UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 14, 2005

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-117263

For the quarterly period ended April 21, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-117263

VICORP RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

STATE OF COLORADO		84-0511072
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
400 WEST 48TH AVENUE, DENVER, COLORADO		80216
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (303) 296-2121

Registrant’s telephone number, including area code: (303) 296-2121

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

~~Number~~Indicate ofby ~~shares~~check ofmark ~~Common~~whether the ~~Stock,~~registrant ~~$.0001~~is ~~par~~a ~~value,~~shell ~~outstanding~~company at(as ~~May 25, 2005:~~defined ~~1,427,602,~~in ~~excluding~~Rule ~~treasury~~12b-2 ~~shares~~of the Exchange Act). o Yes ý No

Number of shares of Common Stock, $.0001 par value, outstanding at August 29, 2005: 1,427,602, excluding treasury shares.

VICORP RESTAURANTS, INC.

Form 10-Q

~~April~~July 2114, 2005

INDEX

PART I - FINANCIAL INFORMATION
~~Item 1.~~	~~Consolidated~~Item ~~Financial Statements~~1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of April 21, 2005 and October 28, 2004 (As restated)
		Consolidated Balance Sheets as of July 14, 2005 and October 28, 2004 (As restated)
	Consolidated Statements of Operations for the 84 days ended April 21, 2005 and April 15, 2004 (As restated) and the 175 days ended April 21, 2005 and the 172 days ended April 15, 2004 (As restated)
		Consolidated Statements of Operations for the 84 days ended July 14, 2005 and July 8, 2004 (As restated) and the 259 days ended July 14, 2005 and the 256 days ended July 8, 2004 (As restated)
	Consolidated Statements of Cash Flows for the 175 days ended April 21, 2005 and the 172 days ended April 15, 2004 (As restated)
		Consolidated Statements of Cash Flows for the 259 days ended July 14, 2005 and the 256 days ended July 8, 2004 (As restated)
	~~Notes to Consolidated Financial Statements~~	Notes to Consolidated Financial Statements
~~Item 2.~~	~~Management’s~~Item ~~Discussion and Analysis of Financial Condition and Results of Operations~~2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~Item 3.~~	~~Quantitative~~Item ~~and Qualitative Disclosures About Market Risk~~3.	Quantitative and Qualitative Disclosures About Market Risk
~~Item 4.~~	~~Controls~~Item ~~and Procedures~~4.	Controls and Procedures
PART II - OTHER INFORMATION
~~Item 1.~~	~~Legal~~Item ~~Proceedings~~1.	Legal Proceedings
~~Item 2.~~	~~Unregistered~~Item ~~Sales of Equity Securities and Use of Proceeds~~2.	Unregistered Sales of Equity Securities and Use of Proceeds
~~Item 3.~~	~~Defaults~~Item ~~Upon Senior Securities~~3.	Defaults Upon Senior Securities
~~Item 4.~~	~~Submission~~Item ~~of Matters to a Vote of Security Holders~~4.	Submission of Matters to a Vote of Security Holders
~~Item 5.~~	~~Other~~Item ~~Information~~5.	Other Information
~~Item 6.~~	~~Exhibits~~Item 6.	Exhibits
SIGNATURES

PART I - FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

VI Acquisition Corp.

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Data)

(Unaudited)

	April 21, 2005			October 28, 2004
	July 14, 2005			October 28, 2004
				(As restated)
Assets
Current assets:
Cash and cash equivalents	$	812,~~930~~595		$	1,332
Receivables, net	86,~~910~~376			11,915
Inventories	910,~~295~~480			12,245
Deferred income taxes, short-term	43,~~914~~507			4,673
Prepaid expenses and other current assets	3,~~230~~274			3,432
Income tax receivable	~~273~~336			270
Total current assets	3536,~~552~~568			33,867
Property and equipment, net	79,508			80,316
Deferred income taxes, long-term	2,771			—
Assets under deemed landlord financing liability, net	111,366			110,342
Property and equipment, net	82,015			80,316
Assets under deemed landlord financing liability, net	117,800			110,342
Goodwill	91,881			91,881
Trademarks and tradenames	42,600			42,600
Franchise rights, net	1110,~~084~~948			11,358
Other assets, net	1211,~~451~~808			13,763
Total assets	$	~~384~~396,~~442~~391		$	384,127
Liabilities and stockholders’ equity
Current liabilities:
Current maturities of long-term debt and capitalized lease obligations	$	~~127~~93		$	201
Cash overdraft	—			3,190
Accounts payable	1112,~~106~~239			13,174
Accrued compensation	7,~~046~~483			7,138
Accrued taxes	911,~~194~~119			7,992
Other accrued expenses	1820,~~955~~384			18,520
Total current liabilities	4651,~~428~~318			50,215
Long-term debt	140,~~220~~270			141,469
Capitalized lease obligations	~~224~~213			248
Deemed landlord financing liability	~~116~~122,~~183~~164			114,670
Deferred income taxes, long-term	~~556~~—			1,360
Other noncurrent liabilities	8,~~998~~936			7,057
Total liabilities	~~312~~322,~~609~~901			315,019
Commitments and contingencies
Stock subject to repurchase	1,063			1,063
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Series A, 100,000 shares authorized, 68,659 shares issued and outstanding at April 21, 2005 and October 28, 2004 (aggregate liquidation preference of $81,040 and $78,846, respectively)	83,997			80,022
Series A, 100,000 shares authorized, 68,943 shares issued and outstanding at July 14, 2005 and 68,659 shares issued and outstanding at October 28, 2004 (aggregate liquidation preference of $85,199 and $78,951, respectively)	86,310			80,022
Unclassified preferred stock, 100,000 shares authorized, no shares issued or outstanding	—			—
Common stock $0.0001 par value:
Class A, 2,800,000 shares authorized, 1,386,552 shares issued and outstanding at April 21, 2005 and October 28, 2004	—			—
Class A, 2,800,000 shares authorized, 1,392,354 shares issued and outstanding at July 14, 2005 and 1,386,552 shares issued and outstanding at October 28, 2004	—			—
Paid-in capital	2,~~426~~452			2,426
Treasury stock, at cost, 923.87 shares of preferred stock and 80,603 shares of common stock at April 21, 2005 and October 28, 2004	(1,004		)	(1,004		)
Treasury stock, at cost, 923.87 shares of preferred stock and 80,603 shares of common stock at July 14, 2005 and October 28, 2004	(1,004		)	(1,004		)
Accumulated deficit	(1415,~~649~~331		)	(13,399		)
Total stockholders’ equity	7072,~~770~~427			68,045
Total liabilities and stockholders’ equity	$	~~384~~396,~~442~~391		$	384,127

See accompanying notes to consolidated financial statements.

VI Acquisition Corp.

Consolidated Statements of Operations

(In Thousands)

(Unaudited)

	84 Days Ended			84 Days Ended			~~175~~259 Days Ended			~~172~~256 Days Ended
	April 21,			April 15,			April 21,			April 15,
	July 14,			July 8,			July 14,			July 8,
	2005			2004			2005			2004
				(As restated)						(As restated)
Revenues:
Restaurant operations	$	9291,~~339~~225		$	9188,~~963~~958		$	~~196~~288,~~862~~087		$	~~191~~280,~~389~~347
Franchise operations	1,~~191~~283			1,~~162~~165			23,~~420~~703			23,~~330~~495
	93,530			93,125			199,282			193,719
	92,508			90,123			291,790			283,842
Costs and expenses:
Restaurant costs:
Food	2423,~~394~~702			24,~~799~~571			5276,~~605~~307			5276,~~096~~667
Labor	3029,~~042~~861			2928,~~491~~827			6292,~~282~~143			6089,~~298~~125
Other operating expenses	2524,~~336~~720			2522,~~027~~923			5377,~~102~~823			5174,~~562~~485
Franchise operating expenses	~~521~~480			~~541~~512			1,~~032~~512			1,~~093~~605
General and administrative expenses	6,~~271~~234			5,~~699~~602			1219,~~878~~112			1117,~~900~~503
Transaction expenses	—			23			15			45
Litigation settlement	(408		)	—			(408		)	—
Management fees	196			506			392			702
Transaction expenses	—			—			15			45
Asset impairment	—			22			—			22
Management fees – related party	196			196			588			897
	86,760			86,108			182,306			177,718
Asset impairment	—			—			—			22
Operating profit	6,770			7,017			16,976			16,001
	84,785			82,631			267,092			260,349
Interest expense	(6,476		)	(5,899		)	(13,454		)	(12,105		)
Operating profit	7,723			7,492			24,698			23,493
Debt extinguishment costs	—			(6,856		)	—			(6,856		)
Interest expense	(6,577		)	(6,383		)	(20,031		)	(18,488		)
Other income, net	138			27			226			50
Debt extinguishment costs	—			—			—			(6,856		)
Income (loss) before income taxes	432			(5,711		)	3,748			(2,910		)
Other income, net	211			111			437			161
Provision for income taxes (benefit)	(24		)	(2,048		)	1,023			(1,290		)
Income (loss) before income taxes	1,357			1,220			5,104			(1,690		)
Net income (loss)	456			(3,663		)	2,725			(1,620		)
Provision for income taxes (benefit)	49			247			1,072			(1,043		)
Preferred stock dividends and accretion	(1,928		)	(1,711		)	(3,975		)	(3,466		)
Net income (loss)	1,308			973			4,032			(647		)
Net loss attributable to common stockholders	$	(1,472	)	$	(5,374	)	$	(1,250	)	$	(5,086	)
Preferred stock dividends and accretion	(1,989		)	(1,778		)	(5,964		)	(5,244		)
Net loss attributable to common stockholders	$	(681	)	$	(805	)	$	(1,932	)	$	(5,891	)

See accompanying notes to consolidated financial statements.

VI Acquisition Corp.

Consolidated Statements of Cash Flow

(In Thousands)

(Unaudited)

	175 Days Ended			172 Days Ended
	259 Days Ended			256 Days Ended
	April 21,			April 15,
	July 14,			July 8,
	2005			2004
				(As restated)
Operating activities:
Net income (loss)	$	24,~~725~~032		$	(~~1,620~~647	)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation and amortization	913,~~000~~744			812,~~608~~983
Amortization of financing costs and original issue discounts	~~579~~869			~~469~~749
Loss on disposition of assets	2274			85138
Deferred finance charge write-off	—			4,288
Deferred income tax expense	(12,~~045~~965		)	(2,~~116~~713		)
Interest on warrants	—			88
Changes in operating assets and liabilities:
Receivables, net	13,~~125~~608			12,~~564~~943
Inventories	21,~~950~~765			23,~~491~~175
Cash overdraft	(3,190		)	(4,866		)
Accounts payable	(~~2,068~~935		)	(1,~~235~~422		)
Accrued compensation	~~(92~~345		)	(40275		)
Other current assets and liabilities	25,~~166~~362			1,~~278~~515
Other noncurrent assets and liabilities	2,~~256~~565			12,~~686~~484
Net cash provided by operating activities	1425,~~428~~274			1018,~~680~~440
Investing activities:
Purchase of property and equipment	(511,~~856~~914		)	(58,~~931~~888		)
Purchase of assets under deemed landlord financing liability	(210,~~977~~469		)	(~~680~~2,666		)
Proceeds from disposition of property	58102			72346
Collection of notes receivable	196			1528
Other	—			(78132		)
Net cash used in investing activities	(822,~~579~~085		)	(611,~~602~~312		)
Financing activities:
Payments of debt and capital lease obligations	(9,~~048~~093		)	(~~160~~164,~~784~~936		)
Proceeds from issuance of debt	7,600			~~158~~162,~~236~~301
Proceeds from deemed landlord financing	39,~~197~~229			~~395~~1,101
Net proceeds from issuance of preferred stock and common stock	—350			264
Debt issuance costs	—(12		)	(5,~~401~~885		)
Repurchase of shares	—			(4		)
Net cash provided by (used in) financing activities	18,~~749~~074			(7,~~294~~159		)
Increase (decrease) in cash and cash equivalents	711,~~598~~263			(~~3,216~~31		)
Cash and cash equivalents at beginning of period	1,332			5,326
Cash and cash equivalents at end of period	$	812,~~930~~595		$	25,~~110~~295
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on long-term debt and deemed landlord financing liability (net of amount capitalized)	$	13,303		$	6,315
Interest on long-term debt and deemed landlord financing liability (net of amounts capitalized)	$	16,470		$	14,393
Income taxes	2,~~076~~188			~~878~~893

See accompanying notes to consolidated financial statements.

VI Acquisition Corp.

Notes to Consolidated Financial Statements

~~April~~July 2114, 2005

(Unaudited)

1. Description of the Business and Basis of Presentation

Description of Business

VI Acquisition Corp. (the “Company” or “VI Acquisition”), a Delaware corporation, was organized in June 2003 by Wind Point Partners and other co-investors. VICORP Restaurants, Inc. (“VICORP”) and its subsidiaries are wholly-owned by VI Acquisition Corp. As a holding company, VI Acquisition Corp. does not have any independent operations and, consequently, its consolidated statements of operations are substantially equivalent to those of VICORP.

The Company operates family style restaurants under the brand names “Bakers Square” and “Village Inn,” and franchises restaurants under the Village Inn ~~brand~~ brand name. At ~~April~~July 2114, 2005, the ~~Company~~ Company operated ~~274~~279 Company-owned restaurants in 15 states. Of the Company-owned restaurants, ~~148~~149 are Bakers Square restaurants and ~~126~~130 are Village Inn restaurants, with an ~~additional~~ ~~103~~additional 100 franchised Village Inn restaurants in 19 states. The Company-owned and franchised restaurants are concentrated in Arizona, California, Florida, the Rocky Mountain region, and the upper Midwest. In addition, the Company operates three pie manufacturing facilities located in Santa Fe Springs, California; Oak Forest, Illinois; and Chaska, Minnesota.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation. However, operating results for the ~~175~~259-day period ended ~~April~~July 2114, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending November 3, 2005. The consolidated balance sheet at October 28, 2004, as restated, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended October 28, 2004 included in our Annual Report on Form 10-K, which was amended on May 18, 2005 for the restatement of previously issued financial statements (see Note 2).

Stock-Based Compensation

Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” defines a fair value method of accounting for employee stock compensation and encourages, but does not require, all entities to adopt that method of accounting. Entities electing not to adopt the fair value method of accounting must make pro forma disclosures of net income as if the fair value method of accounting defined in SFAS No. 123 had been applied. The Company has elected not to adopt the fair value method and instead has elected to follow Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations (however, refer to the discussion in the following paragraph related to the Company’s pending adoption of SFAS No. 123R, “Share-Based Payment”). Under APB Opinion No. 25, compensation expense related to stock options is calculated as the difference, if any, between the exercise price of the option and the fair market value of ~~the~~ the underlying stock at the date of grant. This expense is recognized over the vesting period of the option or at the time of grant if the options immediately vest. As a result of the minimal number of stock options outstanding during all periods presented in the accompanying consolidated financial statements, the pro forma effects of applying the fair value method to outstanding options over their respective vesting periods had an immaterial effect on net income.

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, which replaces the prior SFAS No. 123 and supersedes APB Opinion No. 25. SFAS 123R requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be ~~recognized~~ recognized over the period that an employee provides services in exchange for ~~the~~ the award. This new standard will become effective for the Company on November 4, 2005 (the first quarter of the Company’s fiscal 2006), and while the Company is still evaluating the impact of adopting SFAS No. 123R, the Company does not believe such adoption will have a material impact on its consolidated financial statements because of the minimal number of stock options outstanding.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material, and requires that such items be recognized as current-period charges regardless of whether they meet the “so abnormal” criterion outlined in ARB No. 43. SFAS No. 151 also introduces the concept of “normal capacity” and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated ~~overheads~~ overheads must be recognized as an expense in the period incurred. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. While the Company is still evaluating the impact of this statement, it does not currently believe it will have a material impact on its consolidated financial statements.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform to the presentation in fiscal 2005. These reclassifications had no effect on the Company’s consolidated net income.

Fiscal Periods

The Company’s fiscal year is comprised of 52 or 53 weeks divided into four fiscal quarters of 12 or 13, 12, 12, and 16 weeks. The first ~~two~~three quarters of fiscal 2005 and fiscal 2004 consisted of ~~175~~259 and ~~172~~256 days, respectively, reflecting the difference in duration of the first quarter of those years. The second, third and fourth quarters of fiscal 2005 and fiscal 2004 are the same in duration. Fiscal 2005 will consist of 53 weeks, or 371 total days, while fiscal 2004 consisted of 52 weeks and four days, or 368 total days.

2. Restatement of Previously Issued Financial Statements

The Company has restated its financial statements for periods spanning from fiscal 2000 through fiscal 2004 to correct the following accounting errors primarily as a result of a review of its lease accounting policies and practices prompted by the views expressed by the Office of the Chief Accountant of the Securities and Exchange Commission (“SEC”) on February 7, 2005 in a letter to the American Institute of Certified Public Accountants and other recent interpretations regarding certain operating lease issues and their application under GAAP:

(i) Accounting for Real Estate Transactions

Historically, the Company had accounted for certain of its real estate transactions of restaurant properties as sale-leaseback transactions. The Company has restated its financial statements to now report these transactions as financing transactions under SFAS No. 98, “Accounting for Leases,” rather than as sale-leaseback transactions as previously reported due to a determination that certain lease agreement provisions reflect continuing involvement with the buyer-lessor. Our continuing involvement for most of our leases now accounted for under the financing method results from our ability to control the property with pre-determined rental payments through at least 90 percent of the economic life of the property, even though lease renewals would need to be exercised by the Company to effectuate such control. These “perpetual fixed-price renewal options” are considered continuing involvement because the seller-lessee is deemed to benefit from future appreciation in the underlying property in a manner similar to a fixed-price purchase option. Such ~~continuing~~ continuing involvement precludes the use of sale-leaseback accounting until such time that the continuing involvement no longer exists. The affected real estate transactions related to an aggregate of 79 existing restaurants in 1999, 2001 and 2003 and nine new restaurant locations opened in 2003 and 2004.

The impact of the restatement was to record on the Company’s consolidated balance sheets the assets of the restaurants subject to these transactions as if they had not been sold and record the proceeds from these transactions (including any gains previously deferred) as liabilities under the caption “Deemed landlord financing liability”. Operating results were restated to recognize depreciation expense associated with the assets subject to these transactions and re-characterize the lease payments previously reported as rent expense as principal repayments and imputed interest expense. The rent expense reversal associated with these transactions included the reversal of previously recorded expenses for straight-line rents and rent reductions for certain purchase accounting adjustments made to account for the leases at fair market value. In addition, the capital lease classification for three leased properties was re-characterized as deemed landlord financing assets and liabilities.

The net impact to correctly classify the aforementioned leases as financing transactions increased loss before income taxes by $1,~~042~~005,000 for the 84-day period ended ~~April~~July 158, 2004. The correcting entries consisted of a $1,~~563~~567,000 decrease in other operating expenses, a $41,000 decrease in franchise operating expenses and a $2,~~646~~613,000 increase in interest expense.

The net impact to correctly classify the aforementioned leases as financing transactions increased loss before income taxes by $23,~~096~~101,000 for the ~~172~~256-day period ended ~~April~~July 158, 2004. The correcting entries consisted of a a $34,~~288~~855,000 decrease in other operating expenses, ana $82123,000 decrease in franchise operating expenses and a $58,~~466~~079,000 increase in interest expense.

(ii) Understated Straight-Line Rent Expense

GAAP requires that leases for which there are scheduled rent increases over the term of the lease be accounted for at the average rent payment, or on a straight-line basis, over the applicable term with the differences being recorded on the balance sheet as a deferred rent liability. The Company did not appropriately straight-line its rents for certain locations, which resulted in understated operating expenses in prior financial reporting periods. The net impact to correctly straight-line rents resulted in ~~increased~~an increase in other operating expenses and an increase in the loss before income taxes of $126,000 and $~~257~~383,000 for the 84-day and ~~172~~256-day periods ended ~~April~~July 158, 2004, respectively.

(iii) Understated Depreciation and Amortization Expense

The Company generally has historically depreciated its buildings and leasehold improvements over the lesser of the asset’s useful life or the initial term of the associated lease unless an economic penalty would occur from not exercising renewal options, in ~~which~~ which case, the assets are depreciated over the lesser of the asset’s useful life or the reasonably assured lease term. However, in performing a detailed review of the Company’s depreciable assets, it was determined that buildings and leasehold improvements for approximately 31 restaurant properties had incorrect depreciable lives resulting in an understatement of depreciation expense, predominantly in earlier periods. The net impact of the correction of our leasehold improvement depreciable lives resulted in ~~increased~~an increase in other operating expenses and an increase in the loss before income taxes of $1021,000 and $2950,000 for the 84-day and ~~172~~256-day periods ended ~~April~~July 158, 2004, respectively.

(iv) Understated Interest Expense on Preferred Stock Warrant Accretion

The Company also determined it was appropriate to record additional adjustments which were previously deemed immaterial. The adjustments related to interest expense and preferred dividends imputed from the accretion of preferred stock warrants with anti-dilutive provisions issued originally to certain debt holders at the time of the Company’s June 2003 purchase. For the 84-day and ~~172~~256-day periods ended ~~April~~July 158, 2004, additional preferred stock and interest expense of $~~44,000~~0 and $88,000, respectively, was recorded as a result of the correction of this error, respectively.

(v) Accounting for Income Taxes

In addition to the impact on the Company’s income tax provision resulting from the accounting corrections discussed above, the Company determined that its accounting for income taxes related to our purchase ~~business~~ business combinations was not correct. Under FASB SFAS No. 109, “Accounting for Income Taxes,” companies are to recognize deferred tax assets and liabilities for the tax effects of differences between assigned values in the purchase price allocation in a purchase business combination (except for the portion of goodwill that is not deductible for tax purposes). The provisions of SFAS No. 109 apply to basis differences that arise in both taxable and nontaxable business combinations. In both the Company’s 2001 and 2003 business acquisitions, certain purchase price allocations were not correctly tax effected. The correction resulted in recognition of additional deferred tax liabilities and a corresponding increase in goodwill. The impact of the corrections decreased the Company’s provision for income taxes by $~~656~~427,000 and $1,~~157~~584,000 for the for the 84-day and ~~172~~256-day periods ended ~~April~~July 158, 2004, respectively.

The collective impact of these restatements on the Company’s results of ~~consolidated~~operations ~~financial~~for ~~statements~~the 84-days and 256-days ended July 8, 2004 are summarized below (in thousands):

	As of October 28, 2004
	84 Days Ended July 8, 2004 (Unaudited)
	Previously
	reported			Corrections			As restated
	Reported			Corrections			As restated
	(Unaudited)
Statement of Operations Data
Balance Sheet Data
Other operating expenses	$	24,343		$	(1,420	)	$	22,923
Receivables, net	$	13,676		$	(1,761	)	$	11,915
Franchise operating expenses	553			(41		)	512
Deferred income taxes, short-term	2,463			2,210			4,673
Operating profit	6,031			1,461			7,492
Total current assets	33,418			449			33,867
Interest expense	(3,770		)	(2,613		)	(6,383		)
Property and equipment, net	84,785			(4,469		)	80,316
Income before income taxes	2,372			(1,152		)	1,220
Assets under deemed landlord financing liability, net	—			110,342			110,342
Provision for income taxes	674			(427		)	247
Build-to-suit construction-in-progress	6,258			(6,258		)	—
Net income	1,698			(725		)	973
Deferred income taxes, long-term	22,636			(22,636		)	—
Preferred stock dividends and accretion	(1,733		)	(45		)	(1,778		)
Goodwill	82,843			9,038			91,881
Net income (loss) attributable to common shareholders	(35		)	(770		)	(805		)
Other assets, net	6,482			7,281			13,763
Total assets	290,380			93,747			384,127
Current maturities of long-term debt and capitalized lease obligations	258			(57		)	201
Accounts payable	12,865			309			13,174
Current liabilities	49,963			252			50,215
Capitalized lease obligations	3,490			(3,242		)	248
Deemed landlord financing liability	—			114,670			114,670
Build-to-suit liability	6,258			(6,258		)	—
Deferred income taxes, long-term	—			1,360			1,360
Other non-current liabilities	15,871			(8,814		)	7,057
Total liabilities	217,051			97,968			315,019
Preferred stock	79,769			253			80,022
Accumulated deficit	(8,925		)	(4,474		)	(13,399		)
Total stockholders’ equity	72,266			(4,221		)	68,045
Total liabilities and stockholders’ equity	290,380			93,747			384,127

	84 Days Ended April 15, 2004
	256 Days Ended July 8, 2004 (Unaudited)
	Previously
	Reported			Corrections			As restated
	(Unaudited)
Statement of Operations Data
Other operating expenses	$	2678,~~454~~907		$	(14,~~427~~422	)	$	2574,~~027~~485
Franchise operating expenses	~~582~~1,728			(41123		)	~~541~~1,605
Operating profit	518,~~549~~948			14,~~468~~545			723,~~017~~493
Interest expense	(310,~~209~~321		)	(28,~~690~~167		)	(518,~~899~~488		)
Loss before income taxes	(4,489		)	(1,222		)	(5,711		)
Income (loss) before income taxes	1,932			(3,622		)	(1,690		)
Provision for income taxes	~~(1,392~~541		)	(~~656~~1,584		)	(21,~~048~~043		)
Net loss	(3,097		)	(566		)	(3,663		)
Net income (loss)	1,391			(2,038		)	(647		)
Net loss attributable to common shareholders	(4,808		)	(566		)	(5,374		)
Preferred stock dividends and accretion	(5,199		)	(45		)	(5,244		)
Net income (loss) attributable to common shareholders	(3,808		)	(2,083		)	(5,891		)
Statement of Cash Flows Data
Net cash provided by operations	$	18,838		$	(398	)	$	18,440
Net cash used in investing activities	(11,147		)	(165		)	(11,312		)
Net cash used in financing activities	(7,722		)	563			(7,159		)
Net increase in cash and cash equivalents	(31		)	—			(31		)

11The Company restated its annual consolidated financial statements with the filing of an amended Annual Report on Form 10-K/A with the SEC for the fiscal year ended October 28, 2004.

	172 Days Ended April 15, 2004
	Previously
	Reported			Corrections			As restated
	(Unaudited)
Statement of Operations Data
Other operating expenses	$	54,564		$	(3,002	)	$	51,562
Franchise operating expenses	1,175			(82		)	1,093
Operating profit	12,917			3,084			16,001
Interest expense	(6,551		)	(5,554		)	(12,105		)
Loss before income taxes	(440		)	(2,470		)	(2,910		)
Provision for income taxes	(133		)	(1,157		)	(1,290		)
Net loss	(307		)	(1,313		)	(1,620		)
Net loss attributable to common shareholders	(3,773		)	(1,313		)	(5,086		)
Statement of Cash Flows Data
Net cash provided by operations	$	10,967		$	(287	)	$	10,680
Net cash used in investing activities	(6,473		)	(129		)	(6,602		)
Net cash used in financing activities	(7,710		)	416			(7,294		)
Net increase in cash and cash equivalents	(3,216		)	—			(3,216		)

~~The Company restated its annual consolidated financial statements with the filing of an amended Annual Report on Form 10-K with the SEC for the fiscal year ended October 28, 2004~~3. Inventories

3. Inventories are stated at the lower of cost (which is determined on a first-in, first-out basis) or market and consist of food, paper products and supplies. Inventories consisted of the following (in thousands):

Inventories are stated at the lower of cost (which is determined on a first-in, first-out basis) or market and consist of food, paper products and supplies. Inventories consisted of the following (in thousands):

	July 14,		October 28,
	2005		2004
Inventories at pie production facilities and third-party storage locations:
Raw materials	$	4,257	$	4,353
Finished goods	3,235		4,717
	7,492		9,070
Restaurant inventories	2,988		3,175
	$	10,480	$	12,245

	April 21,			October 28,
	2005			2004
Inventories at pie production facilities and third-party storage locations:
Raw materials	$		4,029	$	4,353
Finished goods	2,182			4,717
	6,211			9,070
Restaurant inventories	3,084			3,175
	$	9,295		$		12,245

4. Debt

12On April 14, 2004, the Company completed a private placement of $126.5 million aggregate principal amount of 10½% senior unsecured notes maturing on April 15, 2011. The notes were issued at a discounted price of 98.791% of face value, resulting in net proceeds before transaction expenses of $125.0 million. The senior unsecured notes were issued by VICORP Restaurants, Inc. and are guaranteed by VI Acquisition Corp. and Village Inn Pancake House of Albuquerque, Inc. In August 2004, the Company’s registration statement with the Securities and Exchange Commission on Form S-4 was declared effective and the senior unsecured notes and guarantees were exchanged for registered notes and guarantees having substantially the same terms and evidencing the same indebtedness. Interest is payable semi-annually on April 15 and October 15 until maturity.

4The Company has an Amended and Restated Senior Secured Credit Facility consisting of a $15. 0 million term loan and a $30.0 million revolving credit ~~Debt~~facility, with a $15.0 million sub-limit for letters of credit. As of July 14, 2005, the Company had issued letters of credit aggregating $7.2 million and had no borrowings outstanding under the senior secured revolving credit facility. The senior secured revolving credit facility permits borrowings equal to the lesser of (a) $30.0 million and (b) 1.2 times trailing twelve months Adjusted EBITDA (as defined in the senior secured credit agreement) minus the original amount of the new senior secured term loan. Under this formula, as of July 14, 2005, the Company had the ability to borrow the full $30.0 million, less the amount of outstanding letters of credit and borrowings under the senior secured revolving credit facility, or $22.8 million.

OnBorrowings ~~April 14,~~under ~~2004,~~both the ~~Company~~revolving ~~completed~~credit afacility ~~private~~and ~~placement~~the term loan of the Amended and Restated Senior Credit Facility bear interest at floating ~~$126.5~~rates ~~million~~tied ~~aggregate~~to ~~principal~~either ~~amount~~the base rate of ~~10½%~~the ~~senior~~agent ~~unsecured~~bank ~~notes~~under the credit agreement ~~maturing~~or onLIBOR ~~April 15~~rates for a period of one, ~~2011. The~~two ~~notes were~~or ~~issued~~three atmonths, in each case plus a margin ~~discounted~~that ~~price~~will ofadjust ~~98.791%~~based on the ratio of ~~face~~our ~~value~~Adjusted EBITDA to total indebtedness, ~~resulting~~as defined in ~~net~~the agreement. ~~proceeds~~At ~~before~~July 14, ~~transaction~~2005, ~~expenses~~the ofinterest ~~$125~~rates were 6.05% ~~million~~for term loan borrowings. ~~The~~Both ~~senior~~facilities ~~unsecured~~are ~~notes~~secured by ~~were~~a ~~issued~~lien ~~by VICORP~~on ~~Restaurants~~all of the assets of VICORP, ~~Inc.~~ and ~~are~~ guaranteed by VI Acquisition Corp. and Village Inn Pancake House of Albuquerque, Inc. In ~~August 2004~~addition, the guarantees ~~Company’s~~also ~~registration~~are ~~statement~~secured ~~with~~by the ~~Securities~~ ~~and~~pledge ~~Exchange~~of ~~Commission~~all onof ~~Form S-4~~the ~~was~~outstanding ~~declared effective and~~capital ~~the~~stock ~~senior~~of ~~unsecured~~VICORP ~~notes~~by ~~and~~VI ~~guarantees~~Acquisition ~~were~~Corp. ~~exchanged~~The ~~for~~term ~~registered~~loan ~~notes and~~does ~~guarantees~~not ~~having~~require ~~substantially the same terms and evidencing the same~~periodic ~~indebtedness. Interest~~principal ispayments, ~~payable semi-annually~~but onrequires ~~April 15~~mandatory ~~and~~repayments ~~October 15~~under ~~until maturity.~~

The Company has an Amended and Restated Senior Secured Credit Facility consisting of a $15.0 million term loan and a $30.0 million revolving credit facility, with a $15.0 million sub-limit for letters of credit. As of April 21, 2005, the Company had issued letters of credit aggregating $6.6 million and had no borrowings outstanding under the senior secured revolving credit facility. The senior secured revolving credit facility permits borrowings equal to the lesser of (a) $30.0 million and (b) 1.2 times trailing twelve months Adjusted EBITDA (as defined in the senior secured credit agreement) minus the original amount of the new senior secured term loan. Under this formula, as of April 21, 2005, the Company had the ability to borrow the full $30.0 million, less the amount of outstanding letters of credit and borrowings under the senior secured revolving credit facility, or $23.4 million.12

Borrowings under both the revolving credit facility and the term loan of the Amended and Restated Senior Credit Facility bear interest at floating rates tied to either the base rate of the agent bank under the credit agreement or LIBOR rates for a period of one, two or three months, in each case plus a margin that will adjust based on the ratio of our Adjusted EBITDA to total indebtedness, as defined in the agreement. At April 21, 2005, the interest rates were 6.1% for term loan borrowings. Both facilities are secured by a lien on all of the assets of VICORP, and guaranteed by VI Acquisition Corp. and Village Inn Pancake House of Albuquerque, Inc. In addition, the guarantees also are secured by the pledge of all of the outstanding capital stock of VICORP by VI Acquisition Corp. The term loan does not require periodic principal payments, but requires mandatory repayments under certain events, including proceeds from sale of assets, issuance of equity and issuance of new indebtedness. Both facilities mature on April 14, 2009.

The Amended and Restated Senior Secured Credit Facility and the indenture governing the 10½% Senior Unsecured Notes contain a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries, to sell assets, incur additional indebtedness, as defined, or issue preferred stock, repay other indebtedness, pay dividends and distributions or repurchase our capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations, enter into sale-leaseback transactions, engage in certain transactions with affiliates, amend certain material agreements governing our indebtedness, change the business conducted by us and our subsidiaries and enter into hedging agreements. In addition, the Company’s Amended and Restated Senior Secured Credit Facility requires us to maintain or comply with a maximum total leverage ratio, a minimum interest coverage ratio and a maximum capital expenditures limitation. On ~~April~~July 2114, 2005, the Company was in compliance with these requirements.

13In connection with the April 2004 refinancing, we incurred $6.9 million of debt extinguishment costs, including prepayment penalties of $2.3 million, $4.4 million of noncash write-offs of unamortized deferred financing costs and $0.2 million of costs relating to terminating interest rate swaps.

5. Commitments and Contingencies

Insurance reserves

The Company retains a significant portion of certain insurable risks primarily in the medical, dental, workers’ compensation, general liability and property areas. Traditional insurance coverage is obtained for catastrophic losses. Provisions for losses expected under these programs are recorded based upon the Company’s estimates of liabilities for ~~claims~~ claims incurred, including those not yet reported. Such estimates utilize prior Company history and actuarial assumptions followed in the insurance industry. Favorable workers compensation claims experience related to recent years has permitted a reduction in workers compensation expense accruals in fiscal 2005 versus previous years. Should the current claims experience trends continue, it is likely further expense reductions will be made. As of ~~April~~July 2114, 2005, the Company had recorded an insurance reserve liability of $109.37 million and had placed letters of credit totaling approximately $67.62 million, primarily associated with its insurance programs.

Litigation and tax contingencies

From time-to-time, the Company has been involved in various lawsuits and claims arising from the conduct of its business. Such lawsuits typically involve claims from customers and others related to operational issues and complaints and allegations from former and current employees. These matters are believed to be common for restaurant businesses. Additionally, the Company has been party to various assessments of taxes, penalties and interest from federal and state agencies. Management believes the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

The Company was a defendant in two purported class action claims in California. The first class action claim was brought in October 2003 by two former employees and one current employee, and the second class action claim was brought in May 2004 by two former employees. The complaints alleged that the Company violated California law with regard to rest and meal periods, bonus payment calculations (in the October 2003 complaint), overtime payments (in the May 2004 complaint) and California law regarding unfair business practices. The classes and subclasses alleged in the actions have not been certified by the respective courts at the current stages of the litigation, but generally are claimed in the 2003 complaint to include persons who have been employed by the Company in California since October 17, 1999 in the positions of food server, restaurant general manager and assistant restaurant manager, and generally are claimed in the 2004 complaint to include persons who have been employed by the Company in California since May 21, 2000 in the positions of restaurant general manager and restaurant associate manager. No dollar amount in damages was requested in either complaint, and the complaints sought statutory damages, compensatory damages, interest and attorneys’ fees in unspecified amounts.

The parties have entered into a settlement agreement, which is subject to the final approval of the court. Under the terms of the proposed settlements, the Company has agreed to pay up to an aggregate of $6.55 million for the alleged claims and associated legal fees, subject to partial indemnification as noted below.13

14payment calculations (in the October 2003 complaint), overtime payments (in the May 2004 complaint) and California law regarding unfair business practices. The classes and subclasses alleged in the actions have not been certified by the respective courts at the current stages of the litigation, but generally are claimed in the 2003 complaint to include persons who have been employed by the Company in California since October 17, 1999 in the positions of food server, restaurant general manager and assistant restaurant manager, and generally are claimed in the 2004 complaint to include persons who have been employed by the Company in California since May 21, 2000 in the positions of restaurant general manager and restaurant associate manager. No dollar amount in damages was requested in either complaint, and the complaints sought statutory damages, compensatory damages, interest and attorneys’ fees in unspecified amounts.

The ~~Company~~parties ~~filed~~entered into a ~~lawsuit~~settlement ~~on December 3~~agreement, ~~2004~~which ~~against~~was ~~the~~approved ~~former~~June 1, ~~shareholders~~2005. ofUnder ~~Midway (~~the ~~former~~terms ~~parent~~ of ~~VICORP) in~~ the ~~Circuit Court of Cook County~~settlements, ~~Illinois seeking indemnification for all of~~ the ~~damages~~Company ~~related~~agreed to ~~such~~ ~~litigation~~pay ~~under~~up ~~the~~to ~~purchase agreement dated June 14, 2003 pursuant~~an toaggregate ~~which~~of ~~VICORP~~$6.55 ~~was~~million ~~acquired,~~for ~~in addition to~~ the ~~assertion~~alleged ~~of other~~ claims~~. The~~ ~~former~~and ~~shareholders~~associated ~~of Midway~~legal ~~filed a lawsuit on December 22~~fees, subject ~~2004~~to inpartial ~~Suffolk~~indemnification ~~County~~as ~~Superior Court~~noted ~~in Massachusetts~~below. ~~The~~ During ~~former shareholders~~the offourth ~~Midway~~quarter ~~claim,~~of ~~among~~fiscal ~~other allegations~~2004, ~~that~~ the Company ~~has improperly~~established ~~sought~~a ~~indemnification~~reserve ~~and~~of ~~are~~$6.55 ~~denying~~million ~~liability~~in ~~for~~connection with the ~~portion~~proposed settlement of ~~the~~ ~~damages~~these ~~in the previously mentioned~~ class action lawsuits ~~that arose following the closing of the June 2003 acquisition, and for certain settlements for which they claim they did not receive appropriate notice or approval rights~~.

~~While~~The ~~the~~ Company ~~believes~~filed ~~that~~a ~~its~~lawsuit ~~claims~~on December 3, 2004 against the former shareholders of Midway ~~Investors~~(the ~~Holdings~~former ~~Inc.~~parent ~~are~~of ~~meritorious~~VICORP) ~~and~~in ~~that~~the itCircuit ~~will~~Court of Cook ~~prevail~~County, inIllinois ~~the~~seeking ~~event~~indemnification for all of the ~~Company~~damages ~~does~~related ~~not~~to ~~fully~~such litigation ~~prevail~~under onthe ~~its~~purchase ~~indemnification claims~~agreement dated June 14, ~~management~~2003 ~~estimates~~pursuant ~~that~~to which ~~the~~VICORP ~~Company’s~~was ~~maximum~~acquired, ~~exposure~~in ~~under~~addition to the ~~settlement~~ ~~agreements~~assertion isof ~~$3.2~~other ~~million~~claims. The ~~During~~former ~~the~~shareholders ~~fourth~~of ~~quarter~~Midway offiled ~~fiscal~~a ~~2004~~lawsuit on December 22, ~~the~~2004 ~~Company~~in ~~established~~Suffolk aCounty ~~reserve~~Superior ofCourt $3in Massachusetts.2 The ~~million~~former inshareholders of ~~connection~~Midway ~~with~~claim, among other allegations, that the Company has improperly ~~proposed~~sought ~~settlement~~indemnification ofand ~~these~~are ~~class~~denying ~~action~~liability ~~lawsuits. A~~for ~~receivable~~the portion of ~~$3.4~~the ~~million~~damages in ~~was~~the ~~reflected~~previously ~~at both~~mentioned ~~January 27,~~class ~~2005~~action ~~and~~lawsuits ~~October 28,~~that ~~2004~~arose onfollowing the ~~Company’s~~ ~~consolidated~~closing ~~balance~~of ~~sheets~~the June 2003 acquisition, and for ~~the~~certain ~~difference~~settlements ~~between~~for which ~~the~~they ~~aggregate~~claim ~~amount~~they ~~of the~~did ~~settlement~~not ~~and~~receive ~~the~~appropriate ~~Company’s~~notice ~~estimated~~or ~~exposure~~approval rights.

~~Guarantees~~The former shareholders of Midway Investors Holdings Inc. have acknowledged they are liable to the Company for the pre-closing portion of class action settlement agreements. Currently, the Company and ~~commitments~~the former shareholders are in discussions regarding the final settlement amount. During the fourth quarter of fiscal 2004, the Company established a receivable of $3.4 million on the Company’s consolidated balance sheet for the former shareholders’ estimated portion of the settlement.

~~VICORP guaranteed~~In ~~certain~~the ~~leases~~third ~~for~~quarter ~~restaurant~~of ~~properties~~2005, ~~sold~~the in$6.55 ~~1986~~million ~~and~~reserve ~~restaurant~~mentioned above ~~leases~~was ofreduced ~~certain~~to ~~franchisees~~$5.3 ~~Minimum~~million, ~~future~~as ~~rental~~the ~~payments~~information ~~remaining~~regarding ~~under~~the ultimate costs ~~these~~was ~~leases~~finalized ~~were~~by ~~approximately~~the $2trustee.5 ~~million~~The asassociated ofreceivable ~~April 21~~was reduced by $0.8 million, ~~2005~~in conjunction with the reduction to the estimated reserve for the settlement agreements.

~~Contractual obligations,~~Guarantees ~~primarily~~and ~~for restaurants under construction, amounted to approximately $8.1 million as of April 21, 2005.~~commitments

6. VICORP ~~Other~~guaranteed ~~accrued~~certain ~~expenses~~leases for restaurant properties sold in 1986 and ~~other~~restaurant leases ~~noncurrent~~of ~~liabilities~~certain franchisees. Minimum future rental payments remaining under these leases were approximately $2.4 million as of July 14, 2005.

~~Other~~Contractual obligations, ~~accrued~~primarily ~~expenses~~for ~~consisted~~restaurants ofunder ~~the~~construction, ~~following~~amounted ~~(in~~to approximately ~~thousands):~~$16.7 million as of July 14, 2005.

	April 21, 2005		October 28, 2004
Legal settlements	$	7,076	$	6,775
Insurance	4,635		4,372
Rent	977		1,611
Interest	443		729
Gift certificates and cards	1,566		891
Advertising	649		869
Reserve for closed/subleased locations	428		556
Miscellaneous	3,181		2,717
	$	18,955	$	18,520

~~Accrued~~6. Other ~~miscellaneous expenses consisted primarily of~~ accrued expenses ~~for 401(k) employer contributions, credit card fees, royalty prepayments~~ and ~~legal, management~~other ~~and~~noncurrent ~~audit fees.~~liabilities

15Other accrued expenses consisted of the following (in thousands):

Other noncurrent liabilities consisted of the following (in thousands):

	July 14, 2005		October 28, 2004
Legal settlements	$	5,793	$	6,775
Insurance	4,398		4,372
Rent	1,332		1,611
Interest	3,477		729
Gift certificates and cards	1,508		891
Advertising	802		869
Reserve for closed/subleased locations	411		556
Miscellaneous	2,663		2,717
	$	20,384	$	18,520

	April 21, 2005		October 28, 2004
			(As restated)
Reserve for closed/subleased properties	$	690	$	714
Deferred straight-line rent payable	1,772		1,354
Insurance	5,674		4,477
Landlord incentive	839		466
Other	23		46
	$	8,998	$	7,057

Accrued miscellaneous expenses consisted primarily of accrued expenses for 401(k) employer contributions, credit card fees, royalty prepayments and legal, management and audit fees.

7. Other ~~Related~~noncurrent ~~Party~~liabilities ~~Transactions~~consisted of the following (in thousands):

On June 14, 2003, the Company entered into a professional services agreement with Wind Point Investors, IV, L.P. and Wind Point Investors V, L.P. (collectively “Wind Point”), whereby certain management, financial and other consulting services would be provided to the Company. Under the terms of the agreement, the Company pays an annual fee to both partnerships in the aggregate amount of $850,000. In connection with the April 14, 2004 debt refinancing (Note 4), the Company also paid an additional $309,000 in fees to Wind Point, which represented a deferral of a portion of the transaction fee payable to Wind Point in connection with the June 2003 acquisition. Management fees expensed under this agreement totaled approximately $196,000 and $506,000 during the 84 day periods ended April 21, 2005 and April 15, 2004, respectively, and $392,000 and $702,000 during the 175 day and 172 day periods ended April 21, 2005 and April 15, 2004, respectively. Management fees paid to Wind Point under this agreement totaled $213,000 and $142,000 during the 84 day periods ended April 21, 2005 and April 15, 2004, respectively, and $426,000 and $664,000 during the 175 day and 172 day periods ended April 21, 2005 and April 15, 2004, respectively.

	July 14, 2005		October 28, 2004

Reserve for closed/subleased properties	$	653	$	714
Deferred straight-line rent payable	2,172		1,354
Insurance	5,263		4,477
Landlord incentive	825		466
Other	23		46
	$	8,936	$	7,057

167. Related Party Transactions

~~Item~~On 2June 14, 2003, the Company entered into a professional services agreement with Wind Point Investors, IV, L. ~~MANAGEMENT’S~~P. ~~DISCUSSION~~and Wind Point Investors V, L.P. ~~AND~~(collectively ~~ANALYSIS~~“Wind OFPoint”), ~~FINANCIAL~~whereby ~~CONDITION~~certain ~~AND~~management, ~~RESULTS~~financial OFand ~~OPERATIONS~~other consulting services would be provided to the Company. Under the terms of the agreement, the Company pays an annual fee to both partnerships in the aggregate amount of $850,000. In connection with the April 14, 2004 debt refinancing (Note 4), the Company also paid an additional $309,000 in fees to Wind Point, which represented a deferral of a portion of the transaction fee payable to Wind Point in connection with the June 2003 acquisition. Management fees accrued under this agreement totaled approximately $226,000 at July 14, 2005 and July 8, 2004.

Statements included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this information report. See the “Risk Factors” section of our Annual Report on Form 10-K/A for the year ended October 28, 2004 for a discussion of some of the factors that may affect the Company and its operations. Such factors include the following: competitive pressures within the restaurant industry; changes in consumer preferences; the level of success of our operating strategy and growth initiatives; the level of our indebtedness and the terms and availability of capital; fluctuations in commodity prices; changes in economic conditions; government regulation; litigation; and seasonality and weather conditions. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements which we make in this report speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance and should only be viewed as historical data.15

~~Company~~Item ~~Profile~~2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

VIStatements ~~Acquisition~~included ~~Corp.~~in Management’s Discussion and ~~its~~Analysis ~~subsidiaries~~of Financial ~~(referred~~Condition toand ~~herein~~Results asof ~~the~~Operations ~~“Company”~~and elsewhere in this report are, or ~~“we”~~may be deemed to be, “usforward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “~~our~~Exchange Act”). These ~~operate family~~forward-~~dining~~looking ~~restaurants~~statements ~~under~~include ~~two~~all matters that are not ~~well-recognized~~historical ~~brands~~facts. By their nature, forward-looking ~~Village~~statements ~~Inn~~involve risks and ~~Bakers~~uncertainties ~~Square~~because they relate to events and depend on circumstances that may or may not occur in the future. We ~~Our~~caution ~~Company~~you that forward-looking statements are not guarantees of future performance and that our actual results of operations, ~~founded~~financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or ~~1958,~~suggested ~~had~~by ~~377~~the ~~restaurants~~forward-looking statements contained in 25this ~~states~~information report. See asthe “Risk Factors” section of our ~~April~~Annual Report on Form ~~21,~~10-K/A ~~2005~~for the year ended October 28, ~~consisting~~2004 for a discussion of some of the factors that may affect the Company and its ~~274~~operations. Such ~~company-operated~~factors ~~restaurants~~include the following: competitive pressures within the restaurant industry; changes in consumer preferences; the level of success of our operating strategy and ~~103~~growth initiatives; ~~franchised~~the ~~restaurants~~level of our indebtedness and the terms and availability of capital; fluctuations in commodity prices; changes in economic conditions; government regulation; litigation; and seasonality and weather conditions. In Weaddition, ~~also~~even if our results of ~~produce~~operations, ~~premium~~financial ~~pies~~condition ~~that~~and liquidity, and the development of the industry in which we ~~serve~~operate are consistent with the forward-looking statements contained in ~~our~~this ~~restaurants~~announcement, those results or ~~sell~~developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements which we make in this report speak only as of the date of such statement, and we undertake no obligation to ~~third~~update ~~parties~~such statements. atComparisons ~~three~~of ~~strategically~~results ~~located~~for ~~facilities~~current and any prior periods are not intended to express any future trends or indications of future performance and should only be viewed as historical data.

17Company Profile

~~The~~VI ~~following~~Acquisition ~~table~~Corp. ~~sets~~and ~~forth~~its ~~the~~subsidiaries ~~changes~~(referred to herein as the ~~number~~“Company” or “we”, “us” and “our”) operate family-dining restaurants under two well-recognized brands, Village Inn and Bakers Square. Our Company, founded in 1958, had 379 restaurants in 25 states as of July 14, 2005, consisting of 279 company-operated restaurants and 100 franchised restaurants. ~~for~~We ~~the~~also produce ~~periods~~premium ~~presented~~pies ~~below~~that we serve in our restaurants or sell to third parties at three strategically located facilities.

	175 Days Ended		172 Days Ended
(Units)	April 21, 2005		April 15, 2004
Village Inn company-operated restaurants:
Beginning of period	121		118
Openings	5		2
Closings	—		(1	)
End of period	126		119
Bakers Square company-operated restaurants:
Beginning of period	150		149
Openings	—		1
Closings	(2	)	—
End of period	148		150
Total company-operated restaurants	274		269
Village Inn franchised restaurants:
Beginning of period	103		105
Closings	—		(1	)
End of period	103		104
Total restaurants	377		373

~~Management~~The ~~Overview~~following table sets forth the changes to the number of company-operated and franchised restaurants for the periods presented below.

Our restaurant revenues are affected by restaurant openings and closings and same unit sales performance. Same unit sales is a measure of the percentage increase or decrease of the sales of units open at least 18 months relative to the same period in the prior year. We do not use new restaurants in our calculation of same unit sales until they are open for 18 months in order to allow a new restaurant’s operations and sales time to stabilize and provide more meaningful results. Same unit sales is an important indicator within the restaurant industry because small changes in same unit sales can have a proportionally higher impact on operating margins because of the high degree of fixed costs associated with operating restaurants.

	259 Days Ended		256 Days Ended
(Units)	July 14, 2005		July 8, 2004
Village Inn company-operated restaurants:
Beginning of period	121		118
Openings	9		2
Closings	—		(1	)
End of period	130		119
Bakers Square company-operated restaurants:
Beginning of period	150		149
Openings	1		1
Closings	(2	)	—
End of period	149		150
Total company-operated restaurants	279		269
Village Inn franchised restaurants:
Beginning of period	103		105
Closings	(3	)	(1	)
End of period	100		104
Total restaurants	379		373

~~The~~Management negative same unit sales trend at Bakers Square has been of significant concern to us. Same unit sales were 2.5% negative in fiscal 2003, 1.0% negative in fiscal 2004 and 3.7% and 5.5% negative in the first and second quarters of fiscal 2005, respectively. We attribute much of the larger negative same unit sales in fiscal 2005 to differences in advertising efforts, unfavorable timing of adverse winter weather, a softer economy in the Midwest and higher fuel costs impacting guest decisions. Despite these factors, we believe that longer negative same unit sales trend indicates that our Bakers Square restaurants have not met our guests’ expectations.Overview

WeOur ~~have~~restaurant revenues ~~recently~~are ~~embarked~~affected onby anrestaurant ~~effort~~openings weand ~~have~~closings ~~labeled~~and asame ~~“brand~~unit ~~revitalization”~~sales toperformance. ~~reverse~~Same ~~this~~unit ~~trend. The~~sales ~~first~~is ~~part~~a measure of the ~~revitalization~~percentage ~~project~~increase ~~was~~or decrease ~~completed~~of inthe ~~December 2004~~sales ~~and~~of ~~involved identifying~~units ~~our~~open ~~opportunities~~at ~~with~~least 18 months relative to the ~~help~~same period ofin anthe ~~outside~~prior ~~consultant~~year. We ~~have~~do ~~since~~not ~~been~~use ~~working~~new onrestaurants ~~refining~~in ~~the~~our calculation of ~~expected~~same ~~changes~~unit tosales ~~Bakers~~until ~~Square~~they ~~and~~are ~~expect~~open tofor ~~test~~18 ~~these~~months ~~changes~~in atorder ~~select stores~~to inallow ~~the~~a ~~third~~new restaurant’s ~~quarter~~operations ofand ~~fiscal~~sales ~~2005~~time ~~with~~to ~~continued~~stabilize ~~roll-out~~and inprovide ~~fiscal~~more meaningful ~~2006~~results. ~~The~~Same ~~changes~~unit ~~are~~sales ~~expected~~is toan beimportant ~~reasonably~~indicator ~~extensive~~within ~~and~~the ~~include~~restaurant ~~changes~~industry tobecause ~~the~~small ~~physical~~changes ~~plant,~~in ~~menu~~same ~~and~~unit ~~operations. Most~~sales ofcan ~~the~~have ~~revitalization efforts~~a ~~will~~proportionally behigher ~~focused~~impact inon ~~our~~operating ~~Midwest~~margins ~~markets,~~because ~~although~~of the ~~certain~~high ~~aspects~~degree of ~~the efforts~~fixed ~~may~~costs beassociated ~~incorporated~~with ~~into~~operating ~~our California market~~restaurants.

18Whereas same unit sales trends at the Village Inn operating unit have been consistently positive in recent years, the same unit trends at Bakers Square have been negative over this same period. The negative same unit sales trend at Bakers Square has been of significant concern to us. Same unit sales were 2.5% negative in fiscal 2003, 1.0% negative in fiscal 2004 and 3.7%, 5.5% and 2.0% negative in the first, second and third quarters of fiscal 2005, respectively. We attribute much of the larger negative same unit sales in fiscal 2005 to differences in advertising efforts, unfavorable timing of adverse winter weather, a softer economy in the Midwest and higher fuel costs impacting guest decisions. Despite these factors, we believe that longer negative same unit sales trend indicates that our Bakers Square restaurants have not met our guests’ expectations.

InWe ~~addition~~have recently embarked on an effort we have labeled a “revitalization” to reverse this trend. The first part of the revitalization ~~efforts,~~project wewas ~~have~~completed ~~recently~~in ~~hired~~December 2004 aand ~~new advertising~~involved ~~agency~~identifying our opportunities with the help of an outside consultant. We ~~expect~~have tosince ~~see~~been ~~their~~working ~~first efforts~~on ~~for~~refining ~~both~~ the expected changes to Bakers Square and ~~Village~~began ~~Inn~~to ~~concepts~~test ~~starting~~these inchanges ~~the~~at a selected Bakers Square restaurant subsequent to the third quarter of fiscal 2005. We expect to test the revitalization in several additional Bakers Square existing restaurants in fiscal 2006. The changes are reasonably extensive, and include changes to the physical store, menu and operations. Most of the revitalization

We have not substantially increased the number of restaurants within either the Village Inn or Bakers Square concepts for a number of years. However, with our new strategic focus, we intend to increase the number of company-operated Village Inn and Bakers Square restaurants more significantly over the next several years. We currently expect to open an estimated 23 to 27 new restaurants in fiscal 2005 with most of the openings occurring in the latter half of the fiscal year and primarily in our Village Inn concept.17

~~Like~~efforts ~~much~~will ~~of the~~be ~~restaurant~~focused ~~industry,~~in ~~we view same unit sales as a key performance metric, at the individual unit level, within regions, across each chain and throughout~~ our ~~company.~~Midwest ~~With our field-level and corporate information systems~~markets, wealthough ~~monitor~~certain ~~same~~aspects ~~unit sales on a daily, weekly and four-week period basis from the chain level down to the individual unit level. The primary drivers~~ of ~~same unit sales performance are changes in~~ the average per-person check and changes in the number of customers, or customer count. Average check performance is primarily affected by menu price increases and changes in the purchasing habits of our customers. We also monitor entrée count, exclusive of take-out business, and sales of whole pies, which we believe is indicative of overall customer traffic patterns. To increase average unit sales, we focus marketing and promotional efforts onmay ~~increasing~~be ~~customer~~incorporated ~~visits~~into ~~and sales of particular products. We also selectively increase prices, but are constrained by the price sensitivity of customers in~~ our ~~market~~California ~~segment and our desire to maintain an attractive price-to-value relationship that is a fundamental characteristic of our concepts~~market. We generally have increased prices in line with increases in the consumer price index, and expect to continue to do so in the future. Same unit sales performance is also affected by other factors, such as food quality, the level and consistency of service within our restaurants, the attractiveness and physical condition of our restaurants, as well as local and national economic factors.

AsIn ofaddition ~~April 21,~~to ~~2005~~the revitalization efforts, we ~~had~~have ~~103~~recently ~~franchised~~hired ~~Village~~a ~~Inn~~new ~~restaurants~~advertising ~~in nineteen states~~agency, ~~operated~~Ryan byPartnership. We 25began ~~franchisees which operate one~~ to ~~eleven~~see ~~restaurants~~their first ~~each. Although~~efforts wefor ~~may~~advertising ~~increase~~programs ~~franchise~~for ~~revenues by~~both ~~increasing~~ the ~~number~~Bakers ofSquare ~~franchised~~and Village Inn ~~restaurants,~~concepts westarting ~~expect~~late ~~that our franchise revenues will decline as a percentage of our total revenue as we emphasize growth~~ in the ~~number~~third quarter of ~~Company-operated~~fiscal ~~units~~2005.

InWith ~~addition~~our tonew ~~unit~~strategic ~~sales~~focus, ~~the~~we ~~other~~intend ~~major~~to ~~factor~~increase ~~affecting~~ the ~~performance~~number of ~~our~~company-operated ~~restaurants~~Village isInn ~~the~~and ~~cost~~Bakers ~~associated~~Square ~~with~~restaurants ~~operating~~more ~~our~~significantly ~~restaurants.~~over Wethe ~~monitor~~next ~~and assess~~several ~~these~~years. ~~costs~~During ~~principally~~the asthird ~~a percentage of a restaurant’s revenues~~quarter, orwe onopened ~~a margin~~5 ~~basis~~new restaurants. We ~~The~~have ~~operating~~opened ~~margin~~10 ofnew arestaurants ~~restaurant~~in is the ~~profitability,~~ ~~expressed~~first asthree aquarters ~~percentage~~ of ~~sales~~this year, ofnine ~~the~~Village ~~restaurant~~Inn ~~after~~restaurants ~~accounting~~and ~~for~~one ~~all~~Bakers ~~direct~~Square ~~expenses of operating the~~ restaurant. We ~~Another~~plan ~~key~~to ~~performance~~open ~~metric is~~a ~~the~~total ~~prime~~of ~~margin,~~12 ~~which~~to is15 ~~the~~new ~~profitability, expressed as a percentage of sales, of the~~ restaurants ~~after~~in ~~deducting~~ the ~~two~~fourth ~~most significant costs~~quarter, ~~labor and food. Due~~ to bring the ~~importance~~full ~~of both labor cost and food cost, we closely~~year ~~monitor~~openings ~~prime margin from the chain level down~~ to ~~the~~22 ~~individual restaurant. We have systems in place at each restaurant~~ to ~~assist~~25 ~~restaurant~~new ~~managers~~restaurants, inpredominantly ~~effectively managing~~under ~~these~~the ~~costs~~Village ~~to improve prime margin~~Inn brand.

19Like much of the restaurant industry, we view same unit sales as a key performance metric, at the individual unit level, within regions, across each chain and throughout our company. With our field-level and corporate information systems, we monitor same unit sales on a daily, weekly and four-week period basis from the chain level down to the individual unit level. The primary drivers of same unit sales performance are changes in the average per-person check and changes in the number of customers, or customer count. Average check performance is primarily affected by menu price increases and changes in the purchasing habits of our customers. We also monitor entrée count, exclusive of take-out business, and sales of whole pies, which we believe is indicative of overall customer traffic patterns. To increase average unit sales, we focus marketing and promotional efforts on increasing customer visits and sales of particular products. We also selectively increase prices, but are constrained by the price sensitivity of customers in our market segment and our desire to maintain an attractive price-to-value relationship that is a fundamental characteristic of our concepts. We generally have increased prices in line with increases in the consumer price index, and expect to continue to do so in the future. Same unit sales performance is also affected by other factors, such as food quality, the level and consistency of service within our restaurants, the attractiveness and physical condition of our restaurants, as well as local and national economic factors.

~~Labor~~As isof ~~our~~July 14, ~~largest~~2005, ~~cost~~we ~~element.~~had ~~The~~100 ~~principal~~franchised ~~drivers~~Village ofInn ~~labor~~restaurants ~~cost~~in ~~are~~nineteen ~~wage rates~~states, ~~particularly~~operated ~~for~~by ~~the~~25 ~~significant~~franchisees ~~number~~which ofoperate ~~hourly~~one ~~employees~~to ineleven ~~our~~ restaurants~~, and~~ ~~the~~each. Although ~~number~~we ofmay ~~labor~~increase ~~hours~~franchise ~~utilized~~revenues inby increasing ~~serving~~the ~~our~~number ~~customers~~of ~~and~~franchised ~~operating our~~Village Inn restaurants, aswe ~~well~~expect asthat ~~health insurance costs for~~ our ~~employees. Wage~~ ~~rates~~franchise ~~are~~revenues ~~largely~~will ~~market~~decline ~~driven,~~as ~~with~~a ~~increases~~percentage toof ~~minimum wage rates causing corresponding increases in~~ our ~~pay~~total ~~scales.~~revenue ~~Differences~~as ~~in minimum wage laws~~we ~~among~~emphasize ~~the~~growth ~~various~~in ~~states impact~~ the ~~relative~~number ~~profitability~~ of ~~the~~Company-operated ~~restaurants in those states~~units. ~~In both January 2004 and 2005~~ Also, ~~the~~we ~~minimum~~expect ~~wage~~that ~~rate~~a ~~for the~~certain ~~state~~number of ~~Illinois increased. The~~ ~~state~~franchise ofagreements ~~Florida’s~~will ~~minimum~~not ~~wage~~be ~~increased~~renewed inat ~~May 2005~~expiration ~~and~~for ~~the~~lower ~~state~~sales ofvolume ~~Minnesota’s minimum wage is scheduled to increase August 2005~~stores.

~~While~~In ~~the~~addition ~~wage~~to ~~rates~~unit ~~are~~sales, ~~largely~~the ~~externally~~other ~~determined,~~major ~~labor~~factor ~~utilization~~affecting ~~within~~the performance of our ~~restaurants~~ restaurants is ~~more~~the ~~subject~~cost toassociated with operating our ~~control~~restaurants. We monitor and isassess these ~~closely~~costs ~~monitored.~~principally Weas ~~seek~~a ~~to staff~~percentage ~~each~~of a restaurant’s torevenues, ~~provide~~or on a margin ~~high~~basis. ~~level~~The operating margin of ~~service~~a torestaurant ~~our~~is ~~customers~~the profitability, ~~without~~expressed ~~incurring~~as ~~more~~a ~~labor~~percentage ~~cost~~of ~~than~~sales, isof ~~needed~~the restaurant after accounting for all direct expenses of operating the restaurant. WeAnother ~~have~~key ~~included~~performance ~~labor~~metric is ~~scheduling~~the ~~tools~~prime inmargin, ~~each~~which ofis ~~our~~the ~~company-operated~~profitability, ~~restaurants’~~expressed ~~back~~as ~~office~~a percentage of ~~systems~~sales, toof ~~assist~~the ~~our~~restaurants ~~managers~~after indeducting ~~improving~~the two most significant costs, labor and ~~utilization~~food. WeDue ~~monitor~~to the importance of both labor cost and food cost, we closely ~~hours~~monitor ~~actually~~prime ~~incurred~~margin infrom ~~relation~~the tochain ~~sales~~level ~~and~~down ~~customer~~to ~~count~~the onindividual arestaurant. We have systems in place at each restaurant- ~~by-~~to assist restaurant ~~basis~~managers ~~throughout~~in effectively ~~each~~managing ~~week~~these costs to improve prime margin.

In managing prime margin, we also focus on percentage food cost, which is food cost expressed as a percentage of total revenues. Our food cost is affected by several factors, including market prices for the food ingredients, our effectiveness at controlling waste and proper portioning, and shifts in our customers’ buying habits between low-food-cost and high-food-cost menu items. Our food cost management system within each restaurant measures actual ingredient costs and actual customer product purchases against an “ideal” food cost standard. Ideal food cost is calculated within each restaurant based on the cost of ingredients used, assuming proper portion size, adherence to recipes, limited waste and similar factors. We track variances from ideal food cost within each restaurant and seek to address the causes of such variances, to the extent they are within our control, in order to improve our percentage food cost. In addition, our centralized purchasing department buys a majority of the products used in both Village Inn and Bakers Square (as well as our pie production operations), leveraging the purchasing volumes of our restaurants and our franchisees to obtain favorable prices. We attempt to stabilize potentially volatile prices for certain high-cost ingredients such as chicken, beef, coffee and dairy products for three to twelve month periods by entering into purchase contracts when we believe that this will improve our food cost. We also use “menu engineering” to promote menu items which have a lower percentage food cost. However, we are vulnerable to fluctuations in food costs. Given our customers’ sensitivity to price increases and since we only reprint our full menus every six months, our ability to adjust prices and featured menu items in response to rapidly changing commodity prices is limited.18

~~Since~~Labor ~~we produce~~is ~~a majority of~~ our largest ~~pies~~cost ~~for~~element. ~~Village~~The ~~Inn~~principal ~~and~~drivers ~~Bakers~~of ~~Square~~labor ~~and~~cost ~~since~~are ~~our~~wage rates, ~~third-party~~particularly ~~pie~~for ~~sales~~the ~~historically~~significant ~~have~~number ~~not~~of ~~had,~~hourly ~~and~~employees ~~currently~~in doour ~~not have~~restaurants, a ~~material~~and ~~impact~~the onnumber ~~our~~of ~~operating~~labor ~~profit,~~hours weutilized ~~include~~in ~~the~~serving ~~net~~our ~~results~~customers ofand operating our ~~pie manufacturing~~restaurants, ~~operations~~as well as anmedical ~~offset~~and toworkers ~~our~~compensation ~~food~~insurance costs. for Asour aemployees. ~~result,~~Wage ~~any profit~~rates ~~(or~~are ~~loss)~~largely ~~from~~market ~~third-party~~driven, ~~pie~~with ~~sales~~increases ~~has~~to minimum ~~the~~wage ~~effect~~rates ofcausing ~~reducing~~corresponding ~~(or increasing)~~increases in our ~~total~~pay ~~food cost~~scales. Differences Asin ~~part~~minimum ofwage ~~our~~laws ~~overall~~among ~~effort~~the tovarious ~~optimize total~~states ~~company~~impact ~~food~~the ~~cost,~~relative profitability weof ~~have~~the ~~been~~restaurants ~~focusing~~in onthose ~~various~~states. ~~measures~~In toboth ~~improve~~January 2004 and 2005, the ~~net~~minimum ~~margins~~wage ~~within~~rate ~~our~~for ~~pie~~the ~~manufacturing~~state ~~operations,~~of ~~including~~Illinois ~~increasing third-party~~increased. The ~~sales,~~state ~~renegotiating~~of ~~our~~Florida’s ~~distribution~~minimum ~~contracts~~wage ~~and~~increased in ~~rebalancing~~May 2005 and the ~~production~~ ~~among~~state ~~our~~of ~~three~~Minnesota’s ~~plants~~minimum towage is scheduled to increase ~~efficiency~~August 2005.

20While the wage rates are largely externally determined, labor utilization within our restaurants is more subject to our control and is closely monitored. We seek to staff each restaurant to provide a high level of service to our customers, without incurring more labor cost than is needed. We have included labor scheduling tools in each of our company-operated restaurants’ back office systems to assist our managers in improving labor utilization. We monitor labor hours actually incurred in relation to sales and customer count on a restaurant- by-restaurant basis throughout each week.

~~Other~~In managing ~~operating~~prime ~~expenses~~margin, ~~principally~~we ~~include~~also ~~occupancy~~focus ~~costs~~on percentage food cost, ~~depreciation~~which ~~and~~is food cost ~~amortization~~expressed as a percentage of total revenues. Our food cost is affected by several factors, ~~supplies~~including market prices for the food ingredients, ~~repairs~~our effectiveness at controlling waste and ~~maintenance~~proper portioning, ~~utility~~and ~~costs,~~shifts ~~marketing~~in our ~~expenses,~~customers’ ~~insurance~~buying ~~expenses~~habits between low-food-cost and ~~workers’~~high-food-cost ~~compensation~~menu ~~costs~~items. Our ~~Historically,~~food cost management system within each restaurant measures actual ~~these~~ingredient costs ~~have~~and ~~increased~~actual ~~over~~customer ~~time~~product purchases against an “ideal” food cost standard. Ideal food cost is calculated within each restaurant based on the cost of ingredients used, assuming proper portion size, adherence to recipes, limited waste and ~~many~~similar ~~are~~factors. ~~not~~We ~~directly~~track ~~related~~variances from ideal food cost within each restaurant and seek to address the ~~level~~ causes of ~~sales~~such variances, to the extent they are within our control, in order to improve our ~~restaurants~~percentage food cost. WeIn ~~have~~addition, ~~experienced~~our ~~increases~~centralized inpurchasing ~~many~~department ~~of these~~buys ~~items~~a ~~throughout~~majority of the ~~last~~products ~~three~~used ~~fiscal~~in ~~years~~both Village Inn and Bakers Square (as well as our pie production operations), ~~particularly~~leveraging ~~utility~~the ~~costs~~purchasing volumes of our restaurants and ~~insurance~~our ~~expenses~~franchisees to obtain favorable prices. InWe ~~order~~attempt to ~~maintain~~stabilize potentially ~~our~~volatile ~~operating~~prices ~~performance~~for ~~levels~~certain high-cost ingredients such as chicken, beef, coffee and dairy products for three to ~~address~~twelve ~~expected~~month ~~cost~~periods ~~increases,~~by entering into purchase contracts when we believe that this will beimprove ~~required~~our food cost. We also use “menu engineering” to ~~increase~~promote menu items which have a lower ~~efficiency~~percentage food cost. However, we are vulnerable to fluctuations in ~~restaurant~~food ~~operations~~costs. Given our customers’ sensitivity to price increases and ~~increase~~since ~~sales~~we only reprint our full menus every six months, ~~although~~our ~~there~~ability isto ~~no assurance~~adjust ~~that~~prices weand ~~will~~featured bemenu items ~~able~~in response to ~~offset~~rapidly ~~future~~changing ~~cost~~commodity ~~increases~~prices is limited.

~~Our~~Since ~~2005~~we ~~second~~produce ~~quarter~~a ~~financial~~majority of our pies for Village Inn and Bakers Square and since our third-party pie sales historically have not had, and currently do not have, a material impact on our operating profit, we include the net results ~~included:~~of our pie manufacturing operations as an offset to our food costs. As a result, any profit (or loss) from third-party pie sales has the effect of reducing (or increasing) our total food cost. As part of our overall effort to optimize total company food cost, we have been focusing on various measures to improve the net margins within our pie manufacturing operations, including increasing third-party sales, renegotiating our distribution contracts and rebalancing the production among our three plants to increase efficiency.

• Growth of revenues in the second quarter by 0.4% to $93.5 million from 2004 to 2005, reflecting the net addition of five company-operated restaurants over the past two years. Same store sales decreased by 2.6% from 2004 to 2005.19

~~• Operating~~Other operating ~~profit~~expenses principally include occupancy costs, depreciation and ~~decreased~~amortization, tosupplies, $6repairs and maintenance, utility costs, marketing expenses, insurance expenses and workers’ compensation costs.8 ~~million~~Historically, these ~~from~~costs $7have increased over time and many are not directly related to the level of sales in our restaurants.0 ~~million~~In order to maintain our operating performance levels, and to address expected cost increases, we will be required to increase efficiency in ~~2004~~restaurant ~~(as~~operations ~~restated)~~and increase sales, although there is no assurance that we will be able to offset future cost increases.

~~• Net~~Our ~~income improved to $0.5 million in the second quarter of fiscal~~ 2005 ~~from a net loss of $3.7 million~~third ~~(as restated) in the second~~ quarter offinancial ~~fiscal 2004. Debt extinguishment costs of $6.9 million were included in the second quarter of fiscal 2004’s~~ results~~. Interest~~ expense increased $0.6 million in the second quarter of fiscal 2005 due to greater debt outstanding throughout the second quarter of 2005 and a higher average interest rate, both a result of the high-yield financing consummated at the end of the second quarter of 2004.included:

~~Restatement~~• Growth of revenues in the third quarter by 2.6% to $92.5 million from 2004 to 2005, reflecting the net addition of ~~Previously~~fourteen ~~Reported~~company-operated ~~Financial~~restaurants over the ~~Statements~~past two years. Same store sales decreased by 0.8% from 2004 to 2005.

~~We have restated our~~• Operating ~~financial~~profit ~~statements~~increased ~~for periods spanning from fiscal 2000 through fiscal 2004~~ to ~~correct~~$7.7 ~~the~~million ~~following~~in ~~accounting~~2005 ~~errors~~from ~~primarily as a result of a review of our lease accounting policies and practices prompted by the views expressed by the Office of the Chief Accountant of the SEC on February~~ $7,.5 ~~2005~~million in ~~a letter~~2004 ~~to the American Institute of Certified Public Accountants and other~~(as ~~recent interpretations regarding certain operating lease issues and their application under GAAP:~~restated).

• Net income increased to $1.3 million in the third quarter of fiscal 2005 from a net income of $1.0 million (ias restated) ~~Accounting~~ ~~for~~in ~~Real~~the ~~Estate~~third quarter of fiscal 2004. Interest expense increased $0.2 million in ~~Transactions~~the third quarter of fiscal 2005 due to higher debt outstanding throughout the third quarter of 2005 and a higher average interest rate on both the high-yield financing consummated at the end of the second quarter of 2004 and the deemed landlord financing obligations.

~~Historically,~~Restatement ~~we have accounted for certain~~ of ~~our~~Previously ~~real~~Reported ~~estate transactions of restaurant properties as sale-leaseback transactions. We have restated our financial statements to now report these transactions as financing transactions under~~ Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 98, “Accounting for Leases,” rather than as sale-leaseback transactions as previously reported due to a determination that certain lease agreement provisions reflect continuing involvement with the buyer-lessor. Our continuing involvement for most of our leases now accounted for under the financing method results from our ability to control the property with pre-determined rental payments through at least 90 percent of the economic life of the property, even though lease renewals would need to be exercised by us to effectuate such control. These “perpetual fixed-price renewal options” are considered continuing involvement because the seller-lessee is deemed to benefit from future appreciation in the underlying property in a manner similar to a fixed-price purchase option. Such continuing involvement precludes the use of sale-leaseback accounting until such time that the continuing involvement no longer exists. The affected real estate transactions related to an aggregate of 79 existing restaurants in 1999, 2001 and 2003 and nine new restaurant locations opened in 2003 and 2004.Statements

21We have restated our financial statements for periods spanning from fiscal 2000 through fiscal 2004 to correct the following accounting errors primarily as a result of a review of our lease accounting policies and practices prompted by the views expressed by the Office of the Chief Accountant of the SEC on February 7, 2005 in a letter to the American Institute of Certified Public Accountants and other recent interpretations regarding certain operating lease issues and their application under GAAP:

The impact of the restatement was to record on our consolidated balance sheets the assets of the restaurants subject to these transactions as if they had not been sold and record the proceeds from these transactions (~~including any gains previously deferred~~i) Accounting as liabilities under the caption “Deemed landlord financing liability”. Operating results were restated to recognize depreciation expense associated with the assets subject to these transactions and re-characterize the lease payments previously reported as rent expense as principal repayments and imputed interest expense. The rent expense reversal associated with these transactions included the reversal of previously recorded expenses for ~~straight-line~~ ~~rents~~Real ~~and rent reductions for certain purchase accounting~~Estate adjustments made to account for the leases at fair market value. In addition, the capital lease classification for three leased properties was re-characterized as deemed landlord financing assets and liabilities.Transactions

~~The~~Historically, ~~net~~we ~~impact~~have toaccounted for certain of ~~correctly~~our ~~classify~~real ~~the~~estate ~~aforementioned~~transactions ~~leases~~of restaurant properties as sale-leaseback transactions. We have restated our financial statements to now report these transactions as financing transactions ~~increased~~under ~~loss~~Financial ~~before~~Accounting ~~income~~Standards ~~taxes~~Board by(“FASB”) $1Statement of Financial Accounting Standards (“SFAS”) No. 98,~~042~~ “Accounting for Leases,~~000~~” rather than as sale-leaseback transactions as previously reported due to a determination that certain lease agreement provisions reflect continuing involvement with the buyer-lessor. Our continuing involvement for most of our leases now accounted for under the 84financing method results from our ability to control the property with pre-~~day~~determined ~~period~~rental ~~ended~~payments ~~April 15~~through at least 90 percent of the economic life of the property, even though lease renewals would need to be exercised by ~~2004~~us to effectuate such control. ~~The~~These ~~correcting~~“perpetual fixed-price ~~entries~~renewal ~~consisted~~options” are considered continuing involvement because the ofseller-lessee ais ~~$1,563,000~~deemed ~~decrease~~to benefit from future appreciation in ~~other~~the ~~operating~~underlying property ~~expenses,~~in a ~~$41,000~~manner ~~decrease~~similar into a fixed-price purchase option. Such continuing involvement precludes the use ~~franchise~~of ~~operating~~sale-leaseback ~~expenses~~accounting ~~and~~until asuch $2time that the continuing involvement no longer exists. The affected real estate transactions related to an aggregate of 79 existing restaurants in 1999,~~646,000~~ ~~increase~~2001 and 2003 and nine new restaurant locations opened in ~~interest~~2003 ~~expense~~and 2004.

The net impact to correctly classify the aforementioned leases as financing transactions increased loss before income taxes by $2,096,000 for the 172-day period ended April 15, 2004. The correcting entries consisted of a $3,288,000 decrease in other operating expenses, an $82,000 decrease in franchise operating expenses and a $5,466,000 increase in interest expense.20

The impact of the restatement was to record on our consolidated balance sheets the assets of the restaurants subject to these transactions as if they had not been sold and record the proceeds from these transactions (iiincluding any gains previously deferred) ~~Understated~~ ~~Straight~~as liabilities under the caption “Deemed landlord financing liability”. Operating results were restated to recognize depreciation expense associated with the assets subject to these transactions and re-~~Line~~characterize the ~~Rent~~lease payments previously reported as rent expense as principal repayments ~~Expense~~and imputed interest expense. The rent expense reversal associated with these transactions included the reversal of previously recorded expenses for straight-line rents and rent reductions for certain purchase accounting adjustments made to account for the leases at fair market value. In addition, the capital lease classification for three leased properties was re-characterized as deemed landlord financing assets and liabilities.

~~GAAP~~The ~~requires~~net ~~that leases~~impact ~~for~~to ~~which~~correctly ~~there~~classify ~~are scheduled rent increases over~~ the ~~term of the lease~~ beaforementioned ~~accounted~~leases ~~for~~as atfinancing ~~the~~transactions ~~average~~increased ~~rent~~loss ~~payment,~~before orincome taxes onby ~~a straight-line basis~~$1,005,000 ~~over the~~for ~~applicable term with~~ the ~~differences being recorded on the balance sheet as a deferred rent liability. We did not appropriately straight~~84-~~line~~day ~~its~~period ~~rents~~ended ~~for certain locations~~July 8, ~~which resulted in understated operating expenses in prior financial reporting periods~~2004. The ~~net~~correcting ~~impact~~entries toconsisted ~~correctly~~of ~~straight-line~~a ~~rents~~$1,567,000 ~~resulted~~decrease in ~~increased~~other ~~loss~~operating ~~before~~expenses, ~~income~~a ~~taxes of~~ $~~126~~41,000 ~~and~~decrease ~~$257,000~~in ~~for~~franchise ~~the~~operating ~~84-day~~expenses and ~~172-day~~a ~~periods~~$2,613,000 ~~ended~~increase ~~April 15,~~in ~~2004,~~interest ~~respectively~~expense.

~~(iii) Understated~~The ~~Depreciation~~net ~~and~~impact to correctly classify the ~~Amortization~~aforementioned ~~Expense~~leases as financing transactions increased loss before income taxes by $3,101,000 for the 256-day period ended July 8, 2004. The correcting entries consisted of a $4,855,000 decrease in other operating expenses, an $123,000 decrease in franchise operating expenses and a $8,079,000 increase in interest expense.

We(ii) Understated generally have historically depreciated our buildings and leasehold improvements over the lesser of the asset’s useful life or the initial term of the associated lease unless an economic penalty would occur from not exercising renewal options, in which case, the assets are depreciated over the lesser of the asset’s useful life or the reasonably assured lease term. However, in performing a detailed review of our depreciable assets, it was determined that buildings and leasehold improvements for approximately 31 restaurant properties had incorrect depreciable lives resulting in an understatement of depreciation expense, predominantly in earlier periods. The net impact of the correction of our leasehold improvement depreciable lives resulted in increased loss before income taxes of $10,000 and $29,000 for the 84Straight-~~day~~Line ~~and 172-day periods ended April 15,~~Rent ~~2004, respectively.~~Expense

22GAAP requires that leases for which there are scheduled rent increases over the term of the lease be accounted for at the average rent payment, or on a straight-line basis, over the applicable term with the differences being recorded on the balance sheet as a deferred rent liability. We did not appropriately straight-line its rents for certain locations, which resulted in understated operating expenses in prior financial reporting periods. The net impact to correctly straight-line rents resulted in an increase in other operating expenses and an increase in the loss before income taxes of $126,000 and $383,000 for the 84-day and 256-day periods ended July 8, 2004, respectively.

(iviii) Understated ~~Interest~~Depreciation ~~Expense on~~and ~~Preferred~~Amortization ~~Stock Warrant Accretion~~Expense

We ~~also~~generally ~~determined~~have ithistorically ~~was~~depreciated ~~appropriate~~our buildings toand ~~record~~leasehold ~~additional~~improvements ~~adjustments~~over the lesser of the asset’s useful life or the initial term of the associated lease unless an economic penalty would occur from not exercising renewal options, in which ~~were~~case, ~~previously~~the ~~deemed~~assets ~~immaterial~~are depreciated over the lesser of the asset’s useful life or the reasonably assured lease term. However, in ~~The~~performing ~~adjustments~~a ~~related~~detailed toreview ~~interest~~of ~~expense~~our depreciable assets, it was determined that buildings and ~~preferred~~leasehold ~~dividends~~improvements for approximately 31 restaurant properties ~~imputed~~had ~~from~~incorrect ~~the~~depreciable ~~accretion~~lives ofresulting ~~preferred~~in ~~stock~~an ~~warrants~~understatement ~~with~~of ~~anti-dilutive~~depreciation ~~provisions~~expense, ~~issued~~predominantly ~~originally~~in toearlier ~~certain~~periods. The ~~debt~~net ~~holders~~impact atof the ~~time~~correction of our ~~June 2003~~leasehold improvement ~~purchase. For~~depreciable ~~the~~lives ~~84-day~~resulted in an increase in other operating expenses and ~~172-day~~an ~~periods~~increase ~~ended~~in ~~April 15,~~the ~~2004,~~loss ~~additional~~before ~~interest~~income ~~expense~~taxes of $4421,000 and $8850,000, ~~respectively,~~for ~~was~~the ~~recorded~~84-day and as256-day aperiods ~~result~~ended ofJuly 8, ~~the~~2004, ~~correction of this error~~respectively.

~~(v) Accounting for Income Taxes~~21

In addition to the impact on our income tax provision resulting from the accounting corrections discussed above, we also determined that our accounting for income taxes related to its purchase business combinations was not correct. Under FASB SFAS No. 109, “Accounting for Income Taxes,” companies are to recognize deferred tax assets and liabilities for the tax effects of differences between assigned values in the purchase price allocation in a purchase business combination (~~except for the portion of goodwill that is not deductible for tax purposes~~iv)~~. The~~ Understated ~~provisions~~Interest ofExpense ~~SFAS No. 109 apply to~~on ~~basis~~Preferred ~~differences~~Stock ~~that~~Warrant arise in both taxable and nontaxable business combinations. In both our 2001 and 2003 business acquisitions, certain purchase price allocations were not correctly tax effected. The correction resulted in recognition of additional deferred tax liabilities and a corresponding increase in goodwill. The impact of the corrections decreased our provision for income taxes by $646,000 and $1,157,000 for the for the 84-day and 172-day periods ended April 15, 2004, respectively.Accretion

We ~~restated~~also ~~our~~determined ~~annual~~it ~~consolidated~~was ~~financial~~appropriate ~~statements~~to ~~with~~record ~~the~~additional adjustments ~~filing~~which ofwere anpreviously ~~amended~~deemed ~~Annual~~immaterial. The ~~Report~~adjustments onrelated ~~Form 10-K~~to interest expense and preferred dividends imputed from the accretion of preferred stock warrants with anti-dilutive provisions issued originally to certain debt holders at the ~~SEC~~time ~~for~~of our June 2003 ~~fiscal~~purchase. For ~~year~~the 84-day and 256-day periods ended ~~October~~July 288, 2004, additional preferred stock and interest expense of $0 and $88,000, respectively, was recorded as a result of the correction of this error.

~~See Note 2 to the Consolidated Financial Statements~~ (v) Accounting for ~~further discussion~~Income ~~of the restatement. All previously reported amounts affected by the restatement that appear in this Quarterly Report on Form 10-Q have been restated.~~Taxes

~~Critical~~In addition to the impact on our income tax provision resulting from the accounting corrections discussed above, we also determined that our accounting for income taxes related to its purchase business combinations was not correct. Under FASB SFAS No. 109, “Accounting ~~Policies~~for Income Taxes,” companies are to recognize deferred tax assets and ~~Estimates~~liabilities for the tax effects of differences between assigned values in the purchase price allocation in a purchase business combination (except for the portion of goodwill that is not deductible for tax purposes). The provisions of SFAS No. 109 apply to basis differences that arise in both taxable and nontaxable business combinations. In both our 2001 and 2003 business acquisitions, certain purchase price allocations were not correctly tax effected. The correction resulted in recognition of additional deferred tax liabilities and a corresponding increase in goodwill. The impact of the corrections decreased our provision for income taxes by $427,000 and $1,584,000 for the for the 84-day and 256-day periods ended July 8, 2004, respectively.

InWe ~~the~~restated ~~ordinary course of business,~~ our ~~company~~annual ~~makes a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our~~ consolidated financial statements ~~in conformity~~ with ~~U.S. generally accepted accounting principles. Actual results could differ significantly from those estimates and assumptions. We believe that~~ the ~~following discussion addresses our most critical accounting~~ ~~policies,~~filing ~~which~~of ~~are~~an ~~those~~amended ~~that~~Annual ~~are~~Report ~~most~~on ~~important~~Form 10-K/A towith the ~~portrayal~~SEC offor our ~~financial~~fiscal ~~condition~~year ~~and~~ended ~~results~~October 28, ~~of operations and require management judgment about the effect of matters that are uncertain~~2004.

OnSee anNote ~~ongoing~~2 ~~basis,~~to ~~management~~the ~~evaluates~~Consolidated ~~its~~Financial ~~estimates~~Statements ~~and~~for further ~~assumptions,~~discussion ~~including those related to recoverability~~ of ~~long-lived~~the ~~assets, revenue recognition and goodwill~~restatement. ~~Management bases its estimates and~~ All ~~assumptions~~previously onreported ~~historical~~amounts ~~experience~~affected ~~and~~by onthe ~~various~~restatement ~~other factors~~ that ~~are believed~~appear toin ~~be reasonable at the time the estimates and assumptions are made.~~this ~~Actual~~Quarterly ~~results~~Report ~~may~~on ~~differ~~Form 10-Q ~~from~~have ~~these~~been ~~estimates and assumptions under different circumstances or conditions~~restated.

23Critical Accounting Policies and Estimates

WeIn ~~have~~the ~~discussed~~ordinary course of business, our company makes a number of estimates and assumptions relating to the ~~development~~reporting of results of operations and ~~selection~~financial condition in the preparation of ~~critical~~our ~~accounting~~consolidated financial ~~policies~~statements ~~and~~in ~~estimates~~conformity with ~~our~~U.S. ~~audit~~generally ~~committee~~accepted accounting principles. ~~The~~ Actual ~~following~~results iscould adiffer ~~summary~~significantly offrom those estimates and assumptions. We believe that the following discussion addresses our most critical ~~accounting~~ accounting policies, which are those that are most important to the portrayal of our financial condition and ~~estimates:~~results of operations and require management judgment about the effect of matters that are uncertain.

~~Inventories~~On an ongoing basis, management evaluates its estimates and assumptions, including those related to recoverability of long-lived assets, revenue recognition and goodwill. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable at the time the estimates and assumptions are made. Actual results may differ from these estimates and assumptions under different circumstances or conditions.

Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first-out method. The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. Both our manufactured pie inventories and individual store food inventories are subject to spoilage. We use estimates of future demand as well as historical trend information to schedule manufacturing and ordering. If our demand forecast for specific products is greater than actual demand, we could be required to record additional inventory reserves or losses which would have a negative impact on our gross margin.22

~~Property~~We have discussed the development and ~~equipment,~~ ~~build-to-suit~~selection ~~projects~~of critical accounting policies and ~~assets~~estimates ~~under~~with ~~deemed~~our ~~landlord~~audit ~~financing~~committee. The following is a summary of our critical ~~liability~~accounting policies and estimates:

Property and equipment is recorded at cost and is depreciated on the straight-line basis over the estimated useful lives of such assets or through the applicable lease expiration, if shorter. Leasehold improvements added subsequent to the inception of a lease are amortized over the shorter of the useful life of the assets or a term that includes lease renewals, if such renewals are considered reasonably assured. The useful lives of assets typically range from 20 to 40 years for buildings and three to ten years for equipment and improvements. Changes in circumstances such as the closing of units in underproductive markets or changes in our capital structure could result in the actual useful lives of these assets differing from our estimates.Inventories

~~For~~Inventories ~~many of our build-to-suit projects, we~~ are ~~considered~~stated at the ~~owner~~lower of ~~the~~ ~~project~~cost ~~during~~or ~~the~~market ~~construction~~value. ~~period~~Cost ~~in accordance with Emerging Issues~~is ~~Task~~principally ~~Force~~determined ~~(“EITF”)~~by ~~Issue~~the ~~No. 97~~first-~~10, “The Effect of Lessee Involvement~~ in ~~Asset Construction~~,” ~~because~~first-out ~~we are deemed to have substantially all of the construction period risk~~method. At ~~the~~The ~~end~~valuation of ~~these~~inventory ~~construction~~requires ~~projects,~~us ~~a sale-leaseback could be deemed~~ to ~~occur~~estimate ~~in certain~~obsolete ~~situations and we would record the sale, remove all property and related liabilities from our balance sheet and recognize gain~~ or ~~loss~~excess ~~from~~inventory ~~the sale, which is generally deferred and amortized~~ as anwell ~~adjustment to rent~~as ~~expense~~inventory ~~over~~that ~~the~~is ~~term~~not of ~~the~~saleable ~~lease~~quality. ~~However,~~ ~~many~~Both of our ~~real~~manufactured ~~estate~~pie inventories ~~transactions~~ and ~~build-to-suit~~individual ~~projects have~~store ~~not~~food ~~qualified~~inventories ~~for~~are ~~sale-leaseback~~subject ~~accounting~~to ~~because~~spoilage. ~~of our deemed~~We ~~continuing~~use ~~involvement~~estimates ~~with~~of ~~the~~future ~~buyer-lessor,~~demand ~~which~~as ~~results~~well inas ~~the~~historical ~~transaction being~~trend ~~recorded~~information ~~under~~to ~~the financing method.~~schedule manufacturing ~~Under~~and ~~the~~ordering. ~~financing~~If ~~method,~~our ~~the~~demand ~~assets~~forecast ~~remain~~for onspecific ~~the~~products ~~consolidated balance~~is ~~sheet~~greater ~~and~~than actual ~~are~~demand, ~~depreciated~~we ~~over~~could ~~their~~be ~~useful~~required ~~life,~~to ~~and~~record ~~the~~additional ~~proceeds~~inventory ~~from~~reserves or ~~the~~losses ~~transaction~~which ~~are~~would ~~recorded~~have as a ~~financing~~negative ~~liability. A~~impact ~~portion~~on ofour ~~lease~~gross ~~payments are applied as payments of deemed principal and imputed interest~~margin.

24Property and equipment, build-to-suit projects and assets under deemed landlord financing liability

WeProperty ~~review~~and ~~long-lived~~equipment ~~assets,~~is ~~including~~recorded ~~land,~~at ~~buildings,~~cost ~~building improvements~~ and ~~assets~~is ~~under~~depreciated ~~deemed~~on ~~landlord financing liability, for~~the ~~impairments~~straight-line ~~on a quarterly~~ basis orover ~~whenever events or changes in circumstances indicate that~~ the ~~carrying~~estimated ~~amount~~useful lives of such assets ~~may~~or ~~not be recoverable.~~through ~~Management~~the ~~evaluates~~applicable ~~individual~~lease ~~restaurants~~expiration, ~~which~~if ~~are~~shorter. ~~considered~~Leasehold toimprovements beadded subsequent to the ~~lowest~~ ~~level~~inception ~~for~~of ~~which~~a ~~there~~lease are ~~identifiable~~amortized ~~cash~~over ~~flows~~the ~~for~~shorter ~~impairment.~~of Athe ~~specific~~useful ~~restaurant~~life isof ~~deemed~~the toassets beor ~~impaired if~~ a ~~forecast~~term ~~of undiscounted future operating cash flows directly relating to~~ that ~~restaurant,~~includes ~~including disposal~~lease ~~value~~renewals, if ~~any,~~such renewals isare ~~less~~considered ~~than~~reasonably ~~the~~assured. The ~~carrying~~useful ~~amount~~lives of ~~that~~assets ~~restaurant.~~typically ~~If a~~range ~~restaurant~~from is20 ~~determined~~ to be40 ~~impaired,~~years ~~the loss is measured as the amount~~for bybuildings ~~which~~and ~~the~~three ~~carrying~~to ~~amount~~ten ofyears ~~the~~for ~~restaurant~~equipment ~~exceeds~~and ~~its fair value~~improvements. ~~Management~~ ~~determines~~Changes ~~fair value based on quoted market prices~~ in ~~active~~ ~~markets,~~circumstances ifsuch ~~available.~~as ~~If quoted market prices are not available, management estimates~~ the ~~fair~~closing ~~value~~ of aunits ~~restaurant~~in ~~based~~underproductive onmarkets ~~either the estimates provided~~or bychanges ~~real~~in ~~estate~~our ~~professionals~~capital ~~and/or~~structure ~~our~~could ~~past~~result ~~experience~~ in ~~disposing~~the ~~of restaurant~~actual ~~properties.~~useful ~~Our~~lives ~~estimates~~ of these ~~undiscounted~~assets ~~cash~~differing ~~flows may differ~~ from ~~actual~~ ~~cash~~our ~~flows due to economic conditions or changes in operating performance~~estimates.

~~Leases~~For many of our build-to-suit projects, we are considered the owner of the project during the construction period in accordance with Emerging Issues Task Force (“EITF”) Issue No. 97-10, “The Effect of Lessee Involvement in Asset Construction,” because we are deemed to have substantially all of the construction period risk. At the end of these construction projects, a sale-leaseback could be deemed to occur in certain situations and we would record the sale, remove all property and related liabilities from our balance sheet and recognize gain or loss from the sale, which is generally deferred and amortized as an adjustment to rent expense over the term of the lease. However, many of our real estate transactions and build-to-suit projects have not qualified for sale-leaseback accounting because of our deemed continuing involvement with the buyer-lessor, which results in the transaction being recorded under the financing method. Under the financing method, the assets remain on the consolidated balance sheet and are depreciated over their useful life, and the proceeds from the transaction are recorded as a financing liability. A portion of lease payments are applied as payments of deemed principal and imputed interest.

We lease a substantial amount of our restaurant properties and one of our pie production plants. We account for our leases under the provisions of Statement of Financial Accounting Standards No. 13, “Accounting for Leases,” and subsequent amendments, which require leases to be evaluated and classified as operating or capitalized leases for financial reporting purposes. In addition, the Company records leases with escalating rents on a straight-line basis over the initial term of the lease and those renewal periods that have been exercised or are considered reasonably assured. The difference between the rent paid and the straight-line rent is recorded as a deferred rent liability. The initial lease term includes the “build-out”, or rent holiday period, for our leases where no rent payments are due under the terms of the lease. Such amounts are capitalized during the construction period, which starts when we take possession of the property and ends when the property is certified for occupancy. Incentive payments received from landlords are recorded as deferred rent liabilities and are amortized on a straight-line basis over the lease term as a reduction of rent. Contingent rentals, based upon restaurant sales volume, are accrued each accounting period as the liabilities are incurred utilizing prorated periodic sales targets. Certain of our leases are accounted for under the financing method as discussed above. Future authoritative changes to the methods of accounting for leases could have a material impact on the Company’s reported results of operations and financial position.23

~~Insurance~~We ~~reserves~~review long-lived assets, including land, buildings, building improvements and assets under deemed landlord financing liability, for impairments on a quarterly basis or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Management evaluates individual restaurants, which are considered to be the lowest level for which there are identifiable cash flows for impairment. A specific restaurant is deemed to be impaired if a forecast of undiscounted future operating cash flows directly relating to that restaurant, including disposal value, if any, is less than the carrying amount of that restaurant. If a restaurant is determined to be impaired, the loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair value. Management determines fair value based on quoted market prices in active markets, if available. If quoted market prices are not available, management estimates the fair value of a restaurant based on either the estimates provided by real estate professionals and/or our past experience in disposing of restaurant properties. Our estimates of undiscounted cash flows may differ from actual cash flows due to economic conditions or changes in operating performance.

We self-insure a significant portion of our employee medical insurance, workers’ compensation and general liability insurance plans. We have obtained stop-loss insurance policies to protect from individual losses over specified dollar values ($175,000 for employee health insurance claims, $250,000 workers’ compensation and $150,000 for general liability for fiscal 2005). The full extent of certain claims, especially workers’ compensation and general liability claims, may not become fully determined for several years. Therefore, we estimate potential obligations for liabilities that have been incurred but not yet reported based upon historical data and experience. Although management believes that the amounts accrued for these obligations are sufficient, any significant increase in the number of claims or costs associated with claims made under these plans could have a material adverse effect on our financial results.Leases

25We lease a substantial amount of our restaurant properties and one of our pie production plants. We account for our leases under the provisions of Statement of Financial Accounting Standards No. 13, “Accounting for Leases,” and subsequent amendments, which require leases to be evaluated and classified as operating or capitalized leases for financial reporting purposes. In addition, the Company records leases with escalating rents on a straight-line basis over the initial term of the lease and those renewal periods that have been exercised or are considered reasonably assured. The difference between the rent paid and the straight-line rent is recorded as a deferred rent liability. The initial lease term includes the “build-out”, or rent holiday period, for our leases where no rent payments are due under the terms of the lease. Such amounts are capitalized during the construction period, which starts when we take possession of the property and ends when the property is certified for occupancy. Incentive payments received from landlords are recorded as deferred rent liabilities and are amortized on a straight-line basis over the lease term as a reduction of rent. Contingent rentals, based upon restaurant sales volume, are accrued each accounting period as the liabilities are incurred utilizing prorated periodic sales targets. Certain of our leases are accounted for under the financing method as discussed above. Future authoritative changes to the methods of accounting for leases could have a material impact on the Company’s reported results of operations and financial position.

~~Loss~~Insurance ~~contingencies~~reserves

We ~~maintain~~self-insure ~~accrued~~a ~~liabilities~~significant ~~and~~portion ~~reserves~~of ~~relating~~our toemployee ~~the~~medical ~~resolution~~insurance, ofworkers’ ~~certain~~compensation ~~contingent~~and ~~obligations~~general liability insurance plans. ~~Significant contingencies~~ ~~include~~We ~~those~~have ~~related~~obtained stop-loss insurance policies to ~~litigation. We~~protect ~~account~~from ~~for~~individual ~~contingent~~losses ~~obligations~~over inspecified ~~accordance~~dollar ~~with~~values ~~SFAS No. 5~~($175,000 ~~“Accounting~~ for ~~Contingencies~~employee health insurance claims,” as$250,000 ~~interpreted~~workers’ bycompensation ~~FASB~~and ~~Interpretation~~$150,000 Nofor general liability for fiscal 2005). 14 ~~which~~The ~~requires~~full extent ~~that~~of wecertain ~~assess~~claims, ~~each~~especially workers’ compensation and general ~~contingency~~liability toclaims, ~~determine~~may ~~estimates~~not ofbecome ~~the~~fully ~~degree~~determined offor ~~probability~~several ~~and~~years. ~~range~~Therefore, we ofestimate potential obligations for liabilities that have been incurred but ~~possible~~not ~~settlement~~yet reported based upon historical data and experience. ~~Contingencies~~ ~~which~~Although management ~~are~~believes ~~deemed~~that tothe beamounts ~~probable~~accrued ~~and~~for ~~where~~these obligations are sufficient, any significant increase in the ~~amount~~number of ~~such~~claims ~~settlement~~or iscosts ~~reasonably~~associated with claims ~~estimable~~made ~~are~~under ~~accrued~~these inplans could have a material adverse effect on our financial ~~statements~~ results. If ~~only~~Favorable aworkers ~~range~~compensation ofclaims ~~loss~~experience ~~can~~related beto ~~determined, we~~recent ~~accrue~~years tohas ~~the~~permitted ~~best~~a ~~estimate~~reduction ~~within~~in ~~that~~workers ~~range;~~compensation ifexpense ~~none~~accruals ofin fiscal ~~the~~2005 ~~estimates~~versus ~~within~~previous years. ~~that~~Should ~~range~~the iscurrent ~~better~~claims ~~than~~experience ~~another~~trends continue, weit ~~accrue~~is tolikely further ~~the~~expense ~~low~~reductions ~~end~~will ofbe ~~the range~~made.

The assessment of loss contingencies is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of the accruals and related financial statement disclosure. The ultimate settlement of loss contingencies may differ significantly from amounts we have accrued in our financial statements.24

~~Income~~Loss ~~taxes~~contingencies

~~Deferred~~We ~~income~~maintain ~~tax~~accrued ~~assets~~liabilities and ~~liabilities~~reserves ~~are~~relating ~~recognized~~to the resolution of certain contingent obligations. Significant contingencies include those related to litigation. We account for ~~the~~contingent obligations in ~~expected~~accordance ~~future~~with ~~income~~SFAS ~~tax~~No. 5, ~~consequences~~“Accounting offor Contingencies,” ~~carryforwards~~as ~~and~~interpreted ~~temporary~~by FASB Interpretation ~~differences~~No. 14 ~~between~~which ~~the~~requires ~~book~~that ~~and~~we ~~tax~~assess ~~bases~~each contingency to determine estimates of ~~assets~~the degree of probability and ~~liabilities~~range of possible settlement. Contingencies ~~Valuation~~which are deemed to be probable ~~allowances~~and where the amount of such settlement is reasonably estimable are ~~established~~accrued ~~for~~in our ~~deferred~~financial ~~tax~~statements. If ~~assets~~only a range of loss can be determined, we accrue to the best estimate within that range; ~~are~~if ~~deemed~~none of the estimates within that range is better than another, we ~~unrealizable~~accrue to the low end of the range.

WeThe ~~must~~assessment ~~assess~~of ~~the~~loss ~~likelihood~~contingencies ~~that we will be able to recover our deferred tax assets. If recovery~~ is ~~not~~a ~~likely,~~highly ~~valuation~~subjective ~~allowances are~~process ~~established.~~that ~~The~~requires ~~valuation~~judgments ~~allowance~~about ~~is based on our estimates of~~ future events. ~~taxable~~Contingencies ~~income~~are byreviewed ~~each~~at ~~jurisdiction~~least inquarterly ~~which~~to wedetermine ~~operate,~~the ~~tax planning~~adequacy ~~strategies~~of ~~and~~ the ~~period~~accruals ~~over~~and ~~which~~related ~~our~~financial ~~deferred~~statement ~~tax assets will be recoverable~~disclosure. The Inultimate ~~the~~settlement ~~event~~of ~~that~~loss ~~actual~~contingencies may ~~results~~ differ significantly from ~~these~~amounts ~~estimates,~~ we ~~are~~ ~~unable~~have toaccrued ~~implement certain tax planning strategies or we adjust these estimates~~ in ~~future periods, we may need to establish an additional valuation allowance which could have a material negative impact on~~ our ~~results of operations or~~ financial ~~position~~ statements.

~~Significant~~Income judgment is required in determining our effective tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are supportable, we believe that certain positions are likely to be successfully challenged. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit. Our effective tax rate includes the impact of reserve provisions and changes to reserves that we consider appropriate.taxes

26Deferred income tax assets and liabilities are recognized for the expected future income tax consequences of carryforwards and temporary differences between the book and tax bases of assets and liabilities. Valuation allowances are established for deferred tax assets that are deemed unrealizable.

~~New~~We ~~Accounting~~must ~~Pronouncements~~assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, valuation allowances are established. The valuation allowance is based on our estimates of future taxable income by each jurisdiction in which we operate, tax planning strategies and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates, we are unable to implement certain tax planning strategies or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which could have a material negative impact on our results of operations or financial position.

InSignificant ~~December 2004,~~judgment ~~the~~is ~~FASB~~required ~~issued~~in ~~SFAS~~determining ~~No. 123R~~our ~~which replaces~~effective ~~the~~tax ~~prior SFAS No. 123, “Accounting for Stock-Based Compensation,”~~rate and ~~supersedes~~in ~~APB~~evaluating ~~Opinion~~our Notax positions. ~~25,~~ ~~“Accounting~~We ~~for~~establish ~~Stock~~reserves ~~Issued~~when, ~~to Employees.” SFAS~~despite ~~123R requires~~our ~~compensation~~belief ~~costs~~that ~~related~~our totax ~~share-based~~return ~~payment~~positions ~~transactions~~are tosupportable, bewe ~~recognized in~~believe ~~the~~that ~~financial statements. With~~certain ~~limited~~positions ~~exceptions,~~are ~~the~~likely ~~amount~~to ofbe ~~compensation~~successfully ~~cost~~challenged. ~~will~~We beadjust ~~measured~~these ~~based~~reserves onin ~~the~~light ~~grant-date fair value~~ of ~~the~~changing ~~equity~~facts orand ~~liability instruments issued. In addition~~circumstances, ~~liability~~such ~~awards~~as ~~will be re-measured each reporting period. Compensation cost will be recognized over~~ the ~~period~~progress ~~that~~of ana ~~employee provides~~tax ~~services in exchange for the award~~audit. ~~This~~Our ~~new standard will become~~ effective ~~for~~tax usrate onincludes ~~November 4, 2005 (~~the ~~first~~impact ~~quarter~~ of ~~our~~reserve ~~fiscal~~provisions ~~2006),~~ and ~~while~~changes ~~we are still evaluating the~~to ~~impact~~reserves ofthat ~~adopting SFAS No. 123R,~~ we doconsider ~~not believe such adoption will have a material impact on our consolidated financial statements because of the minimal number of stock options outstanding~~appropriate.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material, and requires that such items be recognized as current-period charges regardless of whether they meet the “so abnormal” criterion outlined in ARB No. 43. SFAS No. 151 also introduces the concept of “normal capacity” and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period incurred. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. While we are still evaluating the impact of this statement, we do not currently believe it will have a material impact on our consolidated financial statements.25

~~Factors~~New ~~Affecting~~Accounting ~~Comparability~~Pronouncements

~~Our~~In ~~fiscal~~December 2004, ~~year~~the isFASB ~~comprised~~issued ofSFAS 52No. 123R orwhich 53replaces ~~weeks~~the ~~divided~~prior ~~into~~SFAS ~~four~~No. 123, ~~fiscal~~“Accounting for Stock-Based ~~quarters~~Compensation,” ofand 12supersedes orAPB ~~13,~~Opinion 12No. 25, ~~12,~~“Accounting ~~and~~for 16Stock Issued ~~weeks~~to Employees. ~~The~~” SFAS ~~first~~123R ~~two~~requires ~~quarters~~compensation ofcosts ~~fiscal~~related ~~2005~~to share-based ~~and~~payment ~~fiscal~~transactions ~~2004~~to ~~consisted~~be ofrecognized ~~175~~in the financial ~~and~~statements. With ~~172~~limited ~~days~~exceptions, ~~respectively,~~the amount ~~reflecting~~of ~~the~~compensation ~~difference~~cost inwill ~~duration~~be ofmeasured based on the ~~first quarter~~grant-date fair value of ~~those~~the ~~years~~equity or liability instruments issued. ~~The~~ In ~~second~~addition, ~~third~~ ~~and~~liability ~~fourth~~awards ~~quarters~~will ofbe ~~fiscal~~re-measured ~~2005~~each ~~and~~reporting period. Compensation ~~fiscal~~cost ~~2004~~will ~~are~~be recognized over the ~~same~~period that an employee provides services in exchange for ~~duration~~the award. ~~Fiscal~~This ~~2005~~new standard will ~~consist~~become effective offor ~~53 weeks~~us on November 4, or2005 ~~371~~(the ~~total~~first ~~days~~quarter of our fiscal 2006), and while ~~fiscal~~we ~~2004~~are ~~consisted~~still evaluating the impact of 52adopting ~~weeks~~SFAS ~~and~~No. 123R, ~~four~~we do not believe such adoption will ~~days,~~have ora ~~368~~material ~~total~~impact ~~days~~on our consolidated financial statements because of the minimal number of stock options outstanding.

~~Seasonality~~In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material, and requires that such items be recognized as current-period charges regardless of whether they meet the “so abnormal” criterion outlined in ARB No. 43. SFAS No. 151 also introduces the concept of “normal capacity” and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period incurred. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. While we are still evaluating the impact of this statement, we do not currently believe it will have a material impact on our consolidated financial statements.

Our sales fluctuate seasonally and, as mentioned in the preceding paragraph, our quarters do not all have the same time duration. Specifically, our fourth quarter generally has an extra three to four weeks compared to the other quarters of our fiscal year. Also, based on fiscal 2003 and 2004, our average daily sales were highest in our first quarter (November through January) as a result of holiday pie sales while our fourth quarter (mid-July through October) recorded our lowest average daily sales. Therefore, our quarterly results are not necessarily indicative of results that may be achieved for the full fiscal year. Factors ~~influencing~~Affecting relative sales variability in addition to those noted above include the frequency and popularity of advertising and promotions, the relative sales level of new and closed locations, holidays and weather.Comparability

27Our fiscal year is comprised of 52 or 53 weeks divided into four fiscal quarters of 12 or 13, 12, 12, and 16 weeks. The first three quarters of fiscal 2005 and fiscal 2004 consisted of 259 and 256 days, respectively, reflecting the difference in duration of the first quarter of those years. The second, third and fourth quarters of fiscal 2005 and fiscal 2004 are the same in duration. Fiscal 2005 will consist of 53 weeks, or 371 total days, while fiscal 2004 consisted of 52 weeks and four days, or 368 total days.

~~Results of Operations~~Seasonality

	84 Days Ended			84 Days Ended			175 Days Ended			172 Days Ended
(in Thousands)	April 21, 2005			April 15, 2004			April 21, 2005			April 15, 2004
				(As restated)						(As restated)
Revenues:
Restaurant operations	$	92,339		$	91,963		$	196,862		$	191,389
Franchise operations	1,191			1,162			2,420			2,330
	93,530			93,125			199,282			193,719
Costs and expenses:
Restaurant costs:
Food	24,394			24,799			52,605			52,096
Labor	30,042			29,491			62,282			60,298
Other operating expenses	25,336			25,027			53,102			51,562
Franchise operating expenses	521			541			1,032			1,093
General and administrative expenses	6,271			5,699			12,878			11,900
Transaction expenses	—			23			15			45
Management fees	196			506			392			702
Impairment of assets	—			22			—			22
	86,760			86,108			182,306			177,718
Operating profit	6,770			7,017			16,976			16,001
Interest expense	(6,476		)	(5,899		)	(13,454		)	(12,105		)
Debt extinguishment costs	—			(6,856		)	—			(6,856		)
Other income, net	138			27			226			50
Income (loss) before income taxes	432			(5,711		)	3,748			(2,910		)
Provision for income taxes (benefit)	(24		)	(2,048		)	1,023			(1,290		)
Net income (loss)	456			(3,663		)	2,725			(1,620		)
Preferred stock dividends and accretion	(1,928		)	(1,711		)	(3,975		)	(3,466		)
Net loss attributable to common stockholders	$	(1,472	)	$	(5,374	)	$	(1,250	)	$	(5,086	)

Our sales fluctuate seasonally and, as mentioned in the preceding paragraph, our quarters do not all have the same time duration. Specifically, our fourth quarter generally has an extra three to four weeks compared to the other quarters of our fiscal year. Also, based on fiscal 2003 and 2004, our average daily sales were highest in our first quarter (November through January) as a result of holiday pie sales while our fourth quarter (mid-July through October) recorded our lowest average daily sales. Therefore, our quarterly results are not necessarily indicative of results that may be achieved for the full fiscal year. Factors influencing relative sales variability in addition to those noted above include the frequency and popularity of advertising and promotions, the relative sales level of new and closed locations, holidays and weather.

	84 Days Ended		84 Days Ended		175 Days Ended		172 Days Ended
	April 21, 2005		April 15, 2004		April 21, 2005		April 15, 2004
			(As restated)				(As restated)
Revenues:
Restaurant operations	98.7	%	98.8	%	98.8	%	98.8	%
Franchise operations	1.3		1.2		1.2		1.2
	100.0		100.0		100.0		100.0
Costs and expenses:
Restaurant costs:
Food	26.1		26.6		26.4		26.9
Labor	32.1		31.7		31.3		31.1
Other operating expenses	27.1		26.9		26.6		26.6
Franchise operating expenses	0.6		0.6		0.5		0.6
General and administrative expenses	6.7		6.1		6.5		6.1
Transaction expenses	0.0		0.0		0.0		0.0
Management fees	0.2		0.6		0.2		0.4
Impairment of assets	—		0.0		—		0.0
	92.8		92.5		91.5		91.7
Operating profit	7.2		7.5		8.5		8.3
Interest expense	(6.9	)	(6.3	)	(6.7	)	(6.3	)
Debt extinguishment costs	—		(7.3	)	—		(3.5	)
Other income, net	0.2		0.0		0.1		0.0
Income (loss) before income taxes	0.5		(6.1	)	1.9		(1.5	)
Provision for income taxes (benefit)	0.0		(2.2	)	0.5		(0.7	)
Net income (loss)	0.5		(3.9	)	1.4		(0.8	)
Preferred stock dividends and accretion	(2.1	)	(1.9	)	(2.0	)	(1.8	)
Net loss attributable to common stockholders	(1.6	)%	(5.8	)%	(0.6	)%	(2.6	)%

~~Net~~Results ~~rental~~of expense totaled $4.5 million and $4.4 million for the 84 day periods ended April 21, 2005 and April 15, 2004, respectively, and $9.4 million and $8.9 million for the 175 day period ended April 21, 2005 and 172 day period ended April 15, 2004, respectively.Operations

	84 Days Ended			84 Days Ended			259 Days Ended			256 Days Ended
(in Thousands)	July 14, 2005			July 8, 2004			July 14, 2005			July 8, 2004
				(As restated)						(As restated)
Revenues:
Restaurant operations	$	91,225		$	88,958		$	288,087		$	280,347
Franchise operations	1,283			1,165			3,703			3,495
	92,508			90,123			291,790			283,842
Costs and expenses:
Restaurant costs:
Food	23,702			24,571			76,307			76,667
Labor	29,861			28,827			92,143			89,125
Other operating expenses	24,720			22,923			77,823			74,485
Franchise operating expenses	480			512			1,512			1,605
General and administrative expenses	6,234			5,602			19,112			17,503
Litigation settlement	(408		)	—			(408		)	—
Transaction expenses	—			—			15			45
Management fees	196			196			588			897
Impairment of assets	—			—			—			22
	84,785			82,631			267,092			260,349
Operating profit	7,723			7,492			24,698			23,493
Interest expense	(6,577		)	(6,383		)	(20,031		)	(18,488		)
Debt extinguishment costs	—			—			—			(6,856		)
Other income, net	211			111			437			161
Income (loss) before income taxes	1,357			1,220			5,104			(1,690		)
Provision for income taxes (benefit)	49			247			1,072			(1,043		)
Net income (loss)	1,308			973			4,032			(647		)
Preferred stock dividends and accretion	(1,989		)	(1,778		)	(5,964		)	(5,244		)
Net loss attributable to common stockholders	$	(681	)	$	(805	)	$	(1,932	)	$	(5,891	)

84 Days Ended April 21, 2005 (“Second Quarter of Fiscal 2005”) Compared to 84 Days Ended April 15, 2004 (“Second Quarter of Fiscal 2004”)

	84 Days Ended		84 Days Ended		259 Days Ended		256 Days Ended
	July 14, 2005		July 8, 2004		July 14, 2005		July 8, 2004
			(As restated)				(As restated)
Revenues:
Restaurant operations	98.6	%	98.7	%	98.7	%	98.8	%
Franchise operations	1.4		1.3		1.3		1.2
	100.0		100.0		100.0		100.0
Costs and expenses:
Restaurant costs:
Food	26.0		27.6		26.5		27.3
Labor	32.8		32.4		32.0		31.8
Other operating expenses	27.1		25.8		27.0		26.6
Franchise operating expenses	0.5		0.6		0.5		0.6
General and administrative expenses	6.7		6.2		6.5		6.2
Litigation settlement	(0.4	)	—		(0.1	)	—
Transaction expenses	0.0		0.0		0.0		0.0
Management fees	0.2		0.2		0.2		0.3
Impairment of assets	—		0.0		—		0.0
	91.7		91.7		91.5		91.7
Operating profit	8.3		8.3		8.5		8.3
Interest expense	(7.1	)	(7.1	)	(6.9	)	(6.5	)
Debt extinguishment costs	—		—		—		(2.4	)
Other income, net	0.2		0.2		0.1		0.0
Income (loss) before income taxes	1.4		1.4		1.7		(0.6	)
Provision for income taxes (benefit)	0.0		0.3		0.3		(0.4	)
Net income (loss)	1.4		1.1		1.4		(0.2	)
Preferred stock dividends and accretion	(2.1	)	(2.0	)	(2.0	)	(1.8	)
Net loss attributable to common stockholders	(0.7	)%	(0.9	)%	(0.6	)%	(2.0	)%

Total revenues increased by $0.4 million, or 0.4%, to $93.5 million in fiscal 2005’s second quarter, from $93.1 million for the same quarter in fiscal 2004. The increase was due largely to operating approximately five more locations on average during the second quarter of fiscal 2005 compared to the second quarter of fiscal 2004. However, we experienced a net 2.6% decrease in same unit sales for the second quarter of fiscal 2005 over the second quarter of fiscal 2004. Village Inn same unit sales for the second quarter of fiscal 2005 increased 0.9% over the second quarter of fiscal 2004, but Bakers Square same unit sales decreased 5.5% over the same period. Average guest spending, increased 3.8% at Village Inn and 2.5% at Bakers Square in the second quarter of fiscal 2005 compared to the second quarter of fiscal 2004.27

~~Food~~84 ~~costs decreased~~Days byEnded ~~$0.4 million~~July 14, ~~or 1.6%, to $24.4 million in the second quarter of fiscal~~ 2005, ~~from~~(“Third ~~$24.8~~Quarter ~~million for the second quarter~~ of ~~fiscal~~Fiscal ~~2004. Food costs as a percentage of total revenues~~2005”) ~~decreased~~Compared to ~~26.1%~~84 ~~for~~Days ~~the~~Ended ~~second~~July 8, ~~quarter~~2004 of(“Third ~~fiscal~~Quarter ~~2005 from 26.6% in the second quarter~~ of ~~fiscal~~Fiscal 2004~~. The first half of fiscal 2004 experienced a spike in commodity prices, especially dairy.~~”)

~~Labor~~Total ~~costs~~revenues increased by $02.54 million, or 12.76%, to $3092.05 million in ~~the second quarter of~~ fiscal 2005’s third quarter, from $2990.51 million for the ~~second~~same quarter ofin fiscal 2004. The ~~and~~increase aswas adue principally to sales ~~percentage~~stemming from the net 10 additional restaurants opened since the end of ~~total~~the third ~~revenues~~quarter ~~increased~~of tofiscal 322004.1% However, we ~~from~~experienced 31a net 0.78% ~~over~~decrease ~~these~~in same unit sales for the third quarter of ~~periods~~fiscal 2005 over the third quarter of fiscal 2004. ~~The~~ ~~relative~~Village ~~increase~~Inn insame ~~labor~~unit sales ~~costs~~for ~~was~~the ~~due~~third ~~largely~~quarter toof ~~inefficiencies~~fiscal ~~resulting~~2005 ~~from~~increased 0.6% over the ~~lower~~third quarter of fiscal 2004, but Bakers Square same unit sales decreased 2.0% over the same period. Average guest spending, increased 3.5% at Village Inn and an2.8% ~~increase~~at Bakers Square in ~~minimum~~the ~~wage~~third inquarter ~~Illinois~~of infiscal ~~January~~ 2005 compared to the third quarter of fiscal 2004.

~~Other~~Food ~~operating expenses~~costs ~~increased~~decreased by $0.39 million, or 13.27%, to $2523.37 million in the ~~second~~third quarter of fiscal 2005, from $2524.06 million for the ~~second~~third quarter of fiscal 2004. Food ~~Other operating~~costs ~~expenses~~ as a percentage of ~~total~~ restaurant revenues ~~slightly~~decreased ~~increased~~ to ~~27.1%~~ ~~from~~ 26.90% ~~over~~in ~~these~~the ~~periods.~~third ~~This~~quarter ~~increase~~of ~~was~~fiscal ~~primarily~~2005 ~~due~~from to27.6% ~~higher~~in ~~utility,~~the ~~credit~~third ~~card~~quarter ~~fee~~of ~~and~~fiscal ~~occupancy costs~~2004, ~~partially~~as ~~offset~~the bycontribution ~~lower advertising~~at ~~costs. Advertising~~the ~~costs~~Company’s pie ~~decreased~~manufacturing asfacilities aimproved ~~result~~significantly ofin the ~~decision in fiscal~~ 2005 tothird ~~spread~~quarter ~~our advertising~~and ~~expenditures~~commodity ~~more~~cost ~~evenly~~increases ~~over~~at the ~~fiscal~~restaurant ~~year~~level aswere ~~compared~~more tothan ~~fiscal~~offset ~~2004. Utility~~by ~~costs increased predominantly due to~~menu ~~higher~~price ~~rates and higher usage from colder weather~~increases.

~~General~~Labor ~~and~~costs ~~administrative expenses~~ increased by $01.61 million, or 10 3.58%, to $629.39 million ~~for~~in the ~~second~~third quarter of fiscal 2005, from $528.78 million for the ~~second~~third quarter of fiscal 2004. As ~~The~~a ~~increase~~percentage ~~resulted~~of ~~from~~restaurant ~~higher support wages~~revenues, ~~legal~~labor costs ~~fees~~increased ~~and~~to ~~settlements~~32.8% ~~and~~from ~~professional~~32.4% ~~fees,~~over ~~partially offset~~these byperiods. ~~lower~~The ~~bonus~~increase ~~expense~~in percentage ~~and~~labor ~~direct~~costs ~~construction~~was ~~oversight and support expenses~~ due largely to ~~increased~~negative ~~capitalization~~leverage ofresulting ~~such~~from ~~costs~~the lower assame weunit ~~emphasize~~sales ~~growth~~ in the ~~number~~Bakers ofSquare ~~Company-operated~~operating ~~units. As~~unit ~~a percentage of revenues, general~~ and ~~administrative~~minimum ~~expenses were~~wage ~~6.7%~~increases in ~~the~~Florida ~~second quarter of fiscal 2005~~ and ~~6.1%~~Illinois in ~~the second quarter of fiscal 2004~~May 2005.

~~Operating~~Other ~~profit~~operating ~~decreased~~expenses increased by $01.28 million, or 27.9%, to $624.87 million in the ~~second~~third quarter of fiscal 2005, from $722.09 million for the third ~~second~~ quarter of fiscal 2004. ~~Operating profit~~Other operating expenses as a percentage of restaurant ~~total~~ revenues ~~for~~increased ~~the~~to ~~second~~27.1% ~~quarter~~from of25.8% ~~fiscal~~over ~~2005~~these periods. This ~~decreased~~percentage increase was primarily due to ~~7.2%~~higher ~~from~~utility 7and occupancy costs, in addition to higher advertising costs.5% The increased advertising costs were a result of incremental costs associated with the hiring of an advertising agency to enhance the Company’s advertising initiatives, in addition to incremental spending in the ~~second~~2005 third quarter over that of the previous year’s third quarter reflecting efforts to spread our advertising expenditures more evenly over the fiscal 2005 year as compared to fiscal 2004. ~~The~~Utility ~~decrease~~costs increased predominantly due to higher rates and higher usage from warmer weather. The increase in percentage occupancy costs was due ~~largely~~ to ~~the~~significantly higher ~~decline~~pre-opening incosts ~~our~~associated ~~same~~with ~~unit~~the ~~sales~~increased new restaurant opening activity and ~~its~~to ~~effect~~negative onleverage stemming from normal occupancy costs ~~profits~~increases relative to the decline in comparable restaurant sales.

29General and administrative expenses increased $0.6 million, or 10.7%, to $6.2 million for the third quarter of fiscal 2005 from $5.6 million for the third quarter of fiscal 2004. The increase was a result of higher human resources costs associated with the opening of new restaurants and legal fees related to on-going litigation, partially offset by lower bonus expense. As a percentage of revenues, general and administrative expenses were 6.7% in the third quarter of fiscal 2005 and 6.2% in the third quarter of fiscal 2004.

Interest expense increased by $0.6 million, or 10.2%, to $6.5 million in the second quarter of fiscal 2005, from $5.9 million for the second quarter of fiscal 2004. Interest expense as a percentage of total revenues increased to 6.9% from 6.3% over these periods. This increase was due primarily to higher average debt balances and interest rates on debt refinanced in April 2004.28

~~Debt~~Operating ~~extinguishment~~profit ~~costs~~increased ofby $60.92 million, ~~were~~or ~~incurred~~2.7%, to $7.7 million in the ~~second~~ third quarter of fiscal ~~2004~~2005, infrom ~~connection~~$7.5 ~~with~~million ~~our~~for ~~debt~~the ~~refinancing~~third ~~transaction~~quarter ~~that closed~~of ~~April 14,~~fiscal 2004. ~~These~~ Operating ~~expenses~~profit ~~included~~as ~~$2.3~~a ~~million~~percentage of ~~prepayment~~total ~~penalties,~~revenues afor ~~write-off~~the ofthird ~~deferred financing~~quarters ~~costs~~ of ~~$4.4~~fiscal ~~million~~2005 and ~~associated~~fiscal ~~with~~2004 ~~the~~was ~~previous~~8.3%. In ~~obligations~~addition ~~and~~to ~~settlement~~the ofimpacts ~~outstanding~~noted ~~derivative~~above, ~~obligations~~operating profit in the ~~amount~~third quarter of 2005 was increased by a $0.2 3 million~~. No~~ ~~debt~~reduction ~~extinguishment~~in ~~costs were~~workers ~~incurred~~compensation inexpense versus the ~~second~~comparable ~~quarter~~period of ~~fiscal~~2004, ~~2005~~due to favorable claims experience.

~~Provision~~Interest ~~for income~~expense ~~taxes~~increased ~~(benefit)~~by ~~for~~$0.2 ~~the~~million, ~~second~~or ~~quarter~~3.1%, ofto ~~fiscal 2005~~$6.6 ~~was~~million ain ~~$24,000~~the ~~benefit,~~third ~~compared~~quarter toof fiscal 2005, from $26.04 million ~~benefit~~ for the ~~second~~ third quarter of fiscal 2004. ~~The~~ ~~effective~~The ~~tax~~increase ~~rate~~ was ~~not~~due ~~significant~~to ~~for~~higher debt outstanding throughout the ~~second~~third quarter of ~~fiscal~~ 2005 ~~compared~~and ~~to 35.9%~~a inhigher ~~fiscal~~average ~~2004’s~~interest ~~second~~rate ~~quarter,~~on asboth ~~restated. The~~the ~~provisions~~high-yield ~~differ~~financing consummated ~~from~~at ~~our~~the ~~statutory~~end ~~rate~~ of ~~39.9%~~the ~~due~~second toquarter ~~general~~of ~~business~~2004 ~~credits~~and ~~that~~the wedeemed ~~earn from FICA taxes paid on~~landlord ~~employee~~financing ~~tips~~obligations.

~~Net~~Provision for income taxes (~~loss~~benefit) ~~increased~~for the third quarter of fiscal by2005 was $40.21 million, compared to $0.52 million offor ~~income in~~ the ~~second~~third quarter of fiscal ~~2005~~ ~~from~~2004. The aeffective ~~loss~~tax ofrate ~~$3.7~~was ~~million~~not significant infor the ~~second~~third quarter of fiscal ~~2004. Net~~2005 ~~income~~compared ~~as a percentage of total revenues increased~~ to 020.52% ~~from~~in afiscal 2004’s ~~negative~~third ~~3.9%~~quarter, ~~over~~as ~~these periods~~restated. The provisions ~~increase~~differ ~~was~~from ~~driven~~our byblended ~~the~~federal ~~debt~~and state statutory rate of 39.9% ~~extinguishment~~principally ~~costs~~due ~~incurred~~to ingeneral ~~fiscal~~business ~~2004~~credits ~~and~~that anwe ~~absence~~earn offrom ~~such~~FICA ~~costs~~taxes inpaid ~~fiscal~~on ~~2005~~employee tips.

~~Preferred~~Net ~~stock dividends~~income ~~and~~(loss) ~~accretion~~ increased by $0.23 million to $1.93 million of income in the ~~second~~third quarter of fiscal 2005 from $1.70 million ~~for~~in the ~~second~~ third quarter of fiscal 2004. Net income as a ~~result~~percentage of ~~the~~total ~~compounding~~revenues increased ~~effect~~to of1.4% ~~unpaid preferred~~from ~~stock~~1.1% ~~dividends~~over these periods.

~~175~~Preferred ~~Days~~stock dividends ~~Ended~~and ~~April 21,~~accretion ~~2005~~increased ~~(“First~~by $0.2 million ~~Two~~to ~~Quarters~~$2.0 million in the third quarter of ~~Fiscal~~fiscal 2005”) ~~Compared~~from to$1.8 ~~172~~million ~~days~~for ~~Ended~~the third ~~April 15,~~quarter of fiscal 2004 ~~(“First Two~~as ~~Quarters~~a result of ~~Fiscal~~the ~~2004”)~~compounding effect of unpaid preferred stock dividends.

~~Total~~259 ~~revenues increased~~Days byEnded ~~$5.6 million~~July 14, or2005 ~~2.9%,~~(“First toThree ~~$199.3~~Quarters ~~million in the first two quarters~~ of ~~fiscal~~Fiscal 2005~~, from $193.7 million for the first two quarters of fiscal~~”) ~~2004. The~~Compared ~~increase was partly due~~ to ~~operating~~ ~~approximately~~256 ~~five more locations on average during the first two quarters of fiscal 2005 compared to the same quarters of fiscal 2004 and the three extra operating~~ days inEnded ~~the first two quarters of fiscal 2005. However~~July 8, ~~we experienced a net 1.9% decrease in same unit sales for the first two quarters of fiscal 2005 over the same quarters of fiscal~~ 2004 ~~with~~(“First ~~Village~~Three ~~Inn~~Quarters same unit sales increasing 1.6% and Bakers Square same unit sales decreasing 4.6% over the same period. Average guest spending, increased 3.3% at Village Inn and 2.3% at Bakers Square in the first two quarters of ~~fiscal 2005~~Fiscal ~~compared to the same quarters in fiscal~~ 2004.”)

~~Food~~Total ~~costs~~revenues increased by $08.50 million, or 12.08%, to $52291.68 million in the first ~~two quarters~~three quarters of fiscal 2005, from $52283.18 million for the ~~same~~first three quarters of fiscal 2004. ~~Food~~The ~~costs~~increase aswas apartly ~~percentage~~due to ofoperating ~~total~~approximately ~~revenues~~ten more locations on average during the first three ~~decreased~~quarters of fiscal 2005 compared to ~~26.4%~~the ~~for~~same quarters of fiscal 2004 and the three extra operating days in the first ~~two~~three quarters of fiscal 2005. However, ~~from~~we 26experienced a net 1.95% decrease in ~~the~~ same unit sales for the first three quarters of fiscal 2005 over the same quarters of fiscal 2004 with Village Inn same unit sales increasing 1.3% and Bakers Square same unit sales decreasing 3.8% over the same period. ~~The~~Average ~~first~~guest spending, increased 3.3% at ~~two~~Village Inn and 2.5% at Bakers Square in the first three quarters of fiscal 2005 ~~2004~~compared ~~experienced~~to athe ~~spike~~same quarters in ~~commodity~~fiscal ~~prices, especially dairy~~2004.

30Food costs decreased by $0.4 million, or 0.5%, to $76.3 million in the first three quarters of fiscal 2005, from $76.7 million for the same quarters of fiscal 2004. Food costs as a percentage of restaurant revenues decreased to 26.5% for the first three quarters of fiscal 2005 from 27.3% in the same quarters of fiscal 2004. The first three quarters of fiscal 2004 experienced a spike in commodity prices, especially dairy.

Labor costs increased by $23.0 million, or 3.34%, to $6292.31 million in the first ~~two quarters~~three quarters of fiscal 2005, from $6089.31 million for the same quarter of fiscal 2004, but as a percentage of ~~total~~restaurant revenues increased only modestly to 3132.30% from 31.18% over these periods.

Other operating expenses increased by $1.5 million, or 2.9%, to $53.1 million in the first two quarters of fiscal 2005 from $51.6 million for the same quarters of fiscal 2004 and, as a percentage of total revenues, stayed constant at 26.6% for these periods. Higher credit card fee, utility and occupancy costs were offset by lower advertising costs.29

~~General~~Other ~~and~~operating ~~administrative~~ expenses increased by $13.03 million, or 8 4.4%, to $1277.98 million ~~for~~in the first ~~two~~three quarters of fiscal 2005 from $1174.9 5 million for the ~~first~~same ~~two~~ quarters of fiscal 2004. ~~The increase resulted from higher support wages, legal fees~~ and ~~settlements~~, ~~and professional fees partially offset by lower direct construction oversight and support expenses due to increased capitalization of such costs~~ as ~~we emphasize growth in the number of Company-operated units. As~~ a percentage of ~~revenues,~~restaurant ~~general and administrative expenses~~ revenues increased to 627.50% in for the first ~~two~~three quarters of fiscal 2005 from 626.16% in the same quarters of fiscal 2004. Higher credit card fees, utility and occupancy costs were offset by lower advertising costs.

~~Operating~~General ~~profit~~and administrative expenses increased $1.06 million, or 6 9.31%, to $1719.01 million infor the first ~~two~~three quarters of fiscal 2005, from $1617.0 5 million for the ~~same~~first three quarters of fiscal 2004. ~~Operating profit~~The asincrease was principally a ~~percentage~~result of ~~total~~higher ~~revenues~~hiring ~~was 8.5%~~ and ~~8.3%~~training ~~for~~costs ~~the~~related ~~first~~to ~~two~~the ~~quarters~~increased ofgrowth ~~fiscal~~in ~~2005~~new restaurants and ~~fiscal~~legal ~~2004,~~fees ~~respectively~~associated with on-going litigation. As ~~The~~a ~~improvement~~percentage ~~was~~of ~~due~~revenues, ~~largely~~general and administrative expenses increased to 6.5% in the ~~increased~~first ~~restaurant~~three quarters ~~sales~~of ~~and~~fiscal ~~lower~~2005 ~~relative~~from ~~food~~6.2% ~~costs~~in the same quarters of fiscal 2004.

~~Interest~~Operating ~~expense~~profit increased by $1.42 million, or 115.61%, to $1324.57 million in the first ~~two~~three quarters of fiscal 2005, from $1223.15 million for the same quarters of fiscal 2004. ~~Interest~~Operating ~~expense~~profit as a percentage of total revenues ~~increased~~was ~~to 6~~8.75% ~~from~~and 68.3% ~~over~~ ~~these~~for ~~periods.~~the first ~~This~~three ~~increase~~quarters ~~was~~of ~~due~~fiscal ~~primarily~~2005 toand ~~higher~~fiscal ~~average~~2004, ~~debt~~respectively. The ~~balances~~improvement ~~and~~was ~~interest~~due ~~rates~~largely onto ~~debt~~the ~~refinanced~~increased inrestaurant ~~April 2004~~sales and lower relative food costs.

~~Debt~~Interest ~~extinguishment~~expense ~~costs~~increased ofby $61.95 million, ~~were~~or ~~incurred~~8.1%, to $20.0 million in the ~~second~~first three ~~quarter~~quarters of fiscal ~~2004~~2005, infrom ~~connection~~$18.5 ~~with~~million ~~our~~for ~~debt~~the ~~refinancing~~same ~~transaction~~quarters ~~that closed~~of ~~April 14,~~ fiscal 2004. ~~These expenses~~ ~~included~~Interest ~~$2.3~~expense ~~million~~as ~~of prepayment penalties,~~ a ~~write-off~~percentage of ~~deferred financing~~total ~~costs~~revenues ofincreased $4to 6.49% ~~million~~from 6.5% ~~associated~~over ~~with~~these ~~the~~periods. ~~previous~~This ~~obligations~~increase ~~and settlement~~was ofdue ~~outstanding~~primarily ~~derivative~~to ~~obligations~~higher inaverage ~~the~~debt balances ~~amount~~and ofinterest ~~$0.2 million. No~~rates on debt ~~extinguishment~~refinanced ~~costs were incurred~~ in ~~fiscal 2005~~April 2004.

~~Provision~~Debt ~~for income~~extinguishment ~~taxes~~costs ~~for~~of ~~the~~$6.9 ~~first~~million ~~two~~were ~~quarters~~incurred ofin ~~fiscal~~the ~~2005~~second ~~was~~quarter ~~$1.0~~of ~~million,~~fiscal ~~compared~~2004 toin aconnection ~~$1.3~~with ~~million~~our ~~benefit~~debt ~~for~~refinancing ~~the~~transaction ~~same quarters of~~that ~~fiscal~~closed April 14, 2004. ~~The~~These expenses ~~effective~~included ~~tax rate was 27~~$2.3% ~~for~~million ~~the~~of ~~first~~prepayment ~~two~~penalties, ~~quarters~~a write-off of ~~fiscal~~deferred financing ~~2005~~costs ~~compared~~of ~~to 44~~$4.3%4 inmillion ~~fiscal 2004’s~~associated ~~first~~with ~~two~~the ~~quarters. The provisions~~previous ~~differ~~obligations ~~from~~and settlement ~~our~~of ~~statutory~~outstanding ~~rate~~derivative ofobligations ~~39.9%~~in ~~due~~the toamount ~~general~~of ~~business~~$0.2 ~~credits~~million. No ~~that~~debt weextinguishment ~~earn~~costs were ~~from~~incurred ~~FICA~~in ~~taxes~~fiscal ~~paid on employee tips~~2005.

~~Net~~Provision ~~income~~for ~~increased~~income bytaxes ~~$4.3~~for ~~million to $2.7 million of income in~~ the first ~~two~~three quarters of fiscal 2005 was ~~from~~$1.1 amillion, ~~loss~~compared ofto a $1.60 million inbenefit for the same quarters of fiscal 2004. ~~Net~~The ~~income~~effective astax arate ~~percentage~~was 21.0% for the first three quarters of ~~total~~fiscal ~~revenues increased~~2005 compared to 161.47% ~~from~~benefit ain fiscal ~~negative~~2004’s ~~0.8%~~first ~~over~~three ~~these periods~~quarters. The provisions ~~increase~~differ ~~largely~~from ~~resulted~~our ~~from~~blended ~~debt~~federal and state statutory rate of 39.9% ~~extinguishment~~due ~~costs~~to ~~incurred~~general inbusiness ~~fiscal~~credits ~~2004~~that we earn from FICA taxes paid on employee tips.

~~Preferred~~Net ~~stock dividends~~income ~~and accretion~~ increased by $04.56 million to $4.0 million of income in the first ~~two~~three quarters of fiscal 2005 from a loss of $30.56 million ~~for first~~in ~~two~~the same quarters of fiscal 2004. Net income as a ~~result~~percentage of ~~the~~total ~~compounding~~revenues increased ~~effect~~to of1.4% from a negative 0.2% over these periods. The increase largely resulted from debt ~~unpaid~~extinguishment ~~preferred~~costs ~~stock~~incurred ~~dividends~~in fiscal 2004.

31Preferred stock dividends and accretion increased by $0.8 million to $6.0 million in first three quarters of fiscal 2005 from $5.2 million for first three quarters of fiscal 2004 as a result of the compounding effect of unpaid preferred stock dividends.

~~Liquidity and Capital Resources~~30

~~Cash~~Liquidity ~~requirements~~and Capital Resources

~~Our principal liquidity requirements are to continue to finance our operations, service our debt and fund capital expenditures for maintenance and expansion.~~ Cash ~~flow from operations has historically been sufficient to finance continuing operations and meet normal debt service~~ requirements. However, we are highly leveraged and our ability to repay our borrowings at maturity is likely to depend in part on our ability to refinance the debt when it matures, which will be contingent on our continued successful operation of the business as well as other factors beyond our control, including the debt and capital market conditions at that time.

Our ~~cash~~principal ~~balance~~liquidity ~~and working~~requirements ~~capital~~are ~~needs~~to ~~are~~continue ~~generally~~to ~~low~~finance our operations, asservice ~~sales~~our ~~are~~debt ~~made~~and ~~for~~fund ~~cash~~capital orexpenditures ~~through~~for maintenance and ~~credit~~expansion. Cash ~~cards~~flow ~~that~~from ~~are~~operations ~~quickly~~has historically ~~converted~~been sufficient to ~~cash,~~finance ~~purchases~~continuing ofoperations ~~food~~ and ~~supplies~~meet normal ~~and~~debt ~~other~~service ~~operating~~requirements. However, ~~expenses~~ we are ~~generally~~highly ~~paid~~leveraged ~~within~~and 30our ability to 60repay ~~days~~our ~~after~~borrowings at maturity is ~~receipt~~likely ofto ~~invoices~~depend ~~and~~in ~~labor~~part ~~costs~~on ~~are~~our ~~paid~~ability ~~bi-weekly. The~~to ~~timing~~refinance ofthe ~~our~~debt ~~sales~~when ~~collections~~it ~~and~~matures, ~~vendor~~which ~~and~~will ~~labor~~be ~~payments~~contingent ~~are~~on ~~consistent~~our ~~with~~continued successful operation of the business as well as other ~~companies~~factors ~~engaged~~beyond inour control, including the debt and capital ~~restaurant~~market ~~industry~~conditions at that time.

~~For~~Our ~~the~~cash balance ofand ~~fiscal~~working ~~2005, we anticipate~~ capital ~~expenditures~~needs are ~~before~~generally ~~build-to-suit~~low, ~~construction (~~as ~~discussed~~sales ~~below)~~are ofmade ~~approximately~~for ~~$21 million,~~cash ~~reflecting~~or anthrough ~~acceleration~~credit ofcards ~~our~~that ~~unit~~are quickly ~~growth. Of~~converted ~~this amount, $10 million is expected~~ to ~~be spent on new restaurant construction~~cash, $5purchases ~~million~~of ~~for~~food ~~remodels~~ and ~~the~~supplies ~~remainder on capital maintenance~~ and other ~~support~~operating expenses ~~related~~are ~~projects. We~~generally ~~may~~paid ~~also~~within ~~have~~30 ~~capital expenditures in fiscal 2005 related~~ to ~~our~~60 ~~Bakers~~days ~~Square~~after ~~brand~~receipt ~~repositioning,~~of ~~although~~invoices atand ~~present~~labor ~~such~~costs ~~plans~~are ~~have~~paid ~~not been finalized~~bi-weekly. The Wetiming ~~currently~~of ~~expect~~our tosales ~~open~~collections anand ~~estimated~~vendor 23and tolabor 27payments ~~new~~are ~~restaurants in~~consistent ~~fiscal~~with ~~2005,~~other ~~including~~companies ~~the~~engaged ~~three~~in ~~we opened through~~ the ~~second~~restaurant ~~quarter~~industry.

WeFor ~~may~~the ~~also~~balance beof ~~required~~fiscal to2005, ~~make~~we ~~cash~~anticipate ~~payments~~capital ~~associated with certain~~expenditures ~~litigation~~before ~~settlements (refer~~ build-to-suit ~~Note~~construction 5(as todiscussed ~~our~~below) ~~unaudited~~of ~~consolidated~~approximately ~~financial~~$12 ~~statements~~million, ~~and~~reflecting ~~Part II~~an ~~Item~~acceleration 1.of ~~Legal~~our ~~Proceedings~~unit ~~included elsewhere herein for further discussion)~~growth. WeOf ~~expect~~this ~~our maximum~~amount, ~~net~~$7 ~~cash~~million ~~outlay~~is ~~for~~expected ~~these~~to ~~litigation~~be spent ~~settlements~~on tonew berestaurant construction, $3.2 million ~~reflecting~~ ~~indemnification~~for ofremodels ~~pre-acquisition~~and ~~activities~~the byremainder on ~~our~~capital ~~predecessor~~maintenance ~~for the~~and ~~balance~~other ofsupport ~~the~~related $6projects.55 ~~million~~We ~~proposed~~currently ~~settlements. Timing~~expect to ~~may~~open ~~require~~an ~~that~~estimated ~~the~~22 ~~settlement~~to ~~be paid~~25 ~~out~~new restaurants in ~~advance~~fiscal of2005, ~~receipt~~including ofthe ten we opened through the ~~indemnification~~third ~~proceeds~~quarter.

InWe ~~connection~~will ~~with~~also ~~our~~be ~~new~~required ~~restaurant development program, we have entered into build-~~to~~-suit~~ ~~development~~make ~~agreements~~cash ~~whereby~~payments ~~third~~associated ~~parties~~with ~~will~~certain ~~purchase~~litigation ~~property,~~settlements ~~fund~~(refer ~~the costs~~ to ~~develop~~Note ~~new~~5 ~~restaurant properties for us and lease the properties~~ to usour ~~upon completion.~~ unaudited ~~Under~~consolidated ~~these~~financial ~~agreements,~~statements ~~we generally are responsible for the construction of the restaurant~~ and ~~remitting~~Part II ~~payments~~Item to1. ~~the~~Legal ~~contractors on the~~Proceedings ~~projects,~~included ~~which~~elsewhere ~~are~~herein ~~subsequently~~for ~~reimbursed~~further ~~by the property owner~~discussion). ~~These~~We ~~amounts~~expect ~~advanced~~our ~~and~~ultimate ~~subsequently reimbursed~~maximum ~~are~~net ~~not included in the anticipated capital spending totals~~cash ~~above. On~~outlay ~~April 21,~~for ~~2005,~~these welitigation ~~had outstanding~~settlements ~~receivables~~to ofbe $2.8 million ~~relating to these types of~~reflecting ~~agreements. In~~indemnification ~~certain~~ of ~~these agreements,~~pre-acquisition weactivities ~~are~~by ~~obligated~~our topredecessor ~~purchase~~for the balance ~~property~~of in the ~~event~~$5.3 ~~that~~million weproposed ~~are unable~~settlements. It tois ~~complete~~expected that the ~~construction~~timing ~~within~~will arequire that ~~specified~~the ~~time~~settlement ~~frame,~~be ~~and~~paid ~~are~~out ~~also responsible~~in ~~for~~advance ~~cost~~of ~~overruns~~receipt ~~above~~of ~~specified~~the ~~amounts~~indemnification proceeds.

32In connection with our new restaurant development program, we have entered into build-to-suit development agreements whereby third parties will purchase property, fund the costs to develop new restaurant properties for us and lease the properties to us upon completion. Under these agreements, we generally are responsible for the construction of the restaurant and remitting payments to the contractors on the projects, which are subsequently reimbursed by the property owner. These amounts advanced and subsequently reimbursed are not included in the anticipated capital spending totals above. On July 14, 2005, we had outstanding receivables of $1.2 million relating to these types of agreements. In certain of these agreements, we are obligated to purchase the property in the event that we are unable to complete the construction within a specified time frame, and are also responsible for cost overruns above specified amounts.

~~Debt and other obligations and liabilities~~31

OnDebt April 14, 2004, we completed a private placement of $126.5 million aggregate principal amount of 10½% senior unsecured notes maturing on April 15, 2011. The notes were issued at a discounted price of 98.791% of face value, resulting in net proceeds before transaction expenses of $125.0 million. The senior unsecured notes were issued by VICORP Restaurants, Inc. and ~~are~~other ~~guaranteed~~obligations ~~by VI Acquisition Corp.~~ and ~~our subsidiary Village Inn Pancake House of Albuquerque, Inc.~~liabilities

~~Concurrently~~On ~~with~~April 14, ~~the issuance of the 10½% senior unsecured notes~~2004, we ~~entered~~ ~~into~~completed ana ~~amended~~private ~~and~~placement ~~restated senior secured credit facility consisting~~ of a $15126.0 5 million ~~term~~aggregate ~~loan~~principal ~~and~~amount aof ~~$30.0~~10½% ~~million~~senior ~~revolving~~unsecured ~~credit~~notes ~~facility, with~~maturing aon ~~$15.0 million sublimit for letters of credit. On~~ April 2115, ~~2005, we~~ ~~had issued letters of credit aggregating $6~~2011.6 The ~~million~~notes ~~and~~were ~~had~~issued noat ~~borrowings~~a ~~outstanding~~discounted ~~under~~price ~~the~~of ~~senior~~98.791% ~~secured~~of ~~revolving~~face ~~credit~~value, ~~facility. The~~resulting ~~senior~~in ~~secured~~net ~~revolving~~proceeds ~~credit facility~~before ~~permits~~transaction ~~borrowings~~expenses ~~equal to the lesser~~ of ~~(a)~~ $30125.0 million ~~and (b) 1~~.2 ~~times~~The ~~trailing twelve months Adjusted EBITDA (as defined in the~~ senior ~~secured credit~~unsecured ~~agreement)~~notes ~~minus~~were ~~the~~issued ~~original~~by ~~amount of the senior secured term~~VICORP ~~loan. Under this formula~~Restaurants, ~~as of April~~ ~~21, 2005,~~Inc. weand ~~had~~are ~~the~~guaranteed ~~ability~~by toVI ~~borrow~~Acquisition ~~the~~Corp. ~~full~~and ~~$30~~our subsidiary ~~million,~~Village ~~less~~Inn ~~the~~Pancake ~~amount~~House of ~~outstanding~~ ~~letters of credit~~Albuquerque, ~~under the senior secured revolving credit facility, or $23~~ Inc.~~4 million.~~

~~Borrowings~~Concurrent ~~under~~with ~~both~~ the ~~revolving~~issuance ~~credit~~of ~~facility and~~ the ~~term~~10½% ~~loan bear~~senior ~~interest~~unsecured atnotes, ~~floating~~we entered ~~rates~~into ~~tied~~an toamended ~~either~~and ~~the~~restated ~~base~~senior ~~rate~~secured ofcredit ~~the~~facility ~~agent bank~~consisting ~~under~~of ~~the~~a ~~credit~~$15.0 ~~agreement~~million orterm ~~LIBOR~~loan ~~rates~~and ~~for~~ a ~~period~~$30.0 ofmillion ~~one,~~revolving ~~two~~credit ~~or three months~~facility, with ~~in each case plus~~ a ~~margin~~$15.0 ~~that~~million ~~will~~sublimit ~~adjust~~for ~~based~~letters ~~on the ratio~~ of ~~our~~credit. ~~Adjusted~~On ~~EBITDA~~July 14, to2005, ~~total~~we ~~indebtedness,~~had asissued ~~defined~~letters inof ~~the~~credit ~~senior~~aggregating ~~secured~~$7.2 ~~credit~~million ~~agreement.~~and Athad ~~April 21,~~no ~~2005,~~borrowings ~~the~~outstanding ~~interest~~under ~~rates~~the ~~were~~senior ~~6.1%~~secured ~~for~~revolving ~~term loan~~credit ~~borrowings~~facility. ~~Both~~The ~~facilities~~senior ~~are~~ secured revolving bycredit afacility ~~lien~~permits onborrowings ~~all~~equal ofto the ~~assets~~lesser of ~~VICORP Restaurants,~~(a) ~~Inc~~$30.,0 million and ~~guaranteed by VI Acquisition Corp~~(b) 1.2 ~~and~~times ~~our~~trailing ~~subsidiary~~twelve ~~Village~~months ~~Inn~~Adjusted ~~Pancake~~EBITDA ~~House~~(as ~~of Albuquerque, Inc.,~~defined in the ~~guarantees~~senior ~~also~~ secured bycredit agreement) minus the ~~pledge~~original ofamount ~~all~~ of the ~~outstanding~~ ~~capital~~senior ~~stock~~secured ofterm ~~VICORP Restaurants, Inc~~loan. Under bythis VIformula, ~~Acquisition Corp.~~as ~~The~~of ~~term~~July 14, ~~loan~~2005, we ~~does~~had ~~not~~the ~~require~~ability ~~periodic~~to ~~principal~~borrow ~~payments,~~the ~~but~~full ~~requires mandatory~~$30 ~~repayments under certain events~~million, ~~including~~less ~~proceeds~~the ~~from~~amount ~~sale~~ of outstanding ~~assets,~~letters ~~issuance~~ of ~~equity~~credit, ~~and~~under ~~issuance~~the ofsenior ~~new~~secured ~~indebtedness. Both~~revolving ~~facilities~~credit ~~mature~~facility, onor ~~April 14,~~$22.8 ~~2009~~million.

~~Our~~Borrowings ~~senior~~under ~~secured~~both the revolving credit facility and the ~~indenture~~term ~~governing~~loan bear interest at floating rates tied to either the base rate of the agent bank ~~senior~~under ~~unsecured~~the ~~notes~~credit ~~contain~~agreement or LIBOR rates for a ~~number~~period of ~~covenants that~~one, ~~among~~two ~~other~~or ~~things,~~three ~~restrict~~months, ~~subject~~in toeach ~~certain~~case ~~exceptions,~~plus ~~our~~a ~~ability~~margin ~~and~~that will adjust based on the ~~ability~~ratio of our ~~subsidiaries,~~Adjusted EBITDA to ~~sell~~total ~~assets~~indebtedness, ~~incur~~as ~~additional~~defined ~~indebtedness~~in the orsenior ~~issue~~secured ~~preferred stock,~~credit ~~repay~~agreement. ~~other~~At ~~indebtedness~~July 14, ~~pay~~2005, ~~dividends~~the ~~and~~interest ~~distributions~~rates were or6.5% ~~repurchase~~for term loan borrowings. Both ~~our~~facilities ~~capital~~are ~~stock,~~secured ~~create~~by ~~liens~~a lien on ~~assets,~~all ~~make~~of ~~investments,~~the ~~loans~~assets orof ~~advances,~~VICORP ~~make certain acquisitions~~Restaurants, Inc., ~~engage~~and inguaranteed ~~mergers~~by orVI ~~consolidations,~~Acquisition ~~enter~~Corp. ~~into~~and our ~~sale-leaseback~~subsidiary ~~transactions,~~Village ~~engage~~Inn inPancake ~~certain~~House ~~transactions~~of ~~with affiliates~~Albuquerque, Inc., the guarantees ~~amend~~also ~~certain~~secured ~~material~~by ~~agreements~~the ~~governing~~pledge ~~our~~of ~~indebtedness,~~all ~~change~~of the ~~business~~ ~~conducted~~outstanding bycapital usstock ~~and~~of ~~our~~VICORP ~~subsidiaries~~Restaurants, Inc. ~~and~~by ~~enter~~VI ~~into~~Acquisition ~~hedging agreements~~Corp. InThe term ~~addition,~~loan ~~our~~does ~~senior~~not ~~secured~~require ~~credit~~periodic ~~facility~~principal ~~requires~~payments, usbut torequires mandatory ~~maintain~~repayments orunder ~~comply~~certain ~~with~~events, aincluding ~~maximum~~proceeds ~~total~~from ~~leverage~~sale ~~ratio,~~of ~~a minimum interest~~assets, ~~coverage~~issuance ~~ratio~~of equity and aissuance ~~maximum~~of ~~capital~~new ~~expenditures limitation~~indebtedness. OnBoth ~~April 21,~~facilities ~~2005,~~mature weon ~~were in compliance~~April 14, ~~with these requirements~~2009.

WeOur ~~are~~senior secured credit facility and the indenture governing the senior unsecured notes contain a number of covenants that, among other things, restrict, subject to ~~capital~~certain ~~lease~~exceptions, ~~obligations~~our ~~related~~ability toand ~~five~~the ability of our ~~leased~~subsidiaries, ~~properties.~~to ~~The~~sell ~~principal~~assets, ~~component~~incur ofadditional indebtedness or issue preferred stock, repay other indebtedness, pay dividends and distributions or repurchase our capital ~~lease~~stock, ~~obligations~~create ~~was~~liens on assets, make investments, loans or advances, ~~$0.4~~make ~~million~~certain asacquisitions, ofengage ~~April 21~~in mergers or consolidations, ~~2005~~enter into sale-leaseback transactions, engage in certain transactions with affiliates, amend certain material agreements governing our indebtedness, change the business conducted by us and our subsidiaries and enter into hedging agreements. ~~These~~In ~~capital~~addition, ~~leases~~our ~~have~~senior ~~expiration~~secured credit facility requires us to ~~dates~~maintain ~~ranging~~or ~~from~~comply ~~October~~with a maximum total leverage ratio, a minimum interest coverage ratio and a maximum capital expenditures limitation. On July 14, 2005, towe ~~June 2011~~were in compliance with these requirements.

33We are subject to capital lease obligations related to five of our leased properties. The principal component of our capital lease obligations was $0.3 million as of July 14, 2005. These capital leases have expiration dates ranging from October 2005 to June 2011.

We are the prime lessee under various operating leases or agreements under deemed landlord financing liability transactions for land, building and equipment for company-operated and franchised restaurants, pie production facilities and locations subleased to non-affiliated third parties. These leases and agreements have initial terms ranging from 15 to 35 years and, in most instances, provide for renewal options ranging from five to 20 years. These leases and agreements expire at various dates through September 2025.32

We ~~have~~are ~~guaranteed~~the ~~certain~~prime lessee under various operating leases or agreements under deemed landlord financing liability transactions for ~~restaurant~~land, ~~properties~~building ~~sold~~and equipment infor company-operated and franchised restaurants, pie production ~~1986~~facilities and ~~restaurant~~locations ~~leases~~subleased ofto ~~certain~~non-affiliated ~~franchisees~~third parties. ~~Estimated~~These leases ~~minimum~~and ~~future rental~~agreements ~~payments~~have ~~remaining~~initial ~~under~~terms ~~these~~ranging ~~leases~~from ~~were~~15 ~~approximately~~to ~~$2.5~~35 ~~million~~years asand, in ofmost ~~April 21~~instances, ~~2005~~provide for renewal options ranging from five to 20 years. These leases and agreements expire at various dates through September 2025.

AsWe ofhave ~~April 21,~~guaranteed ~~2005,~~certain ~~our~~leases ~~commitments~~for ~~with~~restaurant ~~respect~~properties tosold ~~the~~in 1986 ~~above~~and restaurant leases of certain franchisees. Estimated minimum future ~~obligations~~rental payments remaining under these leases were asapproximately ~~follows~~$2.4 ~~(in~~million ~~millions):~~as of July 14, 2005.

~~Payments~~As ~~due~~of byJuly 14, ~~periods~~2005, our commitments with respect to the above obligations were as follows (in millions):

			Less than		1-3		3-5		More than 5
	Payments due by periods
	Total		Less than one year		1-3 years		3-5 years		More than 5 years
Senior secured credit facility	$	15.0	$	—	$	—	$	15.0	$	—
10-1/2% senior unsecured notes	126.5		—		—		—		126.5
Total notes payable	141.5		—		—		15.0		126.5
Capital lease obligations(1) (2)	0.43		0.21		0.1		0.1		—
Operating lease obligations(2)	~~125~~189.36		1619.92		2834.20		2127.2		59109.02
Deemed landlord financing liability(1) (2)	299.5		12.3		24.9		25.4		236.9
Deemed landlord financing liability (1) (2)	317.5		13.0		26.3		27.0		251.2
Letters of credit (3)	67.62		67.62		—		—		—
Purchase commitments(4)	816.17		816.17		—		—		—
Total	$	~~581~~672.48	$	4456.12	$	5360.24	$	6169.73	$	486.9	~~422.4~~

(1)		Amounts payable under capital leases and the deemed landlord financing liability represent gross lease payments, including both deemed principal and imputed interest components.
(2)		Many of our leases and financing obligations contain provisions that require additional rent payments contingent on sales performance and the payment of common area maintenance charges and real estate taxes. Amounts in this table do not reflect any of these additional amounts.
(3)		We have letters of credit outstanding primarily to guarantee performance under insurance contracts. The letters of credit are irrevocable and have one-year renewable terms.
(4)		We have commitments under contracts for the purchase of property and equipment. Portions of such contracts not completed at April 21, 2005 as noted in the table above were not reflected as assets or liabilities in our consolidated financial statements.

(1) Amounts payable under capital leases and the deemed landlord financing liability represent gross lease payments, including both deemed principal and imputed interest components.

34(2) Many of our leases and financing obligations contain provisions that require additional rent payments contingent on sales performance and the payment of common area maintenance charges and real estate taxes. Amounts in this table do not reflect any of these additional amounts.

~~Sources~~ (3) We ~~and~~have letters of credit outstanding ~~uses~~primarily to guarantee performance under insurance contracts. The letters of ~~cash~~credit are irrevocable and have one-year renewable terms.

~~The~~(4) We ~~following~~have ~~table~~commitments ~~presents~~under acontracts ~~summary~~for the purchase of ~~our~~property ~~cash~~and ~~flows from~~equipment. ~~operating,~~Portions ~~investing~~of ~~and~~such ~~financing~~contracts ~~activities~~not ~~for~~completed at July 14, 2005 as noted in the ~~periods~~table ~~indicated~~above (were not reflected as assets or liabilities in our ~~millions):~~consolidated financial statements.

	175 Days Ended			172 Days Ended
	April 21,			April 15,
	2005			2004
				(As restated)
Net cash provided by operating activities	$	14.4		$	10.7
Net cash used in investing activities	(8.6		)	(6.6		)
Net cash provided by (used in) financing activities	1.8			(7.3		)
Net increase (decrease) in cash and cash equivalents	$	7.6		$	(3.2	)

~~Operating~~Sources ~~activities~~and uses of cash

~~For~~The ~~the~~following ~~first~~table ~~two~~presents ~~quarters~~a summary of ~~fiscal~~our ~~2005,~~ cash flows from ~~operating~~ ~~activities~~operating, ~~increased~~investing ~~$3.7~~and ~~million~~financing ~~compared~~activities tofor the ~~same~~periods ~~quarters~~indicated ~~of fiscal 2004. The increase resulted primarily from payments of debt extinguishment costs~~ (in ~~fiscal 2004 and favorable changes~~ ~~in working capital in the first two quarters of 2005 compared to the same quarters of 2004, primarily related to funding of cash overdraft balances.~~millions):

Investing activities

	259 Days Ended			256 Days Ended
	July 14,			July 8,
	2005			2004
				(As restated)
Net cash provided by operating activities	$	25.3		$	18.4
Net cash used in investing activities	(22.1		)	(11.3		)
Net cash provided by (used in) financing activities	8.1			(7.1		)
Net increase (decrease) in cash and cash equivalents	$	11.3		$	0.0

~~Net~~Operating ~~cash used in our investing~~ activities in the first two quarters of fiscal 2005 and 2004 consisted primarily of capital expenditures. Our capital expenditures for property and equipment in the first two quarters of fiscal 2005 and 2004 were comprised of the following (in millions):

	April 21, 2005		April 15, 2004
			(As restated)
New store construction	$	1.8	$	1.4
Existing store remodel and refurbishment	1.3		2.0
Capital replacements	2.5		1.9
Corporate related	0.3		0.6
Purchase of property and equipment	$	5.9	$	5.9

For the first three quarters of fiscal 2005, cash flows from operating activities increased $6.9 million compared to the same quarters of fiscal 2004. The increase resulted primarily from payments of debt extinguishment costs in fiscal 2004 and favorable changes in working capital in the first three quarters of 2005 compared to the same quarters of 2004, primarily related to funding of cash overdraft balances.

InInvesting addition to the capital expenditures noted above, we spent $3.0 million for assets under deemed landlord finance liability during the first two quarters of fiscal 2005 compared to $0.7 million in the same quarters of fiscal 2004. We opened five new restaurants in the first two quarters of fiscal 2005 and three restaurants in the same quarters of fiscal 2004. Also, we had an additional nine locations under construction at the end of the second quarter of fiscal 2005.activities

35Net cash used in our investing activities in the first three quarters of fiscal 2005 and 2004 consisted primarily of capital expenditures. Our capital expenditures for property and equipment in the first three quarters of fiscal 2005 and 2004 were comprised of the following (in millions):

Financing activities

	July 14, 2005		July 8, 2004
			(As restated)
New store construction	$	3.7	$	1.5
Existing store remodel and refurbishment	3.4		3.3
Capital replacements	3.2		2.9
Corporate related	1.6		1.2
Purchase of property and equipment	$	11.9	$	8.9

~~Our~~In ~~financing~~addition ~~activities~~to the ~~provided~~capital ~~cash~~expenditures ofnoted above, we incurred $110.84 million for assets under deemed landlord finance liability during the first ~~two~~ three quarters of fiscal 2005, ~~consisting~~compared ~~principally~~to of $3.2.7 million ofin ~~proceeds from~~the ~~deemed~~same ~~landlord~~quarters ~~financing~~of ~~transactions~~fiscal ~~associated~~2004. We ~~with~~opened ~~our~~ten new ~~restaurant~~restaurants in the first ~~construction,~~three ~~partially~~quarters ~~offset~~of byfiscal ~~the~~2005 ~~repayment~~and ofthree ~~all~~restaurants ~~$1.4~~in ~~million~~the same quarters of ~~outstanding~~fiscal ~~borrowings~~2004. Also, we had an additional nineteen locations under ~~our~~construction at ~~revolving~~the ~~line~~end of ~~credit~~the atthird ~~October 28, 2004~~quarter of fiscal 2005.

During the first two quarters of fiscal 2004, we used cash in financing activities of $7.3 million, consisting primarily of repayments of $9.8 million to reduce the amount of borrowings under our credit facility, debt issuance costs of $5.4 million, the payment of our term loans in the amount of $132.5 million partially offset by proceeds from the issuance of debt of $140.0 million.34

~~Cash management~~Financing activities

WeOur ~~have historically~~financing ~~funded~~activities ~~the~~provided ~~majority~~cash of ~~our capital expenditures with cash provided by operating activities~~$8.1 Wemillion ~~have~~during ~~on occasion obtained, and may in~~ the ~~future~~first ~~obtain,~~three ~~capitalized~~quarters ~~lease financing for certain expenditures related to equipment. Our investment requirements for new restaurant development include requirements for acquisition~~ of ~~land~~fiscal 2005, ~~building~~consisting ~~and~~principally ~~equipment. Historically we have either acquired all~~ of ~~these~~ ~~assets for cash, or purchased building and equipment assets for cash and acquired a leasehold interest in land~~$9.2 Wemillion ~~have entered into sale-leaseback arrangements for many~~ of ~~the land and building assets that we have purchased in~~ ~~the~~proceeds ~~past,~~from ~~many~~deemed oflandlord ~~which have been accounted for as~~ financing transactions~~. Since~~ ~~the~~associated ~~initial~~with ~~net~~our ~~cash investment required for leased units is~~new ~~significantly~~restaurant ~~lower than for owned properties~~construction, wepartially ~~intend~~offset toby ~~focus on leasing sites for future growth so that we only have to fund~~ the ~~equipment~~repayment ~~portion~~ of ~~our~~ ~~new~~all ~~restaurant capital costs from our cash flows~~$1.4 ~~We believe that this will~~million ~~reduce~~of ~~our~~outstanding ~~upfront~~borrowings ~~cash~~under ~~requirements associated with new restaurant growth and enable us to increase~~ our ~~return~~revolving online ~~these~~of ~~investments,~~credit ~~although~~at ~~it will result~~October 28, ~~in significant long term obligations under either operating or capital leases~~2004.

~~Item~~During 3the first three quarters of fiscal 2004, we used cash in financing activities of $7.1 ~~Quantitative~~million, ~~and~~consisting ~~Qualitative~~primarily ~~Disclosures~~of ~~About~~repayments ~~Market~~of ~~Risk~~$9.8 million to reduce the amount of borrowings under our credit facility, debt issuance costs of $5.9 million, the payment of our term loans in the amount of $132.5 million partially offset by proceeds from the issuance of debt of $140.0 million.

~~We are exposed to market risk primarily from changes in interest rates~~Cash ~~and changes in food commodity prices.~~management

We ~~are~~have historically ~~subject~~funded the majority of our capital expenditures with cash provided toby ~~changes~~operating inactivities. ~~interest~~We ~~rates~~have on ~~borrowings~~occasion ~~under~~obtained, ~~our~~and ~~senior~~may ~~secured~~in ~~credit~~the future ~~facility~~obtain, ~~that~~capitalized ~~bear~~lease ~~interest~~financing atfor ~~floating~~certain ~~rates~~expenditures related to equipment. Our investment requirements for new restaurant development include requirements Asfor acquisition of ~~April 21~~land, ~~2005,~~building ~~$15~~and equipment.0 Historically ~~million~~we have either acquired all of these assets for cash, or ~~10.7%~~purchased ofbuilding ~~our~~and ~~total~~equipment ~~debt~~assets for cash and ~~capitalized~~acquired ~~lease~~a ~~obligations~~leasehold ofinterest ~~$140~~in land.6 ~~million,~~We have entered into sale-leaseback ~~bears~~arrangements ~~interest~~for atmany aof ~~floating~~the ~~rate. A hypothetical~~land ~~one~~and ~~hundred~~building ~~basis~~assets ~~point~~that ~~increase~~we have purchased in the ~~interest~~past, ~~rates~~many of which have been accounted for ~~our~~as financing transactions. ~~variable~~Since ~~rate~~the ~~borrowings~~initial asnet ofcash ~~April 21,~~investment ~~2005,~~required ~~would~~for ~~increase~~leased ~~our~~units ~~future~~is ~~interest~~significantly ~~expense~~lower bythan ~~approximately~~for ~~$0.2~~owned ~~million~~properties, ~~per~~we ~~year. This~~intend ~~sensitivity~~to ~~analysis~~focus ~~does~~on ~~not~~leasing sites ~~factor~~for ~~in potential~~future ~~changes~~growth inso that we only have to fund the ~~level~~equipment portion of our new restaurant capital costs from our ~~variable~~cash ~~interest~~flows. ~~rate~~We ~~borrowings,~~believe orthat ~~any~~this will ~~actions~~reduce ~~that~~our weupfront ~~might~~cash ~~take~~requirements associated with new restaurant growth and enable us to ~~mitigate~~increase our ~~exposure~~return toon ~~changes~~these ininvestments, ~~interest~~although it will result ~~rates~~in significant long term obligations under either operating or capital leases.

36Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Many~~We ~~of the ingredients purchased for use in the products sold to our guests~~ are ~~subject~~exposed to ~~unpredictable~~market ~~price volatility outside of our control. We try to manage this~~ risk ~~by entering~~primarily ~~into selective short-term agreements for the products we use most extensively. Also, we believe that our commodity cost risk is diversified as many of our food ingredients are available~~ from ~~several~~changes ~~sources and we have the ability to modify recipes or vary our menu items offered. Historically, we have also been able to increase certain menu prices~~ in ~~response~~ tointerest ~~food commodity price increases~~ rates and ~~believe~~changes ~~the opportunity may exist~~ in ~~the future. To compensate for a hypothetical price increase of 10% for~~ food ~~ingredients, we would need to increase prices charged to our guests by an average of approximately 2.7%. We have not historically used financial instruments to hedge our~~ commodity ~~ingredient~~ prices.

~~Item~~We 4are subject to changes in interest rates on borrowings under our senior secured credit facility that bear interest at floating rates. As ~~Controls~~of July 14, 2005, $15.0 million, or 10.7% of our total debt and capitalized ~~Procedures~~lease obligations of $140.6 million, bears interest at a floating rate. A hypothetical one hundred basis point increase in interest rates for our variable rate borrowings as of July 14, 2005, would increase our future interest expense by approximately $0.2 million per year. This sensitivity analysis does not factor in potential changes in the level of our variable interest rate borrowings, or any actions that we might take to mitigate our exposure to changes in interest rates.

~~Evaluation of Disclosure Controls and Procedures~~35

~~Within~~Many of the ~~90-day~~ingredients ~~period~~purchased ~~prior~~for touse in the ~~filing~~products ~~date~~sold ofto ~~this report,~~ our ~~management,~~guests ~~under~~are ~~the~~subject ~~supervision~~to unpredictable price volatility outside of our control. We ~~Chief~~try ~~Executive~~to ~~Officer~~manage ~~and~~this ~~Chief~~risk by ~~Financial~~entering ~~Officer,~~into ~~carried~~selective ~~out~~short-term anagreements ~~evaluation~~for of the ~~effectiveness~~products ofwe ~~the~~use ~~design~~most ~~and~~extensively. Also, ~~operation~~we ofbelieve that our commodity ~~disclosure~~cost ~~controls~~risk ~~and~~is ~~procedures~~diversified ~~pursuant~~as tomany ~~Rules 13a-14 and~~of ~~15d-14~~our ~~under~~food ~~the~~ingredients ~~Securities~~are available ~~Exchange~~from ~~Act~~several ofsources ~~1934~~and (we have the ~~“Exchange~~ability ~~Act”),~~to asmodify recipes or ~~amended. Based~~vary ~~upon~~our ~~their~~menu ~~evaluation,~~items offered. ~~our~~Historically, ~~Chief~~we ~~Executive~~have ~~Officer~~also ~~and~~been ~~Chief~~able ~~Financial~~to ~~Officer~~increase ~~concluded~~certain ~~that~~menu ~~our~~prices in ~~disclosure~~response ~~controls~~to food commodity price increases and ~~procedures~~believe ~~were~~the ~~not~~opportunity ~~effective~~may exist in ~~alerting~~the ~~them~~future. To ~~timely~~compensate for a tohypothetical ~~material~~price ~~information~~increase ~~required~~of 10% for food ingredients, we would need to increase beprices ~~included~~charged into our ~~Exchange~~guests ~~Act~~by ~~filings~~an ~~due~~average of approximately 2.6%. We have not historically used financial ~~primarily~~instruments to ~~the~~hedge ~~lease~~our ~~restatement~~commodity ~~issue~~ingredient ~~noted below~~prices.

OnItem March 21, 2005, we announced that our financial statements were likely to be restated, relating to certain lease accounting and leasehold improvement depreciation accounting practices, consistent with similar adjustments made by many other retailers and other publicly traded companies concerning these practices4. ~~This restatement~~ isControls ~~described elsewhere in this Form 10-Q~~ and in the Form 10-K/A we filed with the Securities and Exchange Commission (“SEC”) on May 18, 2005. Our conclusion to change our accounting policies and restate was made, among other things, in consideration of the views of the Office of the Chief Accountant of the SEC expressed in its letter related to these matters dated February 7, 2005. Accordingly, we concluded that our controls over the selection of appropriate assumptions and factors affecting lease accounting practices and the calculation of deferred taxes in relation to business combinations were not effective, which we believe represents a material weakness in internal control over financial reporting. There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation, except as described in the following paragraph.Procedures

~~We have enhanced our internal controls to require an evaluation of the~~Evaluation ~~applicable lease provisions that could affect, in the context~~ of ~~current interpretive~~Disclosure ~~guidance~~Controls ~~pertaining to the application of GAAP for lease accounting, the classification~~ and ~~accounting for such transactions.~~Procedures

37Within the 90-day period prior to the filing date of this report, our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them timely to material information required to be included in our Exchange Act filings due primarily to the lease restatement issue noted below.

~~Limitations~~On March 21, 2005, we announced that our financial statements were likely to be restated, relating to certain lease accounting and leasehold improvement depreciation accounting practices, consistent with similar adjustments made by many other retailers and other publicly traded companies concerning these practices. This restatement is described elsewhere in this Form 10-Q and in the Form 10-K/A we filed with the Securities and Exchange Commission (“SEC”) on May 18, 2005. Our conclusion to change our accounting policies and restate was made, among other things, in consideration of the views ~~Effectiveness~~of the Office of ~~Controls~~the Chief Accountant of the SEC expressed in its letter related to these matters dated February 7, 2005. Accordingly, we concluded that our controls over the selection of appropriate assumptions and factors affecting lease accounting practices and the calculation of deferred taxes in relation to business combinations were not effective, which we believe represented a material weakness in internal control over financial reporting.

AAs ~~control system, no matter how well designed and operated, can provide~~of ~~only~~July ~~reasonable~~14, ~~not absolute~~2005, ~~assurance~~we ~~that~~have ~~the~~remediated ~~control system’s objectives will be met. Further,~~ the ~~design of a~~material ~~control~~weaknesses ~~system~~related ~~must~~to ~~reflect~~both ~~the~~our ~~fact~~lease ~~that~~accounting ~~there~~practices ~~are~~and ~~resource~~our ~~constraints, and~~accounting ~~the~~for ~~benefits~~deferred oftaxes ~~controls~~related ~~must be considered relative~~ to ~~their~~business ~~costs~~combinations. ~~Because~~We ofhave ~~the~~updated ~~inherent~~our ~~limitations~~internal incontrols ~~all control~~to ~~systems,~~require noan evaluation of ~~controls~~the applicable ~~can~~lease ~~provide~~provisions ~~absolute assurance~~ that ~~all~~ ~~control~~could ~~issues~~affect, ~~and~~in ~~instances~~the context of ~~fraud,~~current interpretive ifguidance ~~any,~~pertaining ~~with~~to the ~~company~~application ~~have~~of ~~been~~GAAP ~~detected. These~~for ~~inherent~~lease ~~limitations include~~accounting, the ~~realities~~classification ~~that~~and ~~judgments~~accounting infor ~~decision-making~~such ~~can be faulty, that~~transactions. We ~~breakdowns~~have ~~can~~also ~~occur~~adopted ~~because~~a ofpolicy ~~simple~~to ~~errors~~engage orappropriate ~~mistakes,~~third ~~and~~party ~~that~~consulting ~~controls~~support ~~can~~in bethe ~~circumvented~~event bythat ~~the~~we ~~acts~~enter ofinto ~~individuals~~different ortypes ~~groups. Because~~ of ~~the~~lease ~~inherent~~transactions ~~limitations in a~~or ~~cost-effective~~business ~~control~~combinations ~~system,~~with ~~misstatements~~material ~~due~~tax ~~to error or fraud may occur and not be detected~~effects.

~~PART II – OTHER INFORMATION~~36

~~Item~~Limitations ~~1. Legal~~on ~~Proceedings~~the Effectiveness of Controls

~~From~~A ~~time-to-time~~control system, weno ~~have~~matter ~~been~~how ~~involved~~well indesigned ~~various~~and ~~lawsuits~~operated, ~~and~~can ~~claims~~provide ~~arising~~only ~~from~~reasonable, not absolute, assurance that the ~~conduct~~control ofsystem’s ~~our~~objectives will ~~business~~be met. Further, ~~Such~~the ~~lawsuits~~design ~~typically~~of ~~involve~~a ~~claims~~control ~~from~~system ~~customers~~must reflect the fact that there are resource constraints, and the ~~others~~benefits ~~related~~of controls must be considered relative to ~~operational~~their ~~issues~~costs. Because ~~and~~of ~~complaints~~the inherent limitations in all ~~and~~control ~~allegations~~systems, ~~from~~no ~~former~~evaluation ~~and~~of ~~current~~controls ~~employees.~~can ~~These~~provide ~~matters~~absolute ~~are~~assurance ~~believed~~that toall becontrol ~~common~~issues ~~for~~and ~~restaurant~~instances ~~businesses.~~ of fraud, if any, with the company have been Wedetected. These ~~believe~~inherent limitations include the ~~ultimate~~realities ~~disposition~~that judgments in decision-making can be faulty, that breakdowns can occur because of ~~these~~simple ~~matters~~errors ~~will~~or ~~not~~mistakes, ~~have~~and athat controls ~~material~~can ~~adverse~~be ~~effect~~circumvented onby ~~our~~the ~~consolidated~~acts ~~financial~~of ~~position~~individuals or ~~results~~groups. Because of the inherent limitations in a ~~operations~~cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~We were a defendant in two purported class action claims in California. The first class action claim was brought in October~~PART ~~2003~~II by– ~~two~~OTHER former employees and one current employee, and the second class action claim was brought in May 2004 by two former employees. The complaints alleged that we violated California law with regard to rest and meal periods, bonus payment calculations (in the October 2003 complaint), overtime payments (in the May 2004 complaint) and California law regarding unfair business practices. The classes and subclasses alleged in the actions have not been certified by the respective courts at the current stages of the litigation, but generally are claimed in the 2003 complaint to include persons who have been employed by us in California since October 17, 1999 in the positions of food server, restaurant general manager and assistant restaurant manager, and generally are claimed in the 2004 complaint to include persons who have been employed by us in California since May 21, 2000 in the positions of restaurant general manager and restaurant associate manager. No dollar amount in damages was requested in either complaint, and the complaints sought statutory damages, compensatory damages, interest and attorneys’ fees in unspecified amounts.INFORMATION

~~The~~Item ~~parties have entered into a settlement agreement, which is subject to the final approval of the court~~1. ~~Under~~Legal ~~the terms of the proposed settlements, we have agreed to pay up to an aggregate of $6.55 million for the alleged claims and associated legal fees, subject to partial indemnification as noted below.~~Proceedings

38From time-to-time, we have been involved in various lawsuits and claims arising from the conduct of our business. Such lawsuits typically involve claims from customers and others related to operational issues and complaints and allegations from former and current employees. These matters are believed to be common for restaurant businesses. We believe the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position or results of operations.

We ~~filed~~were a ~~lawsuit~~defendant onin ~~December 3,~~two ~~2004~~purported ~~against~~class ~~the~~action ~~former shareholders~~claims ofin ~~Midway~~California. The ~~(the~~first ~~former~~class ~~parent~~action ofclaim ~~VICORP)~~was brought in ~~the~~October 2003 ~~Circuit~~by ~~Court~~two offormer ~~Cook~~employees ~~County,~~and ~~Illinois~~one ~~seeking~~current ~~indemnification~~employee, ~~for~~and ~~all~~the ofsecond ~~the~~class ~~damages~~action ~~related~~claim towas ~~such~~brought ~~litigation~~in ~~under~~May 2004 ~~the~~by ~~purchase~~two ~~agreement~~former ~~dated~~employees. ~~June 14,~~The ~~2003~~complaints ~~pursuant~~alleged that we violated California law with regard to ~~which~~rest ~~VICORP~~and ~~was~~meal ~~acquired~~periods, inbonus ~~addition~~payment calculations to(in the ~~assertion~~October 2003 ofcomplaint), ~~other~~overtime payments (in the May 2004 ~~claims~~complaint) and California law regarding unfair business practices. The ~~former~~classes and ~~shareholders~~subclasses ofalleged in the actions have not been certified by the respective ~~Midway~~courts ~~filed~~at athe ~~lawsuit~~current onstages ~~December 22~~of the litigation, ~~2004~~but generally are claimed in the ~~Suffolk~~2003 ~~County~~complaint ~~Superior~~to include persons who have been employed by us in ~~Court~~California since October 17, 1999 in ~~Massachusetts. The~~the ~~former shareholders~~positions of ~~Midway~~food ~~claim~~server, restaurant ~~among~~general ~~other~~manager ~~allegations~~and assistant restaurant manager, ~~that~~and wegenerally ~~improperly~~are ~~sought~~claimed ~~indemnification~~in ~~and~~the ~~are~~2004 ~~denying~~complaint ~~liability~~to ~~for~~include ~~the~~persons ~~portion~~who ofhave ~~the~~been ~~damages~~employed by us in ~~the~~California ~~previously~~since ~~mentioned~~May 21, ~~class~~2000 ~~action~~in ~~lawsuits~~the ~~that~~positions ~~arose~~of ~~following~~restaurant ~~the~~general ~~closing~~manager ofand ~~the~~restaurant ~~June 2003~~associate ~~acquisition,~~manager. ~~and~~No ~~for~~dollar ~~certain~~amount ~~settlements~~in ~~for~~damages was ~~which~~requested ~~they~~in ~~claim~~either ~~they~~complaint, ~~did~~and ~~not~~the ~~receive~~complaints ~~appropriate~~sought ~~notice~~statutory ordamages, compensatory ~~approval~~damages, ~~rights~~interest and attorneys’ fees in unspecified amounts.

~~While~~The weparties ~~believe~~entered ~~that~~into ~~our~~a ~~claims~~settlement ~~against the former shareholders of Midway Investors Holdings Inc. are meritorious and that we will prevail~~agreement, inwhich ~~the event~~was weapproved ~~do not fully prevail~~ on ~~our indemnification claims~~June 1, ~~we estimate that~~ ~~our maximum exposure under the settlement agreements is $3~~2005.2 ~~million. Therefore,~~Under ~~during~~ the ~~fourth~~terms ~~quarter~~ of ~~fiscal~~the ~~2004~~settlements, we ~~established~~agreed ato ~~reserve of~~pay ~~$3.2~~up ~~million~~to inan ~~connection with the proposed settlement of these class~~aggregate ~~action lawsuits. A receivable~~ of $36.4 55 million ~~was~~for ~~reflected~~the atalleged ~~both~~claims ~~April 21,~~and ~~2005~~associated ~~and~~legal ~~October 28~~fees, ~~2004~~subject ~~for~~to ~~the~~partial ~~difference~~indemnification ~~between~~as ~~the~~noted ~~aggregate amount of the settlement and our estimated exposure~~below.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~37

~~Not~~We ~~applicable~~filed a lawsuit on December 3, 2004 against the former shareholders of Midway (the former parent of VICORP) in the Circuit Court of Cook County, Illinois seeking indemnification for all of the damages related to such litigation under the purchase agreement dated June 14, 2003 pursuant to which VICORP was acquired, in addition to the assertion of other claims. The former shareholders of Midway filed a lawsuit on December 22, 2004 in Suffolk County Superior Court in Massachusetts. The former shareholders of Midway claim, among other allegations, that we improperly sought indemnification and are denying liability for the portion of the damages in the previously mentioned class action lawsuits that arose following the closing of the June 2003 acquisition, and for certain settlements for which they claim they did not receive appropriate notice or approval rights.

~~Item~~The former shareholders of Midway Investors Holdings Inc. have acknowledged they are liable to the Company for the pre-closing portion of class action settlement agreements. Currently, the Company and the former shareholders are in discussions regarding the final settlement amount. During the fourth quarter of fiscal 2004, the Company established a receivable of $3. 4 million on the Company’s consolidated balance ~~Defaults~~sheet ~~Upon~~for ~~Senior~~the ~~Securities~~former shareholders’ estimated portion of the settlement.

~~Not~~In ~~applicable~~the third quarter of 2005, the $6.55 million reserve mentioned above was reduced to $5.3 million, as the information regarding the ultimate costs was finalized by the trustee. The associated receivable was reduced by $0.8 million, in conjunction with the reduction to the estimated reserve for the settlement agreements.

Item 42. ~~Submission~~ Unregistered Sales of ~~Matters~~Equity toSecurities aand ~~Vote~~Use of ~~Security Holders~~Proceeds

Not applicable.

Item 53. ~~Other~~ ~~Information~~Defaults Upon Senior Securities

Not applicable.

39Item 4. Submission of Matters to a Vote of Security Holders

~~Item 6~~Not applicable. ~~Exhibits~~

~~(a) Exhibits~~Item 5. Other Information

~~31.1 Certification by~~Not our Chief Executive Officer with respect to our Form 10-Q for the quarterly period ended April 21, 2005, pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002applicable.

31.2 Certification by our Chief Financial Officer with respect to our Form 10-Q for the quarterly period ended April 21, 2005, pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.38

~~32.1 Certifications by~~Item ~~our Chief Executive Officer and Chief Financial Officer with respect to our Form 10-Q for the quarterly period ended April 21, 2005, pursuant to 18 U~~6.~~S.C.~~ ~~Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Exhibits

(ba) ~~Reports on Form 8-K~~ Exhibits

~~During~~31.1 Certification by ~~the~~our ~~second~~Chief ~~quarter~~Executive ofOfficer ~~fiscal~~with ~~2005~~respect ~~ended~~to ~~April~~our 21Form 10-Q for the quarterly period ended July 14, 2005, wepursuant ~~filed~~to Rule 13a-14 or 15d-14 of the ~~following~~Securities ~~reports~~Exchange onAct ~~Form~~of 81934, as adopted pursuant to Section 302 of the Sarbanes-K:Oxley Act of 2002.

~~Current~~31.2 Certification by ~~report~~our onChief ~~Form~~Financial 8Officer with respect to our Form 10-KQ onfor ~~March~~the quarterly 21period ended July 14, 2005, ~~announcing~~pursuant ato ~~delay~~Rule 13a-14 inor 15d-14 of the ~~filing~~Securities Exchange Act of ~~our~~1934, ~~Form~~as ~~10-Q~~adopted ~~for~~pursuant ~~our~~to ~~first~~Section 302 of ~~quarter~~the ~~ended~~Sarbanes-Oxley ~~January~~Act ~~27,~~of ~~2005~~2002.

~~Current~~32.1 Certifications by ~~report~~our onChief ~~Form~~Executive ~~8-K~~Officer onand ~~April~~Chief ~~11,~~Financial ~~2005,~~Officer ~~announcing~~with ~~financial~~respect ~~results~~to our Form 10-Q for ~~our~~the ~~first~~quarterly ~~quarter~~period ended ~~January 27~~July 14, 2005, ~~and~~pursuant ~~adjustments~~ to ~~prior~~18 ~~period~~U.S.C. ~~financial~~Section 1350, ~~results~~as ~~for~~adopted ~~lease~~pursuant ~~accounting~~to ~~errors,~~Section 906 of ~~including~~the ~~non~~Sarbanes-~~reliance~~Oxley onAct ~~previously~~of ~~issued financial statements~~2002.

40(b) Reports on Form 8-K

~~SIGNATURES~~During the third quarter of fiscal 2005 ended July 14, 2005, we filed the following reports on Form 8-K:

~~Pursuant~~Current toreport ~~the~~on ~~requirements~~Form 8-K ofon ~~the Securities~~May 25, ~~Exchange Act of 1934~~2005, ~~the registrant has duly caused this report to~~announcing befinancial ~~signed~~results onfor ~~its~~our ~~behalf~~second byquarter ~~the~~ended ~~undersigned~~April 21, ~~thereunto duly authorized~~2005.

	VICORP Restaurants, Inc.
Date: May 27, 2005
	/s/ Debra Koenig
	Debra Koenig
	Chief Executive Officer
	(Principal Executive Officer)
Date: May 27, 2005
	/s/ Anthony Carroll
	Anthony Carroll
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Current report on Form 8-K on June 1, 2005, announcing the settlement of the class action lawsuit.

41Current report on Form 8-K on June 8, 2005, announcing change in registrant’s certifying accountant.

SIGNATURES

Pursuant to the requirements 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.

	VICORP Restaurants, Inc.


Date: August 29, 2005


	/s/ Debra Koenig
	Debra Koenig
	Chief Executive Officer
	(Principal Executive Officer)


Date: August 29, 2005


	/s/ Anthony Carroll
	Anthony Carroll
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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