forward~~Buyer ~~looking~~has ~~statements~~agreed ~~contained~~that infollowing ~~this~~the ~~report~~closing ~~reflect~~of ~~our~~the ~~current~~Stock ~~view about future events and are subject to risks~~Purchase, ~~uncertainties~~it ~~and assumptions. The important factors described above~~will, as ~~well as~~ the holder ~~factors~~of ~~described~~more ~~elsewhere~~than in80% ~~this~~of ~~report~~Company’s ~~and~~common instock, ~~our~~effect ~~Annual~~a ~~Report on Form 10~~short-Kform ~~for~~merger ~~fiscal 2005~~ (the “~~Form 10~~Short-KForm Merger”), ~~could~~with ~~cause the assumptions underlying our forward looking statements to be incorrect~~ and ~~thereby~~into ~~cause~~Company ~~our~~under ~~actual~~Section 607.1104 ~~results~~of tothe ~~differ~~Florida ~~materially from those expressed in or implied by our forward looking statements~~Statutes. WeIn ~~undertake~~the ~~no obligation to revise~~Short-Form ~~any~~Merger, of the ~~forward~~shares ~~looking~~of ~~statements~~Company ~~contained~~common instock ~~this~~owned ~~report,~~by ~~which~~the ~~speak~~Minority ~~only~~Shareholders aswill ofbe ~~the date~~converted ~~hereof.~~into ~~Readers~~the ofright ~~this report are therefore cautioned not~~ to ~~place~~receive ~~undue~~$0.46 ~~reliance~~per onshare ~~these forward~~in ~~looking~~cash ~~statements~~(without interest).

~~GENERAL~~ The Agreement has been approved by the Company’s Board of Directors. Further, the Company’s Board of Directors has determined that the transactions contemplated by the Agreement, including the Short Form Merger, are in the best interest of the Company and its shareholders. Neither the Short-Form Merger nor any of the transactions contemplated by the Agreement require approval by the Company’s shareholders, including the Minority Shareholders.

~~We operate~~Finally, ~~franchise~~at ~~and license high-quality, full-service casual dining restaurants under~~ the ~~name~~closing ~~“Roadhouse Grill.” As~~ of ~~January 22, 2006, there were 60 Company-owned Roadhouse Grill restaurants, 31 of which are located in Florida and~~ the ~~balance~~Stock ~~of which are located in Alabama~~Purchase, ~~Arkansas,~~ ~~Georgia,~~Buyer ~~Louisiana,~~intends ~~Mississippi,~~to ~~New~~enter ~~York,~~into ~~North~~a ~~Carolina, Ohio, and South Carolina. We~~consulting ~~also~~agreement ~~have~~with 12Sabi ~~franchised~~with orrespect licensed restaurants. During the thirty nine weeks ended January 22, 2006, five restaurants were closed upon the termination of the related leases. 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~~certain ~~properties will terminate upon the sale of the respective properties. In addition~~matters, ~~during~~all ~~the~~as ~~thirty~~more ~~nine~~particularly ~~weeks~~set ~~ended~~forth ~~January 22, 2006, one of our restaurants was destroyed by Hurricane Katrina. Subsequent to January 22, 2006, one additional restaurant was closed~~ in ~~conjunction with~~ the ~~expiration of the related lease~~ Agreement.

~~During~~While ~~the~~there ~~last~~can ~~few~~be ~~years~~no assurance, ~~our~~the ~~business~~closing ~~has~~of ~~been~~the ~~hampered~~transactions contemplated by ~~heavy~~the ~~debt and working capital~~Agreement ~~insufficient~~is toexpected ~~operate our business. We have also experienced a continuing decline in restaurant sales due~~ to, ~~among~~close ~~other~~on ~~issues,~~or ~~our~~about ~~lack of resources to adequately market our restaurants~~May 31, ~~competition~~ ~~in the markets where we operate, weather~~2007.

Additional Borrowings

In January and May, 2007, the Company borrowed an aggregate of $1.9 million from Credit Cash, LLC. The loan is due in February 2008, bears interest at 12% per annum and is secured by a lien on the Company’s credit card receivables. At May 8, 2007, the balance due (including interest) was approximately $1.4 million.

Agreement with Supplier

In February 2007, the Company entered into a payment plan with its principal supplier. Pursuant to the payment plan, the Supplier agreed to term-out $2.4 million of the amounts then due from the Company to the Supplier. The payment plan was evidenced by a written agreement between the Company and the Supplier that requires the Company to pay interest on the amount termed-out equal to the prime rate plus 2.5% and requires the Company to make weekly payments to the Supplier of $25,000 with respect to this obligation.

~~conditions~~ITEM ~~and economic conditions generally~~2. ~~Further,~~MANAGEMENT’S weDISCUSSION ~~have~~AND ~~experienced~~ANALYSIS ~~substantial~~OF ~~food~~FINANCIAL ~~cost increases,~~CONDITION ~~primarily~~AND ~~driven~~RESULTS byOF ~~higher beef prices, only a portion of which we have been able to~~OPERATIONS 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 have had a material negative impact on our working capital and cash position.

~~AGREEMENT~~FORWARD ~~AND~~LOOKING ~~PLAN OF MERGER~~STATEMENTS

OnThis ~~November 17,~~Quarterly ~~2005,~~Report weon ~~entered~~Form ~~into~~10-Q anfor ~~agreement~~the ~~and~~thirteen ~~plan~~weeks ofended ~~merger with Steakhouse Partners~~July 30, ~~Inc.~~2006 (the “~~Steakhouse~~Form 10-Q”) ~~pursuant~~contains to“forward ~~which~~looking ~~Steakhouse~~statements” ~~was~~within tothe ~~acquire~~meaning ~~our~~of ~~outstanding~~the ~~common~~Private Securities ~~stock.~~Litigation ~~For~~Reform ~~details~~Act ~~regarding~~of ~~our~~1995. ~~proposed~~These ~~merger,~~statements ~~see~~concern ~~our definitive proxy statement dated January 5~~expectations, ~~2006. The merger was subject~~beliefs, ~~among other matters~~projections, ~~to Steakhouse obtaining financing sufficient~~future toplans ~~complete~~and ~~the transaction. However~~strategies, ~~Steakhouse~~anticipated ~~was~~events ~~not~~or ~~able~~trends toand ~~obtain~~similar ~~the~~expressions ~~financing~~concerning ~~necessary~~matters tothat ~~complete~~are ~~the~~not ~~Merger~~historical ~~and,~~facts. asStatements apreceded ~~result~~by, onfollowed ~~March 14~~by, ~~2006~~or wethat ~~terminated~~include the ~~Merger. On March 15,~~words ~~2006~~“believes,” we“expects,” ~~announced~~“anticipates,” ~~that~~or ~~our~~similar ~~Board~~expressions ofare ~~Directors~~generally ~~would~~considered ~~continue~~ to ~~explore strategic options that~~be ~~might~~forward-looking bestatements. ~~available~~Specifically, ~~and~~this ~~that~~report wecontains ~~would~~forward-looking ~~continue~~statements regarding, toamong ~~have~~other ~~the~~matters, ~~financial support of~~ our ~~principal shareholders~~plans, ~~including~~objectives, ~~the~~expectations, ~~Berjaya Group. In that regard~~operations, wecash ~~continue to be advised with respect~~flow, tomargins, ~~our~~revenue, ~~strategic~~liquidity ~~planning~~and ~~process~~capital ~~by the investment banking firm of J~~resources. ~~H. Chapman Group, L.L.C.~~

~~LOANS~~ Forward ~~FROM~~looking ~~RELATED~~statements ~~PARTIES~~contained in this Form 10-Q 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 Form 10-Q. Important factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements in this Form 10-Q include, but are not limited to, the following:

In• ~~August 2005,~~Our weability ~~entered~~to ~~into~~satisfy athe ~~loan~~conditions ~~agreement~~to ~~with~~the ~~our~~closing ~~majority~~of ~~shareholder~~our ~~under~~agreement ~~which~~with ~~we borrowed~~Duffy’s ~~$1.25 million.~~Holdings, ~~In October 2005~~Inc., wea ~~entered~~transaction ~~into~~in ~~an amended and restated loan agreement with our majority shareholder under~~ which weDuffy’s ~~borrowed~~will aninfuse ~~additional~~ $~~2.0~~ 11 million. Ininto ~~each of March and May 2006, the loan agreement was amended, thereby allowing~~ us ~~to borrow~~, ina ~~the~~portion ~~aggregate,~~of ~~an additional~~which ~~$1.6 million.~~will ~~The~~be ~~total amount currently outstanding under the amended loan agreement is $4.8 million. No additional amounts are presently available for further borrowing under the loan agreement. Proceeds were~~ used ~~for~~to ~~working~~reduce ~~capital.~~our ~~Borrowings~~accounts ~~under~~payable ~~the agreement bear interest at 10%~~ and ~~are~~accrued ~~to be repaid upon certain events or transactions including a change of control of the Company. The loan is secured by a lien on substantially all of our assets.~~ expenses;

In• ~~September 2005,~~Our ~~our~~having ~~President~~sufficient ~~and~~funds ~~Chief~~to ~~Executive~~pay ~~Officer~~our ~~loaned us $120~~debts,~~000~~ onincluding ~~demand, which~~our ~~was~~tax ~~used for working capital. In May 2006~~obligations, anour ~~additional~~operating ~~$104~~leases,~~000~~ ~~was~~capital ~~loaned~~leases ~~to us. This loan is unsecured~~ and ~~bears~~our ~~interest~~vendor ~~at the rate of 10% per annum.~~ contracts;

•

Our ability to increase our sales and manage our labor costs, food costs, other restaurant costs and corporate expenses, and our ability to turn our business from one with negative cash flow and net losses to one with positive cash flow and net income;

•

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;

•

The impact of seasonality on our business resulting from having 28 of our 56 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;

~~IMPACT~~• OFIncreases ~~2005~~in ~~HURRICANES~~ interest rates; and

On• ~~August 24~~Economic ~~and~~conditions ~~25, 2005, Hurricane Katrina hit South Florida. The storm thereafter hit the Southeast Gulf Coast region on August 29, 2005. None of our South Florida restaurants were heavily damaged~~ in the ~~storm,~~markets ~~and all South Florida restaurants that were temporarily closed due to the hurricane have reopened. We had seven restaurants~~ in ~~Mississippi,~~which Louisiana and Alabama. Of these restaurants, one restaurant located in Biloxi, Mississippi, was destroyed by the storm and was a total loss. We do not intend to reopen this restaurant. All of our other restaurants in the gulf coast region had varying degrees of damage from the storm. However, all of these other restaurants have now reopened. Excluding Biloxi, an aggregate of 80 full or partial days of sales were lost in our South Florida and Gulf Coast restaurants, representing approximately $0.3 million in lost sales based on prior year sales for these days. We have filed insurance claims with respect to our losses, including claims for business interruption. In the aggregate, we ~~have received $0~~operate.5 million in proceeds as a partial settlement on our Hurricane Katrina insurance claim, including $0.4 million that was received prior to January 22, 2006. At this time, we are unable to determine the amount of any additional insurance recoveries with respect to our Hurricane Katrina losses.

OnThe ~~October 24,~~forward ~~2005,~~looking ~~Hurricane~~statements ~~Wilma~~contained ~~hit South Florida, which resulted~~ in ~~the~~this ~~temporary closure~~Form 10-Q ofreflect ~~thirteen of~~ our ~~restaurants.~~current ~~The~~view ~~restaurants~~about ~~had~~future events ~~varying~~and ~~degrees~~are ofsubject ~~damage~~to ~~from the storm. However~~risks, ~~all~~uncertainties ofand ~~these restaurants have now reopened~~assumptions. AnThe ~~aggregate~~important offactors ~~145~~described above, ~~full~~as orwell ~~partial days~~as ofthe ~~sales~~factors ~~were~~described ~~lost~~elsewhere in ~~our~~this ~~South~~Form ~~Florida restaurants~~10-Q, ~~representing~~could ~~approximately~~cause ~~$0.6 million~~the assumptions inunderlying ~~lost~~our ~~sales~~forward ~~based~~looking onstatements ~~prior~~to ~~year~~be ~~sales~~incorrect ~~for~~and ~~these~~thereby ~~days.~~cause ~~In addition,~~ our ~~corporate~~actual ~~office~~results ~~was~~to ~~closed~~differ ~~for~~materially anfrom ~~eight-day~~those ~~period.~~expressed ~~We are~~ in ~~the~~or ~~process~~implied ofby ~~filing~~our ~~insurance~~forward ~~claims~~looking ~~with~~statements. ~~respect to~~We ~~our~~undertake ~~losses,~~no ~~including~~obligation ~~claims~~to ~~for~~revise ~~business~~any ~~interruption.~~of In the ~~aggregate,~~forward welooking ~~have~~statements ~~received~~contained ~~$0.3 million~~in asthis areport, which ~~partial~~speak ~~settlement~~only as of the ~~insurance~~date ~~claim including $0~~hereof.~~1 million~~ ~~that~~Readers ~~was~~of ~~received before January 22, 2006. At~~ this ~~time,~~Form we10-Q are ~~unable~~therefore tocautioned ~~determine~~not ~~the~~to place ~~amount~~undue ofreliance ~~any~~on ~~additional insurance~~these ~~recoveries~~forward ~~with~~looking ~~respect~~statements tocontained ~~our~~in ~~Hurricane~~this ~~Wilma~~Form ~~losses~~10-Q.

~~OVERVIEW~~GENERAL

~~Our~~We ~~revenues~~operate, ~~are~~franchise ~~derived~~and ~~primarily~~license ~~from~~high-quality ~~the~~full-service ~~sale~~casual ofdining ~~food~~restaurants ~~and beverages. Restaurant sales~~under ~~generated~~the ~~from~~name ~~lunch~~“Roadhouse ~~and~~Grill.” ~~dinner~~As ~~amounted~~of ~~to approximately 28% and 72%~~May 29, ~~respectively~~2007, ~~of restaurant~~there ~~sales~~were ~~during~~56 ~~each of the thirteen~~company-~~week~~owned ~~periods~~Roadhouse ~~ended January 22~~Grill restaurants, ~~2006~~28 ~~and~~of ~~January 23,~~which ~~2005. Restaurant~~were ~~sales~~located ofin ~~food~~Florida and ~~beverages~~the ~~accounted~~balance ~~for~~of ~~approximately~~which ~~91%~~are ~~and~~located ~~9%,~~in ~~respectively~~Alabama, of ~~total~~Arkansas, ~~restaurant~~Georgia, ~~sales~~Louisiana, inMississippi, ~~each~~New ofYork, ~~the~~North ~~third~~Carolina, ~~fiscal~~Ohio, ~~quarters of 2006~~ and ~~2005~~South Carolina. ~~Franchise and~~We ~~management~~also ~~fees~~have ~~during~~five ~~the~~franchisees ~~thirteen~~or ~~weeks~~licensees ~~ended~~that ~~January 22,~~currently ~~2006~~operate ~~and~~an ~~January 23,~~additional ~~2005~~12 ~~accounted for less than 1% of our revenues~~restaurants.

~~Restaurant~~OUR ~~operating~~LIQUIDITY ~~expenses~~IS ~~include~~TIGHT ~~food~~AND ~~and~~OUR ~~beverage,~~CIRCUMSTANCES ~~labor,~~RAISE ~~direct~~SUBSTANTIAL ~~operating~~DOUBT ~~and~~AS ~~occupancy costs.~~TO ~~Direct~~OUR ~~operating~~ABILITY ~~costs~~TO ~~consist primarily of costs of expendable supplies, marketing and~~CONTINUE ~~advertising~~AS ~~expense,~~A ~~maintenance,~~GOING ~~utilities and restaurant general~~CONCERN

We reported net losses in each of the thirteen weeks ended July 30, 2006 and July 24, 2005. We have also experienced cash flow constraints over the last few years and we have not always been timely in our payments due to our creditors, including taxing authorities. We are also in default with respect to the $8.1 million in senior debt that is due to our majority shareholder. Among the obligations that have not been timely paid are certain payroll and sales tax obligations, and our failure to pay such obligations on a timely basis has caused us to incur substantial penalty and interest charges with respect to such obligations.

If the transactions with Duffy’s closes, Duffy’s will infuse $11 million into us at the closing, a portion of which will be used to satisfy such past due obligations to taxing authorities. The closing will also reduce the borrowings due to our majority shareholder and will recast the terms of our debt due to our majority shareholder such that the debt will no longer be in default.

If we are unable to complete the transactions contemplated by the agreement with Duffy’s, we will seek to secure additional financing from our majority shareholder or other sources. In that regard, our majority shareholder is not obligated to provide any such additional financing to us and has not indicated its willingness to do so. Our inability to obtain such additional financing would likely have a material adverse effect on our business, results of operations and financial condition and could result in a curtailment of our operations. Our auditors have included a going concern modification in their audit report on our financial statements at April 30, 2006 and for the fiscal year then ended as a result of these contingencies.

LOANS FROM OUR MAJORITY SHAREHOLDER AND OUR CHIEF EXECUTIVE OFFICER

In August 2005, we entered into a loan agreement with our principal shareholder under which we initially borrowed $1.25 million. In October 2005, we entered into an amended and restated loan

~~and~~agreement ~~administrative~~with ~~expenses~~our principal shareholder under which we borrowed an additional $2.0 million. ~~Occupancy~~In each ~~costs~~of ~~include~~March ~~rent~~and May 2006, ~~real~~the ~~estate~~loan ~~and~~agreement ~~personal~~was ~~property~~further ~~taxes~~amended, thereby allowing us to borrow, ~~and~~in ~~property~~the ~~insurance~~aggregate, an additional $1.6 million. ~~Certain~~The ~~elements~~loan ofwas ~~our~~further ~~restaurant~~increased ~~operating~~in ~~expenses,~~July 2006 ~~including~~to ~~direct~~its ~~operating~~current ~~and~~borrowing ~~occupancy~~level. ~~costs~~The ~~and~~loan tois acurrently ~~lesser~~in ~~extent~~default. ~~labor~~At ~~costs~~the date of this Form 10-Q, ~~are~~we ~~relatively~~owe our ~~fixed~~majority shareholder approximately $8.1 million, including accrued but unpaid interest.

OfIn ~~the~~addition, 60as ~~Company-owned~~part ~~restaurants~~of ~~operating~~its asagreement ofto ~~January 22,~~make ~~2006,~~ the ~~newest~~loan ~~was opened~~ in ~~June~~ October ~~2003.~~2005, ~~Two~~we ~~restaurants~~issued ~~were closed during~~ the ~~thirteen~~Berjaya Warrant ~~weeks~~to ~~ended~~our ~~January 22,~~majority ~~2006~~shareholder ~~and~~allowing ~~three other~~it ~~restaurants~~to ~~were~~purchase, ~~closed~~for innominal ~~fiscal~~consideration, ~~2006~~4,474,337 shares inof ~~conjunction~~our ~~with~~authorized ~~the~~but ~~termination~~unissued ofcommon stock (the ~~related leases~~“Shares”). ~~During~~Under the ~~thirteen~~terms ~~weeks~~of ~~ended~~the ~~October 23~~Berjaya Warrant, ~~2005~~as amended, ~~two~~our ~~additional~~majority ~~restaurants~~shareholder ~~were~~has ~~closed and~~the ~~remain~~right ~~closed~~to ~~while~~purchase the ~~properties~~Shares ~~are~~on ~~marketed~~or ~~for~~after ~~sale. Although there can be no assurance,~~July we1, ~~expect~~2006. ~~that~~The ~~the~~Berjaya ~~leases~~Warrant ~~related to these properties~~ will ~~terminate~~be ~~upon~~canceled ~~the~~as ~~sale~~part of the ~~respective~~ ~~properties.~~transaction Wecontemplated ~~closed~~by ~~these seven restaurants because they were underperforming from a~~the ~~financial~~agreement ~~standpoint~~with ~~and~~Duffy’s. weFor ~~determined~~accounting ~~that~~purposes, itno ~~would~~value bewas ~~better~~assigned to ~~focus~~the ~~our~~Berjaya ~~management~~Warrant ~~time and~~at ~~attention~~date ~~and~~of ~~our~~grant ~~available~~since ~~resources~~it onwas ~~our~~not ~~better performing restaurants~~exercisable. ~~Finally,~~We ~~one~~have ofrecorded ~~our restaurants~~a ~~was~~charge ~~destroyed by Hurricane Katrina and one additional restaurant was closed~~ in ~~early 2005 upon~~ the ~~termination~~amount of ~~the related lease~~$1.1 million for Nothe ~~additional~~fair ~~Company-owned~~value ~~restaurants~~of ~~are currently~~the ~~expected~~Berjaya toWarrant ~~open~~ in ~~fiscal year 2006. In addition to~~ the ~~Company-owned~~first ~~restaurants,~~quarter ~~we also~~of ~~have~~Fiscal 12Year ~~franchised~~2007 oron ~~licensed restaurants. Subsequent to January 22, 2006, one additional restaurant was closed in conjunction with~~ the ~~expiration~~date ofsuch ~~the~~warrant ~~related~~first ~~lease~~became exercisable.

~~CRITICAL~~ In ~~ACCOUNTING~~September 2005, ~~POLICIES~~our Chief Executive Officer, Ayman Sabi, loaned us $120,000, which was used for working capital. In May 2006, Mr. Sabi loaned us an additional $100,000 (see Note 16 of Notes to Financial Statements).

~~Our~~IMPACT ~~accounting~~OF ~~policies are more fully described in our Form 10-K. As disclosed therein, the~~HURRICANES 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.

~~DISCONTINUED~~ On ~~OPERATIONS~~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 our South Florida restaurants were heavily damaged in the storm, and all South Florida restaurants that were temporarily closed due to the hurricane have reopened. We had seven restaurants in Mississippi, Louisiana and Alabama. Of these restaurants, one restaurant located in Biloxi, Mississippi, was destroyed by the storm and was a total loss. We do not intend to reopen this restaurant. All of our other restaurants in the gulf coast region had varying degrees of damage from the storm. However, all of these other restaurants have now reopened. Excluding Biloxi, an aggregate of 80 full or partial days of sales were lost in our South Florida and Gulf Coast restaurants, representing approximately $0.3 million in lost sales based on prior year sales for these days. In the aggregate, as of July 30, 2006, we had received $0.5 million in proceeds as partial settlement on our Hurricane Katrina insurance claim, which has been recorded as an offset to the loss on the carrying value of the assets impacted by the hurricane. While additional insurance claims are pending with respect to the Biloxi restaurant, there can be no assurance that any additional amounts will be received with respect to such claims.

AsOn ~~discussed~~October 24, ~~above~~2005, weHurricane ~~committed~~Wilma tohit aSouth ~~formal~~Florida, ~~plan~~which ~~for~~resulted ~~disposal~~in the temporary closure of ~~nine~~thirteen of our restaurants. AsOur South Florida restaurants had varying degrees of adamage ~~result~~from the storm. However, weall of these restaurants have ~~adopted~~now ~~discontinued~~reopened. ~~operations~~An ~~accounting~~aggregate ~~treatment~~of ~~for~~145 full ~~these~~or ~~nine~~partial days of sales were lost in our South Florida restaurants, representing ~~which~~approximately ~~requires~~$0.6 million ~~separation~~in oflost ~~financial~~sales ~~results~~based ~~for~~on ~~such~~prior ~~discontinued~~year ~~operations~~sales ~~from~~for ~~those~~these ofdays. ~~the~~In addition, ~~remaining~~our ~~continuing~~corporate ~~operations.~~office Inwas ~~conjunction~~closed ~~with~~for ~~such~~an ~~accounting~~eight-day ~~treatment~~period. In the aggregate, weas ~~have~~of ~~recorded~~July 30, a2006, we ~~charge~~had ofreceived $0.83 million ~~during~~in ~~the~~proceeds ~~thirty~~as ~~nine~~full ~~weeks~~settlement ~~ended~~on ~~January 22~~our Hurricane Wilma insurance claim, which ~~2006~~has ~~relating~~been recorded as an offset to the ~~estimated~~ loss on ~~disposal~~the carrying value of ~~these~~the ~~restaurants~~assets impacted by the hurricane.

~~PROPERTY~~RECENT ~~AND EQUIPMENT~~DEVELOPMENTS

WeAgreement ~~account for long-lived assets in accordance~~ with ~~SFAS No. 144, “Accounting for the~~Duffy’s ~~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 2006 and fiscal 2005 and depending on the success of our efforts to increase sales, we may take additional charges in the future if our sales at several of our restaurants do not increase to forecasted levels during future periods. As part of this analysis, management considers factors that have in the past and may continue in the future to impact operating results. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated 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 exceeds fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

~~INTANGIBLE~~ On ~~ASSETS~~April 6, 2007, we entered into an agreement (the “Agreement”) with Duffy’s Holdings, Inc., a Florida corporation (“Duffy’s”), RHG Acquisition Corporation, a Florida corporation and a wholly-owned subsidiary of Duffy’s (“Buyer”), Berjaya Group (Cayman) Limited, which is our majority shareholder and our principal lender (“Berjaya Cayman”), Prime Gaming Philippines, Inc., a corporation organized under the laws of the Philippines that is an affiliate of Berjaya Cayman (“Prime”), Tonto Capital Partners, GP (“Tonto”), which is controlled by our President and Chief Executive Officer, Ayman Sabi (“Sabi”), and Steven Saterbo, an individual (“Saterbo”) (Berjaya, Prime, Tonto, and Saterbo are collectively referred to herein as the “Selling Shareholders”). In the Agreement, the Selling Shareholders agreed to sell to Buyer the 24,996,342 shares (the “Shares”) of our outstanding common stock that they own, constituting 85.5% of our outstanding common stock (the “Stock Purchase”). Duffy’s has guaranteed the obligations of Buyer under the terms of the Agreement.

WePursuant ~~account~~to ~~for~~the ~~intangible~~Agreement, ~~assets~~Buyer inwill ~~accordance~~purchase ~~with~~the ~~SFAS~~Shares ~~No. 142,~~from ~~“Goodwill~~the ~~and~~Selling ~~Other Intangible~~Shareholders ~~Assets”~~for $0.32 Asper ~~of January 22~~share, ~~2006,~~or wean ~~had~~aggregate ~~unamortized~~of ~~goodwill~~$7,998,829, inwhich ~~the~~will ~~amount~~consist of $1~~.5 million~~,000,000 ~~and~~of ~~unamortized~~cash ~~identifiable~~and ~~intangible~~a promissory ~~assets~~note in the principal amount of $~~0.1 million.~~6,998,829 ~~In accordance~~(the ~~with~~“Selling ~~SFAS~~Shareholder NoNote”). ~~142,~~ ~~goodwill,~~The ~~which~~cash portion ~~relates~~and to the ~~prior~~portion ~~acquisition~~ of ~~two~~the ~~individual restaurant~~consideration ~~operations,~~payable ~~is subject~~ to anthe ~~annual~~Selling ~~impairment~~Shareholders ~~test~~that ~~based~~is represented onby ~~its~~the ~~fair~~Selling ~~value~~Shareholder ~~and~~Note ~~no amortization~~is ofsubject ~~goodwill~~to iscertain ~~recorded.~~additions Asor ~~of October 23~~reductions, ~~2005,~~as ~~the~~more particularly ~~date~~set onforth ~~which~~in wethe ~~completed~~Agreement. ~~our last annual goodwill impairment test~~Further, wethe ~~determined~~Selling ~~that~~Shareholders wewill ~~had~~be noentitled ~~impairment of goodwill. We will~~to ~~continue~~receive toadditional ~~assess~~consideration ~~the~~under ~~value~~certain ofcircumstances ~~our~~(all ~~goodwill~~as inmore ~~fiscal~~particularly ~~2006~~set ~~and~~forth ~~future periods~~ in ~~accordance with~~ ~~applicable~~the ~~accounting~~Agreement), ~~rules.~~provided, ~~Other~~however, ~~intangible~~that ~~assets,~~the ~~which~~Selling ~~have~~Shareholders ~~been~~will ~~determined~~receive tono ~~have~~more athan ~~finite~~$0.46 ~~life,~~per ~~are~~share ~~being~~for ~~amortized~~their ~~over~~shares ~~their~~under ~~useful~~any ~~lives~~circumstances.

~~USE~~ The OFSelling ~~ESTIMATES~~Shareholder Note will be an unsecured obligation and will bear interest at the rate of 8% per annum. Interest will be payable quarterly, and principal will be due on the date that is two years after the closing of the Stock Purchase.

~~The~~In ~~preparation~~connection ofwith the ~~Condensed~~Stock ~~Consolidated~~Purchase, ~~Financial~~Berjaya ~~Statements~~Cayman, inwhich ~~conformity~~is ~~with accounting~~currently ~~principles~~a ~~generally~~senior ~~accepted~~lender ~~in the United States of America requires management~~ to ~~make~~us ~~estimates~~ and ~~assumptions~~was ~~that~~owed ~~affect~~approximately ~~the~~$8.1 million ~~reported~~at ~~amounts~~February 25, of2007, ~~assets~~including ~~and~~accrued ~~liabilities~~but ~~and~~unpaid ~~disclosure~~interest of(the ~~contingent~~“Berjaya ~~assets~~Loan”), ~~and~~has ~~liabilities~~agreed atto ~~the~~modify ~~date~~its ofloans (the ~~financial~~“Berjaya ~~statements~~Loan ~~and~~Restructuring”). Under the ~~reported~~ ~~amounts~~Agreement, ofat ~~revenues~~the ~~and~~closing ~~expenses~~of ~~during~~ the ~~reporting~~Stock ~~period.~~Purchase ~~Actual~~the ~~results~~Berjaya ~~could~~Loan ~~differ materially~~will ~~from~~be ~~those~~reduced ~~estimates.~~to ~~Amounts reported in our Condensed Consolidated Financial~~an ~~Statements~~amount that ~~are~~when ~~based,~~added into ~~part,~~our onoutstanding ~~the~~debt ~~use~~due ofto ~~estimates~~third ~~include~~parties ~~reserves~~will ~~relating~~not toexceed ~~the~~$10 million, ~~collectibility~~all ofas ~~accounts~~more ~~receivable,~~particularly ~~insurance~~set ~~reserves~~forth ~~relating~~in tothe ~~claim~~Agreement. ~~costs~~Had ~~required to be funded by us,~~ the ~~recoverability~~closing of ~~deposits~~the ~~and~~Stock ~~other~~Purchase ~~prepaid items, estimated accrued property~~taken ~~taxes~~place ~~and~~on ~~other~~February 25, ~~accrued~~2007, ~~liabilities~~the ~~for~~Berjaya ~~which~~Loan ~~actual~~would ~~invoices~~ have ~~not yet~~ been ~~received,~~reduced ~~the estimated costs~~ to beapproximately $4,143,000.

The restructured Berjaya Loan will be an unsecured loan and will bear interest at the rate of 8% per annum. For the first two years, interest only will be payable quarterly. Thereafter, for three years, the principal (along with accrued but unpaid interest) will be paid in 12 consecutive quarterly payments. Pursuant to the Agreement, Berjaya Cayman will also be entitled to additional consideration of up to approximately $500,000 under certain circumstances, all as more particularly set forth in the Agreement.

Further, as part of the Stock Purchase, Roadhouse will transfer to Berjaya Cayman certain Roadhouse trademarks and intellectual property for the Asia/Pacific region (excluding Australia and New Zealand) and the Middle East (the “Berjaya IP Transfer”). The parties have agreed that the purchase price for these assets will be $2 million, and that such purchase price will be funded from a portion of the senior debt that Berjaya Cayman is agreeing to forgive as part of the Stock Purchase.

The closing of the Stock Purchase, including the Berjaya Loan Restructuring and the Berjaya IP Transfer, is subject to various closing conditions, all as more particularly set forth in the Agreement,

~~incurred~~including inour ~~relation~~filing tocertain ~~the~~delinquent ~~disposal~~filings ~~and~~(which ~~run-off~~includes ofthis ~~discontinued~~Form ~~operations~~10-Q) ~~and~~with the ~~liability for~~U.S. ~~unredeemed~~Securities ~~gift certificates~~ and ~~gift~~Exchange ~~cards.~~Commission ~~Various~~(“SEC”) ~~assumptions~~ and ~~other~~thereafter ~~factors~~our ~~underlie~~filing ~~the determination~~a ofForm 15 ~~these~~with ~~significant~~the ~~estimates. The process of determining significant estimates is~~SEC ~~fact~~deregistering ~~specific~~the ~~and~~Company’s ~~takes~~common ~~into~~stock ~~account~~under ~~factors~~the ~~such~~Securities asExchange ~~historical~~Act ~~experience,~~of ~~current~~1934. ~~and~~We ~~expected~~are ~~economic~~eligible ~~conditions,~~to ~~product~~deregister ~~mix,~~by ~~and~~filing ina ~~some~~Form 15 ~~cases,~~because ~~actuarial~~we ~~techniques.~~have Wefewer ~~constantly re-evaluate~~than ~~these~~300 ~~significant~~record ~~factors~~holders ~~and~~of ~~make adjustments to estimates where facts and~~our ~~circumstances~~common ~~dictate~~stock.

WeAdditionally, ~~believe~~at ~~that~~ the ~~assumptions~~closing ~~and~~of ~~other~~the ~~factors~~Stock ~~used~~Purchase, tothe ~~determine~~Buyer ~~these~~will ~~estimates~~infuse ~~are reasonable~~$11 million ~~and~~into ~~that~~us, $9 million ~~with the exception~~ of ~~insurance~~which ~~reserves~~will ~~relating to claim costs required to~~ be ~~funded~~infused byas ~~us,~~an ~~changes~~equity incontribution ~~these~~and ~~assumptions~~$2 million ~~would~~of ~~not~~which ~~have~~will ~~a material impact on our financial~~be ~~position~~infused oras ~~results~~a ~~of operations~~loan. InWe ~~regard~~will touse ~~insurance~~these ~~reserves,~~funds ~~recorded~~to ~~liabilities~~pay ~~are~~certain ~~based upon~~past-due anobligations ~~estimate of the total amount~~ that ~~may~~we beowe ~~paid~~ to taxing ~~settle~~authorities, ~~claims required~~ to bepay ~~funded~~costs ~~by us~~ and ~~incurred~~expenses ~~through~~relating ~~the balance sheet date, including consideration of amounts paid-~~to~~-date~~ ~~in relation~~or toarising ~~the~~out ~~individual claims, an analysis~~ of the ~~loss development on all reported claims,~~transactions ~~potential~~contemplated ~~legal~~by orthe ~~other~~Agreement ~~related costs~~ and ~~any~~to ~~stop~~fund ~~loss~~the ~~limits~~cash ~~applicable~~required ~~under our insurance policies. Such reserves are subject~~ to ~~change~~purchase ~~based~~the ~~upon~~shares ~~any~~of ~~development~~common ~~that occurs in relation~~stock toowned ~~the~~by ~~outstanding~~our ~~claims~~minority ~~subsequent~~shareholders to (the ~~preparation~~“Minority ofShareholders”), ~~the~~who ~~Condensed~~together ~~Consolidated~~own ~~Balance~~approximately ~~Sheet~~14.5% As of ~~January 22,~~Roadhouse’s ~~2006~~outstanding ~~and~~common ~~January 23~~stock, ~~2005~~as ~~total~~more ~~recorded~~particularly ~~insurance~~described ~~reserves were $1~~below.5 ~~million and $1.8 million, respectively, which are included in accrued expenses on the accompanying balance sheet.~~

~~In addition~~Further, ~~asset~~Buyer ~~impairment~~has ~~charges~~agreed ~~and~~that ~~the~~following ~~estimated costs associated with discontinued operations are primarily based on~~ the ~~amount~~closing of ~~future cash flows estimated to be realized relating to~~ the ~~impaired~~Stock ~~assets~~Purchase, orit ~~restaurants~~will, ~~including~~as ~~any obligations estimated to be incurred. The~~the ~~assumptions~~holder ~~used,~~of ~~particularly~~more inthan ~~regard~~80% ~~to estimates~~ of ~~future~~our ~~cash~~common ~~flows to be realized relating to impaired or potentially impaired assets~~stock, ~~are~~effect ~~critical~~a inshort-form ~~assessing~~merger a(the ~~potential~~“Short-Form Merger”) with ~~impairment~~ and~~, if~~ ~~any,~~into ~~estimating~~us ~~the~~under ~~amount~~Section 607.1104 of the ~~impairment~~Florida Statutes. ~~These~~In ~~assumptions~~the ~~require~~Short-Form Merger, ~~consideration and~~the ~~projection~~shares of ~~future~~our ~~trends~~common instock ~~key~~owned ~~operating~~by ~~ratios and~~ the ~~timing~~Minority ~~and~~Shareholders ~~impact~~will ofbe ~~possible~~converted ~~changes in~~into ~~operations~~the ~~relating~~right to receive ~~specific assets~~$0.46 ~~Changes~~per share in ~~these~~cash ~~assumptions~~(without ~~could have a material impact on the timing and amount of possible asset impairments and therefore on our results of operations~~interest).

The Agreement has been approved by our Board of Directors, which has determined that the transactions contemplated by the Agreement, including the Short Form Merger, are in the best interest of us and our shareholders. Neither the Short-Form Merger nor any of the transactions contemplated by the Agreement require approval by our shareholders, including the Minority Shareholders.

Finally, at the closing of the Stock Purchase, Buyer intends to enter into a consulting agreement with Sabi with respect to certain matters, all as more particularly set forth in the Agreement.

A copy of the Agreement is an exhibit to our 2006 Form 10-K. While there can be no assurance, the closing of the transactions contemplated by the Agreement is expected to occur on or about May 31, 2007.

Transactions with Credit Cash, LLC

In January and May, 2007, we borrowed an aggregate of $1.9 million from Credit Cash, LLC. The loan is due in February 2008, bears interest at 12% per annum and is secured by a lien on our credit card receivables. At May 8, 2007, the balance due (including interest) was approximately $1.4 million.

Agreement with Supplier

In February 2007, we entered into a payment plan with our principal supplier. Pursuant to the payment plan, the Supplier agreed to term-out $2.4 million of the amounts then due from us to the Supplier. The payment plan was evidenced by a written agreement between us and the Supplier that requires us to pay interest on the amount termed-out equal to the prime rate plus 2.5% and requires us to make weekly payments to the Supplier of $25,000 with respect to this obligation.

OVERVIEW

Our revenues are derived primarily from the sale of food and beverages. In each of the thirteen weeks ended July 30, 2006 and July 24, 2005, restaurant sales generated from lunch and dinner amounted to approximately 27% and 73% of restaurant sales, respectively. Restaurant sales of food and beverages accounted for approximately 91% and 9%, respectively, during the thirteen weeks ended July 30, 2006 and July 24, 2005. Franchise and management fees during the thirteen weeks ended July 30, 2006 and July 24, 2005 accounted for less than 1% of our revenues.

Restaurant operating expenses include food and beverage, labor, direct 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.

CRITICAL ACCOUNTING POLICIES

For a full discussion of our critical accounting policies, please see our 2006 Form 10-K.

RESULTS OF OPERATIONS

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

	Thirteen Weeks Ended						~~Thirty Nine Weeks Ended~~
	January 22,			January 23,			January 22,			January 23,
	July 30,			July 24,
	2006			2005			~~2006~~			~~2005~~
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Total revenues:		100.0	%		100.0	%
Cost of restaurant sales:
Food and beverage		3234.83			3634.13			~~33.5~~			~~35.9~~
Labor and benefits		3438.42			33.95			~~34.4~~			~~32.9~~
Occupancy and other		2729.80			25.2			~~27.3~~			~~25.3~~
Total cost of restaurant sales		95101.05			9593.20			~~95.2~~			~~94.1~~
Depreciation and amortization		5.02			5.4.6			~~4.9~~			~~5.0~~
General and administrative expenses		67.69			56.8			~~6.8~~			~~5.6~~
Asset impairment		2.2			0.6			0.7			0.2
Total operating expenses		114.7			104.4
Total operating expenses		108.8			107.0			107.6			104.9
Operating loss		(14.7	)		(4.4	)
Operating loss		(8.8	)		(7.0	)		(7.6	)		(4.9	)
Other (expense) income:
Loss on sale/disposal of fixed assets		—			—			—			—
Gain on extinguishment of debt		—			—			—			8.1
Interest expense, net		(1.3	)		(0.7	)		(1.1	)		(1.6	)
Total other (expense) income		(1.3	)		(0.7	)		(1.1	)		6.5
(Loss) income from continuing operations before income taxes		(10.1	)		(7.7	)		(8.7	)		1.6
Income tax		—			—			—			—
(Loss) income from continuing operations		(10.1	)%		(7.7	)%		(8.7	)%		1.6	%

THIRTEEN WEEKS ENDED JULY 30, 2006 (“FISCAL YEAR 2007 FIRST QUARTER”) COMPARED TO THE THIRTEEN WEEKS ENDED JULY 24, 2005 (“FISCAL YEAR 2006 FIRST QUARTER”)

Total revenues. Total revenues decreased $4.0 million, or 13.7%, from $29.3 million for Fiscal Year 2006 First Quarter to $25.3 million for Fiscal Year 2007 First Quarter. This decrease is primarily attributable to a decrease in customer headcount, partially offset by an increase in check average resulting primarily from menu price changes that were implemented in March 2005.

Management believes that the decrease in headcount is primarily attributable to economic conditions during the Fiscal Year 2007 First Quarter and consumer discretionary spending which have been negatively impacted by the significant increases in gas prices as well as 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 necessary marketing initiatives.

Food and beverage. Food and beverage costs decreased $1.4 million, or 13.6%, to $8.7 million for Fiscal Year 2007 First Quarter, from $10.1 million for Fiscal Year 2006 First Quarter. As a percentage of revenues, food and beverage costs was 34.3% for the Fiscal Year 2007 First Quarter and for the Fiscal Year 2006 First Quarter. The decrease in dollars was impacted by the reduction in revenue, offset in part by higher food costs.

Labor and benefits. Labor and benefits costs decreased $0.2 million, or 1.7%, to $9.6 million for the Fiscal Year 2007 First Quarter, from $9.8 million for the Fiscal Year 2006 First Quarter. As a

~~The~~percentage ~~following~~of ~~table~~revenues, ~~sets~~labor ~~forth~~and benefits costs increased to 38.2% for the ~~periods~~Fiscal ~~indicated~~Year ~~certain~~2007 First ~~restaurant~~Quarter from ~~data:~~33.5% for the Fiscal Year 2006 First Quarter. The decrease in dollars is attributable to a reduction in workers’ compensation costs and the decline in revenues, partially offset by the impact of changes in minimum wage implemented in Florida, New York, and Ohio. The increase in labor and benefits as a percentage of revenues is primarily attributable to the impact of changes in minimum wage and the fixed nature of a significant portion of our labor and benefits compared to reduced revenues.

~~RESTAURANT~~ Occupancy ~~DATA:~~and other. Occupancy and other costs decreased less than $0.1 million, to $7.3 million for Fiscal Year 2007 First Quarter, from $7.4 million for Fiscal Year 2006 First Quarter. As a percentage of revenues, occupancy and other was 29.0% for Fiscal Year 2007 First Quarter compared to 25.2% for Fiscal Year 2006 First Quarter. The increase as a percentage of revenues, is primarily attributable to increased rent as a result of the August 2004 sale/leaseback of 11 properties, offset to some extent by reductions in marketing expense and equipment rental expense resulting from the expiration of certain equipment leases. The increase as a percentage of revenues is primarily impacted by the relatively fixed nature of certain occupancy and other costs, including rent and property taxes, compared to reduced revenues.

	Thirteen Weeks Ended				Thirty Nine Weeks Ended
	January 22,		January 23,		January 22,		January 23,
	2006		2005		2006		2005
Company-owned restaurants:
Beginning of period		62		69		68		69
Opened		—		—		—		—
Closed		2		—		8		—
End of period		60		69		60		69
Franchised and licensed restaurants:
Beginning of period		12		11		12		11
Opened		1		—		1		—
Closed		1		—		1		—
End of period		12		11		12		11
Total restaurants:
Beginning of period		74		80		80		80
Opened		1		—		1		—
Closed		3		—		9		—
End of period		72		80		72		80

Depreciation and amortization. Depreciation and amortization expense decreased from period to period by less than $0.1 million, or 1.3%. As a percentage of revenues, depreciation and amortization expense increased 0.6% to 5.2% from 4.6% during these periods, due to lower revenues.

General and administrative. General and administrative costs remained generally consistent, increasing less than $0.1 million, or 0.7%, between Fiscal Year 2006 First Quarter and Fiscal Year 2007 First Quarter. As a percentage of revenues, general and administrative costs increased 1.1% from 6.8% for Fiscal Year 2006 First Quarter to 7.9% for Fiscal Year 2007 First Quarter. The increase, both in dollars and as a percentage of revenues, is primarily due to increased bank fees and costs associated with the investment banking process, partially offset by a reduction in legal and professional fees. The increase as a percentage of revenues is primarily attributable to the relatively fixed nature of general and administrative costs compared to reduced revenues.

Interest expense, net. Interest expense increased $0.1 million, or 69.4%, to $0.3 million for Fiscal Year 2007 First Quarter, from $0.2 million for Fiscal Year 2006 First Quarter. The increase was primarily due to the interest incurred relating to borrowings from the Company’s principal shareholders.

Income taxes. We did not recognize a tax benefit relating to the operating loss for either the Fiscal Year 2007 First Quarter or Fiscal Year 2006 First Quarter because management does not believe that it is more likely than not that our deferred tax assets will be realized in the future.

Charge for Berjaya Warrant. We recorded a non-cash charge of $1.1 million relating to the Berjaya Warrant, which became exercisable on July 1, 2006. The charge is equal to the fair value of the Berjaya Warrant on the date it became exercisable. It is anticipated that the Berjaya Warrant will be cancelled if the transaction with Duffy’s is completed.

Loss from operations of discontinued restaurants. Total loss from operations of discontinued restaurants decreased $0.4 million to $0.2 million for Fiscal Year 2007 First Quarter, from $0.6 million for Fiscal Year 2006 First Quarter due to the closure of restaurants during the period.

Loss from disposal of discontinued restaurants. During the Fiscal Year 2007 First Quarter, we recorded a loss from disposal of discontinued restaurants in the amount of $20,000. We recorded a gain of $34,000 from disposal of discontinued restaurants during the Fiscal Year 2006 First Quarter.

~~THIRTEEN~~LIQUIDITY ~~WEEKS~~AND ~~ENDED~~CAPITAL ~~JANUARY 22, 2006 (“FISCAL YEAR 2006 THIRD QUARTER”) COMPARED TO THE~~RESOURCES ~~THIRTEEN WEEKS ENDED JANUARY 23, 2005 (“FISCAL YEAR 2005 THIRD QUARTER”)~~

~~Total~~Our ~~revenues.~~material ~~Total~~financial ~~revenues~~commitments ~~decreased~~relate ~~$1.3 million,~~principally orto ~~4.5%,~~our ~~from~~working ~~$28.9 million~~capital ~~for~~requirements ~~Fiscal~~and ~~Year~~our ~~2005~~obligations ~~Third Quarter~~ to ~~$27.6 million~~make ~~for~~operating ~~Fiscal~~and ~~Year~~capital ~~2006~~lease ~~Third~~and ~~Quarter.~~term ~~This~~loan ~~decrease~~payments ~~is primarily attributable to a reduction~~ in ~~sales~~accordance ~~at comparable restaurants. Sales at comparable restaurants for Fiscal Year 2006 Third Quarter decreased 5.3% compared~~ with ~~sales for Fiscal Year 2005 Third Quarter. This decrease results from a reduction in customer headcount, partially offset by an increase in check average resulting primarily from~~ the ~~menu price changes described below~~ ~~that~~terms ~~were~~of ~~implemented~~our inagreements ~~March 2005.~~(see ~~Management~~Note ~~believes~~7 ~~that the decrease in headcount is primarily attributable~~ to ~~economic conditions during~~ the ~~Fiscal~~Condensed ~~Year~~Financial ~~2006~~Statements ~~Third~~for ~~Quarter~~a ~~and consumer~~description ~~discretionary spending which have been negatively impacted by the significant increases in gas prices as well as increased competition from new restaurants in many~~ of ~~the markets in which~~ our current ~~restaurants~~outstanding ~~operate~~debt ~~and~~obligations). ~~the~~As ~~impact~~ of ~~our~~July 30, ~~financial~~2006, ~~condition~~total ~~and~~minimum ~~lack~~payments ofrequired ~~working capital on~~under our ~~ability~~note ~~to invest in our restaurants~~ and ~~engage~~lease obligations in ~~necessary~~Fiscal ~~marketing~~Year ~~initiatives.~~2007, ~~A restaurant~~including isinterest ~~considered~~thereon, ~~comparable~~were ~~after its first 18~~$17.2 ~~months of operation~~million.

~~Food~~The ~~and~~following ~~beverage.~~table ~~Food~~summarizes ~~and~~our ~~beverage~~future ~~costs~~contractual ~~decreased~~cash ~~$1.3 million,~~obligations orfor ~~12.5%,~~the toremainder ~~$9.1 million~~of ~~for~~ Fiscal Year ~~2006~~2007 ~~Third Quarter, from $10.4 million for Fiscal Year 2005 Third Quarter. As a percentage of revenues, food~~ and ~~beverage costs decreased by 3.3% to 32.8%~~ for ~~Fiscal~~each ~~Year 2006 Third Quarter from 36.1% for Fiscal Year 2005 Third Quarter. The decrease in dollars was impacted by the reduction in revenue. The decrease as a percentage~~ of ~~revenues is primarily attributable to~~ the ~~impact~~next offour ~~changes~~fiscal inyears ~~our main menu that were implemented in March 2005. The updated main menu included changes in certain plate presentations~~ and ~~recipes~~thereafter as ~~well as both the introduction~~ of ~~selected~~ new menu offerings and the elimination of 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 additionJuly 30, we2006 ~~attempted~~(dollars ~~to reduce our overall food costs by featuring lower food cost, generally non-beef, menu items~~ in ~~our new menu and advertising~~ ~~materials~~thousands). ~~Management~~Operating ~~will~~lease ~~continue~~commitments toinclude ~~evaluate~~estimated ~~and~~common ~~implement~~area ~~changes~~maintenance ~~designed to reduce overall food costs~~expenses. ~~However, there can be no assurances that such initiatives will continue to be~~ ~~effective in reducing our food costs.~~

Labor and benefits. Labor and benefits costs decreased $0.3 million, or 3.1%, to $9.5 million for Fiscal Year 2006 Third Quarter, from $9.8 million for Fiscal Year 2005 Third Quarter. As a percentage of revenues, labor and benefits costs increased to 34.4% for Fiscal Year 2006 Third Quarter from 33.9% for Fiscal Year 2005 Third Quarter. The decrease in dollars is attributable to a reduction in workers’ compensation costs and the decline in revenues, partially offset by the impact of changes in minimum wage implemented in the state of Florida in May 2005. The increase in labor and benefits as a percentage of revenues is primarily attributable to the impact of changes in minimum wage and the fixed nature of a significant portion of our labor and benefits compared to reduced revenues.


	2007		2008		2009		2010		2011		Thereafter		Total
Debt:

Principal	$	8,359	$	1,236	$	17	$	7	$	—	$	—	$	9,619
Interest		553		19		1		—		—		—		573

Total debt		8,912		1,255		18		7		—		—		10,192

Capital lease debt:

Principal		988		430		341		343		316		752		3,170
Interest		223		198		168		134		98		125		946

Total capital lease debt		1,211		628		509		477		414		877		4,116

Operating leases		6,856		8,957		8,438		7,967		7,645		62,514		102,377
Other commitments		205		140		142		168		—		—		655

Total	$	17,184	$	10,980	$	9,107	$	8,619	$	8,059	$	63,391	$	117,340

Other commitments represent minimum amounts due to certain vendors under contractual agreements. Further, the Company currently owes substantial payroll and sales taxes, including applicable penalties and interest. Additionally, if the transaction with Duffy’s, or another sale transaction, closes, the Company will become obligated under certain Severance Agreements and the Special Incentive Compensation Plan.

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.

Occupancy and other. Occupancy and other costs increased $0.4 million, or 5.5%, to $7.7 million for Fiscal Year 2006 Third Quarter, from $7.3 million for Fiscal Year 2005 Third Quarter. As a percentage of revenues, occupancy and other was 27.8% for Fiscal Year 2006 Third Quarter compared to 25.2% for Fiscal Year 2005 Third Quarter. The increase in both dollars and as a percentage of revenues is attributable to increased marketing expense, caused by the timing of a free-standing insert marketing effort that was executed just prior to the end of the fiscal quarter in Fiscal Year 2006 but immediately after the end of the quarter in Fiscal Year 2005 and utilities expense, partially offset by costs associated with equipment operating leases that expired during these periods. The increase as a percentage of revenues is also attributable to the relatively fixed nature of certain occupancy and other costs, including rent and property taxes, compared to reduced revenues.

Depreciation and amortization. Depreciation and amortization expense decreased $0.2 million, or 12.5%, to $1.4 million during the Fiscal Year 2006 Third Quarter from $1.6 million during the Fiscal Year 2005 Third Quarter. As a percentage of revenues, depreciation and amortization expense decreased 0.4% to 5.0% from 5.4% during these periods.

General and administrative. General and administrative costs increased $0.1 million, or 5.9%, to $1.8 million for the Fiscal Year 2006 Third Quarter, from $1.7 million for the Fiscal Year 2005 Third Quarter. As a percentage of revenues, general and administrative costs increased 0.8% from 5.8% for Fiscal Year 2005 Third Quarter to 6.6% for Fiscal Year 2006 Third Quarter. The increase, both in dollars and as a percentage of revenues, is primarily due to increased bank fees and costs associated with the investment banking process, partially offset by a reduction in legal and professional fees. The increase as a percentage of revenues is also attributable to the relatively fixed nature of general and administrative costs compared to reduced revenues.

Asset impairment. Asset impairment charges totaling $0.6 million, or 2.2% of revenues, were recorded for the Fiscal Year 2006 Third Quarter relating to assets at two restaurants that were not performing as expected. Asset impairment charges of $0.2 million, or 0.6% of revenues, were recorded during the Fiscal Year 2005 Third Quarter.

Interest expense, net. Total interest expense increased $0.1 million, or 50.0%, to $0.3 million for Fiscal Year 2006 Third Quarter, from $0.2 million for Fiscal Year 2005 Third Quarter. The increase was primarily due to the interest incurred relating to borrowings from the Company’s major shareholders.

Income taxes. We did not recognize a tax benefit relating to the operating loss for either the Fiscal Year 2006 Third Quarter or Fiscal Year 2005 Third Quarter because management does not believe that it is more likely than not that our deferred tax assets will be realized in the future.

Loss from operations of discontinued restaurants. Total loss from operations of discontinued restaurants decreased $0.5 million to $0.2 million for Fiscal Year 2006 Third Quarter, from $0.7 million for Fiscal Year 2005 Third Quarter due to the closure of restaurants during the period.

Loss from disposal of discontinued restaurants. During the Fiscal Year 2006 Third Quarter, we recorded a loss from disposal of discontinued restaurants in the amount of $0.3 million. We did not record a loss from disposal of discontinued restaurants during the Fiscal Year 2005 Third Quarter. See further discussion above.

THIRTY NINE WEEKS ENDED JANUARY 22, 2006 (“FISCAL YEAR 2006 FIRST THREE QUARTERS”) COMPARED TO THE THIRTY NINE WEEKS ENDED JANUARY 23, 2005 (“FISCAL YEAR 2005 FIRST THREE QUARTERS”)

Total revenues. Total revenues decreased $4.1 million, or 4.7%, from $87.5 million for Fiscal Year 2005 First Three Quarters to $83.4 million for Fiscal Year 2006 First Three Quarters. This decrease is primarily attributable to a reduction in sales at comparable restaurants. Sales at comparable restaurants for Fiscal Year 2006 First Three Quarters decreased 5.0% compared with sales for Fiscal Year 2005 First Three Quarters. This decrease results from a reduction in customer headcount, partially offset by an increase in check average resulting primarily from the menu price changes described below that were implemented in March 2005. Management believes that the decrease in headcount is primarily attributable to economic conditions during the Fiscal Year 2006 Second and Third Quarters and consumer discretionary spending which have been negatively impacted by the significant increases in gas prices as well as 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 necessary marketing initiatives. A restaurant is considered comparable after its first 18 months of operation.

Food and beverage. Food and beverage costs decreased $3.4 million, or 10.8%, to $28.0 million for Fiscal Year 2006 First Three Quarters, from $31.4 million for Fiscal Year 2005 First Three Quarters. As a percentage of revenues, food and beverage costs decreased by 2.4% to 33.5% for Fiscal Year 2006 First Three Quarters from 35.9% for Fiscal Year 2005 First Three Quarters. The decrease in dollars was impacted by the reduction in revenue. The decrease as a percentage of revenues is primarily attributable to the 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 selected new menu offerings and the elimination of 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 advertising materials. Management will continue to evaluate and implement changes designed to reduce overall food costs. However, there can be no assurances that such initiatives will continue to be effective in reducing our food costs.

Labor and benefits. Labor and benefits costs decreased $0.1 million, or 0.3%, to $28.7 million for Fiscal Year 2006 First Three Quarters, from $28.8 million for Fiscal Year 2005 First Three Quarters. As a percentage of revenues, labor and benefits costs increased to 34.4% for Fiscal Year 2006 Three Second Quarters from 32.9% for Fiscal Year 2005 First Three Quarters. The increase as a percentage of revenues is primarily attributable to the impact of changes in minimum wage implemented in the state 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 is also attributable to the decline in revenues and the fixed nature of a significant portion of our labor and benefits.

Occupancy and other. Occupancy and other costs increased $0.6 million, or 2.7%, to $22.8 million for Fiscal Year 2006 First Three Quarters, from $22.2 million for Fiscal Year 2005 First Three Quarters. As a percentage of revenues, occupancy and other was 27.3% for Fiscal Year 2006 First Three Quarters compared to 25.3% for Fiscal Year 2005 First Three Quarters. The increase in both dollars and as a percentage of revenues is attributable to increased rent expense resulting from the sale and leaseback transaction completed in August 2004 and increased utilities expense, partially offset by reduced costs associated with equipment operating leases that expired during these periods. The increase as a percentage of revenues is also attributable to the relatively fixed nature of certain occupancy and other costs, including rent and property taxes, compared to reduced revenues.

Depreciation and amortization. Depreciation and amortization expense decreased $0.3 million, or 6.8%, to $4.1 million for the Fiscal Year 2006 First Three Quarters, from $4.4 million for the Fiscal Year 2005 First Three Quarters. As a percentage of revenues, depreciation and amortization expense was 4.9% during the Fiscal Year 2006 First Three Quarters compared to 5.0% for the Fiscal Year 2005 First Three Quarters. The decrease in dollars 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.

General and administrative. General and administrative costs increased $0.8 million, or 16.3%, to $5.7 million for the Fiscal Year 2006 First Three Quarters, from $4.9 million for the Fiscal Year 2005 First Three Quarters. As a percentage of revenues, general and administrative costs increased 1.2% from 5.6% for Fiscal Year 2005 First Three Quarters to 6.8% for Fiscal Year 2006 First Three Quarters. The increase, both in dollars and as a percentage of revenues, is primarily due to increased bank fees and costs associated with the investment banking process as well as the non-recurring bad debt recovery realized during the Fiscal Year 2005 Second Quarter, partially offset by a reduction in legal and professional fees. The increase as a percentage of revenues is also attributable to the relatively fixed nature of general and administrative costs compared to reduced revenues.

Asset impairment. Asset impairment charges totaling $0.6 million, or 0.7% of revenues, were recorded for the Fiscal Year 2006 First Three Quarters relating to assets at two restaurants that were not performing as expected. Asset impairment charges of $0.2 million, or 0.2% of revenues, were recorded during the Fiscal Year 2005 First Three Quarters.

Gain 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 discussion above.

Interest expense, net. Total interest expense decreased $0.5 million, or 35.7%, to $0.9 million for Fiscal Year 2006 First Three Quarters, from $1.4 million for Fiscal Year 2005 First Three Quarters. 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 August 2004 sale/leaseback transaction, partially offset be interest incurred relating to borrowings from the Company’s major shareholders.

Income taxes. We did not recognize a tax benefit relating to the operating loss for either the Fiscal Year 2006 First Three Quarters or Fiscal Year 2005 First Three Quarters because management does not believe that it is more likely than not that our deferred tax assets will be realized in the future.

Loss from operations of discontinued restaurants. Total loss from operations of discontinued restaurants decreased $0.9 million to $0.9 million for Fiscal Year 2006 First Three Quarters, from $1.8 million for Fiscal Year 2005 First Three Quarters due to the closure of restaurants during the period.

Loss from disposal of discontinued restaurants. During the Fiscal Year 2006 First Three Quarters, we recorded a loss from disposal of discontinued restaurants in the amount of $0.8 million. We did not record a loss from disposal of discontinued restaurants during the Fiscal Year 2005 First Three Quarters. See further discussion above.

LIQUIDITY AND CAPITAL RESOURCES

Our material financial commitments relate principally to our working capital requirements and our obligations to make operating and capital lease and term loan payments in accordance with the terms of our agreements. See Note 4 to the Condensed Consolidated Financial Statements for a description of our current outstanding debt obligations. As of January 22, 2006, total minimum payments required under our note and lease obligations in 2006, including interest thereon, were $14.6 million.

The following table summarizes our future contractual cash obligations for the remainder of fiscal 2006, each of the next four fiscal years and thereafter as of January 22, 2006 (dollars in thousands). Operating lease commitments include estimated common area maintenance expenses.

	2006		2007		2008		2009		2010		Thereafter		Total
Long term debt:
Principal	$	3,903	$	2,369	$	939	$	16	$	7	$	—	$	7,234
Interest		198		128		19		1		—		—		465
Total		4,101		2,497		958		17		7		—		7,580
Capital lease debt:
Principal		384		1,266		429		341		343		1,052		3,815
Interest		67		230		198		168		135		223		1,091
Total		451		1,496		627		509		478		1,275		4,836
Operating leases		2,409		8,974		8,595		8,077		7,605		69,721		105,381
Other commitments		158		285		140		142		168		—		893
Total	$	7,119	$	13,252	$	10,320	$	8,745	$	8,258	$	70,996	$	118,690

Other commitments 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.

During the thirteen weeks ended January 22, 2006, our primary source of working capital was loans from our principal shareholders and proceeds from insurance claims. The current balance of loans due from our principal shareholders is $5.0 million, all of which is currently due on June 30, 2006. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

On August 6, 2004, we entered into a sale/leaseback for 11 restaurant properties with Sovereign. The sale price for the 11 properties was $21.8 million. The properties have been leased back under lease agreements that extend for 20 years and include four five-year renewal options. We used approximately $18.3 million of the net proceeds from the sale to repay approximately $24.6 million of secured debt, which was repaid at a discount (resulting in a gain on extinguishment of debt of approximately $7.1 million) and to pay transaction expenses relating to the sale/leaseback. The net gain from the debt repayment is reflected in our consolidated statement of operations for the fiscal

year ended April 24, 2005. We also realized a gain on the sale of the properties of approximately $1.7 million, which is recorded as unearned revenue in the consolidated balance sheet as of January 22, 2006 and is being 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, including working capital to meet our ordinary course expenses.

We have experienced significant cash flow problems in the past. We believe that 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 levels of our various food products, and our continuing efforts to reduce our operating costs. During fiscal 2005, we implemented revenue enhancement programs including the implementation of a new menu with enhanced menu items. In addition, we have taken, and continue to take, steps to control our 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 operating results do not improve in the near term as a result of the recent changes that have occurred and the introduction of the new menus, then we may be required to recognize additional impairment charges related to certain long-lived assets (and such charges may be significant).

We require significant working capital to operate our business. We expect that our primary source of working capital for future periods will be cash flow from operations, possible additional debt and/or equity financing and possible additional proceeds from insurance claims. If cash generated from our operations and other possible sources described above are insufficient to fund our financial commitments and working capital requirements, of which there can be no assurance, we 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 us, or at all. In the event we are unable to secure needed additional financing, it will likely have a material adverse effect upon our business, results of operations or financial condition, which could result in a curtailment of our operations.

SUMMARY OF CASH FLOWS

Cash ~~provided~~used byin continuing operating activities during the ~~thirty~~thirteen ~~nine~~ weeks ended ~~January~~July 2230, 2006 was $0.3 6 million, compared with $01.25 million provided by operating activities during the ~~thirty~~thirteen ~~nine~~ weeks ended ~~January~~July 2324, 2005. The primary sources of cash for the ~~thirty~~thirteen ~~nine~~ weeks ended ~~January~~July 2230, 2006 were ~~the~~ the timing of payments of accounts payable and accrued expenses and ~~the~~loans ~~collection of insurance proceeds~~ from ~~hurricane~~our ~~claims. See Note 10 of Notes to Condensed Consolidated Financial~~principal ~~Statements~~shareholders. The primary sources of cash for the ~~thirty~~thirteen ~~nine~~ weeks ended ~~January~~July 2324, 2005 were the net cash generated from operations ~~excluding non-cash expenses such as depreciation and~~ ~~amortization~~ and cash received from the advance sale of food and beverage credits under the program with the loyalty and rewards company. The primary use of cash during each of the thirteen weeks ended July 30, 2006 and July 24, 2005 was cash used to support operations.

33 Cash used in continuing investing activities was $0.3 million during each of the thirteen weeks ended July 30, 2006 and July 24, 2005. Cash used by investing activities during each period consisted of purchases of property and equipment.

~~Table~~ Cash provided by continuing financing activities during the thirteen weeks ended July 30, 2006 was $1.8 million, compared to $0.7 million used in financing activities during the thirteen weeks ended July 24, 2005. Cash provided by financing activities during the thirteen weeks ended July 30, 2006 related to the proceeds of ~~Contents~~borrowings from our principal shareholders. Cash used in financing activities in each period consisted of repayments of long term debt and capital lease obligations.

~~loyalty~~ Cash ~~and~~used ~~rewards~~in ~~company.~~discontinued ~~The~~operations ~~primary~~in ~~use of cash during each of~~ the ~~thirty nine~~thirteen weeks ended ~~January~~July 2230, 2006 ~~and~~was ~~January 23~~$0.5 million, ~~2005~~compared ~~was~~to cash used toin ~~support~~discontinued operations ~~and payments~~of ~~made~~$1.0 million ~~relating~~in to the ~~use~~thirteen ofweeks ended ~~the~~July 24, ~~food and beverage credits~~2005.

Cash used in investing activities was $0.9 million during the thirty nine weeks ended January 22, 2006, compared to $19.7 million provided by investing activities during the thirty nine weeks ended January 23, 2005. Cash used by investing activities during each period consisted of purchases of property and equipment. During the thirty nine weeks ended January 23, 2005, we received $20.6 million relating to proceeds from the sale leaseback transaction in August 2004.

Cash provided by financing activities during the thirty nine weeks ended January 22, 2006 was $0.5 million, compared to $20.3 million used in financing activities during the thirty nine weeks ended January 23, 2005. Cash provided by financing activities during the thirty nine weeks ended January 22, 2006 related to the proceeds of borrowings from related parties. See Note 11 of Notes to Condensed Consolidated Financial Statements. Cash used in financing activities in each period consisted of repayments of long term debt and capital lease obligations, including early debt payments from proceeds of the sale/leaseback transaction during the thirty nine weeks ended January 23, 2005.

CAPITAL EXPENDITURES

We did not open any new restaurants during the thirteen weeks ended January 22, 2006 or January 23, 2005. 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.

SEASONALITY AND QUARTERLY RESULTS

Our operating results fluctuate seasonally because of our geographic concentration. Of the 59 56 restaurants currently owned and operated by us, 3128 are located in generally residential or ~~light~~ 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 hurricanes or other adverse weather conditions in Florida. To offset this seasonal trend and to attempt to reduce 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. In 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.

In 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.

IMPACT OF INFLATION

The 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~~ 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. Additional changes went into effect in both of these states on January 1, 2006. 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.

~~In addition, most of our real property leases require us to pay taxes, maintenance, repairs~~28 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.

and Florida were effective in January and May, 2005, respectively. Additional changes went into effect in both of these states on January 1, 2006. Additional changes went into effect in New York and Ohio on January 1, 2007. 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 2006 Form 10-K and in this Form 10-Q.

In addition, most of our real property 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently use, and have not historically used, derivative financial instruments to 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 operations.

Certain of the food products purchased by us are affected by commodity pricing and are, therefore, subject to unpredictable price volatility. These commodities are generally purchased based upon market prices established with vendors. The purchase ~~arrangement~~arrangements may contain contractual features that limit the price paid by establishing certain floors and caps. We do ~~not~~ not use financial instruments to hedge commodity prices because our purchase arrangements help ~~control~~ control the ultimate cost paid. Extreme changes in commodity prices and/or long-term changes ~~could~~ could adversely affect us. However, changes in commodity prices would ultimately affect our ~~competitors~~ competitors as well as us. We expect that in most cases increased commodity prices could be passed through to our consumers via increases in menu prices. From time to time, competitive circumstances could limit menu price flexibility, and in those cases margins would be negatively impacted by increased commodity prices.

ITEM 4. CONTROLS AND PROCEDURES

We have carried out an evaluation, under the supervision and with the participation of our management, including our ~~Chief~~principal ~~Executive~~executive ~~Officer~~officer and ~~Chief~~acting ~~Financial~~principal ~~Officer~~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~~on such ~~that~~ evaluation, our ~~Chief~~principal ~~Executive Officer~~executive officer and ~~Chief~~acting ~~Financial~~principal ~~Officer~~financial ~~have~~officer have concluded that, as of ~~January~~July 2230, 2006, as set forth in the next paragraph, our disclosure controls and procedures were not effective into ~~timely~~ensure ~~alerting~~that ~~them~~the ~~to material~~ information ~~relating~~required to be disclosed by us ~~(including~~in ~~our~~the ~~consolidated~~reports ~~subsidiaries)~~filed ~~required~~or tosubmitted beby ~~included~~us inunder ~~this~~the ~~report.~~Securities ~~There~~Exchange ~~were~~Act noof 1934, as amended, ~~changes~~was inrecorded, ~~our~~processed, ~~procedures~~summarized ~~during~~or ~~the~~reported ~~thirteen~~with ~~weeks~~the ~~ended~~time ~~January 22,~~periods ~~2006~~specified ~~that~~in ~~have~~the ~~materially~~rules and ~~affected~~regulations of the SEC, orand ~~are~~include ~~reasonably~~controls ~~likely~~and procedures designed to ~~materially~~ensure ~~affect~~that information required to be disclosed by us in such reports was accumulated and communicated to management, including our ~~internal~~principal ~~control~~executive ~~over~~officer and acting principal financial officer, as appropriate to ~~reporting~~allow timely decisions regarding required disclosures.

36 Our registered independent public accounting firm, Rachlin, Cohen & Holtz, LLP, has advised us that in connection with the completion their audit of our financial statements for Fiscal Year 2006, they noted an internal control deficiency constituting a material weakness as defined in professional standards. The deficiency noted related to our not having sufficient qualified accounting staff to prepare complete and accurate financial statements. As a result of our lack of sufficient personnel with an appropriate level of knowledge, experience and training in the application of GAAP and internal controls over financial reporting, we have had to rely on services of consultants who are not our employees. This, coupled with our cash flow constraints has caused us to fall significantly behind in our SEC reporting obligations. We have also been trying to complete a sale of our business since 2005. In June 2006, our Chief Financial Officer resigned to pursue other interests. Subsequently, in August 2006, our Chief Accounting Officer

resigned. We have not replaced these persons, due to our continuing efforts to sell our company, and our Chief Executive Officer is currently acting as both our Chief Financial Officer and our Chief Accounting Officer. In that regard, we recently entered into an agreement with Duffy’s to sell all of our outstanding common stock to Duffy’s in a series of transactions. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If the Duffy’s transaction does not close, we intend to hire a new Chief Financial Officer and Chief Accounting Officer, which we believe will correct the enumerated material weakness.

There have been no changes in our internal controls or in other factors that could have a material effect, or are reasonably likely to have a material effect, on the internal controls subsequent to the date of their evaluation in connection with the preparation of this Form 10-Q, except as described above.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a party to certain legal proceedings arising in the ordinary course of 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.

ITEM 1A. RISK FACTORS

There are many factors that affect our financial position, results of operations and business. In addition to those matters described in this Form 10-Q, you should carefully review the risk factors contained in our 2006 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no changes in securities during the thirteen weeks ended ~~January~~July 2230, 2006.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the thirteen weeks ended ~~January~~July 2230, 2006.

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

ANo ~~proxy~~matters ~~statement~~were ~~dated~~brought ~~January 5,~~before ~~2006~~the ~~was distributed on or about January 10, 2006 to~~ shareholders offor ~~record~~a ~~at the close of business on December 29, 2005 to~~ vote ~~upon~~during ~~a proposal to approve and adopt~~ the ~~Agreement~~thirteen ~~and~~weeks ~~Plan of Merger dated November 17, 2005 between the Company and~~ended ~~Steakhouse Partners, Inc. As discussed above, on March~~July 1430, 2006~~, the Company terminated the Merger Agreement due to the inability of Steakhouse to provide the funding necessary to complete the transaction and satisfy its financing contingency~~. ~~No stockholder vote was ever taken regarding~~ ~~the proposed transaction.~~

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits.

Exhibit
Number		Description
10.1		Second Amended and Restated Loan Agreement dated March 15, 2006, by and between Roadhouse Grill, Inc. and Berjaya Group (Cayman) Limited*
10.2		Second Amended and Restated Line of Credit Promissory Note dated March 15, 2006, by and between Roadhouse Grill, Inc. and Berjaya Group (Cayman) Limited*
10.3		Second Amended and Restated Security Agreement dated March 15, 2006, by and between Roadhouse Grill, Inc. and Berjaya Group (Cayman) Limited*
10.4		First Amendment to Second Amended and Restated Loan Agreement, dated May 8, 2006
10.5		Third Amended and Restated Line of Credit Promissory Note dated May 8, 2006 by Roadhouse Grill, Inc. in favor of Berjaya Group (Cayman) Limited
10.6		Demand Promissory Note dated May 9, 2006 by Roadhouse Grill, Inc. in favor of Ayman Sabi.
10.7		Second Amendment to Stock Warrant Certificate dated June, 2006.
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

* Incorporated by reference from the Current Report on Form 8-K filed by the Company on March 24, 200631

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 ~~19th~~30th day of ~~June 2006.~~May, 2007

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

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