The following presents an analysis of the results and financial condition of our continuing operations. Except where indicated otherwise, the results of discontinued operations are excluded from this discussion.

We are a national, diversified, restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full service, casual dining restaurants and gaming facilities. We locate our restaurants in high-profile, specialty locations in markets that provide a balanced mix of tourist, convention, business and residential clientele. We focus on providing quality food at reasonable prices while offering a memorable atmosphere for our guests. As of March 31, 2009, we operated 173 restaurants, as well as several limited menu restaurants and other properties, including the Golden Nugget Hotels and Casinos ("Golden Nugget") in Las Vegas and Laughlin, Nevada.

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe's Crab Shack units. Subsequently, several additional locations were added to our disposal plan. The results of operations for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income, balance sheets and segment information for all periods presented.

The restaurant and gaming industries are intensely competitive and affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants or casinos may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing operations. We have many well established competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from other casinos in the markets in which we operate and from other mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites.

The current economic conditions in the United States have continued to have a negative impact on our results of operations during 2009. A decline in discretionary spending attributable to tighter credit markets, increased unemployment, increased home foreclosures, the decline in the financial markets and other factors have impacted our customer's level of spending on dining out, gaming, and tourism in general. It is difficult to predict how long the current economic conditions will persist, whether they will deteriorate further, and the extent to which our operations will be adversely affected.

Results of Operations

The following table sets forth the percentage relationship to total revenues of
certain operating data for the periods indicated:



                                                Three Months Ended
                                                     March 31,
                                                2009           2008
               Restaurant and hospitality:
               Revenues                          100.0 %        100.0 %
               Cost of revenues                   24.8 %         26.5 %
               Labor                              29.0 %         29.8 %
               Other operating expenses (1)       20.4 %         24.8 %

               Unit Level Profit (1)              25.8 %         18.9 %


               Gaming:
               Revenues                          100.0 %        100.0 %
               Casino costs                       35.0 %         31.6 %
               Rooms costs                        10.0 %          8.6 %
               Food and beverage costs            10.2 %         10.3 %
               Other operating expenses (1)       22.1 %         23.0 %

               Unit Level Profit (1)              22.7 %         26.5 %

(1) Excludes depreciation, amortization, asset impairment, general and administrative and pre-opening expenses.

Three months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Restaurant and Hospitality

Restaurant and hospitality revenues decreased $22,265,542, or 10%, from $222,541,192 to $200,275,650 for the three months ended March 31, 2009 compared to the prior year comparable period. The change in revenue is the result of the following approximate amounts: new restaurant openings-increase $6.9 million; same store sales (restaurants open all of the first quarter 2009 and 2008)-decrease $20.3 million; closed or sold restaurants-decrease $2.3 million and the remainder of the difference is attributable to the change in sales; hurricane closures - decrease $3.9 million for stores not open a full comparable period or other sales. The total number of units open as of March 31, 2009 and 2008 was 173 and 174, respectively.

Cost of revenues decreased $9,205,443, or 15.6%, from $58,868,968 to $49,663,525 for the three months ended March 31, 2009 as compared to the prior year period due in large part to the decline in revenues. Cost of revenues as a percentage of revenues for the three months ended March 31, 2009 decreased to 24.8% from 26.5% in 2008. This decrease is primarily the result of favorable commodity prices and cost control measures implemented during the latter part of 2008.

Labor expense decreased $8,349,998, or 12.6%, from $66,345,706 to $57,995,708 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 due in large part to the decline in revenues. Labor expenses as a percentage of revenues for 2009 decreased to 29.0% from 29.8% in 2008. The decrease in labor resulted in part from cost control measures implemented during the latter part of 2008, partially offset by increases in the minimum wage.

Other operating expenses decreased $14,400,453 or 26.1%, from $55,274,122 to $40,873,669 for the three months ended March 31, 2009 as compared to the prior year period and such expenses decreased as a percentage of revenues to 20.4% in 2009 from 24.8% in 2008. These decreases primarily relate to decreased rent expense associated with a $7.5 million lease termination payment received from a landlord, decreased advertising and lower energy costs as compared to the comparable prior year period.

Gaming

Casino revenues decreased $6,843,528, or 16.0%, from $42,811,817 to $35,968,289 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. This decrease is primarily the result of reduced slot and table game activity in both Las Vegas and Laughlin.

Room revenues decreased $5,776,564, or 31.8%, from $18,182,380 to $12,405,816 for the three months ended March 31, 2009 as compared to the prior year period. This decrease is the result of reduced occupancy and average daily room rates in Las Vegas as compared to the prior year period.

Food and beverage revenues decreased $1,649,612, or 13.6%, from $12,135,840 to $10,486,228 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease resulted from reduced visitor traffic and the temporary closure of certain outlets as a cost saving measure during the three months ended March 31, 2009.

Casino expenses decreased $2,438,789, or 11.1%, from $22,059,279 to $19,620,490 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease is primarily the result of reduced payroll costs and promotional and complimentary expenses for both Las Vegas and Laughlin.

Food and beverage expenses decreased $1,470,513, or 20.5%, from $7,171,799 to $5,701,286 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease resulted from reduced visitor traffic and the temporary closure of certain outlets as a cost saving measure during the three months ended March 31, 2009.

Other expenses decreased $3,660,570, or 22.8%, from $16,025,257 to $12,364,687 for the three months ended March 31, 2009 as compared to the comparable period in the prior year. This decrease resulted primarily from reduced payroll costs, entertainment expenses, operating supplies and utilities.

Consolidated

General and administrative expenses decreased $732,048 or 5.7%, from $12,790,198 to $12,058,150 for the three months ended March 31, 2009 as reduced corporate payroll costs were partially offset by increased legal and other professional fees associated with the terminated going private transaction. General and administrative expenses increased as a percentage of revenues to 4.7% in 2009 from 4.4% in 2008 as a result of the decline in revenues for the three month period ended March 31, 2009.

We recorded $3,482,697 as income representing insurance proceeds associated with Hurricane Ike that exceeded the recorded book value of the assets which were damaged.

Gains on disposals of fixed assets amounted to $622,299 for the three months ended March 31, 2009 as a result of a gain on the disposition of property in Galveston, Texas.

Pre-opening expenses decreased by $211,762, or 45.3%, from $467,926 to $256,164 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease relates to the size of the units opening undertaken in 2009 compared with the prior year.

Net interest expense for the three months ended March 31, 2009 increased by $3,854,992, or 18.6%, from $20,759,582 to $24,614,574 as compared to the comparable prior year period. This increase is primarily due to higher effective borrowing rates and increased borrowings in 2009 associated with our refinancing and construction of the Golden Nugget tower, respectively.

Other expense decreased $1,169,992, or 22.1%, from $5,304,404 to $4,134,412 for the three months ended March 31, 2009 as compared to the comparable prior year period. The 2009 amount is primarily comprised of $4.0 million in call premiums associated with refinancing our 7.5% and 9.5% senior notes, whereas the prior year amount is primarily comprised of $4.7 million in non-cash charges related to interest rate swaps not considered hedges.

A provision for income taxes of $2,387,581 was recorded for three months ended March 31, 2009 compared with a provision of $1,061,136 for the three months ended March 31, 2008. The effective tax rate for 2009 was 24.5% compared to 29.6% for the prior year period as a result of lower expected earnings in 2009.

The after tax loss from discontinued operations decreased $877,899 from $928,802 to $50,903 for the three months ended March 31, 2009 as compared to the comparable prior year period. The losses in both periods consisted primarily of operating losses.

Liquidity and Capital Resources

On December 22, 2008, we entered into an $81.0 million interim senior secured credit facility. The interim senior secured credit facility provided for a $31.0 million senior secured term loan facility and a $50.0 million senior secured revolving credit facility, the proceeds of which were used to refinance the remaining outstanding indebtedness under our previously issued and outstanding senior credit facility and to pay related transaction fees and expenses.

On February 13, 2009, we completed the offering of $295.5 million in aggregate principal amount of 14.0% senior secured notes due 2011 (the "Notes"). The gross proceeds from the offering and sale of the Notes were $260.0 million. The Notes are unconditionally guaranteed on a senior secured basis as to principal, premium, if any, and interest by all of our current and future domestic restricted subsidiaries (each individually a Guarantor and collectively, the Guarantors) and are secured by a second lien position on substantially all of our and the Guarantors' assets. The Notes were issued pursuant to an indenture, dated as of February 13, 2009 (Indenture), among us, the Guarantors and Deutsche Bank Trust Company America, as Trustee and as Collateral Agent.

The Notes will mature on August 15, 2011. Interest on the Notes will accrue from February 13, 2009, at a fixed interest rate of 14.0% to be paid twice a year, on each February 15th and August 15th, beginning August 15, 2009. We may redeem the Notes any time at par, plus accrued interest. We are required to offer to purchase the Notes at 101% of their aggregate principal amount, plus accrued interest, if we experience a change in control as defined in the Indenture.

The Indenture under which the Notes have been issued contains a maximum leverage ratio covenant as well as restrictions that limit our ability and the Guarantors to, among other things: incur or guarantee additional indebtedness; create liens; pay dividends on or redeem or repurchase stock; make capital expenditures or certain types of investments; sell assets or merge with other companies.

We and the Guarantors entered into a registration rights agreement, dated as of February 13, 2009 (Registration Rights Agreement) with Jefferies & Company, Inc. On May 8, 2009, we filed the registration statement with the SEC. Under the Registration Rights Agreement, we and the Guarantors have agreed to use our best efforts to file and cause to become effective a registration statement with respect to an offer to exchange the Notes for notes registered under the Securities Act of 1933, as amended (the Securities Act), having substantially identical terms as the Notes (except that additional interest provisions and transfer restrictions pertaining to the Notes will be deleted). If we fail to cause the registration statement relating to the exchange offer to become effective within the time periods specified in the Registration Rights Agreement, we will be required to pay additional interest on the Notes until the registration statement is declared effective.

We also entered into a $215.6 million Amended and Restated Credit Agreement dated as of February 13, 2009 (the Credit Agreement) which replaced the interim senior secured credit facility. The Credit Agreement provides for a term loan of $165.6 million and a revolving credit line of $50.0 million. The obligations under the Credit Agreement are unconditionally guaranteed by the Guarantors and are secured by a first lien position on substantially all of our assets and the Guarantors.

Interest on the Credit Agreement accrues at a base rate (which is the greater of 5.50%, the Federal Funds Rate plus .50%, or Wells Fargo's prime rate) plus a credit spread of 5.0%, or at our option, at the Eurodollar base rate of at least 3.5% plus a credit spread of 6.0%, and matures on May 13, 2011.

The Credit Agreement contains covenants that limit our ability and the Guarantors to, among other things, incur or guarantee additional indebtedness; create liens; make capital expenditures; pay dividends on or repurchase stock; make certain types of investments; sell assets or merge with other companies. The Credit Agreement contains financial covenants, including a maximum leverage ratio, a maximum senior leverage ratio, and a minimum fixed charge coverage ratio.

We used the proceeds from the Notes offering, together with borrowings under the Credit Agreement to refinance our existing $395.7 million aggregate principal amount of 9.5% senior notes due 2014 (the "9.5% Notes") and $4.3 million aggregate principal amount of 7.5% senior notes due 2014 (the "7.5% Notes" and, together with the 9.5% Notes, the "Existing Notes"). As of March 31, 2009, $0.8 million of our 7.5% Notes and $0.9 million of our 9.5% Notes remained outstanding. In addition, we paid a redemption premium of approximately $4.0 million in connection with the repurchase of the Existing Notes.

In connection with the planned refinancing of our Existing Notes, on December 23, 2008, we commenced separate cash tender offers (each a "tender offer" and together, the "tender offers") to purchase any and all of our outstanding 9.5% Notes and 7.5% Notes for a purchase price of 101% of the principal amount thereof. In conjunction with the tender offers, we solicited consents of at least a majority of the aggregate principal amount of each of the outstanding 9.5% Notes and 7.5% Notes to certain proposed amendments to each of the indentures governing such 9.5% Notes and 7.5% Notes to eliminate most of the restrictive covenants and certain events of default and to amend certain other provisions contained in the indentures and notes related thereto. We executed supplemental indentures with U.S. Bank National Association, as trustee, to effectuate the proposed amendments to the indentures governing the Existing Notes, which became operative upon the consummation of the Notes offering.

With respect to any Existing Notes that were not tendered, we may, at our option, either (i) pay such Existing Notes in accordance with their terms through maturity, (ii) repurchase any 9.5% Notes if the holders exercise their option to require us to do so, at 101% of the principal amount plus accrued but unpaid interest, if any, through the payment date or (iii) defease any or all of the remaining Existing Notes.

In June 2007, our wholly owned unrestricted subsidiary, the Golden Nugget, completed a new $545.0 million credit facility consisting of a $330.0 million first lien term loan, a $50.0 million revolving credit facility, and a $165.0 million second lien term loan. The $330.0 million first lien term loan includes a $120.0 million delayed draw component to finance the expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada. The revolving credit facility expires on June 30, 2013 and the first lien term loan matures on June 30, 2014. Both the first lien term loan and the revolving credit facility bear interest at Libor or the bank's base rate, plus a financing spread, 2.0% and 0.75%, respectively, at March 31, 2009. In addition, the credit facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw component of the first lien term loan. The second lien term loan matures on December 31, 2014 and bears interest at Libor or the bank's base rate, plus a financing spread, 3.25% and 2.0%, respectively, at March 31, 2009. The financing spreads and commitment fees for the revolving credit facility increase or decrease depending on the leverage ratio as defined in the credit facility. The first lien term loan requires one percent of the outstanding principal balance due annually to be paid in equal quarterly installments commencing on September 30, 2009 with the balance due on maturity. Principal of the second lien term loan is due at maturity. The Golden Nugget's subsidiaries have granted liens on substantially all real property and personal property as collateral under the credit facility and are guarantors of the credit facility.

The proceeds from the new $545.0 million credit facility were used to repay all of the Golden Nugget's outstanding debt, including its 8.75% Senior Secured Notes due 2011 totaling $155.0 million, plus the outstanding balance of approximately $10.0 million on its former $43.0 million revolving credit facility with Wells Fargo Foothill, LLC. In addition, the proceeds were used to pay associated tender premiums of approximately $8.8 million due to the early redemption of the Senior Secured Notes, plus accrued interest and related transaction fees and expenses. We expect to incur higher interest expense as a result of the increased borrowings associated with the Golden Nugget financing.

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities, we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. We have designated $210.0 million of the first lien interest rate swaps and all of the second lien swaps as cash flow hedging transactions as set forth in SFAS 133. These swaps mirror the terms of the underlying debt and reset using the same index and terms. The remaining interest rate swaps associated with the $120.0 million of first lien borrowings reflecting the delayed draw construction loan have not been designated as hedges and the change in fair market value is reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash gain of approximately $0.4 million was recorded for the three months ended March 31, 2009, while a non-cash expense of $4.7 million associated with these swaps was recorded for the three months ended March 31, 2008.

Our debt agreements contain various restrictive covenants including minimum EBITDA, fixed charge and financial leverage ratios, limitations on capital expenditures, and other restricted payments as defined in the agreements. As of March 31, 2009, we were in compliance with all such covenants. As of March 31, 2009, our average interest rate on floating-rate debt was 10.9%, we had approximately $20.8 million in letters of credit outstanding, and our available borrowing capacity was $51.7 million.

As a primary result of the Golden Nugget refinancing and the Notes, we have incurred higher interest expense. We expect to incur additional interest expense in the future as we continue the Golden Nugget expansion and due to higher interest costs arising from our refinancing. We are constructing a hotel tower at the Golden Nugget-Las Vegas which we expect to complete by 2009 at an estimated cost of $140.0 million, funded primarily by the delayed draw term loan and operating cash flow.

Working capital, excluding discontinued operations, increased from a deficit of $83.9 million as of December 31, 2008 to a deficit of $57.9 million as of March 31, 2009 primarily due to an increase in cash and a reduction in accounts payable and accrued liabilities. These increases were partially offset by an increase in the current portion of long-term notes and other obligations. Cash flow to fund future operations, new restaurant development and acquisitions will be generated from operations, available capacity under our credit facilities and additional financing, if appropriate.

From time to time, we review opportunities for restaurant acquisitions and investments in the hospitality, gaming, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities for the next twelve months.

Capital expenditures for the three months ended March 31, 2009 were $42.5 million, including $25.8 million for the Golden Nugget renovation. We expect capital expenditures to be approximately $86.0 million for the remainder of the year, primarily for the renovation of the Golden Nugget and new restaurants.

Seasonality and Quarterly Results

Our business is seasonal in nature. Our reduced winter volumes cause revenues and, to a greater degree, operating profits to be lower in the first and fourth quarters than in other quarters. We have and will continue to open restaurants in highly seasonal tourist markets. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results.

Critical Accounting Policies

Restaurant and other properties are reviewed on a property by property basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. Goodwill and other non-amortizing intangible assets are reviewed for impairment at least annually. Significant estimates used in these reviews include projected operating results and cash flows, discount rates, terminal value growth rates, capital expenditures, changes in future working capital requirements, cash flow multiples, control premiums and assumed royalty rates. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their carrying amount or fair values, reduced for estimated disposal costs, and are included in other current assets.

We operate approximately 173 restaurants and periodically we expect to experience unanticipated individual unit deterioration in revenues and profitability, on a short-term and occasionally longer-term basis. When such events occur and we determine that the associated assets are impaired, we will record an asset impairment expense in the quarter such

determination is made. Due to our average restaurant net investment cost, such amounts could be significant when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.

We maintain a large deductible insurance policy related to property, general liability and workers' compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit our per occurrence cash outlay. Accrued expenses and other liabilities include estimated costs to settle unpaid claims and estimated incurred but not reported claims using actuarial methodologies.

We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes", as interpreted by FIN 48. SFAS No. 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carry forwards and certain temporary differences. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be recognized. We regularly assess the likelihood of realizing the deferred tax assets based on forecasts of future taxable income and available tax planning strategies that could be implemented and adjust the related valuation allowance if necessary.

Our income tax returns are subject to examination by the Internal Revenue Service and other tax authorities. We regularly assess the potential outcomes of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. Inherent in our determination of any necessary reserves are assumptions based on past experiences and judgments about potential actions by taxing authorities. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe that we have adequately provided for any reasonable and foreseeable outcome related to uncertain tax matters.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for, but not limited to, the recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets and costs to settle unpaid . . .