This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements that have been made pursuant to provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the Company's expectations or beliefs concerning future events, including any statements regarding: future sales and gross profit percentages, the continuation of historical trends, the sufficiency of the Company's cash balances, and cash generated from operating, financing and/or investing activities for the Company's future liquidity and capital resource needs. Without limiting the foregoing, the words "believes," "intends," "projects," "plans," "expects," "anticipates," and similar expressions are intended to identify forward-looking statements. The Company cautions that these statements are further qualified by important economic and competitive factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, risks of the restaurant industry, an industry with many well-established competitors with greater financial and other resources than the Company, and the impact of changes in consumer trends, employee availability, and cost increases. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and may not be realized.

OVERVIEW

The Company consummated a sale of three of its then-existing five steakhouses on January 7, 2004 and executed a definitive agreement on June 22, 2004 to sell its remaining two steakhouses and related intellectual property. See Note 2 "Sale of the Angelo and Maxie's Brand and Related Assets." The Company also consummated a sale of 39 of its then-existing 45 restaurants ("the Chart House Business") to a third party as of July 30, 2002. See Note 3 "Sale of the Chart House Business." The operations of the sold

restaurants have been presented as discontinued operations for the quarters and six months ended June 28, 2004 and June 30, 2003, and the Company has reclassified its Consolidated Statements of Operations for the quarters then ended in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"). In connection with the proposed sale of its remaining two steakhouses and related intellectual property, the assets of the two remaining Angelo and Maxie's restaurants are considered to be held for sale in accordance with FAS
144. However, the operations of the remaining two Angelo and Maxie's restaurants are not presented as discontinued on the accompanying Statements of Operations because the Company believes such a presentation would not be meaningful to the reader.

The Company operates two Angelo and Maxie's Steakhouses, which are full-service steakhouse restaurants located in New York, New York and West Palm Beach, Florida. The Company operated the following number of restaurants at the end of the second quarters of 2004 and 2003:

                      Angelo and
                        Maxie's     Discontinued
                      Steakhouses    operations    Total
Second quarter 2004             2              -       2
Second quarter 2003             2              3       5

The Company acquired the Angelo and Maxie's Steakhouse concept and one restaurant during 1999 to diversify its then-seafood dominated portfolio. The Company opened a total of six additional Angelo and Maxie's restaurants over 2000 and 2001. One of these locations was closed during the fourth quarter of 2001 and another location was closed during the fourth quarter of 2002. During 2001, the Company canceled restaurant development plans for three locations, did not open any locations during 2002 and 2003, and currently has no plans to open additional restaurants during 2004. The Company intends to seek stockholder approval of the sale of the two remaining Angelo and Maxie's restaurants and related intellectual property, as well as the liquidation and dissolution of the Company. No assurances can be given as to whether or when these transactions will be consummated.

RESULTS OF OPERATIONS

The following table presents the results of operations for each of the quarterly and six month periods ended June 28, 2004 and June 30, 2003. Continuing operations relate to the operations of the Company's two remaining Angelo and Maxie's Steakhouses. The operations of the three locations sold on January 7, 2004 and the Chart House Business are presented as discontinued.

                         Quarterly periods ended                Six month periods ended

(Unaudited,         June 28, 2004       June 30, 2003      June 28, 2004       June 30, 2003
dollars in
thousands)          Amount      %      Amount      %       Amount      %      Amount       %

Revenues           $  2,865   100.0   $  2,777    100.0   $  5,910   100.0   $   6,057   100.0

Operating costs
and expenses:
Cost of sales         1,089    38.0        986     35.5      2,224    37.6       2,146    35.4
Restaurant labor        600    20.9        566     20.4      1,227    20.8       1,237    20.4
Other operating
costs                   489    17.1        506     18.2      1,101    18.6         978    16.1
Rent                    244     8.5        244      8.8        487     8.2         486     8.0
Total restaurant
costs                 2,422    84.5      2,302     82.9      5,039    85.3       4,847    80.0
Restaurant
operating income
(before
depreciation and
amortization)           443    15.5        475     17.1        871    14.7       1,210    20.0
General and
administrative
expenses                450    15.7        691     24.9        916    15.5       1,359    22.4
Depreciation and
amortization             27     0.9        113      4.1         55     0.9         254     4.2
Impairment of
assets and
restructuring
charges                 946    33.0      4,413    158.9        946    16.0       4,413    72.9
Loss on sales of
assets                            -         (2 )   (0.1 )        -       -           9       -
Total restaurant
and operating
costs                 3,845   134.2      7,517    270.7      6,956   117.7      10,882   179.7
Income (loss)
from operations        (980 ) (34.2 )   (4,740 ) (170.7 )   (1,046 ) (17.7 )    (4,825 ) (79.7 )
Interest
expense, net             22     0.8         22      0.8         45     0.8          52     0.9
Other income            (51 )  (1.8 )      (51 )   (1.8 )     (102 )  (1.7 )      (102 )  (1.7 )
Income (loss)
from continuing
operations
before income
taxes                  (951 ) (33.2 )   (4,711 ) (169.6 )     (989 ) (16.7 )    (4,775 ) (78.8 )
Provision for
income taxes              -       -          -        -          -       -           -       -
Net income
(loss) from
continuing
operations             (951 ) (33.2 )   (4,711 ) (169.6 )     (989 ) (16.7 )    (4,775 ) (78.8 )
Discontinued
operations:
Income (loss)
from operations           -       -        204      7.3       (107 )  (1.8 )       325     5.4
Recognition of
deferred gain on
sale                      -       -                            967    16.4           -       -
Gain (loss) on
sale                   (910 ) (31.8 )       13      0.5     (1,163 ) (19.7 )        13     0.2
Income (loss)
from
discontinued
operations             (910 ) (31.8 )      217      7.8       (303 )  (5.1 )       338     5.6
Net loss
applicable to
common shares      $ (1,861 ) (65.0 ) $ (4,494 ) (161.8 ) $ (1,292 ) (21.9 ) $  (4,437 ) (73.3 )
Preferred stock
dividends               232     8.1        232      8.4        464     7.9         464     7.7
Net loss
applicable to
common shares      $ (2,093 ) (73.1 ) $ (4,726 ) (170.2 ) $ (1,756 ) (29.7 ) $  (4,901 ) (80.9 )

Angelo and Maxie's revenues are derived entirely from food and beverage sales. Revenues increased $88,000 or 3.2%, to $2.9 million in the second quarter of 2004, compared to $2.8 million in the second quarter of 2003. The increase in revenues is due to a general increase in food and beverage sales.

Revenues decreased $147,000, or 2.4%, to $5.9 million for the six months ended June 28, 2004, compared to $6.1 million for the six months ended June 30, 2003. The decrease in revenues is due in part to the severely cold weather experienced in the New York area during the first half of the first quarter of 2004.

Cost of sales is composed of the cost of food and beverages. Cost of sales as a percentage of revenues increased by 2.5 percentage points to 38.0% in the second quarter of 2004, compared with 35.5% in the second quarter of 2003. This increase is primarily the result of price increases of certain beef and dairy products that occurred during the fourth quarter of 2003 and continued into the first half of 2004. The Company expects that comparative trend to continue for the next quarter. For the six months ended June 28, 2004, cost of sales as a percentage of revenues increased 2.2 percentage points to 37.6%, compared with 35.4% for the six months ended June 30, 2003, driven primarily by the same factors that impacted the quarterly results.

Restaurant labor consists of restaurant management salaries, hourly staff payroll costs, and other payroll-related items. Restaurant labor as a percentage of revenues increased by 0.5 percentage points to 20.9% in the second quarter of 2004, compared with 20.4% in the second quarter of 2003. This increase is due to normal annual merit increases. For the six months ended June 28, 2004, restaurant labor as a percentage of revenues increased 0.4 percentage points to 20.8%, compared with 20.4% for the six months ended June 30, 2003, primarily due to the same merit increases that impacted the quarterly results.

Other operating expenses consist primarily of various restaurant-level costs, which are generally variable and are expected to fluctuate with revenues. Other operating costs as a percentage of restaurant revenues decreased by 1.1 percentage points to 17.1% in the second quarter of 2004, compared with 18.2% in the second quarter of 2003, primarily as a result of lower marketing costs. For the six months ended June 28, 2004, other operating costs as a percentage of revenues increased 2.5 percentage points to 18.6%, compared with 16.1% for the six months ended June 30, 2003, primarily as a result of providing certain additional services and amenities at one of the locations.

Rent includes both fixed and variable portions of rent. Rent as a percentage of revenues decreased by 0.3 percentage points to 8.5% in the second quarter of 2004, compared with 8.8% in the second quarter of 2003, primarily as a result of increased revenues during the second quarter of 2004, thereby causing rent to comprise a smaller percentage of revenues. For the six months ended June 28, 2004, rent as a percentage of revenues increased by 0.2 percentage points to
8.2%, compared with 8.0% for the six months ended June 30, 2003, primarily due to lower revenues for the six month period ending June 28, 2004, thereby causing rent to comprise a larger percentage of revenues.

General and administrative expenses are composed of expenses associated with corporate and administrative functions that support restaurant operations, including management and staff salaries, employee benefits, travel, legal and professional fees, technology, and market research. General and administrative expenses decreased $241,000 to $450,000 in the second quarter of 2004, compared to $691,000 in the second quarter of 2003. The decrease is primarily the result of a reduction in the size of the corporate management and staff that occurred during the fourth quarter of 2003 and the first quarter of 2004. The Company believes that the general and administrative expenses incurred in the second quarter of 2004 reflect an expected and continued decrease of these expenses. For the six months ended June 28, 2004, general and administrative expenses decreased by $443,000 to $916,000, compared with $1,359,000 for the six months ended June 30, 2003, primarily due to the same corporate staff reductions that impacted the quarterly results.

Depreciation and amortization expense includes the depreciation of fixed assets and the amortization of leasehold improvements at both the restaurants and corporate locations. Depreciation and amortization decreased $86,000 to $27,000 in the second quarter of 2004, compared to $113,000 in the second quarter of 2003. The decrease is due to the cessation of depreciation on the restaurant fixed assets and leasehold improvements in connection with the assets being classified as held for sale during the third quarter of 2003 in accordance with FAS 144. . For the six months ended June 28, 2004, depreciation and amortization expenses decreased by $199,000 to $55,000, compared with $254,000 for the six months ended June 30, 2003, primarily due to the same factor that impacted the quarterly results.

During the second quarter of 2004 and the second quarter of 2003, the Company completed its required review by comparing its carrying value for the Angelo and Maxie's restaurant business to estimated fair market value. In determining the estimated fair market value of its assets, management considers several factors requiring the exercise of its business judgment. Such business judgment includes developing valuation multiples such as the ratio of total capitalized value to restaurant earnings before interest,

taxes, depreciation and amortization for an industry peer group of publicly traded companies and applying those ratios to the Company's historical and projected operating performance. These continued reviews resulted in the following during 2004 and 2003:

• During the second quarter 2004 evaluation, the Company recorded a $797,000 provision for loss related to the pending sale of the remaining two steakhouses and the rights to the name "Angelo and Maxie's" and a $149,000 provision for loss on corporate fixed assets.

• In the second quarter of 2003, such evaluation indicated that the recorded value of the Angelo and Maxie's trade name was impaired by $4.3 million. In addition, the Company's lease on its Chicago corporate headquarters expired and the Company relocated to a space commensurate with its current needs. In connection therewith, the Company recorded a $0.1 million restructuring charge during the second quarter of 2003 resulting from the Company receiving lower than anticipated proceeds from the sale and disposal of its furniture and equipment located at the vacated facility.

Net interest expense remained at $22,000 in the second quarters of 2004 and 2003. The current quarter interest expense includes non-cash interest expense related to a capital lease (see discussion of other income in the following paragraph), offset by interest income earned on the Company's outstanding investable cash. For the six months ended June 28, 2004, net interest expense decreased by $7,000 to $45,000, compared with $52,000 for the six months ended June 30, 2003. This decrease is primarily due to the prior six month period including interest expense related to an outstanding term loan that was retired at the beginning of the second quarter of 2003.

Other income remained flat at $51,000 in the second quarter of 2004, compared to the second quarter of 2003 in addition, other income remained flat at $102,000 for the six months ended June 28, 2004, compared to the six months ended June 30, 2003. The Company is committed to a capital lease at a location it has subleased to a third party. This capital lease is reported on the balance sheet in accordance with Statement of Financial Accounting Standards No. 13, "Accounting for Leases," and non-cash reductions to the liability are reflected in other income.

Income from discontinued operations decreased by $1.1 million in the second quarter of 2004, compared to the second quarter of 2003. The decrease is due to the following factors:

• The recognition of an additional $910,000 loss on the sale of the Chart House Business. See Part I, Item 1, Note 3 "Sale of the Chart House Business."

• A $204,000 decrease in income from operations of the three steakhouses sold on January 7, 2004. See Part I, Item 1, Note 2 "Sale of the Angelo and Maxie's Brand and Related Operating Assets." This decrease was due to the sale of the steakhouses in the first quarter of 2004.

Income from discontinued operations decreased $641,000 for the six months ended June 28, 2004, compared to the six months ended June 30, 2003. The decrease is due to the following factors:

• The recognition of an additional $1.2 million loss on the sale of the Chart House Business. See Part I, Item 1, Note 3 "Sale of the Chart House Business."

• The recognition of a $967,000 deferred gain on the sale of previously disposed restaurants. See Part I, Item 1, Note 6 "Commitments and Contingencies."

• A $432,000 decrease in income from operations of the three steakhouses sold on January 7, 2004. See Part I, Item 1, Note 2 "Sale of the Angelo and Maxie's Brand and Related Operating Assets." This decrease was due to the sale of the steakhouses in the first quarter of 2004

The Company issued Series A convertible preferred stock, par value $1.00 per share ("Series A Preferred Stock"), during June 2001. The Series A Preferred Stock is entitled to dividends at the rate of 10.0% per annum, based on the original issue price of $2.25 per share. The Company accrued dividends on the Series A Preferred Stock aggregating $0.2 million during each of the second quarters of 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES



                                                  Six month periods ended
(Unaudited, dollars in thousands)             June 28, 2004     June 30, 2003
Net cash used in operating activities         $       (1,966 )  $         (500 )
Expenditures for equipment and imrpovements               (5 )             (27 )
Proceeds from sale of restaurant assets                5,594                 -
Cash used in financing activities                       (157 )            (980 )
Net increase (decrease) in cash               $        3,466    $       (1,507 )

The Company had $8,017,000 in cash for general corporate purposes at June 28, 2004. The Company believes that this remaining cash balance, together with net cash provided by the continuing operating activities of its remaining two steakhouses will be sufficient to fund its operating expenses and capital needs for at least the next twelve months.

Historically, the Company required significant capital principally for the construction and opening expenses for new restaurants and for the remodeling and refurbishing of existing restaurants. The Company has funded its capital requirements through debt financing, both with third party banks and related parties, tenant improvement monies, equity financing, and cash flows from operations. The Company does not intend to fund any new restaurants or incur any major remodeling or refurbishing costs during fiscal 2004.

Net cash used in operating activities was $1,966,000 in the first six months of 2004, compared to net cash used in operating activities of $500,000 in the first six months of 2003. In 2004, net cash used in operating activities includes an aggregate $1.0 million related to payment of 2003 performance and stay bonuses and accrued vacation for the employees terminated in conjunction with the sale of three of the Company's steakhouses, severance payments related to employees terminated in conjunction with the sale of the Chart House Business, and settlement of prior period insurance claims. In 2003, net cash used in operating activities included an aggregate $0.8 million related to payment of 2002 bonuses, severance payments related to employees terminated in conjunction with the sale of the Chart House Business, and settlement of prior period insurance claims.

Net cash provided by investing activities in the first six months of 2004 included capital expenditures of $5,000 and the receipt of $5,594,000 in net proceeds from the sale of three of the Company's steakhouses. Net cash used in investing activities in the first six months of 2003 included capital expenditures of $27,000.

Net cash used in financing activities was $157,000 in the first six months of 2004, primarily related to reduction of restricted cash for letters of credit related to a guarantee on one of the Company's then-existing five steakhouses offset by non-cash reductions to a capital lease on a restaurant property that the Company has subleased to a third party. Preferred dividends of $464,000 were paid in the second quarter of 2004. Net cash used in financing activities was $980,000 in the first six months of 2003, including $500,000 used to settle the payment of both scheduled payments and the early retirement and payoff of the landlord notes as well as scheduled non-cash reductions to the capital lease on the subleased restaurant property. Preferred dividends of $464,000 were paid in the second quarter of 2003. There were no pre-payment fees or penalties associated with the early retirement of the landlord note obligations.

The Series A Preferred Stock is entitled to dividends at the rate of 10.0% per annum, based on the original price of $2.25 per share. Dividends are payable semiannually on June 1 and December 1. Dividends paid through June 1, 2002 were in the form of additional shares of Series A Preferred Stock, in part, because the Company's credit agreement prohibited the payment of cash dividends. Subsequent to the retirement of amounts owing under the credit agreement, the Company began paying these dividends in cash. The Company expects to satisfy future dividend obligations in cash.

The Company was liable under various capital and operating lease agreements, primarily related to restaurant locations. The Company is also contingently liable under letters of credit, primarily related to leasing obligations and self-insurance reserves, and guarantees on various third party leasing and debt agreements. A $325,000 letter of credit related to one of three restaurants sold in January to McCormick & Schmicks Restaurant Corporation was terminated. No other material changes have occurred regarding these commitments and contingencies from the Company's prior fiscal year ended December 29, 2003.

CRITICAL ACCOUNTING POLICIES

A critical accounting policy is one that would materially affect the Company's operations or financial condition, and requires management to make estimates or judgments in certain circumstances. Set forth below is a description of those accounting policies which the Company believes are most critical and could have the greatest impact on its operations or financial condition.

Impairment of Assets. The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" and FAS 144, which require, among other things, that effective January 1, 2002, goodwill resulting from a business combination accounted for as a purchase no longer be amortized, but be subject to ongoing impairment review. On an ongoing basis, the Company reviews its carrying value of restaurant assets and compares them with fair market value. In determining the fair market value of its assets, management considers several factors requiring the exercise of its business judgment. Such business judgment includes developing valuation multiples, such as the ratio of total capitalized value to restaurant earnings before interest, taxes, depreciation, and amortization for an industry peer group of publicly traded companies, and applying those multiples to the Company's historical and projected operating performance. If management determines that the fair market value of its assets is materially below the current carrying cost of the assets, an impairment charge is recognized in operating income in the period the impairment is identified.

Cost Capitalization and Depreciation Policies. Costs for maintenance, repairs, and purchases are either expensed as incurred or capitalized and amortized over the cost's estimated useful life. This requires management to make business judgments regarding which costs should be capitalized and, if capitalized, the estimated useful life. Management has established the Company's cost capitalization and depreciation policies based on historical experience in the restaurant industry, industry guidelines regarding useful lives, and adherence to applicable accounting standards. Maintenance, repairs, and minor purchases are expensed as incurred. Major purchases of equipment and facilities, and major replacements and improvements, are capitalized. Depreciation and amortization are recorded for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Equipment is depreciated over lives ranging from three to eight years. Leasehold interests and improvements are amortized over the shorter of the lease term, including planned extensions, or the asset life, ranging up to 25 years.

Self-Insurance Liability. The Company is self-insured through October 2002 for its workers' compensation and general liability insurance programs, and continues to be self-insured for its employee health insurance program. The Company maintains stop-loss coverage with third party insurers to limit its total exposure. The accrued liability associated with these programs is based on management's estimate of the ultimate costs to be incurred to settle known claims and claims incurred, but not reported, as of the balance sheet date. Our estimated liability is not discounted and is based on a number of assumptions and factors, including historical trends, actuarial assumptions, and economic conditions. If actual trends differ from our estimates, our financial results could be impacted.

SEASONALITY

The Company's business is seasonal in nature, with revenues and operating income for the first and fourth quarters greater than in the second and third quarters as the Company benefits from urban, holiday, and winter vacation dining which is greater than the benefits associated with dining during leisure travel in the spring and summer quarters.