UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2007
		OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

~~Commission File~~For ~~No.~~the ~~0-23911~~quarterly period ended June 30, 2009

~~Fog Cutter Capital Group Inc.~~OR

~~(Exact~~o ~~name~~TRANSITION ~~of registrant~~REPORT asPURSUANT ~~specified~~TO inSECTION ~~its~~13 ~~charter~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Maryland		52-2081138
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Commission File No. 0-23911

~~1410~~Fog SWCutter ~~Jefferson~~Capital ~~Street~~Group Inc.

~~Portland,~~(Exact ~~OR 97201~~name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Maryland		52-2081138
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~(503)~~301 ~~721-6500~~Arizona Avenue, Suite 200

~~(Registrant’s~~Santa ~~telephone number~~Monica, ~~including~~CA ~~area code)~~90401

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (~~Check one~~310): 319-1850

~~Large~~ (Registrant’s ~~accelerated~~telephone ~~filer~~number, ~~o Accelerated~~including ~~filer~~area ~~o Non-accelerated filer x~~code)

Indicate by check mark whether the registrant: is(1) ahas ~~shell~~filed ~~company~~all ~~(as~~reports ~~defined~~required into ~~Rule~~be ~~12b-2~~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. ~~Yeso Nox~~

~~APPLICABLE ONLY~~ Yes TOo No ~~CORPORATE ISSUERS:~~þ

Indicate by check mark whether the ~~number~~registrant ofhas ~~shares~~submitted ~~outstanding~~electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of ~~each~~Regulation S-T (§232.405 of this chapter) during the ~~issuer’s~~preceding ~~classes~~12 ofmonths ~~common~~(or ~~stock,~~for assuch ofshorter period that the ~~latest~~registrant ~~practicable~~was ~~date~~required to submit and post such files).

Class		Outstanding at April 30, 2007
Common Stock, par value $0.0001 per share		7,957,428 shares

Yes o No o

~~FOG CUTTER~~Indicate ~~CAPITAL~~by ~~GROUP~~check ~~INC~~mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

~~FORM~~Large ~~10-Q~~accelerated filer o Accelerated filer o

~~INDEX~~Non-accelerated filer o (do not check if a smaller reporting company) Smaller reporting company þ

PART I–FINANCIAL INFORMATION
Item 1.		Interim Consolidated Financial Statements (Unaudited):
		Consolidated Statements of Financial Condition
		Consolidated Statements of Operations
		Consolidated Statement of Stockholders’ Equity
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures about Market Risk
Item 4.		Controls and Procedures
PART II–OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.		Defaults Upon Senior Securities
Item 4.		Submission of Matters to a Vote of Security Holders
Item 5.		Other Information
Item 6.		Exhibits
Signatures

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

~~Available~~APPLICABLE ~~information~~ONLY TO CORPORATE ISSUERS:

~~Our~~Indicate ~~website~~the isnumber ~~www.fogcutter.com. We~~of ~~make~~shares ~~our~~outstanding ~~annual~~of ~~report~~each onof ~~Form 10-K, as well as other reports filed with~~ the ~~Securities~~issuer’s ~~and~~classes ~~Exchange~~of ~~Commission~~common stock, ~~available~~ ~~through our website~~ as ~~soon~~of asthe ~~reasonably~~latest practicable ~~after they are filed~~date. ~~A copy of these reports may also be obtained by writing to us at 1410 SW Jefferson Street, Portland, Oregon, 97201, Attn: Investor Reporting.~~

	Class			Outstanding at March 15, 2010
Common Stock, par value $0.0001 per share			7,954,928 shares

~~PART I~~FOG –CUTTER ~~FINANCIAL~~CAPITAL ~~INFORMATION~~GROUP INC.

~~ITEM~~FORM ~~1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~10-Q

~~FOG~~I ~~CUTTER~~N ~~CAPITAL~~D ~~GROUP INC.~~E X

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


		Page No.
PART I—FINANCIAL INFORMATION

Item 1.	Interim Consolidated Financial Statements (Unaudited):

	Consolidated Statements of Financial Condition	3

	Consolidated Statements of Operations	4

	Consolidated Statement of Stockholders’ Equity (Deficit)	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4T.	Controls and Procedures	22

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 3.	Defaults Upon Senior Securities	23

Item 6.	Exhibits	24

Signatures		25

~~(dollars in~~Available ~~thousands, except share data)~~information

	March 31, 2007 (unaudited)			December 31, 2006
Assets
Current Assets:
Cash and cash equivalents	$	1,619		$	1,824
Accounts receivable	1,554			1,586
Notes receivable, current portion	464			464
Loans to senior executives	1,094			1,077
Inventories	2,687			2,442
Investments in real estate, held for sale, net	11,250			11,062
Current assets held for sale	—			27
Other current assets	1,205			1,243
Total current assets	19,873			19,725
Investments in real estate, net	11,460			11,502
Notes receivable	365			371
Property, plant and equipment, net	10,297			10,576
Intangible assets, net	5,193			5,262
Goodwill	10,526			10,526
Other assets held for sale	—			385
Other assets	1,359			1,453
Total assets	$	59,073		$	59,800
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued liabilities	$	13,457		$	11,762
Current liabilities associated with assets held for sale	—			441
Borrowings and notes payable, current portion	14,410			13,453
Obligations under capital leases, current portion	578			608
Total current liabilities	28,445			26,264
Borrowings and notes payable	2,435			2,400
Obligations under capital leases	11,832			11,883
Deferred income	4,536			4,061
Deferred income taxes	4,390			4,397
Total liabilities	51,638			49,005
Commitments and contingencies
Minority interests in consolidated subsidiaries	436			441
Minority interests in consolidated subsidiaries held for sale	—			130
Stockholders’ Equity:
Preferred stock, $.0001 par value; 25,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $.0001 par value; 200,000,000 shares authorized; 11,757,073 shares issued as of March 31, 2007 and December 31, 2006; 7,957,428 shares outstanding as of March 31, 2007 and December 31, 2006	169,391			168,965
Accumulated deficit	(150,383		)	(146,732		)
Treasury stock, 3,799,645 common shares as of March 31, 2007 and December 31, 2006, at cost	(12,009		)	(12,009		)
Total stockholders’ equity	6,999			10,224
Total liabilities and stockholders’ equity	$	59,073		$	59,800

Our website is www.fogcutter.com. We make our annual report on Form 10-K, as well as other reports filed with the Securities and Exchange Commission, available through our website as soon as reasonably practicable after they are filed. A copy of these reports may also be obtained by writing to us at 301 Arizona Avenue, Suite 200, Santa Monica, CA 90401, Attn: Investor Reporting.

~~The accompanying notes are an integral part of these consolidated financial statements.~~2

3Index

~~FOG CUTTER~~PART ~~CAPITAL~~I ~~GROUP~~— ~~INC. CONSOLIDATED~~FINANCIAL ~~STATEMENTS OF OPERATIONS~~INFORMATION

~~(Unaudited) (dollars~~ITEM in1. INTERIM ~~thousands,~~CONSOLIDATED ~~except~~FINANCIAL ~~share~~STATEMENTS ~~data~~(Unaudited)

	Quarter Ended
	March 31,
	2007			2006
Revenue:
Restaurant and manufacturing sales	$	9,919		$	9,595
Restaurant franchise and royalty fees	539			637
Real estate rental income	935			1,067
Total revenue	11,393			11,299
Operating costs and expenses:
Restaurant and manufacturing cost of sales	5,786			5,330
Real estate operating expense	387			441
Engineering and development	386			410
Depreciation and amortization	583			428
Total operating costs and expenses	7,142			6,609
General and administrative expenses:
Compensation and employee benefits	4,847			2,585
Professional fees	674			442
Fees paid to related parties	—			160
Other	4,205			3,323
Total general and administrative expenses	9,726			6,510
Non-operating income (expense):
Gain on sale of real estate	—			505
Gain on sale of notes receivable	—			496
Interest income	43			79
Interest expense	(859		)	(500		)
Other income, net	91			233
Total non-operating income (expense)	(725		)	813
Loss before provision for income taxes, minority interests, and equity in income of equity investees	(6,200		)	(1,007		)
Minority interest in earnings	35			13
Equity in loss of equity investees	—			(76		)
Loss from continuing operations	(6,165		)	(1,070		)
Income from discontinued operations (including gain on sale of $2,492)	2,514			82
Net loss	$	(3,651	)	$	(988	)
Basic loss per share from continuing operations	$	(0.77	)	$	(0.13	)
Basic earnings per share from discontinued operations	$	0.31		$	0.01
Basic loss per share	$	(0.46	)	$	(0.12	)
Basic weighted average shares outstanding	7,957,428			7,957,428
Diluted loss per share from continuing operations	$	(0.77	)	$	(0.13	)
Diluted earnings per share from discontinued operations	$	0.31		$	0.01
Diluted loss per share	$	(0.46	)	$	(0.12	)
Diluted weighted average shares outstanding	7,957,428			7,957,428
Dividends declared per share	$	—		$	0.13

FOG CUTTER CAPITAL GROUP INC.

~~The~~CONSOLIDATED ~~accompanying~~STATEMENTS ~~notes are~~OF anFINANCIAL ~~integral part of these consolidated financial statements.~~CONDITION

4 (dollars in thousands, except share data)

FOG CUTTER CAPITAL GROUP INC.


	June 30, 2009 (unaudited)			December 31, 2008
Assets
Current Assets:
Cash and cash equivalents	$	206		$	390
Accounts receivable		1,759			2,712
Notes receivable, current portion		37			18
Inventories		1,996			2,964
Other current assets		144			294
Total current assets		4,142			6,378

Notes receivable		-			34
Property, plant and equipment, net		3,131			8,253
Intangible assets, net		2,629			4,068
Goodwill		8,028			8,028
Investment in Debtor in Possession Subsidiaries		3,969			-
Other assets		385			812
Total assets	$	22,284		$	27,573

Liabilities and Stockholders’ Equity (Deficit)
Liabilities:
Accounts payable and accrued liabilities	$	14,027		$	17,486
Borrowings and notes payable, current portion		15,876			14,330
Obligations under capital leases, current portion		1,710			1,927
Total current liabilities		31,613			33,743

Deferred income		3,393			2,572
Total liabilities		35,006			36,315

Commitments and contingencies
Minority interests in consolidated subsidiaries		177			365

Stockholders’ Equity (Deficit):
Preferred stock, $.0001 par value; 25,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $.0001 par value; 200,000,000 shares authorized; 11,757,073 shares issued as of June 30, 2009 and December 31, 2008; 7,954,928 shares outstanding as of June 30, 2009 and December 31, 2008		172,367			172,102
Accumulated deficit		(173,255	)		(169,198	)
Treasury stock, 3,802,145 common shares as of June 30, 2009 and December 31, 2008, at cost		(12,011	)		(12,011	)
Total stockholders’ equity (deficit)		(12,899	)		(9,107	)
Total liabilities and stockholders’ equity (deficit)	$	22,284		$	27,573

~~CONSOLIDATED STATEMENT~~The OFaccompanying ~~STOCKHOLDERS’~~notes ~~EQUITY~~are an integral part of these consolidated financial statements.

~~(Unaudited)~~3

~~(dollars in thousands, except share data)~~Index

	Common Stock			Treasury Stock				Accumulated
	Shares (1)	Amount		Shares	Amount			Deficit			Total
Balance at January 1, 2007	7,957,428	$	168,965	3,799,645	$	(12,009	)	$	(146,732	)	$	10,224
Comprehensive income (loss):
Net loss	—	—		—	—			(3,651		)	(3,651		)
Stock options expensed in net loss	—	426		—	—			—			426
Balance at March 31, 2007	7,957,428	$	169,391	3,799,645	$	(12,009	)	$	(150,383	)	$	6,999

FOG CUTTER CAPITAL GROUP INC.

~~(1)Issued~~CONSOLIDATED ~~and~~STATEMENTS ~~outstanding~~OF OPERATIONS

~~The accompanying notes are an integral part of these consolidated financial statements.~~(Unaudited)

5(dollars in thousands, except share data)

FOG CUTTER CAPITAL GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Revenue:
Restaurant and manufacturing sales	$	3,380		$	11,015		$	12,178		$	21,181
Restaurant franchise and royalty fees		721			659			1,302			1,304
Total revenue		4,101			11,674			13,480			22,485

Operating costs and expenses:
Restaurant and manufacturing cost of sales		2,133			6,530			7,265			12,544
Engineering and development		241			299			535			580
Depreciation and amortization		140			509			567			1,006
Total operating costs and expenses		2,514			7,338			8,367			14,130

General and administrative expenses:
Compensation and employee benefits		1,163			2,493			2,967			6,547
Professional fees		537			851			825			1,710
Other		1,220			4,236			4,403			8,055
Total general and administrative expenses		2,920			7,580			8,195			16,312

Non-operating income (expense):
Interest income		4			34			16			71
Interest expense		(596	)		(419	)		(1,272	)		(859	)
Other income (expense), net		27			(468	)		110			(21	)
Total non-operating income (expense)		(565	)		(853	)		(1,146	)		(809	)

Loss before income taxes, minority interests, and equity in income of equity investees		(1,898	)		(4,097	)		(4,228	)		(8,766	)

Minority interest in earnings		112			120			187			204
Equity in income of equity investees		-			17			-			217
Income tax benefit (expense)		-			1			(3	)		52
Loss from continuing operations		(1,786	)		(3,959	)		(4,044	)		(8,293	)

Income (loss) from discontinued operations (including gain on sale of $4,217 in 2008)		-			(424	)		(13	)		3,473
Net loss	$	(1,786	)	$	(4,383	)	$	(4,057	)	$	(4,820	)

Basic loss per share from continuing operations	$	(0.22	)	$	(0.50	)	$	(0.51	)	$	(1.04	)
Basic earnings (loss) per share from discontinued operations	$	-		$	(0.05	)	$	-		$	0.44
Basic loss per share	$	(0.22	)	$	(0.55	)	$	(0.51	)	$	(0.60	)
Basic weighted average shares outstanding		7,954,928			7,954,928			7,954,928			7,954,928

Dividends declared per share	$	-		$	-		$	-		$	-

~~(Unaudited) (dollars~~The inaccompanying ~~thousands)~~notes are an integral part of these consolidated financial statements.

	Quarter Ended
	March 31,
	2007			2006
Cash flows from operating activities:
Net loss	$	(3,651	)	$	(988	)
Income from discontinued operations	(2,514		)	(82		)
Loss from continuing operations	(6,165		)	(1,070		)
Adjustments to reconcile net loss to net operating cash flows:
Equity in loss of equity investees	—			76
Depreciation and amortization	829			587
Gain on foreign currency	(115		)	(137		)
Gain on sale of notes receivable and other assets	—			(496		)
Gain on sale of real estate	—			(505		)
Share based compensation	426			57
Other	5			11
Change in:
Other assets	(162		)	(437		)
Deferred income	475			(20		)
Deferred income taxes	(7		)	(9		)
Accounts payable and accrued liabilities	2,440			(536		)
Net cash used in operating activities	(2,274		)	(2,479		)
Cash flows from investing activities:
Proceeds from sale of real estate	—			3,486
Proceeds from sale of notes receivable and other assets	—			664
Investment in real estate	(118		)	(905		)
Purchase of net assets of restaurant operations	—			(688		)
Investments in property, plant, and equipment	(1,336		)	(351		)
Other	(13		)	(9		)
Net cash provided by (used in) investing activities	(1,467		)	2,197
Cash flows from financing activities:
Proceeds from borrowings	1,064			367
Repayments on borrowings	(123		)	(275		)
Repayments under capital leases	(80		)	(137		)
Investments by minority interests, net	25			97
Dividend payments on common stock	—			(1,034		)
Net cash provided by (used in) financing activities	886			(982		)
Effect of exchange rate change on cash	—			8
Net change in cash and cash equivalents from continuing operations	(2,855		)	(1,256		)
Net change in cash and cash equivalents from discontinued operations:
Net cash used in operating activities	(22		)	(95		)
Net cash provided by investing activities	2,925			—
Net cash used in financing activities	(253		)	(245		)
Net change in cash and cash equivalents	(205		)	(1,596		)
Cash and cash equivalents at beginning of period	1,824			4,071
Cash and cash equivalents at end of period	$	1,619		$	2,475
Supplemental disclosures of cash flow information:
Cash paid for interest	$	789		$	512
Cash paid for income taxes	$	7		$	9

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

6FOG CUTTER CAPITAL GROUP INC.

~~NOTES TO~~ CONSOLIDATED ~~FINANCIAL~~STATEMENT ~~STATEMENTS~~OF STOCKHOLDERS’ EQUITY (~~Unaudited~~DEFICIT)

~~NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES~~(Unaudited)

~~The accompanying interim consolidated financial statements of Fog Cutter Capital Group Inc. and Subsidiaries~~ (~~“FCCG”~~dollars ~~or the “Company”) are unaudited and have been prepared~~ in ~~conformity~~ ~~with the requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934~~thousands, asexcept ~~amended~~share ~~(the “Exchange Act”~~data), particularly Rule 10-01 thereof, which governs the presentation of interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying interim consolidated financial statements should be read in conjunction with the Company’s Annual Report as of and for the year ended December 31, 2006 on Form 10-K (“2006 Form 10-K”), as previously filed with the SEC on April 2, 2007. Except as described below, there have been no changes to the Company’s significant accounting policies as described in Note 2 to the consolidated financial statements in its 2006 Form 10-K.

In the Company’s opinion, all adjustments, comprised of normal recurring accruals necessary for the fair presentation of the interim financial statements, have been included in the accompanying consolidated financial statements. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.


	Common Stock				Treasury Stock					Accumulated
	Shares (1)		Amount		Shares		Amount			Deficit			Total
Balance at January 1, 2009		7,954,928	$	172,102		3,802,145	$	(12,011	)	$	(169,198	)	$	(9,107	)
Comprehensive income (loss):
Net loss		-		-		-		-			(4,057	)		(4,057	)
Stock options expensed in net loss		-		265		-		-			-			265
Balance at June 30, 2009		7,954,928	$	172,367		3,802,145	$	(12,011	)	$	(173,255	)	$	(12,899	)

~~The~~(1) ~~preparation~~Issued ~~of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates~~ and ~~assumptions~~ that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s operations and activities are becoming more focused on restaurant and other more typical commercial businesses, and less focused on finance and real estate. As a result, certain reclassifications of the balances and modifications to the presentation of the financial statements have been made, including the reclassification of certain investments in real estate as held for sale. None of these changes in presentation affected previously reported results of operations.outstanding

AtThe ~~March~~accompanying ~~31,~~notes ~~2007, certain~~are ~~Company~~an ~~officers~~integral ~~and~~part ~~directors~~of ~~had,~~these ~~directly~~consolidated orfinancial ~~indirectly, majority voting control of the Company~~statements.

~~Accounting for income taxes~~5

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), clarifying the manner in which enterprises account for uncertainty in income taxes recognized in an enterprise’s financial statements. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company adopted FIN 48 on January 1, 2007 with no material effect to the Company’s consolidated financial statements.Index

~~NOTE~~FOG 2CUTTER ~~- RESTATEMENT~~CAPITAL OFGROUP ~~CONSOLIDATED FINANCIAL STATEMENTS~~INC.

InCONSOLIDATED ~~the~~STATEMENTS ~~Company’s~~OF ~~2006~~CASH Form 10-K, the Company restated its consolidated statement of financial condition as of December 31, 2005 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the fiscal years ended December 31, 2005 and 2004 as a result of a change in the method of accounting to correct an error in accounting for certain capital leases and the correction of certain timing errors in the recognition of sales. The restatement is more fully described in Note 3 – Restatement of Consolidated Financial Statements to the Consolidated Financial Statements and in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2006 Form 10-K. Financial information included in the reports on Form 10-K, Form 10-Q, and Form 8-K filed by the Company between April 1, 2004 and December 31, 2006, and the related opinions of its independent registered public accounting firm, and all earnings press releases and similar communications issued by the Company during that period, are superseded in their entirety by the 2006 Form 10-K.FLOWS

~~NOTE 3 - SIGNIFICANT TRANSACTIONS~~(Unaudited)

~~The~~(dollars ~~following~~in ~~significant events affected our operations for the three months ended March 31, 2007:~~thousands)

Restaurant openings

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Cash flows from operating activities:
Net loss	$	(1,786	)	$	(4,383	)	$	(4,057	)	$	(4,820	)
Loss (income) from discontinued operations		-			424			13			(3,473	)
Loss from continuing operations		(1,786	)		(3,959	)		(4,044	)		(8,293	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Equity in income of equity investees		-			(17	)		-			(217	)
Depreciation and amortization		202			622			727			1,228
Foreign currency (gain) loss		-			44			-			(536	)
Share based compensation		124			296			265			626
Market value impairment reserve		-			446			-			599
Other		357			(81	)		419			(129	)
Change in:
Other assets		691			(1,159	)		1,635			(1,308	)
Deferred income		166			35			821			20
Accounts payable and accrued liabilities		246			1,955			779			1,981
Net cash provided by (used in) operating activities		-			(1,818	)		602			(6,029	)

Cash flows from investing activities:
Principal repayments on notes receivable, including loans to senior executives		4			55			14			1,204
Investment in Debtor In Possession Subsidiaries		(1,219	)		-			(1,219	)		-
Investments in property, plant, and equipment		(177	)		(618	)		(219	)		(1,014	)
Other		(178	)		191			(178	)		192
Net cash provided by (used in) investing activities		(1,570	)		(372	)		(1,602	)		382

Cash flows from financing activities:
Proceeds from borrowings		1,400			2,250			1,400			2,750
Repayments on borrowings		(31	)		(254	)		(354	)		(4,908	)
Repayments under capital leases		(108	)		(18	)		(217	)		(50	)
Investments by minority interests, net		-			-			-			350
Other, net		-			19			-			38
Net cash provided by (used in) financing activities		1,261			1,997			829			(1,820	)

Effect of exchange rate change on cash		-			(22	)		-			(22	)
Net change in cash and cash equivalents from continuing operations		(309	)		(215	)		(171	)		(7,489	)

Net change in cash and cash equivalents from discontinued operations:
Net cash used in operating activities		-			(251	)		(13	)		(954	)
Net cash provided by investing activities		-			-			-			7,879
Net cash used in financing activities		-			-			-			(79	)
Net change in cash and cash equivalents		(309	)		(466	)		(184	)		(643	)
Cash and cash equivalents at beginning of period		515			954			390			1,131
Cash and cash equivalents at end of period	$	206		$	488		$	206		$	488

Supplemental disclosures of cash flow information:
Cash paid for interest	$	38		$	520		$	256		$	1,423

Non-cash financing and investing activities:
Net assets capitalized to Investment in Debtor In Possession Subsidiaries	$	2,750		$	-		$	2,750		$	-

~~During~~The ~~the~~accompanying ~~three~~notes ~~months ended~~are ~~March~~an ~~31,~~integral ~~2007,~~part ~~Fatburger~~of ~~Holdings~~these ~~Inc.~~consolidated ~~(“Fatburger”),~~financial ~~the Company’s restaurant operations subsidiary, opened one additional franchise location~~statements.

~~Discontinued operations~~6

On February 28, 2007, Fog Cap Commercial Lending Inc., a wholly owned subsidiary of the Company, sold its 51% interest in George Elkins Mortgage Banking Company (“George Elkins”). The Company received $2.9 million for its portion of the proceeds and recorded a gain on sale of $2.5 million.Index

7NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Borrowings~~NOTE on1 – ~~notes~~BASIS ~~payable~~OF PRESENTATION AND ACCOUNTING POLICIES

InThe ~~January~~accompanying ~~2007,~~interim ~~the Company~~consolidated ~~borrowed~~financial anstatements ~~additional~~of $1Fog Cutter Capital Group Inc.1 ~~million~~and onSubsidiaries a(“FCCG” ~~note~~or ~~payable~~the ~~that~~“Company”) ~~had~~are ~~a balance~~unaudited and have been prepared in conformity with the requirements of ~~$2.1~~Regulation ~~million~~S-X atpromulgated ~~December~~under 31the Securities Exchange Act of 1934, ~~2006. The~~as amended ~~note~~(the ~~has~~“Exchange aAct”), ~~balance~~particularly Rule 10-01thereof, which governs the presentation of $3interim financial statements.2 Accordingly, ~~million~~they do not include all of the information and isfootnotes ~~secured~~required ~~primarily~~ by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying interim consolidated financial statements should be read in conjunction with the Company’s ~~interest~~Annual inReport ~~its~~as ~~wholly~~of ~~owned~~and ~~subsidiary~~for the year ended December 31, ~~DAC~~2008 ~~International~~on Form 10-K (“~~DAC~~2008 Form 10-K”) as previously filed with the SEC on March 30, 2010. ~~The~~ Except ~~terms~~as ofdescribed below, there have been no changes to the ~~amended~~Company’s ~~note~~significant ~~were~~accounting ~~not significantly~~policies ~~different~~as ~~from~~described in Notes 2 and 3 to the ~~terms~~consolidated atfinancial ~~December~~statements ~~31,~~in ~~2006~~its 2008 Form 10-K.

~~NOTE~~In 4the –Company’s ~~COMMITMENTS~~opinion, ~~CONTINGENCIES~~all ~~& OFF-BALANCE~~adjustments, ~~SHEET~~comprised ~~RISK~~of normal recurring accruals necessary for the fair presentation of the interim financial statements, have been included in the accompanying consolidated financial statements. Operating results for the six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

~~Warlick~~The ~~complaints~~preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s operations and activities have become more focused on restaurant activities, and less focused on finance and real estate. As a result, certain reclassifications of the balances and modifications to the presentation of the financial statements have been made. None of these changes in presentation affected previously reported results of operations.

OnAt ~~October~~June 1630, ~~2006~~2009, ~~Fatburger~~ ~~Holdings,~~certain ~~Inc.,~~Company ~~Fatburger~~officers ~~Corporation~~ and Fatburger North America, Inc. filed suit against Keith A. Warlick (“Warlick”) the former Chief Executive Officer of Fatburger Holdings, Inc. and Fatburger Corporation. Warlick’s employment with Fatburger was terminated on September 21, 2006 by resolution of the board of directors ~~of Fatburger Holdings~~controlled, ~~Inc. The~~directly ~~Fatburger companies~~or ~~initiated the lawsuit to recover damages from Warlick arising from wrongful acts and conduct during and after his employment~~indirectly, and are asserting claims for: breach of contract, breach of duty of loyalty, breach of fiduciary duty, conversion – embezzlement; fraud/commencement; intentional interference with contractual relations, and equitable indemnity. Warlick filed an answer to the lawsuit denying the allegations and included a ~~cross-complaint against~~significant ~~Fatburger~~voting ~~Holdings,~~majority ~~Inc., Fatburger Corporation, Fatburger North America, Inc., Fog Cutter Capital Group, Inc., and Andrew Wiederhorn, for breach~~ of ~~contract, employment discrimination based on race and retaliation, wrongful termination and defamation — slander without any specification of damages. The defendants to~~ the ~~cross-complaint filed~~Company’s byoutstanding ~~Warlick dispute the allegations of the cross-complaint and intend to vigorously defend against the cross-complaint~~shares.

InNOTE ~~further~~2 ~~response~~– ~~to the~~SIGNIFICANT termination of his employment and above lawsuit, on February 6, 2007, Warlick, his wife, and a limited liability company controlled by Warlick, each of whom is a minority shareholder of Fatburger Holdings, Inc., filed a second lawsuit against various Fatburger entities, the Company, Andrew Wiederhorn, and members of the Fatburger board of directors. The complaint alleges fraud, negligent misrepresentation against Wiederhorn and the Company, and breach of contract and breach of fiduciary duty against all the defendants, related to business transactions which the plaintiff’s allege were not in the best interests of Fatburger Holdings, Inc., or the plaintiff minority shareholders. The defendants dispute the allegations of the lawsuit and intend to vigorously defend against the claims.TRANSACTIONS

~~Liquidity~~The following significant events affected our operations for the six months ended June 30, 2009:

AsBankruptcy of March 31, 2007, borrowings related to the Barcelona properties of $0.9 million were reflected as current liabilities in the accompanying Consolidated Statements of Financial Condition due to management’s intention to sell these properties and repay the related debt at the time of sale.Proceedings

AsOn ofApril ~~March~~6, 312009, ~~2007,~~ ~~Fatburger~~certain ~~was~~controlled ~~not~~subsidiaries inof ~~compliance~~Fog ~~with~~Cutter ~~all~~Capital ~~obligations~~Group ~~under the agreements evidencing its indebtedness, as defined in the applicable agreements~~Inc. ~~Fatburger~~ ~~failed~~filed tovoluntary ~~meet~~petitions ~~the~~for ~~prescribed~~relief ~~fixed charge~~under ~~coverage~~Chapter ~~ratio~~11 ~~and~~of the ~~prescribed~~United ~~debt-coverage~~States ~~ratio~~Bankruptcy ~~for~~Code ~~three notes payable. As a result,~~ (the ~~lender~~“Chapter ~~has~~11 ~~the right~~Cases”) toin ~~demand repayment of~~ the ~~notes~~United ~~after~~States ~~serving~~Bankruptcy ~~notice. As~~Court ~~such,~~for in the ~~accompanying~~Central ~~Consolidated Statements~~District of ~~Financial~~California ~~Condition,~~– ~~approximately~~San ~~$4.1~~Fernando ~~million~~Valley ofDivision ~~long-term~~(the ~~debt has~~“Bankruptcy ~~been classified as current liabilities~~Court”). The ~~lender~~entities ~~has~~involved ~~not~~and ~~demanded~~the ~~early~~case ~~repayment~~numbers ofassigned to the ~~loans;~~subsidiaries ~~however~~(collectively, if the ~~lender~~“Debtor ~~exercises~~In ~~its~~Possession ~~right~~Subsidiaries”) toare ~~demand~~as ~~payment, the Company’s liquidity could be negatively affected.~~follows:

~~The~~Fatburger ~~sale~~Restaurants of ~~real estate~~California, ~~and other investments is considered to be a normal~~Inc., ~~recurring~~Case ~~part of operations and management expects these transactions to generate adequate cash flow to meet the Company’s liquidity needs for the 2007 fiscal year~~No. 1:09-bk-13964-GM

~~Dividends~~Fatburger Restaurants of Nevada, Inc., Case No.1:09-bk-13965-GM

The ~~Company~~Chapter ~~does not~~11 ~~have~~Cases aare ~~fixed~~being ~~dividend~~jointly ~~policy,~~administered. Since ~~and~~the ~~may~~Chapter ~~declare~~11 ~~and~~bankruptcy ~~pay~~filing ~~new~~date, ~~dividends~~the ~~on common~~Debtor ~~stock,~~In ~~subject~~Possession toSubsidiaries ~~financial~~have ~~condition,~~been ~~results~~operating oftheir ~~operations,~~bankruptcy ~~capital requirements~~estates ~~and~~as ~~other~~“debtors ~~factors~~in ~~deemed~~possession” ~~relevant~~under by the ~~Board~~jurisdiction of ~~Directors. One factor~~ the ~~Board~~Bankruptcy ofCourt ~~Directors~~and ~~may consider~~in isaccordance with the ~~impact~~applicable provisions of ~~dividends on~~ the ~~Company’s~~Bankruptcy ~~liquidity. No~~Code ~~dividends~~and ~~have~~orders ~~been~~of ~~declared~~the orBankruptcy ~~paid in 2007~~Court.

~~Fatburger~~On ~~operations~~or about November 3, 2009, the Debtor In Possession Subsidiaries filed a joint plan of reorganization and related disclosure statement. The Bankruptcy Court is currently considering the plan of reorganization and disclosure statement.

~~The~~During ~~Company~~the ~~expects~~time that ~~Fatburger~~the ~~will~~Debtor ~~require~~In ~~capital~~Possession ~~resources and~~Subsidiaries ~~have~~are ~~negative~~under ~~cash~~bankruptcy ~~flow~~protection, in the ~~near~~Company ~~term~~will ~~while~~be itdeemed ~~pursues~~to anot ~~growth~~be ~~strategy through~~in ~~developing~~control ~~additional~~of ~~franchisee~~the ~~and~~Debtor ~~company-owned~~In ~~restaurants~~Possession Subsidiaries. ~~Fatburger~~ As ~~development~~a ~~involves~~result, ~~substantial risks~~certain ~~that~~assets, liabilities and the ~~Company~~results ~~intends~~of tooperations ~~manage;~~of ~~however,~~the itDebtor ~~cannot~~In bePossession ~~assured~~Subsidiaries ~~that present~~were orno ~~future~~longer ~~development~~part ~~will~~of ~~perform~~the inconsolidated ~~accordance~~financial ~~with~~statements of the Company~~’s expectations~~ oreffective ~~that~~as ~~any~~of ~~restaurants~~the ~~will~~date ~~generate~~of the ~~Company’s~~Chapter ~~expected returns~~11 ~~on investment~~Cases. ~~The~~ As ~~Company’s inability~~of toJune ~~expand~~30, ~~Fatburger~~2009, inthe ~~accordance~~Company ~~with~~had ~~planned~~recorded ~~expansion~~an orInvestment toin ~~manage that~~Debtor ~~growth~~In ~~could~~Possession ~~have~~Subsidiaries ain ~~material adverse effect on~~ the ~~Company’s~~amount ~~operations and~~of ~~financial condition~~$4. In0 ~~addition~~million, ~~if Fatburger~~which orrepresents ~~its~~the ~~franchisees~~Company’s ~~are~~net ~~unsuccessful~~carrying invalue ~~obtaining~~of ~~capital~~the ~~sufficient to~~assets ~~fund~~and ~~this~~liabilities ~~expansion,~~of the ~~timing~~Debtor ofIn ~~restaurant~~Possession ~~openings may be delayed and Fatburger’s results may be harmed~~Subsidiaries.

~~Centrisoft operations~~7

8Index

The Company expects that Centrisoft Corporation (“Centrisoft”) will require capital resources and have negative cash flow in the near term. Since Centrisoft is in the early stages of its marketing, there can be no assurance that it will be successful in attracting a significant customer base. Centrisoft is currently marketing its software to potential customers both directly and through re-seller relationships. There can be no assurance that Centrisoft will be successful in generating sufficient cash flow to support its own operations in the near term.Borrowings

~~Other~~On June 26, 2009, certain Fatburger entities entered into two loan agreements in the total amount of $1.5 million.

InThe ~~order~~Debtor ~~to facilitate~~in ~~the~~Possession ~~development~~Subsidiaries ofborrowed ~~franchise~~$1.1 ~~locations,~~million as(the of“DIP ~~March~~Loan”) ~~31,~~under ~~2007,~~authorization ~~Fatburger had~~of ~~guaranteed~~ the ~~annual~~Bankruptcy ~~minimum~~Court. The ~~lease~~loan ~~payments~~matures ofJune ~~four~~26, ~~restaurant~~2010 ~~sites owned~~ and ~~operated~~bears byinterest ~~franchisees~~at 15%. The ~~guarantees~~ ~~approximate~~DIP ~~$1.1~~loan ~~million~~is ~~plus~~secured ~~certain~~by ~~contingent~~the ~~rental~~assets ~~payments~~of ~~as defined~~the inDebtor ~~the~~In ~~respective~~Possession ~~leases. These leases~~Subsidiaries ~~expire~~and atis ~~various~~further ~~times~~guaranteed ~~through~~and ~~2015~~secured by the Company and other non-Debtor Fatburger entities.

~~The Company may utilize a wide variety of off-balance sheet financial techniques to manage risk.~~ In ~~hedging~~addition, ~~the~~Fatburger ~~interest~~Corporation ~~rate~~ and~~/or~~ ~~exchange rate~~Fatburger ~~exposure~~North ~~of a foreign currency denominated asset or liability~~America, ~~the~~Inc. ~~Company may~~borrowed ~~enter into hedge transactions to counter movements in interest rates and foreign currencies~~$0. ~~These~~4 ~~hedges~~million ~~may be in~~ (the ~~form~~“Non-DIP ofLoan”) ~~currency~~from ~~and~~the ~~interest~~same ~~rate swaps, options, and forwards, or combinations thereof~~lender. In The ~~December 2006, the Company purchased 64 American~~Non-~~style~~DIP ~~options~~loan tomatures ~~sell~~June ~~up to 62~~26,~~500~~ ~~euro~~2010 ~~each, (for~~and abears ~~total~~interest ~~of 4.0 million euros)~~ at $115%.31 The ~~per~~Non-DIP ~~euro,~~loan ~~any~~is ~~time~~secured ~~before~~by ~~June~~the ~~30, 2007. These~~assets ~~options~~of ~~are~~Fatburger ~~carried~~Corporation atand ~~fair market~~Fatburger ~~value~~North onAmerica, ~~the~~Inc ~~Consolidated~~and ~~Statements~~is offurther ~~Financial~~guaranteed ~~Condition at March 31, 2007~~ and ~~December~~secured ~~31,~~by ~~2006~~the Company.

~~There~~Restaurant ~~were~~openings ~~no other~~and ~~off-balance sheet arrangements in place as of March 31, 2007.~~closures

~~NOTE~~During 5the ~~– STOCK~~six ~~OPTIONS~~months ~~AND~~ended ~~RIGHTS~~June 30, 2009, Fatburger Holdings Inc. (“Fatburger”), the Company’s restaurant operations subsidiary, opened six additional franchise locations. In addition, one location was converted from a franchise-owned to a company-owned restaurant and one franchise location and four company-owned locations (including locations owned by the Debtor In Possession Subsidiaries) were closed.

~~The~~NOTE Company has a non-qualified stock option plan (the “Option Plan”) which provides for options to purchase shares of the Company’s common stock. The maximum number of shares of common stock that may be issued pursuant to options granted under the Option Plan is 3~~,500,000~~ ~~shares. Each~~– ~~independent director receives~~COMMITMENTS, onCONTINGENCIES ~~the~~& ~~last day of each quarter, an automatic non~~OFF-~~statutory option~~BALANCE ~~grant~~SHEET to purchase 1,500 shares of common stock at 110% of the fair market value on that day. Automatic grants will vest one third on each of the first three anniversaries of the grant date and expire on the tenth anniversary of the grant date. In addition to the 4,500 options granted to independent directors, during the three months ended March 31, 2007, the Company granted to certain Managers of the Company (as defined by the Option Plan) options to purchase a total of 75,000 shares of common stock at 110% of the fair market value on the grant date. These grants will vest one third on each of the first three anniversaries of the grant date and expire on the tenth anniversary of the grant date.RISK

~~There~~Warlick were no options granted with exercise prices below the market value of the stock at the grant date. Fair values for 2007 were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions used: 0% dividend yield, expected volatility of 76%, risk-free interest rate of 5.0% and expected lives of five years.complaints

On October 16, 2006, Fatburger Holdings, Inc., Fatburger Corporation and Fatburger North America, Inc. filed suit against Keith A. ~~summary~~Warlick (“Warlick”) the former Chief Executive Officer of ~~our~~Fatburger ~~stock options~~Holdings, ~~activity~~Inc. and Fatburger Corporation. Warlick’s employment with Fatburger was terminated on September 21, 2006 by resolution of the board of directors of Fatburger Holdings, Inc. The Fatburger companies initiated the lawsuit to recover damages from Warlick arising from wrongful acts and conduct during and after his employment, and are asserting claims for: breach of contract, breach of duty of loyalty, breach of fiduciary duty, conversion – embezzlement; fraud/commencement; intentional interference with contractual relations, and equitable indemnity. Warlick filed an answer to the ~~three~~lawsuit ~~months~~denying ~~ended~~the allegations and included a Cross-complaint against Fatburger Holdings, Inc., Fatburger Corporation, Fatburger North America, Inc., Fog Cutter Capital Group, Inc., and Andrew Wiederhorn (“Cross-Defendants”), for breach of contract, employment discrimination based on race and retaliation, wrongful termination and defamation – slander without any specification of damages. On a motion filed by the Cross-Defendants, the Court dismissed Warlick’s cross-claim for employment discrimination based on race and retaliation. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 315, ~~2007~~2010. The issettlement ~~presented~~did ~~below:~~not have a material effect on the consolidated statements of financial condition or the consolidated statement of operations of the Company.

	Shares	Weighted Average Exercise Price
Outstanding at January 1, 2007	2,762,000	$	1.45
Granted	79,500	$	2.07
Exercised	—	$	—
Cancelled/forfeited	—	$	—
Outstanding at March 31, 2007	2,841,500	$	1.46

On February 6, 2007, Warlick, his wife, and a limited liability company controlled by Warlick, each of whom is a minority shareholder of Fatburger Holdings, Inc., filed a complaint against various Fatburger entities, the Company, Andrew Wiederhorn, and members of the Fatburger board of directors. The complaint alleges fraud, negligent misrepresentation against Wiederhorn and the Company, and breach of contract and breach of fiduciary duty against all the defendants, related to business transactions which the plaintiff’s allege were not in the best interests of Fatburger Holdings, Inc., or the plaintiff minority shareholders. The defendants disputed the allegations of the lawsuit and vigorously defended against the claims. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 5, 2010. The settlement did not have a material effect on the consolidated statements of financial condition or the consolidated statement of operations of the Company.

AOther ~~summary of our stock options outstanding as of March 31, 2007 is presented below:~~litigation

Range of Exercise Prices	Shares	Weighted Average Remaining Life	Weighted Average Exercise Price
$1.00 – 2.00	2,616,000	9.7	$	1.32
$2.01 – 4.00	162,000	9.5	$	2.55
$4.01 – 8.00	63,500	7.3	$	4.46
Total	2,841,500	9.7	$	1.46

The Company is involved in various other legal proceedings occurring in the ordinary course of business which management believes will not have a material adverse effect on the consolidated financial condition or operations of the Company.

~~NOTE 6 – VARIABLE INTEREST ENTITIES~~Liquidity

9The sale of real estate and other investments has historically been a recurring part of operations and a source of liquidity. However, most of those investments have been liquidated as the Company focused on the Fatburger operations. Borrowings and Fatburger’s operations are now the major sources of liquidity for the Company and management expects these sources, including the sale of Fatburger franchises, to generate adequate cash flow to meet the Company’s liquidity needs for the 2009 fiscal year.

As of March 31, 2007, the Company has funded loans totaling $10.1 million to two related Spanish entities formed to purchase, reposition and sell apartment buildings in Barcelona, Spain. Under the terms of the loans, the investments meet the definition of a Variable Interest Entity (“VIE”) under FASB Interpretation No. 46 (“FIN 46”) and the Company is the primary beneficiary of the VIE. As a result, the assets, liabilities, and results of operations of the VIE have been consolidated into the accompanying consolidated financial statements as of March 31, 2007.8

The VIE currently owns two apartment buildings, consisting of 33 residential units with a book value of approximately $10.9 million, including capital improvements and carrying costs. The two properties met the criteria to be classified as “held for sale” and were classified as such on the Statement of Financial Condition at March 31, 2007. In December 2006, the VIE entered into an agreement to sell one of the two buildings for a sales price of approximately $8.6 million. Assets and liabilities of the VIE included in the accompanying consolidated statements of financial condition are summarized as follows:Index

Investment in real estate, held for sale, net	$	10,885,000
Other assets	33,000
Borrowings and notes payable (included in current liabilities at March 31, 2007)	935,000
Accrued expenses and other liabilities	714,000
Minority interest	367,000

Fatburger Debt Covenant

~~NOTE~~As 7of –June ~~LOANS~~30, TO2009, ~~SENIOR~~Fatburger ~~EXECUTIVES~~had not made all of the required payments on indebtedness with an outstanding principal balance of $3.9 million. As a result, the lender has declared the indebtedness in default and has accelerated the maturity date of the entire balance. If the Company is unsuccessful in renegotiating the debt with the lender and obtaining waivers of the default, the resulting consequences could have a material adverse impact on our business, prospects, financial condition, or results of operation. In addition to the payment default, at December 31, 2008, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable. The Company is in discussions with the lender to restructure the debt.

Prior to the passage of the Sarbanes-Oxley Act of 2002, the Company’s employment agreement with its Chief Executive Officer, Andrew Wiederhorn, allowed him to borrow a specified maximum amount from the Company to purchase shares of common stock. The loans are full recourse to the borrower and bear interest at the prime rate. The total amount of loans receivable from Mr. Wiederhorn, including compounded interest, was $1.1 million at March 31, 2007. The loans matured on February 21, 2007. The Company has not extended the maturity date of the loans or amended any other terms. The Company and Mr. Wiederhorn are cooperating in completing the repayment of the loans in full.Dividends

~~NOTE~~The 8Company –does ~~INVENTORIES~~not have a fixed dividend policy, and may declare and pay new dividends on common stock, subject to financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. One factor the Board of Directors may consider is the impact of dividends on the Company’s liquidity. No dividends were declared in the quarter ended June 30, 2009.

~~Inventories~~Fatburger ~~relate primarily to the DAC International subsidiary and consist of the following:~~operations

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Raw materials	$	1,229	$	1,703
Work in progress	826		138
Finished goods	632		601
Total inventories	$	2,687	$	2,442

The Company is pursuing a growth strategy at Fatburger through developing additional franchisee restaurants. Fatburger development involves substantial risks that the Company intends to manage; however, it cannot be assured that present or future development will perform in accordance with the Company’s expectations or that any restaurants will generate the Company’s expected returns on investment. The Company’s inability to expand Fatburger in accordance with planned expansion or to manage that growth could have a material adverse effect on the Company’s operations and financial condition. In addition, if Fatburger or its franchisees are unsuccessful in obtaining capital sufficient to fund this expansion, the timing of restaurant openings may be delayed and Fatburger’s results may be harmed.

~~NOTE 9 – OPERATING SEGMENTS~~Other

~~Operating~~The ~~segments consist~~Company ofhas ~~(i)~~various ~~restaurant~~operating ~~operations~~leases ~~conducted~~for ~~through Fatburger~~office, ~~(ii)~~ manufacturing ~~activities conducted through DAC International, (iii) real estate~~ and ~~financing~~retail ~~activities,~~space ~~and~~which ~~(iv)~~expire ~~software development and sales conducted~~ through ~~Centrisoft Corporation~~2017. ~~Each segment~~ The ~~operates~~leases ~~with~~provide ~~its~~for ~~own~~varying ~~management~~minimum ~~and~~annual ~~personnel. Beginning~~rental inpayments ~~the~~including ~~fourth~~rent ~~quarter~~increases ofand ~~2006,~~free ~~the Company~~rent ~~began allocating certain corporate expenses to Fatburger through a management fee~~periods. ~~This management fee is reflective of management’s increased involvement in the restaurant operations.~~ The Company ~~began~~has ~~charging this~~future ~~fee~~minimum torental ~~more~~payments ~~closely~~under ~~represent~~non-cancelable ~~the~~operating ~~true~~leases ~~costs~~with ofinitial ~~restaurant~~or ~~operations~~remaining ~~in the~~terms ~~appropriate~~of ~~segment~~one ~~reporting. The management~~year ~~fee~~or ismore ~~eliminated~~of ~~upon~~approximately ~~consolidation~~$19. ~~The~~9 ~~following~~million isas ~~a summary~~ of ~~each~~June of30, ~~the operating segments:~~2009.

~~Restaurant~~There ~~operations~~were no other off balance sheet arrangements in effect during the six months ended June 30, 2009.

AsNOTE of4 ~~March~~– ~~31,~~STOCK ~~2007,~~OPTIONS ~~the~~AND Company owned approximately 82% of the voting control of Fatburger, which operates or franchises 87 hamburger restaurants located primarily in California and Nevada. Franchisees currently own and operate 52 of the Fatburger locations. One new franchise restaurant was opened during the three months ended March 31, 2007.RIGHTS

10The Company has a stock option plan (the “Option Plan”) that provides for options to purchase shares of the Company’s common stock. The maximum number of shares of common stock that may be issued pursuant to options granted under the Option Plan is 3,500,000. Newly elected independent directors automatically receive 5,000 options on the day they join the Board of Directors. Additionally, each independent director receives, on the last day of each quarter, an automatic qualified grant of non-qualified options to purchase 1,500 shares of common stock at 110% of the fair market value on that day. Automatic grants vest one third on each of the first three anniversaries of the grant date and expire on the tenth anniversary of the grant date. The Company granted a total of 9,000 options to its independent directors in the six months ending June 30, 2009.

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Company-owned restaurant sales	$	7,602		$	6,285
Royalty revenue	519			564
Franchise fee revenue	20			74
Total revenue	8,141			6,923
Cost of sales	(4,411		)	(3,658		)
Depreciation and amortization	(534		)	(356		)
Other general & administrative costs	(3,888		)	(3,074		)
Interest expense	(214		)	(255		)
Management allocation	(535		)	—
Minority interest in losses	35			13
Segment loss	$	(1,406	)	$	(407	)
Capital expenditures	$	244		$	261
Segment assets	$	22,219		$	19,994
Minority interests	$	68		$	174

There were no options granted with exercise prices below the market value of the stock at the grant date. Fair values for the second quarter of 2009 were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions used: 0% dividend yield, expected volatility of 103%, risk-free interest rate of 4.7% and expected lives of ten years.

~~Manufacturing~~A ~~operations~~summary of our stock options activity for the six months ended June 30, 2009 is presented below:

The Company conducts manufacturing activities through its wholly-owned subsidiary, DAC International. DAC is a supplier of computer controlled lathes and milling machinery for the production of eyeglass, contact, and intraocular lenses.

	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2009		2,980,833	$	1.51
Granted		9,000	$	0.20
Exercised		-	$	-
Cancelled/forfeited		-	$	-
Outstanding at June 30, 2009		2,989,833	$	1.51

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Manufacturing sales	$	2,313		$	3,293
Cost of sales	(1,376		)	(1,672		)
Engineering and development	(235		)	(230		)
Depreciation and amortization	(24		)	(8		)
Other general & administrative costs	(622		)	(377		)
Interest expense	(3		)	(6		)
Other non-operating income	14			1
Segment income	$	67		$	1,001
Capital expenditures	$	45		$	38
Segment assets	$	5,480		$	4,791

~~Real estate and financing operations~~Index

~~The~~A ~~Company~~summary ~~owns~~of ~~various~~our ~~interests~~stock inoptions ~~real~~outstanding ~~estate~~at ~~and~~June ~~notes receivable. At March 31~~30, ~~2007,~~2009 ~~real estate~~ is ~~comprised~~presented of ownership or leasehold interests in 74 freestanding retail buildings located throughout the United States and two apartment buildings located in Barcelona, Spain. At March 31, 2007, notes receivable have a carrying value of $0.8 million and are primarily secured by real estate.below:

	Three months ended March 31,
Range of Exercise Prices	Shares				Weighted Average Remaining Life		Weighted Average Exercise Price
	2007			2006
$0.01 – 2.00		2,489,000				7.5	$	1.32
	(dollars in thousands)
$2.01 – 4.00		500,833				8.0	$	2.47
Rental income	$	935		$	1,066
Total		2,989,833				7.6	$	1.51
Operating expenses	(387		)	(441		)
Depreciation and amortization	(110		)	(138		)
Other general & administrative costs	(50		)	(241		)
Interest income	43			79
Interest expense	(628		)	(256		)
Other non-operating income	77			1,234
Equity in loss of equity investees	—			(76		)
Segment income (loss)	$	(120	)	$	1,227
Capital expenditures	$	—		$	828
Segment assets	$	27,840		$	32,668
Investment in equity investees	$	—		$	738
Minority interests	$	367		$	333

11NOTE 5 – INVENTORIES

~~Other~~Inventories ~~non-operating~~relate ~~income for the three months ended March 31, 2007 is~~ primarily ~~composed of foreign currency gains of $0.1 million, compared~~ to ~~gain on~~the ~~sale~~Company’s ofmanufacturing ~~real estate ($0.5 million)~~subsidiary, ~~gain~~DAC onInternational ~~sale of notes receivable~~ (~~$0.5 million~~“DAC”), ~~foreign currency gains ($0.1 million),~~ and ~~commission~~consist ~~and~~of ~~other non-operating revenue ($0.1 million) for~~ the ~~three months ended March 31, 2006.~~following:

Software development and sales operations

	June 30, 2009		December 31, 2008
	(dollars in thousands)

Raw materials	$	1,140	$	2,097
Work in progress		552		366
Finished goods		304		501
Total inventories	$	1,996	$	2,964

~~The~~NOTE ~~Company~~6 ~~holds~~– aACCOUNTS ~~79%~~PAYABLE ~~ownership~~AND ~~interest~~ACCRUED in Centrisoft, which conducts software development and sales activities. Centrisoft develops and sells software that controls and enhances the productivity of enterprise networks and provides first level security against unauthorized applications and users.LIABILITIES

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Software sales	$	4		$	17
Engineering and development	(151		)	(180		)
Depreciation and amortization	(112		)	(79		)
Other general & administrative costs	(221		)	(436		)
Interest expense	(268		)	(164		)
Segment loss	$	(748	)	$	(842	)
Capital expenditures	$	—		$	7
Segment assets	$	3,534		$	3,997

Accounts payable and accrued liabilities consisted of the following:

Reconciliation to total net loss

	June 30, 2009		December 31, 2008
	(dollars in thousands)
Accounts payable	$	5,066	$	8,439
Sales deposits		835		1,228
Accrued wages, bonus and commissions		370		693
Other		7,756		7,126
Total accounts payable and accrued liabilities	$	14,027	$	17,486

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Segment loss from operations	$	(2,207	)	$	979
Corporate expenses	(4,748		)	(2,230		)
Elimination of intercompany charges	790			181
Income from discontinued operations	2,514			82
Net loss	$	(3,651	)	$	(988	)

At June 30, 2009, other accrued liabilities include the accrual of management fees ($1.7 million) and option commitment fee ($0.3 million), both associated with the 2008 sale of the Company’s former subsidiary, Fog Cap Retail Investors LLC (“FCRI”). Other accrued liabilities also include $2.1 million in accrued professional fees and $1.0 million in accrued interest payable.

NOTE 107 – ~~DISCONTINUED~~OPERATING ~~OPERATIONS~~SEGMENTS

~~The~~Operating ~~Company~~segments ~~held~~consist aof ~~51% ownership~~(i) ~~interest~~restaurant inoperations ~~George~~conducted ~~Elkins~~through Fatburger, a(ii) ~~California~~manufacturing ~~commercial~~activities ~~mortgage~~conducted ~~banking operation. In~~through ~~December~~DAC ~~2006~~International, ~~the~~and ~~Company reached~~(iii) anreal ~~agreement~~estate toand ~~sell~~financing ~~George~~activities. Each ~~Elkins~~segment tooperates awith ~~third~~its ~~party~~own management and ~~the~~personnel. The ~~sale~~Company ~~closed in~~allocates ~~February~~certain ~~2007. As~~corporate ~~such,~~expenses ~~all~~to ~~assets~~Fatburger ~~of George~~through ~~Elkins~~a ~~have~~management ~~been~~fee ~~classified~~to asreflect ~~held~~management’s ~~for~~increased ~~sale~~involvement atin ~~December~~the ~~31,~~restaurant ~~2006~~operations and ~~results~~ ~~from~~to ~~operations~~more ofclosely ~~George~~represent ~~Elkins for~~ the ~~three~~true ~~months~~costs ~~ended~~of ~~March~~restaurant ~~31, 2007~~operations ~~and~~in ~~2006~~the ~~have~~appropriate ~~been~~segment ~~classified as discontinued operations~~reporting. ~~Prior~~ The tomanagement ~~the~~fee ~~decision~~is toeliminated ~~sell~~upon ~~George~~consolidation. The ~~Elkins, it~~following ~~was~~is a ~~reportable~~summary ~~segment~~of each of the ~~Company’s~~operating ~~operations.~~segments:

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Loan brokerage fees	$	1,673		$	1,693
Loan servicing fees	134			300
Total revenue	1,807			1,993
Depreciation and amortization	(4		)	(7		)
Other general & administrative costs	(1,811		)	(1,884		)
Interest income	2			2
Other non-operating income	13			144
Minority interest in earnings	15			(166		)
Gain on sale of discontinued operations	2,492			—
Income from discontinued operations	$	2,514		$	82
Capital expenditures	$	—		$	—
Segment assets	$	—		$	1,341
Minority interests	$	—		$	222

Restaurant operations

As of June 30, 2009, the Company owned approximately 82% of the voting control of Fatburger, which operates or franchises 92 hamburger restaurants located primarily in California and Nevada, as well as 12 other states, Canada, United Arab Emirates and China. Franchisees currently own and operate 60 of the Fatburger locations. Twenty-eight restaurants are currently owned and operated by the Debtor In Possession Subsidiaries. During the bankruptcy period, the Company is being reimbursed for certain costs supporting the operation of the Debtor In Possession Subsidiaries as approved by the Bankruptcy Court.

~~NOTE~~During 11the ~~– SUBSEQUENT~~six ~~EVENTS~~months ended June 30, 2009, Fatburger Holdings Inc. (“Fatburger”), the Company’s restaurant operations subsidiary, opened six additional franchise locations. In addition, one location was converted from a franchise-owned to a company-owned restaurant and one franchise location and four company-owned locations (including locations owned by the Debtor In Possession Subsidiaries) were closed.

~~Restaurant openings~~10

~~Subsequent to March 31, 2007, Fatburger opened one additional franchise location.~~Index

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(dollars in thousands)

Company-owned restaurant sales	$	991		$	7,954		$	8,145		$	15,887
Royalty revenue		575			595			1,103			1,136
Franchise fee revenue		145			64			199			168
Total revenue		1,711			8,613			9,447			17,191

Cost of sales		(561	)		(4,795	)		(4,619	)		(9,482	)
Depreciation and amortization		(123	)		(538	)		(564	)		(1,074	)
Other general & administrative costs		(1,301	)		(4,281	)		(4,705	)		(8,273	)
Interest expense		(54	)		(162	)		(263	)		(358	)
Management allocation		(295	)		(526	)		(822	)		(1,053	)
Minority interest in losses		112			120			187			204
Segment loss	$	(511	)	$	(1,569	)	$	(1,339	)	$	(2,845	)

Capital expenditures	$	-		$	123		$	84		$	268
Segment assets							$	15,301		$	22,065
Minority interests							$	177		$	446

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

~~Certain statements~~The ~~contained herein and certain statements contained in future filings by the~~ Company ~~with~~conducts ~~the~~manufacturing ~~SEC~~activities ~~may~~through ~~not~~its ~~be based on historical facts and are “Forward~~wholly-~~Looking Statements”~~owned ~~within the meaning of Section 27A of the Securities Act of 1933~~subsidiary, ~~as amended,~~DAC ~~and Section 21E of the Securities Exchange Act of 1934, as amended~~International. ~~Forward-Looking~~ DAC ~~Statements~~is ~~are based~~a onsupplier ~~various assumptions (some~~ of ~~which~~computer ~~are~~controlled ~~beyond~~lathes ~~the Company’s control)~~ and ~~may~~milling bemachinery ~~identified~~for ~~by reference to a future period or periods, or by~~ the ~~use of~~production ~~forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative~~ of ~~those~~ ~~terms. Actual results could differ materially from those set forth in Forward-Looking Statements due to a variety of factors~~eyeglass, ~~including~~contact, ~~but not limited to the Risk Factors identified herein~~ and ~~the~~intraocular ~~following:~~lenses.

· economic factors, particularly in the market areas in which the Company operates;

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(dollars in thousands)

Manufacturing sales	$	2,390		$	3,061		$	4,033		$	5,294
Cost of sales		(1,573	)		(1,735	)		(2,646	)		(3,062	)
Engineering and development		(241	)		(299	)		(535	)		(580	)
Depreciation and amortization		(32	)		(36	)		(67	)		(58	)
Other general & administrative costs		(555	)		(799	)		(1,263	)		(1,585	)
Interest expense		(22	)		(12	)		(32	)		(21	)
Other non-operating income		1			8			5			26
Segment income (loss)	$	(32	)	$	188		$	(505	)	$	14

Capital expenditures	$	164		$	228		$	166		$	421
Segment assets							$	5,326		$	6,879

~~· the financial and securities markets and the availability of and costs associated with sources of liquidity;~~11

~~· competitive products and pricing;~~Index

~~· the~~Real ~~real~~ estate ~~market,~~ ~~including~~and ~~the~~financing ~~residential real estate market in Barcelona, Spain;~~operations

~~· the~~The ~~ability~~Company ~~to sell~~invests ~~assets~~in tovarious ~~maintain~~interests ~~liquidity;~~in real estate and notes receivable. At June 30, 2009, this segment did not own any real estate, but owned a note receivable with a carrying value of $37,000 which was primarily secured by real estate.

· fiscal and monetary policies of the U.S. Government;

	Three months ended June 30,					Six months ended June 30,
	2009		2008			2009		2008
	(dollars in thousands)

Rental income	$	-	$	-		$	-	$	-
Operating expenses		-		-			-		-
Depreciation and amortization		-		-			-		-
Other general & administrative costs		-		(13	)		-		(13	)
Interest income		1		31			3		63
Interest expense		-		(452	)		-		(979	)
Other non-operating income (loss)		-		(28	)		-		560
Market value impairment reserves		-		(446	)		-		(599	)
Equity in income of equity investees		-		17			-		217
Segment income (loss)	$	1	$	(891	)	$	3	$	(751	)

Capital expenditures	$	-	$	26		$	-	$	26
Segment assets						$	37	$	11,823
Minority interests						$	-	$	434

~~· changes~~Other ~~in prevailing~~non-operating ~~interest~~income ~~rates;~~for the six months ended June 30, 2008 is primarily composed of foreign currency gains of $0.5 million.

~~· changes~~Reconciliation ~~in currency~~to ~~exchange~~total ~~rates;~~net loss

· acquisitions and the integration of acquired businesses;

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(dollars in thousands)

Segment loss from operations	$	(540	)	$	(2,272	)	$	(1,841	)	$	(3,582	)
Corporate expenses		(1,567	)		(2,421	)		(3,069	)		(6,314	)
Elimination of intercompany charges		321			733			869			1,551
Income tax (expense) benefit		-			1			(3	)		52
Income (loss) from discontinued operations		-			(424	)		(13	)		3,473
Net loss	$	(1,786	)	$	(4,383	)	$	(4,057	)	$	(4,820	)

~~· performance~~NOTE ~~of retail/consumer~~8 ~~markets,~~– ~~including~~DISCONTINUED ~~consumer preferences and concerns about diet;~~OPERATIONS

~~· effective expansion~~Leased ofreal ~~the~~estate ~~Company’s restaurants in new and existing markets;~~portfolio

~~· profitability~~ In February 2008, the Company sold FCRI, a wholly-owned subsidiary that held the Company’s leased real estate portfolio. At the time of sale, this portfolio was comprised of leasehold interests in 72 freestanding retail buildings located throughout the United States. Prior to the sale, the leased real estate portfolio was part of the Real Estate and ~~success~~Financing Operations segment. The following represents the results of ~~franchisee~~operations ~~restaurants;~~during the time of the Company’s ownership of FCRI:

· availability of quality real estate locations for restaurant expansion;

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009			2008
	(dollars in thousands)
Operating revenue	$	-	$	-	$	-		$	610
Operating expenses		-		-		-			(240	)
Depreciation and amortization		-		-		-			(39	)
Operating margin		-		-		-			331

General and administrative expenses		-		-		-			(7	)
Interest expense		-		-		-			(157	)
Other non-operating income (expense)		-		-		(13	)		8
Gain on sale of discontinued real estate operations		-		-		-			4,217
Income (loss) from discontinued real estate operations	$	-	$	-	$	(13	)	$	4,392

Capital expenditures	$	-	$	-	$	-		$	20
Segment assets						-			-

~~· the market for Centrisoft’s software products;~~12

~~· credit risk management; and~~Index

~~· asset/liability management.~~Software development and sales operations

~~Except as~~In ~~may~~June ~~be required by law~~2008, the Company ~~does~~exercised ~~not~~its ~~undertake~~rights under a loan security agreement on loans to a consolidated subsidiary, ~~and~~Centrisoft ~~specifically disclaims~~Corporation. Pursuant ~~any~~to ~~obligation~~the security agreement, the collateral assets of Centrisoft were transferred to ~~publicly~~the ~~release~~Company in satisfaction of the ~~results~~loans. Centrisoft has since ceased operations. As of ~~any~~June ~~revisions which~~30, ~~may~~2008, bethe ~~made~~Company tono ~~any~~longer ~~Forward-Looking~~included ~~Statements~~Centrisoft toas ~~reflect~~a consolidated subsidiary and as of December 31, 2008, the ~~occurrence~~ carrying value of ~~anticipated~~the orassets ~~unanticipated~~acquired ~~events~~from orCentrisoft ~~circumstances~~was ~~after~~zero. The following represents the ~~date~~results of ~~such~~operations ~~statements.~~during the time of the Company’s ownership or operation of the Centrisoft assets:

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements of Fog Cutter Capital Group Inc. and the notes thereto included elsewhere in this filing. References in this filing to “the Company,” “we,” “our,” and “us” refer to Fog Cutter Capital Group Inc. and its subsidiaries unless the context indicates otherwise.

	Three months ended June 30,					Six months ended June 30,
	2009		2008			2009		2008
	(dollars in thousands)

Software sales	$	-	$	26		$	-	$	128
Engineering and development		-		(78	)		-		(158	)
Depreciation and amortization		-		(73	)		-		(182	)
Other general & administrative costs		-		(100	)		-		(215	)
Interest expense		-		(199	)		-		(492	)
Segment loss	$	-	$	(424	)	$	-	$	(919	)

Capital expenditures	$	-	$	-		$	-	$	-
Segment assets						$	-	$	-

~~Executive~~NOTE ~~Overview~~9 – SUBSEQUENT EVENTS

~~Business~~Restaurant ~~overview~~openings

~~Fog~~Subsequent ~~Cutter~~to ~~Capital~~June ~~Group Inc.~~30, is2009, ~~primarily~~Fatburger ~~engaged~~has inopened ~~the~~seven ~~operations~~additional offranchise ~~its Fatburger Holdings~~locations, ~~Inc.~~including ~~(“Fatburger”) restaurant~~new ~~business. Later~~restaurants in ~~our 2007 fiscal year~~Jakarta, weBeijing ~~intend~~and toUnited ~~change~~Arab ~~our~~Emirates. During ~~corporate~~this ~~name~~period, to Fatburger ~~Restaurants Inc.~~has inclosed ~~order~~two toCompany-owned ~~better~~locations ~~reflect~~and ~~our~~three ~~primary~~franchise ~~business going forward~~locations.

~~Fatburger,~~Purchase ~~“The~~of Last Great Hamburger Stand”®, opened its first restaurant in Los Angeles in 1952. There are currently 87 Fatburger restaurants located in 14 states and in Canada. The restaurants specialize in fresh, made to order hamburgers and other specialty sandwiches. French fries, homemade onion rings, hand-scooped ice cream shakes and soft drinks round out the menu. We acquired the controlling interest in Fatburger in August 2003 and currently own 82% voting control.Land

WeOn ~~plan~~December to24, ~~open additional~~2009, ~~Fatburger~~the ~~restaurants~~Company ~~throughout~~acquired all of the ~~United~~membership ~~States~~interests ~~and~~in ~~internationally, including~~Highland ~~Canada~~Road ~~and~~Properties ~~China~~LLC (“HRP”) from an entity controlled by Mr. We ~~intend~~and ~~to continue~~Mrs. toWiederhorn. HRP ~~open~~is ~~company-owned~~a ~~restaurants~~special inpurpose ~~strategic~~entity ~~markets~~that ~~and~~owns ~~increase the~~approximately ~~number~~6 acres of ~~franchised~~residential ~~locations~~land in ~~the~~Portland UOregon.S Mr. and ~~internationally~~Mrs. ~~Franchisees~~ ~~currently~~Wiederhorn ~~own~~had ~~and~~previously ~~operate~~allowed 52the land to be part of ~~the~~ ~~Fatburger~~a ~~locations~~pool of collateral securing indebtedness of the Company and weit ~~have~~became ~~agreements~~necessary for ~~approximately~~the ~~207~~Company ~~new franchise~~to ~~locations~~have direct ownership of HRP in order to protect the remaining collateral. As The Company paid $750,000 for the HRP interests. The Highland Road land is ~~typical~~being used by the Company as collateral for ~~our~~ ~~industry,~~certain borrowings of the ~~identification~~Company. The Board of ~~qualified~~Directors ~~franchisees~~approved the purchase of HRP and ~~quality~~determined ~~locations has~~that anthe ~~impact~~transaction onwas in the ~~rate~~best interests of ~~growth~~the inCompany and its shareholders. On February 17, 2010, the ~~number~~Company ofcaused ~~our~~HRP ~~restaurants~~to transfer the land to certain lenders for a partial reduction in debt of $350,000.

InGuarantee ~~addition~~of to our restaurant operation, we also conduct manufacturing activities, software development and sales activities, and make real estate and other real estate-related investments through various controlled subsidiaries.Debt

14Certain of the Company’s lenders have, from time to time, required that Mr. Wiederhorn personally guarantee the Company’s debt obligations. As of March 15, 2010, Mr. Wiederhorn had personally guaranteed approximately $8.9 million in debt of the Company and its subsidiaries. On March 23, 2010, the Company granted Mr. Wiederhorn a security interest in the assets of Fog Cutter Capital Group Inc. to secure his performance in the event he is required to perform under the guarantees.

~~Operating segments~~13

~~Our operating segments are:~~Index

~~(i) Restaurant~~ITEM ~~operations –~~2. MANAGEMENT’S ~~conducted~~DISCUSSION ~~through~~AND ~~our~~ANALYSIS ~~Fatburger~~OF ~~subsidiary,~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained herein and certain statements contained in future filings by the Company with the SEC may not be based on historical facts and are “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-Looking Statements are based on various assumptions and events (iisome of which are beyond the Company’s control) ~~Manufacturing~~ ~~operations –~~and ~~conducted~~may ~~through~~be ~~our~~identified ~~wholly~~by ~~owned~~reference ~~subsidiary~~to a future period or periods, ~~DAC~~or ~~International~~by (the use of forward-looking terminology, such as “~~DAC~~may,”) “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Actual results could differ materially from those set forth in Forward-Looking Statements due to a variety of factors, including, but not limited to the Risk Factors identified herein and the following:

~~(iii) Real~~● ~~estate~~economic ~~and finance operations~~factors, ~~and~~particularly in the market areas in which the Company operates;

~~(iv) Software~~● ~~development~~the financial and ~~sales operations~~securities –markets ~~conducted~~and ~~through~~the ~~our~~availability ~~subsidiary,~~of ~~Centrisoft~~and ~~Corporation~~costs ~~(“Centrisoft”).~~associated with sources of liquidity;

~~Due~~● tocompetitive ~~the~~products ~~varied~~and nature of our operations, we do not utilize a standard array of key performance indicators in evaluating our results of operations. Our evaluation instead focuses on an investment-by-investment or asset-by-asset analysis within our operating segments.pricing;

~~Significant events~~● the ability to sell assets to maintain liquidity;

~~The~~● ~~following~~fiscal ~~significant events~~and ~~affected~~monetary ~~our~~policies ~~operations~~of ~~for~~ the ~~three~~U.S. ~~months ended March 31, 2007:~~Government;

~~· Restaurant openings~~● –changes ~~During~~in ~~the~~prevailing ~~three~~interest ~~months ended March 31, 2007, Fatburger opened one additional franchise location.~~rates;

~~· Discontinued operations~~● –changes ~~On February 28, 2007, Fog Cap Commercial Lending Inc., our wholly owned subsidiary, sold its 51% interest~~ in ~~George~~currency ~~Elkins~~exchange ~~Mortgage Banking Company (“George Elkins”). We received $2.9 million for our portion of the proceeds and recorded a gain on sale of $2.5 million.~~rates;

~~· Borrowings~~● ~~on notes~~acquisitions ~~payable – In January 2007, we borrowed an additional $1.1 million on a note payable that had a balance of $2.1 million at December 31, 2006. The amended note has a balance of $3.2 million~~ and isthe ~~secured~~integration ~~primarily by our interest in DAC. The terms~~ of ~~the~~acquired ~~amended note were not significantly different from the terms at December 31, 2006.~~businesses;

~~Results~~ ● performance of ~~operations~~retail/consumer markets, including consumer preferences and concerns about diet;

We● ~~have~~effective ~~incurred~~expansion ~~net~~of ~~losses from~~the ~~continuing~~Company’s ~~operations~~restaurants asin ~~follows:~~new and existing markets;

	Three months ended March 31,
	2007			2006
	(dollars in thousands, except per share data)
Net loss	$	(6,165	)	$	(1,070	)
Net loss per share	$	(0.77	)	$	(0.13	)

●	profitability and success of franchisee restaurants;

~~Our~~● ~~net~~availability ~~loss~~of ~~from continuing~~quality ~~operations~~real ~~was~~estate ~~$6.2~~locations ~~million (or $0.77 per share)~~ for ~~the~~restaurant three months ended March 31, 2007, compared to $1.1 million (or $0.13 per share) for the same period in the prior year. The loss is primarily due to operating expenses associated with our management infrastructure. We have put in place a management structure which we believe will enable us to significantly expand our operations, notably our Fatburger subsidiary. However, until the growth is realized, the cost of our management structure will be borne by our existing operations.expansion;

~~The~~● ~~following~~credit ~~sections describe~~risk ~~the~~management; ~~results of operations of our operating segments for the three months ended March 31, 2007.~~and

~~Restaurant~~● ~~segment~~asset/liability ~~operations~~management

~~The~~Except ~~following~~as ~~table~~may ~~shows~~be ~~our~~required ~~operating~~by ~~margin~~law, ~~for~~the ~~company~~Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to any Forward-~~owned restaurants~~Looking ~~for~~Statements to reflect the ~~three~~occurrence ~~months~~of ~~ended~~anticipated ~~March~~or ~~31,~~unanticipated ~~2007~~events ~~and~~or ~~2006:~~circumstances after the date of such statements.

	Three months ended March 31,
	2007		2006
	(% to Company-owned restaurant sales)
Restaurant sales:
Company-owned restaurant sales	100.0	%	100.0	%
Cost of sales – food, paper, merchandise	(24.0	)%	(28.1	)%
Cost of sales – wages and benefits	(34.0	)%	(30.1	)%
Restaurant depreciation and amortization	(6.2	)%	(4.6	)%
Operating margin (restaurant sales only)	35.8	%	37.2	%

~~The~~Executive ~~following table shows our total operating results from the restaurant segment for the three months ended March 31, 2007 and 2006:~~Overview

15Business overview

	Three months ended March 31,
	2007		2006
	(% to total revenue)
Total restaurant operations:
Company-owned restaurant sales	93.4	%	90.8	%
Royalty revenue	6.4	%	8.1	%
Franchise fee revenue	0.2	%	1.1	%
Total revenue	100.0	%	100.0	%
Cost of sales	(60.0	)%	(57.0	)%
General & administrative costs	(48.5	)%	(45.4	)%
Interest expense	(2.6	)%	(3.7	)%
Management allocation	(6.6	)%	—	%
Minority interest in losses	0.4	%	0.2	%
Segment loss	(17.3	)%	(5.9	)%

Fog Cutter Capital Group Inc. is primarily engaged in the operations of its Fatburger Holdings, Inc. (“Fatburger”) restaurant business. We acquired the controlling interest in Fatburger in August 2003 and currently own 82% voting control. Fatburger, “The Last Great Hamburger Stand”®, opened its first restaurant in Los Angeles in 1952. As of June 30, 2009, there were 92 Fatburger restaurants located primarily in California and Nevada, as well as in 12 other states and in Canada, United Arab Emirates and China. The restaurants specialize in fresh, made to order hamburgers and other specialty sandwiches. French fries, homemade onion rings, hand-scooped ice cream shakes and soft drinks round out the menu.

~~For~~We ~~the~~plan ~~three~~to ~~months~~open ~~ended~~additional ~~March~~Fatburger ~~31,~~restaurants ~~2007, company-owned~~throughout ~~restaurant~~the ~~sales~~United ~~increased~~States ~~20.6%~~and tointernationally, ~~$7.6~~including ~~million~~Canada, ~~from~~China, ~~$6.3 million~~Saudi ~~for~~Arabia, ~~the~~Indonesia, ~~same~~Kuwait, ~~period~~and inthe ~~2006~~United Arab Emirates. ~~This increase~~ ~~was~~We ~~primarily~~intend ~~the~~to ~~result~~continue ofto increase the ~~addition~~number of ~~nine~~franchised ~~company-owned restaurants~~locations in ~~2006~~the U.S. and ~~a price increase in June 2006~~internationally. ~~Same~~ Franchisees ~~store~~currently ~~sales~~own ~~for~~and ~~company-owned restaurants~~operate ~~open~~60 ~~during all~~ of ~~2006 decreased 6.3% for~~ the ~~first~~Fatburger ~~three~~locations ~~months of~~and ~~2007~~we ~~compared~~have toagreements ~~the~~for ~~same~~approximately ~~period~~100 innew ~~2006~~franchise locations. ~~The~~ Twenty-eight ~~operating~~restaurants ~~margin~~are ascurrently aowned ~~percentage~~and ofoperated ~~sales~~by ~~for~~the ~~company-owned locations~~Debtor ~~decreased~~In toPossession 35Subsidiaries.8% During inthe ~~2007~~bankruptcy ~~from~~period, ~~37.2%~~we inare ~~2006. This~~not ~~was~~consolidating ~~due~~the ~~primarily~~operations ~~to increases in labor costs~~ of ~~3.9%~~the asDebtor aIn ~~percentage~~Possession ofSubsidiaries ~~sales~~in ~~and~~our ~~restaurant~~financial ~~depreciation~~statements, ~~expense~~but ~~of 1.6%~~we ~~(from~~are ~~the~~being ~~addition~~reimbursed offor ~~nine~~certain ~~company-owned~~costs ~~restaurants~~supporting inthe ~~2006),~~operation ~~partially offset~~of bythe ~~reductions~~Debtor inIn ~~food~~Possession ~~costs~~Subsidiaries as aapproved ~~percentage~~by ofthe ~~sales~~Bankruptcy ~~of 4~~Court.~~1%.~~

~~Royalty~~Many ~~revenue~~factors ~~decreased~~affect ~~16.7%,~~our ~~from~~ability ~~$0.6 million for the first three months of 2006~~ to ~~$0.5~~open ~~million~~new ~~for~~franchise ~~the~~locations ~~three~~and ~~months~~we ~~ended~~expect ~~March 31,~~that ~~2007,~~it aswill atake ~~result~~several ofyears ~~decreased~~for ~~sales in~~ our ~~franchise~~current ~~locations~~franchisees ~~and~~to ~~the conversion~~open all of ~~five~~their ~~franchise~~restaurant locations. As tois ~~company-owned~~typical ~~stores~~for ~~subsequent~~our ~~to March 31~~industry, ~~2006. We added one franchise location during~~ the ~~three~~identification ~~months~~of ~~ended~~qualified ~~March~~franchisees ~~31,~~and ~~2007. Same~~quality ~~store~~locations ~~sales~~has ~~for~~an ~~franchise~~impact ~~restaurants~~on ~~open during~~the ~~all~~rate of ~~2006~~growth ~~decreased~~in ~~11.5% for~~ the ~~first~~number ~~three months~~ of ~~2007~~our ~~compared to the same period in 2006~~restaurants.

~~System-wide~~In ~~same~~addition ~~store sales decreased 9.3% for stores open during all of 2006 during the first three months of 2007 compared~~ to ~~the same~~our ~~period in 2006. Our loss from~~ restaurant ~~operations was 17.3% of total revenue for the three months ended March 31~~operation, ~~2007~~we ~~compared~~also toconduct ~~5.9%~~manufacturing ~~for~~activities ~~the~~and ~~same~~make ~~period~~real inestate ~~2006. The change is due to the implementation of a management allocation of our corporate expenses, as well as increased general~~ and ~~administrative~~other ~~expenses~~real asestate-related weinvestments ~~continue~~through tovarious ~~set~~controlled ~~up our infrastructure to support our expansion~~subsidiaries.

We intend to continue to open company-owned restaurants in strategic markets and increase the number of franchised locations in the U.S. and internationally. Since we acquired our interest in Fatburger in August 2003, Fatburger has added 38 new restaurants through March 31, 2007. While we seek to expand the number of existing restaurants, the identification of qualified franchisees and quality locations has an effect on the rate of growth in the number of our restaurants.14

~~Manufacturing segment operations~~Index

	Three months ended March 31,
	2007		2006
	(% to total revenue)
Manufacturing sales	100.0	%	100.0	%
Manufacturing cost of sales	(59.5	)%	(50.8	)%
Engineering and development	(10.2	)%	(7.0	)%
Operating margin	30.3	%	42.2	%
Compensation expense	(18.1	)%	(8.2	)%
Depreciation expense	(1.1	)%	(0.2	)%
Other operating expense	(8.2	)%	(3.4	)%
Segment income	2.9	%	30.4	%

Operating segments

~~Total~~Our ~~revenue~~operating ~~for~~segments this segment was $2.3 million for the three months ended March 31, 2007, compared to $3.3 million for the same period in 2006. Net income for this segment was $0.1 million for the first three months of 2007, compared to $1.0 for the same period in 2006. In order to focus our efforts on our restaurant segment, we intend to sell our equity position in DAC for an amount higher than our net investment. If we were to sell this segment, it would decrease our net revenue and increase our net loss. There can be no assurance that we will be able to sell this segment for a profit.are:

16(i) Restaurant operations – conducted through our Fatburger subsidiary,

~~Real~~(ii) ~~estate~~Manufacturing ~~and~~operations ~~finance~~– ~~segment operations~~conducted through our wholly owned subsidiary, DAC International (“DAC”), and

	Three months ended March 31,
Real estate operations:	2007			2006
	(dollars in thousands)
Operating revenue	$	935		$	1,066
Operating expenses	(387		)	(441		)
Depreciation and amortization	(110		)	(138		)
Operating margin	438			487
General and administrative expenses	(38		)	(227		)
Interest expense	(339		)	(256		)
Gain on sale of real estate	—			505
Other non-operating income	5			5
Income from real estate operations	$	66		$	514

(iii)

Real estate and financing operations.

~~During~~Due ~~the three months ended March 31, 2007, our operating margin on real estate decreased less than $0.1 million,~~ to ~~$0.4 million, compared to $0.5 million for~~ the ~~same~~varied ~~period~~nature of ~~2006. Although we have continued to sell certain real estate investments, we have been able to maintain~~ our ~~operating margin at relatively stable levels due to our success in reducing vacancies and increasing lease rates. In the first quarter of 2006~~operations, we ~~sold~~do ~~seven~~not ~~buildings~~utilize ~~for total proceeds of $3.5 million, resulting in~~ a ~~net~~standard ~~gain~~array ~~on sale~~ of ~~approximately~~key ~~$0.5~~performance ~~million. General~~indicators ~~and~~in ~~administrative~~evaluating ~~expenses~~our ~~have decreased~~results ~~for the first quarter~~ of ~~2007 compared to 2006, primarily due to the VIE investments in Barcelona nearing completion and being marketed for sale~~operations. ~~Interest~~ Our ~~expense~~evaluation ~~for~~instead ~~the~~focuses ~~three months ended March 31, 2007 has increased compared to the same period of 2006 as we borrowed money~~ on ~~various~~an ~~notes~~investment-by-investment ~~payable~~or ~~secured~~ asset-by-asset ~~certain~~analysis ~~real~~within ~~estate investments~~our inoperating ~~the second half of 2006~~segments.

~~Interest~~Significant income – Our interest income for the three months ended March 31, 2007 was less than $0.1 million, compared with $0.1 million for the first quarter of 2006. The decrease is primarily attributable to a net reduction in average asset balance, reflecting the sale or repayment of notes in our notes receivable portfolio.events

~~Foreign~~The ~~exchange~~following ~~gains –~~significant ~~Changes~~events inaffected ~~foreign~~our ~~currency~~operations ~~exchange rates resulted in a net gain of approximately $0.1 million in this segment~~ for the ~~three~~six months ended ~~March~~June 3130, ~~2007~~ and 2006. At March 31, 2007, approximately 18% of our total assets and 4% of our total liabilities were denominated in the euro. See Item 3 – Quantitative and Qualitative Disclosures about Market Risk for further analysis.2009:

~~Other~~Bankruptcy ~~non-operating~~Proceedings ~~income~~— On ~~– In~~April ~~the~~6, ~~three~~2009, ~~month~~certain ~~ended~~of ~~March~~our ~~31,~~controlled ~~2006,~~subsidiaries wefiled ~~had~~voluntary ~~equity~~petitions infor ~~losses~~relief ofunder ~~equity investee~~Chapter 11 of ~~$0.1~~the ~~million~~United ~~and~~States ~~gain~~Bankruptcy onCode ~~sale~~(the of“Chapter ~~notes~~11 ~~receivable~~Cases”) in the United States Bankruptcy Court for the Central District of ~~$0.5~~California ~~million in~~– ~~this~~San ~~segment~~Fernando Valley Division (the “Bankruptcy Court”). ~~There~~ ~~are~~The noentities ~~comparable income~~involved ~~sources~~and inthe ~~2007.~~case numbers assigned to the subsidiaries (collectively, the “Debtor In Possession Subsidiaries”) are as follows:

~~Software~~Fatburger ~~development~~Restaurants ~~and~~of ~~sales~~California, ~~segment~~Inc., ~~operations~~Case No. 1:09-bk-13964-GM

	Three months ended March 31,
	2007			2006
	(dollars in thousands)
Software sales	$	4		$	17
Engineering and development	(151		)	(180		)
Compensation expense	(108		)	(277		)
Depreciation expense	(112		)	(79		)
Other operating expense	(113		)	(159		)
Interest expense	(268		)	(164		)
Segment loss	$	(748	)	$	(842	)

Fatburger Restaurants of Nevada, Inc., Case No.1:09-bk-13965-GM

~~Total~~The ~~revenue~~Chapter ~~for~~11 ~~this segment~~Cases ~~was~~are ~~less~~being ~~than~~jointly $0administered.1 Since ~~million for each of~~ the ~~three~~Chapter ~~months~~11 ~~ended~~bankruptcy ~~March~~filing 31date, ~~2007~~ ~~and 2006. Segment loss was approximately $0.8 million for~~ the ~~first~~Debtor ~~quarter of 2007 and 2006.~~ In ~~order~~Possession toSubsidiaries ~~focus~~have ~~our~~been ~~efforts~~operating ontheir ~~our restaurant~~bankruptcy ~~segment,~~estates weas ~~intend~~“debtors toin ~~sell~~possession” ~~all,~~under orthe ajurisdiction ~~portion~~ of, ~~our~~the ~~equity~~Bankruptcy ~~position in~~Court ~~Centrisoft. If~~and wein ~~were~~accordance towith ~~sell~~the ~~this segment,~~applicable weprovisions ~~believe~~of ~~that~~the itBankruptcy ~~would~~Code ~~have a positive effect on our cash flow~~ and ~~decrease~~ ~~our~~orders ~~net~~of ~~loss. There~~the ~~can~~Bankruptcy ~~be no assurance that we will be able to sell this segment~~Court.

~~Corporate~~On ~~expenses~~or about November 3, 2009, the Debtor In Possession Subsidiaries filed a joint plan of reorganization and related disclosure statement. The Bankruptcy Court is currently considering the plan of reorganization and disclosure statement.

	Three months ended March 31,
	2007		2006
	(dollars in thousands)
Compensation and employee benefits	$	3,564	$	1,348
Travel and entertainment	429		307
Insurance	136		262
Professional fees	292		61
Occupancy costs	44		47
Directors fees	124		77
Other expenses	159		128
Total operating expenses	$	4,748	$	2,230

During the time that the Debtor In Possession Subsidiaries are under bankruptcy protection, we will be deemed to not be in control of the Debtor In Possession Subsidiaries. As a result, certain assets, liabilities and the results of operations of the Debtor In Possession Subsidiaries were no longer part of our consolidated financial statements effective as of the date of the Chapter 11 Cases. As of June 30, 2009, the we had recorded an Investment in Debtor In Possession Subsidiaries in the amount of $4.0 million, which represents our net carrying value of the assets and liabilities of the Debtor In Possession Subsidiaries.

17Borrowings – On June 26, 2009, certain Fatburger entities entered into two loan agreements in the total amount of $1.5 million.

~~For~~The Debtor ~~the~~In ~~three~~Possession ~~months ended~~Subsidiaries ~~March~~borrowed ~~31, 2007, we incurred corporate operating expenses of~~ $41.71 million~~, compared~~ ~~to $2.2 million for~~ (the ~~same~~“DIP ~~period~~Loan”) inunder ~~2006. This~~authorization ~~increase~~of ~~is primarily due to an increase in compensation expenses. Corporate expenses for~~ the ~~first~~Bankruptcy ~~quarter of 2007 also include $0~~Court.4 The ~~million~~loan ~~for~~matures ~~share based~~June ~~payments~~26, ~~accounted~~2010 ~~for~~and ~~under~~bears ~~FAS~~interest ~~123R,~~at ~~compared~~15%. The toDIP ~~less~~loan ~~than~~is ~~$0.1~~secured ~~million for~~by the ~~same~~assets ~~period~~of inthe ~~2006. The increase~~Debtor isIn ~~due~~Possession toSubsidiaries ~~various~~and ~~stock~~is ~~option~~further ~~grants~~guaranteed ~~in August 2006~~ and asecured ~~stock option~~by ~~exchange~~the ~~plan~~Company ~~adopted~~and inother ~~December~~non-Debtor ~~2006~~Fatburger entities.

~~Management~~In ~~allocation~~addition, Fatburger Corporation and ~~other~~Fatburger ~~intercompany charges~~North America, Inc. borrowed $0.4 million (the “Non-DIP Loan”) from the same lender. The Non-DIP loan matures June 26, 2010 and bears interest at 15%. The Non-DIP loan is secured by the assets of Fatburger Corporation and Fatburger North America, Inc and is further guaranteed and secured by us.

InRestaurant ~~the~~openings ~~fourth~~and ~~quarter~~closures of– ~~2006,~~During ~~as we focused our efforts on~~ the ~~Fatburger~~ ~~segment~~six ~~we began allocating a portion of our corporate expenses to our restaurant segment to more accurately reflect the operating results of that segment. This allocation was $0.5 million for the three~~ months ended ~~March~~June 3130, ~~2007. This~~2009, ~~allocation~~Fatburger isopened ~~eliminated~~six ~~upon consolidation~~additional onfranchise ~~the~~locations. In ~~Consolidated~~addition, ~~Statements~~one oflocation ~~Operations. There~~ was noconverted ~~comparable~~from ~~allocation~~a infranchise-owned ~~the first~~to ~~quarter~~a ofcompany-owned ~~2006. Other intercompany~~restaurant ~~charges,~~and ~~including~~one ~~intercompany~~franchise ~~interest~~location ~~expense,~~and ~~are~~four ~~eliminated upon~~company-owned ~~consolidation,~~locations ~~and~~(including ~~totaled~~locations ~~$0.3~~owned ~~million~~by ~~for~~ the ~~three~~Debtor ~~month~~In ~~ended~~Possession ~~March 31,~~Subsidiaries) ~~2007~~were ~~and $0~~closed.~~2 million for the same period in 2006.~~

~~Income taxes~~15

~~During the three months ended March 31, 2007 and 2006, a provision for income taxes was not required due to the net operating loss generated during the period.~~Index

~~Discontinued~~Results of operations

InWe ~~December,~~have weincurred ~~and~~net ~~our~~losses ~~49% partners reached an agreement to sell our ownership interest in George Elkins, a California commercial mortgage banking operation. The sale closed in February 2007. As such, results~~ from continuing operations of ~~George Elkins for the three months ended March 31, 2007 and 2006 have been classified~~ as discontinued operations. Prior to the decision to sell George Elkins, it was a reportable segment of our operations. The following table shows our total operating results from George Elkins for the first quarterfollows:

	Three months ended March 31,
	Three months ended June 30,							Six months ended June 30,
	2007			2006
	2009				2008			2009			2008
	(% to total revenue)
	(dollars in thousands, except per share data)
Total revenue	$	1,807		$	1,993
Net loss	$	(1,786	)		$	(3,959	)	$	(4,057	)	$	(8,293	)
Compensation expense	(1,534		)	(1,657		)
Net loss per share	$	(0.22	)		$	(0.50	)	$	(0.51	)	$	(1.04	)
Other operating expense	(281		)	(234		)
Non-operating income	17			146
Gain on sale of discontinued operations	2,492			—
Minority interest in earnings	13			(166		)
Segment income	$	2,514		$	82

~~Changes~~Our net loss from continuing operations was $4.0 million (or $0.51 per share) for the six months ended June 30, 2009 and $1.8 million (or $0.22 per share) for the three months then ended. This compares to $8.3 million (or $1.04 per share) and $4.0 million (or $0.50 per share) for the six and three months ended June 30, 2008, respectively. The loss is primarily due to operating expenses associated with our management infrastructure. We have put in ~~financial~~place ~~condition~~a management structure that we believe will enable us to significantly expand our operations, notably our Fatburger subsidiary. However, until the growth is realized, the cost of our management structure will be borne by our existing operations and we will likely continue to incur losses.

~~Our~~The ~~assets,~~following ~~liabilities~~ sections describe the results of operations of our operating segments for the three and ~~stockholders’~~six ~~equity~~months ~~can~~ended beJune ~~summarized~~30, as2009 ~~follows:~~and 2008.

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Total assets	$	59,073	$	59,800
Total liabilities	$	51,638	$	49,005
Total minority interests	$	436	$	571
Total stockholders’ equity	$	6,999	$	10,224

Restaurant segment operations

The ~~decrease~~following intable ~~total assets~~shows ~~during the first three months of 2007 is primarily due to the disposal of~~ our ~~George~~operating ~~Elkins~~margin ~~subsidiary,~~for ~~which~~company-owned ~~was~~restaurants ~~classified as held~~ for ~~sale at December 31, 2006. Total liabilities increased over~~ the ~~first~~ three ~~months of 2007, primarily due to additional borrowings of $1.1 million~~ and ansix ~~increase~~months inended ~~accounts~~June payable and accrued liabilities. The cash received from the disposal of George Elkins was used to support our operating activities. Stockholders’ equity decreased during the first quarter of 2007 by approximately $3.2 million30, ~~mainly~~2009 ~~resulting~~and ~~from our net loss of $3.7 million, partially offset by share based compensation of $0.4 million. These changes are described in more detail as follows~~2008:

Cash

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(% to Company-owned restaurant sales)
Restaurant sales:
Company-owned restaurant sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales – food, paper, merchandise		(24.8	%)		(26.4	%)		(25.1	%)		(25.8	%)
Cost of sales – wages and benefits		(31.8	%)		(33.9	%)		(31.6	%)		(33.9	%)
Restaurant depreciation and amortization		(1.2	%)		(6.1	%)		(6.9	%)		(6.0	%)
Operating margin (restaurant sales only)		42.2	%		33.6	%		36.4	%		34.3	%

~~Our~~For ~~cash~~the six months ended June 30, 2009, company-owned restaurant sales decreased to $08.2 1 million from ~~December~~$15.9 31million for the same period in 2008. For the three months ended June 30, ~~2006~~2009, company-owned restaurant sales decreased to ~~March~~$1.0 ~~31,~~million ~~2007~~from $8. ~~Significant~~0 ~~sources~~million ~~and~~for ~~uses~~the same period in 2008. This decrease was primarily the result of ~~cash~~the elimination of $5.9 million in sales from stores owned by the Debtor In Possession Subsidiaries, which are not being consolidated during the bankruptcy period. Same store sales for company-owned restaurants, including Debtor In Possession Subsidiaries stores, open during all of 2008 decreased 6.2% for the first six months of 2009 and 3.7% in the second quarter ~~include:~~of 2009, as compared to the same periods in 2008.

18The following table shows our total operating results from the restaurant segment for the three and six months ended June 30, 2009 and 2008:

· $2.3 million of cash used in operations – comprised primarily of our net loss of $6.2 million adjusted for non-cash income and expense items of $1.1 million;

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(% to total revenue)
Total restaurant operations:
Company-owned restaurant sales		57.9	%		92.4	%		86.2	%		92.4	%
Royalty revenue		33.6	%		6.9	%		11.7	%		6.6	%
Franchise fee revenue		8.5	%		0.7	%		2.1	%		1.0	%
Total revenue		100.0	%		100.0	%		100.0	%		100.0	%

Cost of sales		(32.8	%)		(61.3	%)		(48.9	%)		(60.8	%)
General & administrative costs		(83.2	%)		(50.3	%)		(55.8	%)		(48.8	%)
Interest expense		(3.1	%)		(1.9	%)		(2.8	%)		(2.1	%)
Management allocation		(17.3	%)		(6.1	%)		(8.7	%)		(6.1	%)
Minority interest in losses		6.5	%		1.4	%		2.0	%		1.2	%
Segment loss		(29.9	%)		(18.2	%)		(14.2	%)		(16.6	%)

· Royalty revenue remained steady at $1.5 1 million for the first six months of ~~cash~~2009 ~~used~~compared to the same period in ~~investing~~2008 ~~activities~~and –was ~~comprised~~also ~~mainly~~stable ofat $10.36 million ~~invested~~ infor ~~restaurant~~the ~~assets~~three months ended June 30, 2009 and ~~other~~2008. We ~~property~~added six franchise locations during the six months ended June 30, ~~plant~~2009, &five ~~equipment;~~of these in the second quarter. This increase was partially offset by one location being converted from a franchise to a company-owned restaurant and the closure of one franchise restaurant. The royalty increase from the net increase in franchise locations was offset by a decrease of 8.9% in same store sales for franchise restaurants for the first half of 2009 (8.4% decrease in the second quarter) compared to the same period in 2008.

· $0.9 million of cash provided by financing activities – includes additional borrowing of $1.1 million, partially offset by repayments of borrowings and capital leases of $0.2 million; and16

~~· $2.7 million net cash inflow from discontinued operations.~~Index

~~Net~~System-wide ~~investments in~~same ~~real~~store ~~estate~~sales decreased 7.7% for stores open during all of 2008 during the first six months of 2009 compared to the same period in 2008, and ~~related~~decreased ~~liabilities~~6.4% in the second quarter of 2009 compared to the same period in 2008.

~~Our~~We ~~investments~~plan to open additional Fatburger restaurants throughout the United States and internationally, including Canada, China, Kuwait, Saudi Arabia, Indonesia and the United Arab Emirates. We intend to increase the number of franchised locations in ~~real~~ ~~estate~~the ~~can~~U.S. beand ~~summarized~~internationally. Fatburger ashas ~~follows:~~opened a net increase of 43 restaurant locations since our acquisition in 2003. As is typical for our industry, the identification of qualified franchisees and quality locations has an impact on the rate of growth in the number of our restaurants.

	March 31, 2007			December 31, 2006
	(dollars in thousands)
US based investments – held for sale (1):
Purchase price / improvements	$	403		$	403
Accumulated depreciation and amortization	(38		)	(35		)
Net book value	365			368
Foreign-based investments – held for sale (2):
Purchase price / improvements	10,885			10,694
Total investments in real estate, held for sale	$	11,250		$	11,062
US based investments – held for use (3):
Purchase price / improvements	$	13,265		$	13,200
Accumulated depreciation and amortization	(1,805		)	(1,698		)
Total investments in real estate, held for use	$	11,460		$	11,502
Total investments in real estate, net	$	22,710		$	22,564

Manufacturing segment operations

~~(1) Includes~~The 1following ~~commercial~~table ~~property~~summarizes ~~within~~ the ~~United~~ ~~States~~operating atresults ~~March~~of ~~31,~~our ~~2007~~manufacturing segment for the three and ~~December~~six 31months ended June 30, ~~2006.~~2009 and 2008:

(2) Includes 2 apartment buildings in Barcelona, Spain at March 31, 2007 and December 31, 2006.

	Three months ended June 30,						Six months ended June 30,
	2009			2008			2009			2008
	(% to total revenue)
Manufacturing sales		100.0	%		100.0	%		100.0	%		100.0	%
Manufacturing cost of sales		(65.8	%)		(56.7	%)		(65.6	%)		(57.8	%)
Engineering and development		(10.1	%)		(9.8	%)		(13.3	%)		(11.0	%)
Operating margin		24.1	%		33.5	%		21.1	%		31.2	%

Compensation expense		(14.3	%)		(14.0	%)		(19.6	%)		(18.7	%)
Depreciation expense		(1.3	%)		(1.2	%)		(1.6	%)		(1.1	%)
Other operating expense		(9.8	%)		(12.2	%)		(12.4	%)		(11.1	%)
Segment income (loss)		(1.3	%)		6.1	%		(12.5	%)		0.3	%

Total revenue for this segment was $4.0 million for the six months ended June 30, 2009 ($2.4 million for the second quarter), compared to $5.3 million for the same six months ($3.1 million for the second quarter) ~~Includes~~ 32in ~~commercial~~2008. Net ~~properties~~loss ~~under capital~~for ~~lease~~this ~~throughout~~segment was $0.5 million for the ~~United~~six ~~States~~months atended ~~March~~June 3130, ~~2007~~2009 ~~and~~(less ~~December~~than 31$0.1 million for the second quarter), ~~2006~~ compared to breakeven operations for the same six months (net income of $0.2 million for the second quarter) in 2008.

~~Borrowings~~Real ~~related to our investments in real~~ estate ~~were~~and asfinance ~~follows:~~segment operations

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Obligations on real estate under capital lease	$	10,337	$	10,471
Borrowings on Barcelona properties	3,435		3,435
Total borrowings related to real estate	$	13,772	$	13,906

In February 2008, we sold FCRI, our wholly-owned subsidiary that held our leased real estate portfolio. The sales price was $8.5 million and we recorded a gain on sale of $4.2 million. Results of operations from FCRI (including the gain on sale in 2008) have been classified as discontinued operations.

~~Investments~~Interest inincome ~~properties under~~– ~~capital~~Our ~~lease~~interest ~~decreased~~income ~~less~~for ~~than~~the ~~$0.1~~first ~~million~~half atof ~~March~~2009 31was $12,000 ~~2007~~compared ~~due~~ to ~~depreciation~~ of $~~0.1~~71,000 ~~million~~in ~~during~~ the first ~~three~~half ~~months~~ of ~~2007,~~2008. For ~~partially offset~~the bythree ~~capital~~months ~~improvements~~ending toJune ~~those~~30, ~~properties. Obligations~~2009 ~~under~~and ~~capital~~2008, ~~leases~~our ~~related~~interest ~~to these~~income ~~properties~~was ~~decreased~~ $~~0.1~~4,000 ~~million~~and ~~due~~$34,000, ~~to scheduled monthly payments during the same period~~respectively. ~~Our~~ The ~~investment in~~reduction ~~apartment buildings~~ in ~~Barcelona,~~interest ~~Spain~~income ~~increased~~reflects ~~$0.2~~the ~~million~~repayment ~~since December~~of ~~31,~~notes ~~2006. This~~receivable ~~was~~during ~~primarily~~ the ~~result~~ oflast ~~increases~~half ~~in unrealized foreign currency translation~~ of $02008.~~1 million.~~

~~Net~~Interest ~~property, plant~~expense – We did not have interest expense related to real estate operations for the first half of 2009. We sold or wrote off our remaining real estate holdings in 2008 and ~~equipment~~repaid or restructured the related debt. During the first six months of 2008, our real estate related interest expense was $1.0 million ($0.5 million for the second quarter).

~~Net~~Foreign ~~property,~~exchange ~~plant~~gains ~~and equipment~~– ~~decreased~~Changes ~~$0.3~~in ~~million~~foreign atcurrency ~~March~~exchange ~~31,~~rates ~~2007~~resulted ~~compared~~in toa ~~December~~net ~~31,~~gain ~~2006, primarily~~of ~~due~~approximately to$0.5 ~~scheduled~~million ~~monthly~~in ~~depreciation~~this onsegment ~~those~~for ~~assets. Obligations~~the onsix ~~property,~~months ~~plant,~~ended ~~and~~June ~~equipment under~~30, ~~capital~~2008 ~~lease~~(net ~~remained~~loss ~~stable~~of atless than $0.21 million atin ~~March~~the ~~31,~~second ~~2007~~quarter). ~~compared to~~There ~~December~~were ~~31,~~no ~~2006~~comparable foreign currency gains or losses during 2009.

~~Goodwill and~~Market ~~net~~value ~~intangible~~impairment ~~assets~~reserves – We recognized a market value impairment reserve of $0.6 million on one property in Barcelona, Spain in the first half of 2008 ($0.4 million in the second quarter). We did not have any impairment losses in 2009.

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Goodwill – Fatburger	$	7,063	$	7,063
Goodwill – Centrisoft	1,999		1,999
Goodwill – DAC International	1,464		1,464
Total goodwill	$	10,526	$	10,526
Net intangible assets – Fatburger	$	4,896	$	4,943
Net intangible assets – Centrisoft	297		319
Total net intangible assets	$	5,193	$	5,262

Other non-operating income – In the six months ended June 30, 2008, we had equity in income of equity investee of $0.2 million. There was nothing comparable in 2009.

1917

Net intangible assets decreased less than $0.1 million in the three months ended March 31, 2007 due to monthly amortization of those assets. Net intangible assets at March 31, 2007 consists of trademark rights of approximately $4.0 million, franchise agreements of approximately $0.6 million, sales contracts for Centrisoft of approximately $0.3 million, and other miscellaneous intangible assets of approximately $0.3 million. We do not believe that there is any impairment of goodwill or net intangible assets at March 31, 2007.Index

~~Notes~~Corporate ~~receivable~~expenses

AsThe offollowing ~~March~~table ~~31,~~summarizes ~~2007,~~ our ~~notes~~ ~~receivable~~corporate ~~portfolio~~expenses ~~(excluding~~for ~~loans~~the ~~to senior executives) consists of~~ three ~~individual~~ ~~loans~~and ~~with~~six amonths ~~combined~~ended ~~carrying~~June ~~value of $0.8 million. Two of the loans are secured by real estate consisting of commercial property located in Texas and Arizona~~30, ~~and~~2009 ~~one loan is secured by stock in a restaurant business. The loans have a weighted average interest rate (excluding fees~~ and ~~points)~~ ~~of 10.9% and a weighted average maturity of 12 months.~~2008:

Loans to senior executives

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008
	(dollars in thousands)
Compensation and employee benefits	$	371	$	1,306	$	1,117	$	4,036
Professional fees		352		296		363		744
Travel and entertainment		38		499		128		848
Insurance		30		42		108		138
Directors fees		78		94		157		189
Occupancy costs		20		32		57		70
Other expenses		677		152		1,139		289
Total operating expenses	$	1,566	$	2,421	$	3,069	$	6,314

WeFor ~~currently~~the ~~have~~six ~~two loans~~months toended ~~our~~June ~~Chairman~~30, ~~and Chief Executive Officer~~2009, ~~Andrew~~we ~~Wiederhorn,~~incurred ~~for~~corporate ~~a total~~operating expenses of $13.1 million ($1. ~~Both~~6 ~~loans~~million ~~were made~~for onthe ~~February~~second 21quarter), ~~2002~~compared ~~(prior~~ to ~~the~~$6.3 ~~passage~~million offor the ~~Sarbanes-Oxley~~same ~~Act~~six ~~of 2002)~~months ($2. ~~The~~4 ~~loans~~million ~~matured~~for onthe ~~February~~second ~~21, 2007,~~quarter) ~~and~~in ~~bear~~2008. This ~~interest~~decrease atis ~~the~~primarily ~~prime~~due ~~rate,~~to asa ~~published~~decrease in ~~the~~compensation ~~Wall~~expenses ~~Street Journal,~~related ~~which~~to ~~interest~~senior isexecutives ~~added~~and topartially ~~the~~offset ~~principal. We~~by ~~have~~an ~~not~~increase ~~extended~~in ~~the~~other ~~maturity~~expenses ~~date~~due ofprimarily ~~the loans~~to oran ~~amended~~increase ~~any~~in ~~other~~interest ~~terms. The Company~~expense ~~and~~on Mrgeneral corporate debt. Other ~~Wiederhorn~~expenses ~~are~~for ~~cooperating~~the insix ~~completing~~months ~~the~~ended ~~repayment~~June 30, 2009 include general corporate interest expense of $1.0 million ($0.5 million for the ~~loans~~ insecond ~~full~~quarter).

~~Other~~Management ~~assets~~allocation and other intercompany charges

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Trade receivables	$	1,554	$	1,586
Inventories	$	2,687	$	2,442
Other current assets:
Prepaid expenses	$	393	$	429
Other restaurant segment assets	779		718
Other VIE-related assets	33		96
Total other current assets	$	1,205	$	1,243
Other assets:
Software costs	$	1,133	$	1,217
Investment in operating leases	42		54
Other	184		182
Total other assets	$	1,359	$	1,453

In 2006, as we focused our efforts on the Fatburger segment we began allocating a portion of our corporate expenses to our restaurant segment to more accurately reflect the operating results of that segment. This allocation was $0.8 million the six months ended June 30, 2009 and $1.1 million for the six months ended June 30, 2008. The management fee was $0.3 and $0.5 million for the second quarter in 2009 and 2008, respectively). This allocation is eliminated upon consolidation on the Consolidated Statements of Operations. Other intercompany charges, including intercompany interest expense, are eliminated upon consolidation.

~~Trade~~Income ~~receivables and inventories at March 31, 2007 relate primarily to the operations of DAC.~~taxes

~~Deferred~~During the six months ended June 30, 2009 and 2008, a provision for income taxes was not required due to the net operating loss generated during the period. We recorded tax expense of $3,000 for state taxes paid during the first quarter of 2009. We recorded a tax benefit of $52,000 to recognize tax refunds received in the first quarter of 2008 on prior taxes paid.

~~Our~~Discontinued deferred income relating to the collection of unearned Fatburger franchise fees was $4.5 million at March 31, 2007, compared with $4.1 million at December 31, 2006. As of March 31, 2007, nearly all of the deferred income was comprised of the non-refundable franchise fee received by Fatburger for each future franchise location. These initial fees generally represent half of the total fee per location. The balance of the franchise fee (approximately an additional $4.5 million) will be collected in the future when leases on these specific franchise locations are signed.operations

~~Notes~~Leased ~~payable~~real estate portfolio – In February 2008, we sold our wholly-owned subsidiary, FCRI, which held our leased real estate portfolio. At the time of sale, this portfolio was comprised of leasehold interests in 72 freestanding retail buildings located throughout the United States. Prior to the sale, the leased real estate portfolio was part of our Real Estate and Financing Operations segment. The following represents the results of operations during the time of our ownership of FCRI:

As of March 31, 2007, our notes payable (excluding borrowings on real estate) totaled $13.4 million, including $7.0 million of debt held at Fatburger, $0.7 million at Centrisoft, and $0.5 million at DAC. This compares to $12.4 million at December 31, 2006. The increase was primarily due to additional borrowings of $1.1 million.

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009			2008
	(dollars in thousands)
Operating revenue	$	-	$	-	$	-		$	610
Operating expenses		-		-		-			(240	)
Depreciation and amortization		-		-		-			(39	)
Operating margin		-		-		-			331

General and administrative expenses		-		-		-			(7	)
Interest expense		-		-		-			(157	)
Other non-operating income (expense)		-		-		(13	)		8
Gain on sale of discontinued real estate operations		-		-		-			4,217
Income from discontinued real estate operations	$	-	$	-	$	(13	)	$	4,392

~~Accounts payable and accrued liabilities~~18

~~Accounts payable and accrued liabilities totaled $13.5 million at March 31, 2007, compared with $11.8 million at December 31, 2006, and consisted of the following:~~Index

	March 31, 2007		December 31, 2006
	(dollars in thousands)
Accounts payable	$	6,263	$	6,999
Sales deposits	1,970		1,104
Accrued wages, bonus and commissions	2,641		669
Leased real estate portfolio-related accruals	551		597
Other	2,032		2,393
Total accrued expenses and other liabilities	$	13,457	$	11,762

Software development and sales operations – In June 2008, we exercised our rights under a loan security agreement on loans to a consolidated subsidiary, Centrisoft Corporation. Pursuant to the security agreement, the collateral assets of Centrisoft were transferred to us in satisfaction of the loans. Centrisoft has since ceased operations. As of June 30, 2008, we no longer included Centrisoft as a consolidated subsidiary and as of December 31, 2008, the carrying value of the assets acquired from Centrisoft was zero. The following represents the results of operations during the time of our ownership or operation of the Centrisoft assets:

	Three months ended June 30,					Six months ended June 30,
	2009		2008			2009		2008
	(dollars in thousands)
Software sales	$	-	$	26		$	-	$	128
Engineering and development		-		(78	)		-		(158	)
Compensation expense		-		(43	)		-		(92	)
Depreciation and amortization		-		(73	)		-		(182	)
Other operating expense		-		(57	)		-		(123	)
Interest expense		-		(199	)		-		(492	)
Segment loss	$	-	$	(424	)	$	-	$	(919	)

~~The increase~~Changes in ~~accounts~~financial ~~payable relates primarily to accrued wages and bonuses.~~condition

~~Deferred~~Our ~~income~~assets, ~~taxes~~liabilities and stockholders’ equity (deficit) can be summarized as follows:

There was no significant change to our deferred income taxes at March 31, 2007, compared to December 31, 2006.

	June 30, 2009			December 31, 2008
	(dollars in thousands)
Total assets	$	22,284		$	27,573
Total liabilities	$	35,006		$	36,315
Total minority interests	$	177		$	365
Total stockholders’ equity (deficit)	$	(12,899	)	$	(9,107	)

~~Liquidity~~ The $5.3 million decrease in total assets during the first six months of 2009 is primarily due to a net decrease in assets of $4.0 related to the Debtor In Possession Subsidiaries, which are not included in the consolidated financial statements during their bankruptcy period. Total liabilities decreased $1.3 million over the first six months of 2009 due to $5.0 million in liabilities related to the Debtor In Possession Subsidiaries, partially offset by increases in accounts payable, accrued liabilities, borrowings and ~~Capital~~deferred ~~Resources~~income. Stockholders’ equity (deficit) decreased during the first quarter of 2009 by approximately $3.8 million, mainly resulting from our net loss of $4.0 million, partially offset by share based compensation of $0.3 million. These changes are described in more detail as follows:

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, acquisitions, and expansion (including growth of company-owned and franchised restaurant locations), engage in loan acquisition and lending activities and for other general business purposes. In addition to our cash on hand, our primary sources of funds for liquidity during the first three months of 2007 consisted of cash provided by proceeds from the sale of discontinued operations, new borrowings, and the repayments to us from borrowers. As of March 31, 2007, we had cash or cash equivalents of $1.6 million, which, together with projected borrowings and proceeds from the sales of assets, we believe will be sufficient to meet our current liquidity needs.Cash

AtOur ~~March~~cash ~~31,~~decreased ~~2007, we~~$0.2 ~~had~~million ~~total~~from ~~consolidated~~December ~~secured~~31, ~~indebtedness~~2008 ofto ~~$29.3~~June ~~million~~30, as2009. Significant ~~well~~sources asand ~~$22.3 million~~uses of ~~other~~cash ~~liabilities. Our consolidated~~during ~~secured~~the ~~indebtedness~~quarter ~~consisted of~~include:

~~· notes payable~~● ~~and~~$0.6 ~~other~~million ~~debt~~of cash provided by operations – comprised primarily of ~~Fatburger~~our net loss from continuing operations of $74.0 million ~~secured~~adjusted byfor ~~the~~net ~~assets~~non-cash items of ~~Fatburger~~ $4.6 million;

· ● $121.4 6 million of cash used in ~~capital~~investing ~~leases~~activities, ~~maturing~~including ~~between~~investment ~~2010~~in Debtor In Possession Subsidiaries of $1.2 million and ~~2040~~investment ~~which~~in ~~are~~property, ~~secured~~plant ~~by real~~and ~~estate~~equipment of $0.2 million; and

~~· notes payable~~● $0.8 million of cash provided in financing activities, including proceeds from borrowings of $31.4 million, ~~secured~~net byof ~~our~~payments ~~two~~on ~~Barcelona~~borrowings ~~properties;~~of $0.4 million and payments on capital leases of $0.2 million.

~~· $5.3 million~~Net ofproperty, ~~notes~~plant ~~payable~~and ~~secured by various assets of the Company;~~equipment

· Net property, plant and equipment decreased $0.5 .1 million at June 30, 2009 compared to December 31, 2008, primarily due to the elimination of ~~short-term~~$4.1 ~~borrowings~~million ~~secured~~in assets owned by the ~~assets~~Debtor ofIn ~~DAC~~Possession ~~International;~~ Subsidiaries and scheduled monthly depreciation. Obligations on property, plant, and equipment under capital lease decreased by $0.2 million as a result of scheduled payments during the six months ended June 30, 2009.

~~· $0.7 million~~Goodwill ofand ~~notes~~net ~~payable~~intangible ~~secured by the~~ assets ~~of Centrisoft.~~

We consider the sale of assets to be a normal, recurring part of our operations and we are currently generating adequate cash flow as a result of these transactions. However, excluding the sale of assets from time to time, we are currently operating with negative cash flow, since many of our operations do not currently generate sufficient cash to cover operating and overhead expenses. We believe that our existing sources of funds will be adequate to meet our liquidity needs; however, there can be no assurance that this will be the case.

	June 30, 2009		December 31, 2008
	(dollars in thousands)
Goodwill – Fatburger	$	6,563	$	6,563
Goodwill – DAC International		1,465		1,465
Total goodwill	$	8,028	$	8,028

Net intangible assets – Fatburger	$	2,629	$	4,068
Total net intangible assets	$	2,629	$	4,068

IfNet ~~our~~intangible ~~existing~~assets ~~liquidity position~~decreased ~~were~~1.4 tomillion ~~prove~~in ~~insufficient,~~the ~~and~~six wemonths ~~were~~ended ~~unable~~June 30, 2009 due to ~~repay,~~the ~~renew~~elimination ~~or replace~~of ~~maturing~~$1.3 ~~indebtedness~~million onin ~~terms~~intangible ~~reasonably~~assets ~~satisfactory~~owned toby ~~us,~~the weDebtor ~~may~~In ~~be required~~Possession toSubsidiaries. Net ~~sell~~intangible ~~(potentially~~assets onat ~~short~~June ~~notice)~~30, a2009 ~~portion~~consist of ~~our~~trademark ~~assets,~~rights of approximately $2.1 million and ~~could~~ ~~incur~~franchise ~~losses~~agreements asof aapproximately ~~result~~$0. ~~Specific risks~~3 tomillion. We ~~our~~do ~~liquidity~~not ~~position~~believe ~~include~~that ~~the~~there ~~following:~~is any impairment of goodwill or net intangible assets at June 30, 2009.

~~Foreign currency exchange rate risk~~19

Our exposure to foreign currency fluctuations arises mainly from our investment in Barcelona real estate. As of March 31, 2007, approximately 18% of our total assets and 4% of our total liabilities were denominated in the euro. We may, from time to time, utilize a wide variety of financial techniques to assist in the management of currency risk, including currency swaps, options, and forwards, or combinations thereof. In December 2006, we purchased American-style options to partially protect us against a downward trend in the euro. These options give us the right, but not the obligation, to sell up to 4.0 million euros, in 62,500 euro increments, at $1.31 per euro any time before June 30, 2007.Index

~~Interest rate~~Notes ~~risk~~receivable

~~Our~~As ~~borrowings and the availability~~ of ~~further~~June ~~borrowings are substantially affected by~~30, ~~among other things~~2009, ~~changes~~our innotes ~~interest~~receivable ~~rates,~~portfolio ~~changes~~consists ~~in market spreads or decreases in credit quality~~ of ~~our~~one ~~assets. Material~~individual ~~increases~~loan inwith ~~interest~~a ~~expense~~carrying ~~from~~value ~~variable-rate~~of ~~funding sources~~$37,000. The orloan ~~material~~is ~~decreases~~secured inby ~~monthly~~real ~~cash~~estate ~~receipts~~consisting ~~from~~of ~~operations, generally~~commercial ~~would~~property ~~negatively~~located ~~impact~~in ~~our liquidity~~Texas. On The ~~the~~loan ~~other~~has ~~hand,~~an ~~material decreases in~~ interest ~~expense from variable-~~rate ~~funding~~(excluding ~~sources~~fees ~~would~~and ~~positively~~points) ~~affect~~of ~~our liquidity. Fluctuations~~7% ~~in interest rates will impact our net income to the extent our operations~~ and ~~our~~matures ~~fixed rate assets are funded by variable rate debt. We may also be impacted to the extent that our variable rate assets re-price on a different schedule or~~ in ~~relation~~April ~~to a different index than any floating rate debt~~2010. ~~See Item 3 – Quantitative and Qualitative Disclosures about Market Risk for further analysis.~~

~~Fatburger debt~~Other ~~covenant~~assets

At December 31, 2006, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements. Fatburger failed to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio at December 31, 2006.

	June 30, 2009		December 31, 2008
	(dollars in thousands)
Trade receivables	$	1,759	$	2,712

Inventories	$	1,996	$	2,964

Other current assets:
Prepaid expenses	$	144	$	294


Other assets:
Security deposits	$	371	$	471
Capitalized finance fees		-		202
Other		14		139
Total other assets	$	385	$	812

21Trade receivables and inventories at June, 30, 2009 relate primarily to the operations of DAC. The reduction in other assets is primarily related to the elimination of assets owned by the Debtor In Possession Subsidiaries.

~~Due~~Deferred to Fatburger’s non-compliance, the lender has the right to demand repayment of the notes after serving notice. As such, on our Consolidated Statements of Financial Condition, $4.1 million of long-term debt has been classified as current at March 31, 2007, and December 31, 2006, that would otherwise be classified as non-current. The lender has not demanded early repayment of the loans, however, if the lender exercises its right to demand repayment, our liquidity could be negatively affected.income

Our deferred income relating to the collection of unearned Fatburger ~~expansion~~ franchise fees increased $0.8 million at June 30, 2009, compared to December 31, 2008. This was the result of the collection of $1.0 million in new franchise fees and prepaid royalties, offset by the recognition of $0.2 million in franchise revenue. As of June 30, 2009, nearly all of the deferred income was comprised of the non-refundable franchise fee received by Fatburger for future franchise locations. These initial fees generally represent half of the total fee per location. The balance of the franchise fee is expected to be collected in the future when leases on these specific franchise locations are signed.

~~Fatburger~~Notes is involved in a nationwide expansion of franchise and company-owned locations, which will require significant liquidity. If real estate locations of sufficient quality cannot be located, the timing of restaurant openings may be delayed. Additionally, if Fatburger or its franchisees cannot obtain capital sufficient to fund this expansion, the timing of restaurant openings may be delayed.payable

~~Centrisoft operations~~As of June 30, 2009, borrowings and notes payable totaled $15.9 million, including $8.6 million of debt held at Fatburger and $0.8 million at DAC. This compares to $14.3 million at December 31, 2008. The increase is primarily due to new borrowings at Fatburger in the amount of $1.5 million.

WeAccounts ~~expect~~payable ~~that Centrisoft will require capital resources~~ and ~~have~~accrued negative cash flow for the near term. Since Centrisoft is in the early stages of its marketing, there can be no assurance that it will be successful in attracting a significant customer base. Centrisoft is currently marketing its software to potential customers both directly and through re-seller relationships. There can be no assurance that Centrisoft will be successful in generating sufficient cash flow to support its own operations in the near term.liabilities

~~Dividends~~Accounts payable and accrued liabilities totaled $14.0 million at June 30, 2009, compared with $17.5 million at December 31, 2008, and consisted of the following:

While we do not have a fixed dividend policy, we may declare and pay new dividends on our common stock, subject to our financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. One factor the Board of Directors may consider is the impact of dividends on our liquidity. We have not declared or paid any dividends in the first quarter of 2007.

	June 30, 2009		December 31, 2008
	(dollars in thousands)
Accounts payable	$	5,066	$	8,439
Sales deposits		835		1,228
Accrued wages, bonus and commissions		370		693
Other		7,756		7,126
Total accounts payable and accrued liabilities	$	14,027	$	17,486

~~NASDAQ~~At ~~delisting~~June 30, 2009, other accrued liabilities include the accrual of management fees ($1.7 million) and option commitment fee ($0.3 million), both associated with the 2008 sale of the Company’s former subsidiary, Fog Cap Retail Investors LLC (“FCRI”). Other accrued liabilities also include $2.1 million in accrued professional fees and $1.0 million in accrued interest payable.

Effective October 14, 2004, our stock began trading in the over-the-counter (“OTC”) market. Trading of our common stock on the OTC market may reduce the liquidity of our common stock compared to quotation on a national market. Also, the coverage of the Company by security analysts and media could be reduced, which could result in lower prices for our common stock than might otherwise prevail and could also result in increased spreads between the bid and ask prices for our common stock. Additionally, certain investors will not purchase securities that are not quoted on a national market, which could materially impair our ability to raise funds through the issuance of common stock or other securities convertible into common stock.20

~~Common stock trading price~~Index

IfLiquidity the trading price of our common stock is less than $5.00 per share, trading in our common stock could be subject to Rule 15g-9 of the Securities Exchange Act of 1934, as amended. Under that Rule, brokers who recommend such securities to persons other than established customers and ~~accredited~~Capital investors must satisfy special sales practice requirements, including an individualized written suitability determination for the purchaser and the purchaser’s written consent prior to any transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share), including the delivery of a disclosure schedule explaining the penny stock market and the associated risks. Such requirements could severely limit the market liquidity of our common stock. There can be no assurance that our common stock will not become treated as penny stock.Resources

~~Off~~Liquidity ~~Balance~~is ~~Sheet~~a ~~Arrangements~~measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations, acquisitions, and expansion (including growth of company-owned and franchised restaurant locations and for other general business purposes. In addition to our cash on hand, our primary sources of funds for liquidity during the first six months of 2009 consisted of cash provided by borrowings and operations. As of June 30, 2009, we had cash or cash equivalents of $0.2 million, which, together with projected borrowings and funds provided by operations, we believe will be sufficient to meet our current liquidity needs.

InAt ~~order~~June ~~to facilitate the development of franchise locations~~30, ~~as of March 31~~2009, ~~2007, Fatburger~~we had ~~guaranteed~~total ~~the~~consolidated ~~annual~~secured ~~minimum~~indebtedness ~~lease payments~~ of ~~four restaurant sites owned and operated by franchisees. The guarantees approximate~~ $117.16 million, ~~plus~~as ~~certain~~well ~~contingent rental payments~~ as ~~defined~~$17.4 inmillion ~~the~~of ~~respective~~other ~~leases~~liabilities. ~~These~~ Our ~~leases~~consolidated ~~expire~~secured atindebtedness ~~various~~consisted ~~times through 2015.~~of:

~~The~~● ~~lease guarantees by Fatburger do not provide us with a material source of liquidity, capital resources or other benefits~~$8. ~~There~~6 ~~are no~~million ~~revenues,~~in ~~expenses~~notes orpayable ~~cash~~and ~~flows connected with the lease guarantees~~ other ~~than~~ ~~the~~debt ~~receipt~~ of ~~normal franchise royalties. As of March 31~~Fatburger, ~~2007,~~secured weby ~~were~~the ~~not~~assets ~~aware~~ of ~~any event or demand that was likely to trigger the guarantee by~~ Fatburger.;

We● ~~have various operating leases for office and retail space which expire through 2015~~$1. ~~The~~7 ~~leases~~million ~~provide~~in ~~for~~capital ~~varying minimum annual rental payments including rent increases and free rent periods. We have future minimum rental payments under non-cancelable operating~~ leases ~~with~~maturing ~~initial~~on or ~~remaining~~before ~~terms~~2010 ofwhich ~~one~~are ~~year~~secured ~~or more~~by ofan ~~approximately~~aircraft ~~$16.0~~and ~~million~~various asrestaurant ~~of March 31, 2007.~~assets;

We● ~~did~~$6.5 ~~not~~million ~~have~~of ~~any~~notes ~~other off-balance~~payable ~~sheet~~secured ~~arrangements~~by invarious ~~place~~assets as of ~~March~~the ~~31,~~Company; ~~2007.~~and

22● $0.8 million of short-term borrowings secured by the assets of DAC International.

~~ITEM~~The 3sale of real estate and other investments has historically been a recurring part of operations and a source of liquidity. However, ~~QUANTITATIVE~~most ~~AND~~of ~~QUALITATIVE~~those ~~DISCLOSURES~~investments ~~ABOUT~~have ~~MARKET~~been ~~RISK~~liquidated as we focused on the Fatburger operations. Borrowings and Fatburger’s operations are now our major source of liquidity and we expect these sources, including the sale of Fatburger franchises, to generate adequate cash flow to meet the Company’s liquidity needs for the 2009 fiscal year. We believe that our existing sources of funds will be adequate to meet our liquidity needs; however, there can be no assurance that this will be the case.

~~Our~~If ~~market~~our ~~risk results~~existing ~~from~~liquidity ~~instruments~~position ~~entered~~were ~~into~~to ~~other~~prove ~~than~~insufficient, ~~for~~and ~~trading~~we ~~purposes~~were ~~and consists~~unable ~~primarily~~to ofrepay, ~~exposure~~renew toor ~~loss~~replace ~~resulting~~maturing ~~from~~indebtedness ~~changes~~on interms ~~foreign currency~~reasonably ~~exchange~~satisfactory ~~rates~~to us, ~~interest~~we ~~rates~~may be required to sell (potentially on short notice) a portion of our assets, and ~~commodity~~could ~~prices~~incur losses as a result. Specific risks to our liquidity position include the following:

~~Foreign currency~~Interest ~~exchange~~ rate risk

Our ~~exposure~~borrowings ~~to foreign~~and ~~currency~~the ~~fluctuations~~availability ~~arises~~of ~~mainly~~further ~~from~~borrowings ~~our~~are ~~investment~~substantially affected by, among other things, changes in ~~Barcelona real~~interest ~~estate. As~~rates, changes in market spreads or decreases in credit quality of ~~March~~our 31assets. Material increases in interest expense from variable-rate funding sources, ~~2007~~or material decreases in monthly cash receipts from operations, ~~approximately~~ ~~18%~~generally ofwould negatively impact our ~~total~~liquidity. On ~~assets~~the ~~and~~other 4%hand, ofmaterial ~~our~~decreases ~~total~~in ~~liabilities~~interest ~~were denominated~~expense from variable-rate funding sources would positively affect our liquidity. Fluctuations in interest rates will impact our net income to the ~~euro~~extent our operations and our fixed rate assets are funded by variable rate debt. ~~The~~ We ~~following table~~may ~~illustrates~~also ~~the~~be ~~projected~~impacted ~~effect~~to onthe extent that our ~~net~~variable ~~asset~~rate ~~value~~assets asre-price on a ~~result~~different ~~of hypothetical~~schedule ~~changes~~or in ~~foreign~~relation ~~currency~~to ~~rates~~a asdifferent ofindex ~~March~~than ~~31,~~any ~~2007:~~floating rate debt.

Change in foreign exchange rates (1)	Projected change in net asset fair value			Projected percentage change in net asset fair value
Decrease 20%	$	(814,000	)	-1.6	%
Decrease 10%	$	(458,000	)	-0.9	%
No Change	$	—		0.0	%
Increase 10%	$	890,000		1.7	%
Increase 20%	$	1,780,000		3.4	%

Fatburger debt covenant

~~(1) Assumes~~As ~~that~~of ~~uniform~~June ~~percentage~~30, ~~changes~~2009, ~~occur instantaneously~~Fatburger inhad not made all of the ~~euro~~required payments on indebtedness with an outstanding principal balance of $3. A9 ~~decrease in~~million. As a result, the ~~foreign~~lender ~~exchange~~has ~~rate~~declared ~~indicates~~the aindebtedness ~~strengthening~~in default and has accelerated the maturity date of the Uentire balance.S. If ~~dollar against~~the ~~that~~Company ~~currency. An~~is ~~increase~~unsuccessful in renegotiating the ~~foreign~~debt ~~exchange~~with ~~rate~~the ~~indicates~~lender and obtaining waivers of the default, the resulting consequences could have a ~~weakening~~material adverse impact on our business, prospects, financial condition, or results of operation. In addition to the Upayment default, at December 31, 2008, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable.S. We ~~dollar~~are ~~against~~currently ~~that currency~~in discussions with the lender to restructure the debt.

WeFatburger can utilize a wide variety of financial techniques to assist in the management of currency risk, including currency swaps, options, and forwards, or combinations thereof. In December 2006, we purchased American-style options to partially protect us against a downward trend in the euro. These options give us the right, but not the obligation, to sell up to 4.0 million euros, in 62,500 euro increments, at $1.31 per euro any time before June 30, 2007.expansion

~~Interest rate~~Fatburger ~~risk~~is involved in a nationwide expansion of franchise and company-owned locations, which will require significant liquidity. If real estate locations of sufficient quality cannot be located and either leased or purchased, the timing of restaurant openings may be delayed. Additionally, if Fatburger or its franchisees cannot obtain capital sufficient to fund this expansion, the timing of restaurant openings may be delayed.

Changes in interest rates can affect net income by increasing the cost associated with operating and expanding our restaurant operation. Changes in the level of interest rates can also affect, among other things, the value of our interest-earning assets (and the associated default rates), our payments on variable-interest rate debt, our ability to acquire loans and general levels of consumer spending.Dividends

~~Other~~While ~~market~~we ~~risks~~do not have a fixed dividend policy, we may declare and pay new dividends on our common stock, subject to our financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. One factor the Board of Directors may consider is the impact of dividends on our liquidity. We have not declared or paid any dividends during 2009.

~~Our restaurant operations are exposed to~~ Over-the-counter ~~impact~~stock of commodity and utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs through higher prices is limited by the competitive environment in which we operate.listing

~~ITEM~~Effective 4October 14, 2004, our stock began trading in the over-the-counter (“OTC”) market. Trading ~~CONTROLS~~of ~~AND~~our ~~PROCEDURES~~common stock on the OTC market reduces the liquidity of our common stock compared to quotation on a national market. Also, the coverage of the Company by security analysts and media is reduced, which we believe results in lower prices for our common stock than might otherwise prevail and also results in increased spreads between the bid and ask prices for our common stock. Additionally, certain investors will not purchase securities that are not quoted on a national market, which we believe impairs our ability to raise funds through the issuance of common stock or other securities convertible into common stock.

~~Evaluation of disclosure controls and procedures~~21

Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures were effective and designed to ensure that material information relating to us and our consolidated subsidiaries is accumulated and communicated to our management to allow timely decisions regarding required disclosure.Index

~~Changes~~Off inBalance ~~internal~~Sheet ~~control over financial reporting~~Arrangements

~~There~~We ~~were~~have novarious ~~significant~~operating ~~changes~~leases infor ~~our~~office, ~~internal~~manufacturing ~~control~~and ~~over~~retail ~~financial~~space ~~reporting~~which inexpire ~~connection~~through ~~with~~2017. The anleases ~~evaluation~~provide ~~that~~for ~~occurred~~varying ~~during~~minimum ~~our~~annual ~~first~~rental ~~fiscal~~payments ~~quarter~~including ofrent ~~2007~~increases ~~that~~and free rent periods. We have ~~materially~~future ~~affected~~minimum rental payments under non-cancelable operating leases with initial or ~~are~~remaining ~~reasonably~~terms ~~likely~~of toone ~~materially~~year ~~affect~~or ~~our~~more ~~internal~~of ~~control~~approximately ~~over~~$19.9 ~~financial~~million ~~reporting~~as of June 30, 2009.

23We did not have any other off-balance sheet arrangements in place as of June 30, 2009.

~~PART~~Related IIParty ~~– OTHER INFORMATION~~Transactions

~~ITEM~~Purchase 1.of ~~LEGAL PROCEEDINGS~~Land

~~Warlick~~On ~~complaint~~December 24, 2009, the Company acquired all of the membership interests in Highland Road Properties LLC (“HRP”) from an entity controlled by Mr. and Mrs. Wiederhorn. HRP is a special purpose entity that owns approximately 6 acres of residential land in Portland Oregon. Mr. and Mrs. Wiederhorn had previously allowed the land to be part of a pool of collateral securing indebtedness of the Company and it became necessary for the Company to have direct ownership of HRP in order to protect the remaining collateral. The Company paid $750,000 for the HRP interests. The Highland Road land is being used by the Company as collateral for certain borrowings of the Company. The Board of Directors approved the purchase of HRP and determined that the transaction was in the best interests of the Company and its shareholders. On February 17, 2010, the Company caused HRP to transfer the land to certain lenders for a partial reduction in debt of $350,000.

~~Fatburger~~Guarantee ~~Holdings, Inc., et al. v. Keith A. Warlick/ Warlick v. Fatburger, et al, Superior Court~~ of California for the County of Los Angeles, Case No. SC 091436. On October 16, 2006, Fatburger Holdings, Inc., Fatburger Corporation and Fatburger North America, Inc. filed suit against Keith A. Warlick (“Warlick”) the former Chief Executive Officer of Fatburger Holdings, Inc. and Fatburger Corporation. Warlick’s employment with Fatburger was terminated on September 21, 2006 by resolution of the board of directors of Fatburger Holdings, Inc. The Fatburger companies initiated the lawsuit to recover damages from Warlick arising from wrongful acts and conduct during and after his employment, and are asserting claims for: breach of contract, breach of duty of loyalty, breach of fiduciary duty, conversion – embezzlement; fraud/commencement; intentional interference with contractual relations, and equitable indemnity. Warlick filed an answer to the lawsuit denying the allegations and included a Cross-complaint against Fatburger Holdings, Inc., Fatburger Corporation, Fatburger North America, Inc., Fog Cutter Capital Group, Inc., and Andrew Wiederhorn, for breach of contract, employment discrimination based on race and retaliation, wrongful termination and defamation – slander without any specification of damages. The defendants to the Cross-complaint filed by Warlick dispute the allegations of the cross-complaint and intend to vigorously defend against the cross-complaint.Debt

~~Keith~~Certain ~~Warlick,~~of etthe ~~al.~~Company’s v.lenders ~~Fog Cutter Capital Group~~have, etfrom ~~al.,~~time ~~Superior~~to ~~Court of California for the County of Los Angeles~~time, ~~Case~~required ~~No.~~that ~~58365915~~Mr. In ~~further~~Wiederhorn ~~response~~personally toguarantee the ~~termination~~Company’s ~~of his~~debt ~~employment~~obligations. As ~~and~~of ~~above~~March ~~lawsuit~~15, ~~on February 6~~2010, ~~2007,~~Mr. ~~Warlick,~~Wiederhorn ~~his~~had ~~wife,~~personally ~~and~~guaranteed ~~a limited~~approximately ~~liability~~$8.9 ~~company~~million ~~controlled~~in bydebt ~~Warlick, each~~ of ~~whom is a minority shareholder of Fatburger Holdings, Inc., filed a second lawsuit against various Fatburger entities,~~ the Company, ~~Andrew Wiederhorn,~~ and ~~members~~its ~~of the Fatburger board of directors~~subsidiaries. ~~The complaint~~ On ~~alleges~~March ~~fraud~~23, ~~negligent misrepresentation against Wiederhorn and the Company~~2010, ~~and breach of contract and breach of fiduciary duty against all~~ the ~~defendants,~~ ~~related~~Company togranted ~~business~~Mr. ~~transactions~~Wiederhorn ~~which~~a ~~the~~security ~~plaintiff’s~~interest ~~allege were not~~ in the ~~best~~assets ~~interests~~ of ~~Fatburger~~Fog ~~Holdings,~~Cutter Capital Group Inc., orto ~~the~~secure ~~plaintiff minority~~his ~~shareholders. The~~performance ~~defendants dispute~~in the ~~allegations~~event ofhe ~~the~~is ~~lawsuit~~required ~~and intend~~ to ~~vigorously~~perform ~~defend~~under ~~against~~ the ~~claims~~guarantees.

~~Shareholder~~ITEM ~~Derivative~~3. QUANTITATIVE ~~Complaint~~AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

OnNot July 6, 2004, Jeff Allan McCoon, derivatively on behalf of Fog Cutter, filed a lawsuit in the Circuit Court for the State of Oregon (Multnomah County) which named us and all of our directors as defendants. In December 2006, the Company reached a settlement with the plaintiff in which the Company agreed to pay $125,000 in legal fees and is released from further liability under this complaint. The settlement agreement was accepted by the court on January 2, 2007. No further action is expected under this complaint.Required

ITEM 1A4. CONTROLS ~~RISK~~AND ~~FACTORS~~PROCEDURES

~~There~~Evaluation ~~have been no material changes in the risk factors set forth in Part I, Item 1A – Risk Factors~~ of ~~our~~disclosure ~~Annual~~controls ~~Report as of~~ and ~~for the year ended December 31, 2006 on Form 10-K, as previously filed with the SEC on April 2, 2007.~~procedures

~~ITEM~~Our 2.Chief ~~UNREGISTERED~~Executive ~~SALES~~Officer OFand ~~EQUITY~~our ~~SECURITIES~~Chief ~~AND~~Financial ~~USE~~Officer, OFafter ~~PROCEEDS~~evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of June 30, 2009, have concluded that our disclosure controls and procedures were effective and designed to ensure that material information relating to us and our consolidated subsidiaries is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

~~None~~The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedures are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The Company considered these limitations during the development of its disclosure controls and procedures, and will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.

~~ITEM~~Changes 3.in ~~DEFAULTS~~internal ~~UPON~~control ~~SENIOR~~over ~~SECURITIES~~financial reporting

~~Not~~There ~~applicable~~were no significant changes in our internal control over financial reporting in connection with an evaluation that occurred during the second quarter ended June 30, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~22

~~None.~~Index

~~ITEM~~PART 5.II — OTHER INFORMATION

~~None~~ITEM 1. LEGAL PROCEEDINGS

~~ITEM~~Warlick ~~6. EXHIBITS~~Complaint

3Fatburger Holdings, Inc.~~1 Amended~~, ~~and~~et ~~Restated Articles~~al. v. Keith A. Warlick/ Warlick v. Fatburger, et al, Superior Court of ~~Incorporation~~California for the County of Los Angeles, Case No. SC 091436. On October 16, 2006, Fatburger Holdings, Inc., Fatburger Corporation and Fatburger North America, Inc. filed suit against Keith A. Warlick (“Warlick”) the ~~Registrant~~former Chief Executive Officer of Fatburger Holdings, ~~incorporated~~Inc. and Fatburger Corporation. Warlick’s employment with Fatburger was terminated on September 21, 2006 by ~~reference~~resolution of the board of directors of Fatburger Holdings, Inc. The Fatburger companies initiated the lawsuit to ~~Exhibit~~ 3recover damages from Warlick arising from wrongful acts and conduct during and after his employment, and are asserting claims for: breach of contract, breach of duty of loyalty, breach of fiduciary duty, conversion – embezzlement; fraud/commencement; intentional interference with contractual relations, and equitable indemnity.1 Warlick filed an answer to the ~~Form~~lawsuit 10denying the allegations and included a Cross-Qcomplaint ~~for~~against ~~the~~Fatburger ~~period~~Holdings, ~~ended~~Inc., ~~September~~Fatburger 30Corporation, ~~1999~~Fatburger North America, ~~as previously~~Inc., Fog Cutter Capital Group, Inc., and Andrew Wiederhorn (“Cross-Defendants”), for breach of contract, employment discrimination based on race and retaliation, wrongful termination and defamation – slander without any specification of damages. On a motion filed ~~with~~by the ~~SEC~~Cross-Defendants, the Court dismissed Warlick’s cross-claim for employment discrimination based on ~~November~~race 22and retaliation. In further response Warlick initiated a second lawsuit against the Company, ~~1999~~various ~~(File~~Fatburger Nocompanies, and members of the Fatburger board of directors, which is set out below. ~~000~~The Cross-~~23911)~~Defendants disputed the allegations of the cross-claim and vigorously defended against the claims. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 5, 2010. The settlement did not have a material effect on the financial statements of the Company.

24Keith Warlick, et al. v. Fog Cutter Capital Group, et al., Superior Court of California for the County of Los Angeles, Case No. 58365915 On February 6, 2007, Warlick, his wife, and a limited liability company controlled by Warlick, each of whom is a minority shareholder of Fatburger Holdings, Inc., filed a complaint against various Fatburger entities, the Company, Andrew Wiederhorn, and members of the Fatburger board of directors. The complaint alleges fraud, negligent misrepresentation against Wiederhorn and the Company, and breach of contract and breach of fiduciary duty against all the defendants, related to business transactions which the plaintiff’s allege were not in the best interests of Fatburger Holdings, Inc., or the plaintiff minority shareholders. The defendants disputed the allegations of the lawsuit and vigorously defended against the claims. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 5, 2010. The settlement did not have a material effect on the financial statements of the Company.

~~3.2 Bylaws~~ITEM ~~of the Registrant, incorporated by reference to Exhibit 3~~1A.2 RISK ~~to Amendment No. 3 to the Registration Statement (Registration No. 333-39035) on Form S-11, as previously filed with the SEC on March 30, 1998.~~FACTORS

~~4.1 Common~~Other ~~Stock Certificate~~than ~~Specimen~~as described below, ~~incorporated~~there byhave ~~reference~~been tono ~~Exhibit~~material ~~4.1~~changes toin ~~Amendment~~the ~~No. 3~~risk tofactors set forth in Part I, Item 1A – Risk Factors of our Annual Report as of and for the ~~Registration~~year ~~Statement~~ended ~~(Registration~~December ~~No.~~31, ~~333-39035)~~2008 on Form S10-11K, as previously filed with the SEC on March 30, ~~1998~~2010.

~~4.2 Form~~Two of ~~Registration Rights~~our ~~Agreement,~~Fatburger ~~incorporated~~operating bysubsidiaries ~~reference~~are tocurrently ~~Exhibit~~operating ~~10.8~~as to“debtors ~~Amendment~~in ~~No.~~possession” ~~3 to~~in ~~the~~Chapter ~~Registration~~11 ~~Statement~~Bankruptcy ~~(Registration~~proceedings, ~~No.~~and ~~333-39035)~~there oncan ~~Form~~be ~~S-11,~~no ~~as previously~~assurance ~~filed~~that ~~with~~Bankruptcy ~~the~~Court ~~SEC~~will onapprove ~~March~~the ~~30,~~plan ~~1998~~of reorganization.

~~4.3 Form~~On ofApril ~~Stock~~6, ~~Option Plan~~2009, ~~incorporated~~two byof ~~reference~~our tooperating ~~Exhibit~~Fatburger 10subsidiaries (the “Debtor In Possession Subsidiaries”) filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court. On or about November 3, to2009, ~~Amendment~~the NoDebtor In Possession Subsidiaries filed a joint plan of reorganization and related disclosure statement. The 3Bankruptcy toCourt is currently considering the ~~Registration~~ ~~Statement~~plan ~~(Registration~~of Noreorganization and disclosure statement. There ~~333-39035)~~can onbe ~~Form~~no ~~S-11,~~assurance that the Bankruptcy Court will approve the plan of reorganization as ~~previously filed~~proposed ~~with~~by the ~~SEC~~Debtor In Possession Subsidiaries, which could have a material adverse effect on ~~March~~our 30business, ~~1998~~financial condition and results of operations.

~~4.4 Waiver,~~ITEM ~~Release, Delegation and Amendment to Stock Option and Voting Agreement among Andrew A~~3. ~~Wiederhorn,~~ DEFAULTS ~~Lawrence~~UPON A.SENIOR Mendelsohn, Joyce Mendelsohn, Tiffany Wiederhorn, and the Registrant, dated July 31, 2002, incorporated by reference to Exhibit 2.1 to the Form 8-K dated August 8, 2002, as previously filed with the SEC on August 15, 2002.SECURITIES

~~4.5 Summary~~Fatburger ofDebt ~~Rights to Purchase Shares, incorporated by reference to Exhibit 99.1 to the Form 8-K dated October 18, 2002, as previously filed with the SEC on October 18, 2002.~~Covenant

~~4.6 Rights~~As ~~Agreement~~of ~~dated as~~June 30, 2009, Fatburger had not made all of ~~October~~the 18required payments on indebtedness with an outstanding principal balance of $3.9 million. As a result, ~~2002~~the ~~between~~lender has declared the ~~Registrant~~indebtedness in default and ~~The~~has ~~Bank~~accelerated the maturity date of ~~New~~the ~~York~~entire balance. If the Company is unsuccessful in renegotiating the debt with the lender and obtaining waivers of the default, ~~incorporated~~ bythe ~~reference~~resulting toconsequences ~~Exhibit~~could 1have a material adverse impact on our business, prospects, financial condition, or results of operation. In addition to ~~Form~~the ~~8-A~~payment default, asat ~~previously~~December ~~filed~~31, 2008, Fatburger was not in compliance with all obligations under the ~~SEC~~agreements onevidencing ~~October~~its 29indebtedness, ~~2002~~as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable. The Company is in discussions with the lender to restructure the debt.

~~4.7 Amendment to the Rights Agreement, dated as of May 1, 2004, by and between the Registrant and The Bank of New York, as previously filed with the SEC on March 30, 2005.~~23

4.8 Long Term Vesting Trust Agreement among the Registrant and Lawrence Mendelsohn, Andrew Wiederhorn and David Egelhoff, dated October 1, 2000, incorporated by reference to Exhibit 4.4 to the Form 10-K for the year ended December 31, 2002, as previously filed with the SEC on March 3, 2003.Index

~~4.9 Amendment~~ITEM Number 1 to the Long Term Vesting Trust Agreement dated as of September 19, 2002, by and between the Registrant and Andrew Wiederhorn, Don Coleman, and David Dale-Johnson, as previously filed with the SEC on March 30, 20056. EXHIBITS

411.~~10 Amendment~~1 ~~Number~~Computation ~~2 to the Long Term Vesting Trust Agreement, dated as~~ of ~~May~~Loss ~~26,~~Per ~~2004,~~Common ~~by and between the Registrant and Andrew Wiederhorn, Don Coleman, and David Dale-Johnson, as previously filed with the SEC on March 30, 2005~~Share.

1131.1 ~~Computation~~ Certification of ~~Per~~Chief ~~Share Earnings~~Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1 2 Certification of Chief ~~Executive~~ Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

3132.2 1 Certification of the Chief ~~Financial~~ Executive Officer, pursuant to 18 U.S.C. Section ~~302~~1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1 2 Certification of the Chief ~~Executive~~Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2 Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~24

25Index

SIGNATURES

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

FOG CUTTER CAPITAL GROUP INC.
	By: /s/ Andrew A. Wiederhorn
	Andrew A. Wiederhorn
	Chief Executive Officer
	By: /s/ R. Scott Stevenson
	R. Scott Stevenson
	Senior Vice President and Chief Financial Officer
Date: May 11, 2007

FOG CUTTER CAPITAL GROUP INC.

26By: /s/ Andrew A. Wiederhorn Andrew A. Wiederhorn Chief Executive Officer By: /s/ R. Scott Stevenson R. Scott Stevenson Senior Vice President and Chief Financial Officer

~~EXHIBIT~~Date: March ~~INDEX~~30, 2010

3.1 Amended and Restated Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the Form 10-Q for the period ended September 30, 1999, as previously filed with the SEC on November 22, 1999 (File No. 000-23911).25

3.2 Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 to Amendment No. 3 to the Registration Statement (Registration No. 333-39035) on Form S-11, as previously filed with the SEC on March 30, 1998.Index

~~4.1 Common~~EXHIBIT Stock Certificate Specimen, incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Registration Statement (Registration No. 333-39035) on Form S-11, as previously filed with the SEC on March 30, 1998.INDEX

411.~~2 Form~~1 Computation of ~~Registration Rights~~Loss ~~Agreement,~~Per ~~incorporated~~Common ~~by reference to Exhibit 10~~Share.~~8 to Amendment No. 3 to the Registration Statement (Registration No. 333-39035) on Form S-11, as previously filed with the SEC on March 30, 1998.~~

431.~~3 Form~~1 Certification of ~~Stock~~Chief ~~Option Plan~~Executive Officer, ~~incorporated~~pursuant ~~by reference~~ to ~~Exhibit~~Section ~~10.3~~302 toof ~~Amendment No. 3 to~~ the ~~Registration~~ ~~Statement (Registration No. 333~~Sarbanes-~~39035)~~Oxley onAct ~~Form~~of ~~S-11, as previously filed with the SEC on March 30, 1998~~2002.

431.~~4 Waiver,~~2 ~~Release, Delegation~~Certification ~~and~~of ~~Amendment~~Chief toFinancial ~~Stock Option and Voting Agreement among Andrew A. Wiederhorn~~Officer, ~~Lawrence~~pursuant A.to ~~Mendelsohn,~~Section ~~Joyce~~302 ~~Mendelsohn,~~of ~~Tiffany Wiederhorn, and~~ the ~~Registrant, dated July 31, 2002, incorporated by reference to Exhibit 2.1 to the Form 8~~Sarbanes-KOxley ~~dated~~Act ~~August~~of 8, 2002~~, as previously filed with the SEC on August 15, 2002~~.

432.~~5 Summary~~1 Certification of ~~Rights~~the ~~to Purchase~~Chief ~~Shares~~Executive Officer, ~~incorporated~~pursuant ~~by reference~~ to ~~Exhibit~~18 99U.1S.C. toSection ~~the~~1350, ~~Form~~as ~~8-K dated~~adopted ~~October~~pursuant ~~18,~~to ~~2002,~~Section as906 ~~previously~~of ~~filed with~~ the ~~SEC~~Sarbanes-Oxley onAct ~~October~~of ~~18,~~ 2002.

432.~~6 Rights~~2 ~~Agreement~~Certification ~~dated as~~ of ~~October~~the ~~18,~~Chief ~~2002~~Financial ~~between~~Officer, ~~the~~pursuant ~~Registrant~~to ~~and~~18 ~~The~~U.S.C. ~~Bank~~Section ~~of New York~~1350, ~~incorporated~~ byas ~~reference~~adopted topursuant ~~Exhibit 1~~ to ~~Form~~Section ~~8-A,~~906 asof ~~previously filed with~~ the ~~SEC~~Sarbanes-Oxley onAct ~~October~~of ~~29,~~ 2002.

~~4.7 Amendment to the Rights Agreement, dated as of May 1, 2004, by and between the Registrant and The Bank of New York, as previously filed with the SEC on March 30, 2005.~~26

4.9 Amendment Number 1 to the Long Term Vesting Trust Agreement dated as of September 19, 2002, by and between the Registrant and Andrew Wiederhorn, Don Coleman, and David Dale-Johnson, as previously filed with the SEC on March 30, 2005.

4.10 Amendment Number 2 to the Long Term Vesting Trust Agreement, dated as of May 26, 2004, by and between the Registrant and Andrew Wiederhorn, Don Coleman, and David Dale-Johnson, as previously filed with the SEC on March 30, 2005.

11.1 Computation of Per Share Earnings.

31.1 Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filing Compare · FOG CUTTER CAPITAL GROUP INC