Certain reclassifications of prior period balances have been made to conform to the current period presentation. In connection with the planned or actual sale or closure of various restaurants, the operations of these businesses have been presented as discontinued operations in the consolidated financial statements. Accordingly, the Company has reclassified its statements of operations for the prior periods presented. These dispositions are discussed below in "Recent Restaurant Dispositions."

Overview

As of June 30, 2012, the Company owns and operates 21 restaurants and bars, 22 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods. The Company believes it meets the criteria for aggregating its operating segments into a single reporting segment in accordance with applicable accounting guidance.

The Company has substantial fixed costs that do not decline proportionally with sales. The first and second fiscal quarters, which include the winter months, usually reflect lower customer traffic than in the third and fourth fiscal quarters. In addition, sales in the third and fourth fiscal quarters can be adversely affected by inclement weather due to the significant amount of outdoor seating at the Company's restaurants.

Results of Operations

The Company had operating income of $4,312,000 in the third fiscal quarter of 2012 compared to operating income of $3,438,000 in the third fiscal quarter of 2011. This increase resulted primarily from improved conditions in the Washington, DC market (which was negatively impacted by a flood in the third fiscal quarter of 2011) and improved menu costing, partially offset by operating losses in the amount of approximately $1,383,000 related to our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012.

The following table summarizes the significant components of the Company's operating results for the 13 and 39-week periods ended June 30, 2012 and July 2, 2011, respectively:

                                         13 Weeks Ended         39 Weeks Ended
                                      --------------------   --------------------
                                      June 30,    July 2,    June 30,    July 2,
                                        2012        2011       2012        2011
                                      ---------   --------   ---------   --------
                                         (in thousands)         (in thousands)

REVENUES:
Food and beverage sales               $  38,688   $ 38,583   $ 100,764   $ 99,397
Other revenue                               305        166         831        518
                                      -- ------ - - ------   - ------- - - ------
Total revenues                           38,993     38,749     101,595     99,915
                                      -- ------ - - ------   - ------- - - ------
COSTS AND EXPENSES:
Food and beverage cost of sales           9,992     10,574      26,020     27,006
Payroll expenses                         11,702     11,657      32,758     32,999
Occupancy expenses                        4,494      4,917      13,485     13,825
Other operating costs and expenses        5,156      4,931      13,250     13,197
General and administrative expenses       2,240      2,309       7,271      7,117
Depreciation and amortization             1,097        923       2,976      2,939
                                      -- ------ - - ------   - ------- - - ------
Total costs and expenses                 34,681     35,311      95,760     97,083
                                      -- ------ - - ------   - ------- - - ------

OPERATING INCOME                      $   4,312   $  3,438   $   5,835   $  2,832
                                      -- ------ - - ------   - ------- - - ------

Revenues

During the Company's 13 and 39-week periods ended June 30, 2012, revenues increased 0.6% and 1.7% compared to revenues in the 13 and 39-week periods ended July 2, 2011, respectively. These increases are primarily due to: (i) improved conditions in the Washington, DC market (which was negatively impacted by a flood in the third fiscal quarter of 2011), and (ii) revenues related to our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012, partially offset by the closure of TheGrill Room property located in New York, the America property located in Washington, DC in the first quarter

     Food and Beverage Same-Store Sales

On a Company-wide basis, same store sales increased 4.0% during the third fiscal
quarter of 2012 compared to the same period last year as follows:


                             13 Weeks Ended          Variance
                          --------------------   -----------------
                          June 30,    July 2,
                            2012        2011        $         %
                          ---------   --------   -------   -------
                             (in thousands)
Las Vegas                 $  14,218   $ 14,619   $  (401 )    -2.7 %
New York                      9,476      9,427        49       0.5 %
Washington, DC                6,230      4,569     1,661      36.4 %
Atlantic City                   851        779        72       9.2 %
Boston                        1,116      1,254      (138 )   -11.0 %
Connecticut                     374        377        (3 )    -0.8 %
                          -- ------   - ------   - -----   - -----
Same store sales             32,265     31,025   $ 1,240       4.0 %
                                                 - -----   - -----
VIEs                          5,607      5,738   $  (131 )    -2.3 %
                                                 - -----   - -----
Other                           816      1,820
                          -- ------   - ------
Food and beverage sales   $  38,688   $ 38,583
                          -- ------   - ------

Same-store sales in Las Vegas decreased 2.7% in the third fiscal quarter of 2012 compared to the third fiscal quarter of 2011 primarily as a result of an overall decrease in traffic in Las Vegas during the quarter. Same-store sales in New York during the third quarter of fiscal 2012 compared to 2011 were relatively flat as expected. Same-store sales in Washington, DC increased 36.4% in the third fiscal quarter of 2012 compared to the third fiscal quarter of 2011 primarily as a result of improved market conditions (2011 was negatively impacted by a flood in the third fiscal quarter of 2011) and increased catering business at our Sequoia DC property. Same-store sales in Atlantic City increased 9.2% in the third quarter of fiscal 2012 compared to 2011 as result of new ownership at Resorts Casino Hotel and their significant marketing efforts for the property. Same-store sales in Boston decreased 11% during the third quarter of fiscal 2012 compared to 2011 as the location continued to suffer the negative impact of a fire that temporarily closed the property in the second fiscal quarter of 2012. Same-store sales at the consolidated VIEs decreased 2.3% in the third fiscal quarter of 2012 compared to the third fiscal quarter of 2011 primarily as a result of decreases in traffic at our properties in Florida. Other food and beverage sales consist of sales related to new restaurants opened during the applicable period and sales related to properties that were closed during the period due to lease expiration and therefore not included in discontinued operations.

Costs and Expenses

Costs and expenses from continuing operations for the 13 and 39-weeks ended June
30, 2012 and July 2, 2011 were as follows (in thousands):


                  13 Weeks                 13 Weeks                    Increase       39 Weeks                 39 Weeks                     Increase
                    Ended        % to        Ended        % to        (Decrease)        Ended        % to        Ended        % to         (Decrease)
                  June 30,      Total       July 2,      Total      ---------------   June 30,      Total       July 2,      Total      -----------------
                    2012       Revenues      2011       Revenues       $        %       2012       Revenues      2011       Revenues        $         %
                  --------------------------------------------------------   - ----   ----------------------------------------------------------   - ----
Food and
beverage cost
of sales          $   9,992         25.6 % $  10,574         27.3 % $ (582 )   -5.5 % $  26,020         25.6 % $  27,006         27.0 % $   (986 )   -3.7 %
Payroll
expenses             11,702         30.0 %    11,657         30.1 %     45      0.4 %    32,758         32.2 %    32,999         33.0 %     (241 )   -0.7 %
Occupancy
expenses              4,494         11.5 %     4,917         12.7 %   (423 )   -8.6 %    13,485         13.3 %    13,825         13.8 %     (340 )   -2.5 %
Other operating
costs and
expenses              5,156         13.2 %     4,931         12.7 %    225      4.6 %    13,250         13.0 %    13,197         13.2 %       53      0.4 %
General and
administrative
expenses              2,240          5.7 %     2,309          6.0 %    (69 )   -3.0 %     7,271          7.2 %     7,117          7.1 %      154      2.2 %
Depreciation
and
amortization          1,097          2.8 %       923          2.4 %    174     18.9 %     2,976          2.9 %     2,939          2.9 %       37      1.3 %
                  -- ------                -- ------                - ----            -- ------                -- ------                - ------
                  $  34,681                $  35,311                $ (630 )          $  95,760                $  97,083                $ (1,323 )
                  -- ------                -- ------                - ----            -- ------                -- ------                - ------

Food and beverage costs as a percentage of total revenues for the 13 and 39-weeks ended June 30, 2012 decreased as compared to the same periods of fiscal 2011 as a result of improved menu costing partially offset by higher commodity prices.

Occupancy expenses for the 13 and 39-weeks ended June 30, 2012 decreased as compared to the same periods of fiscal 2011 as a result of a reduction in costs related to properties that were closed due to lease expiration.

Other operating costs and expenses for the 13-weeks ended June 30, 2012 increased as compared to the same period of fiscal 2011 due to the opening of Clyde Frazier's Wine & Dine in March 2012. Other operating costs and expenses for the 39-weeks ended June 30, 2012 increased slightly as compared to the same period of fiscal 2011 due to the opening of Clyde Frazier's Wine & Dinein March 2012, partially offset by cost cutting measures implemented in the latter part of fiscal 2011 combined with a reduction in other operating costs and expenses related to properties that were closed due to lease expiration.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13-weeks ended June 30, 2012 decreased compared to the same period of fiscal 2011 as a result of the elimination of the former President's salary in connection with his resignation in December 2011. General and administrative expenses (which relate solely to the corporate office in New York City) for the 39-weeks ended June 30, 2012 increased compared to the same period of fiscal 2011 as a result amounts recorded in connection with the former President's separation agreement partially offset by cost cutting measures implemented in the latter part of fiscal 2011.

Income Taxes

The Company's provision for income taxes consists of U.S. Federal, state and local taxes in amounts necessary to align the Company's year-to-date provision for income taxes with the effective tax rate that the Company expects to achieve for the full year. The income tax provision on income from continuing operations for the 39-week periods ended June 30, 2012 and July 2, 2011 reflect effective tax rates of approximately 28% and 12%, respectively. The provision for income tax consists of U.S. Federal, state and local taxes and includes discrete items related to certain tax return to provision adjustments in connection with the filing of the fiscal 2011 and 2010 tax returns respectively, and the accrual of interest for uncertain tax positions. The Company expects its effective tax rate for its current fiscal year to be significantly lower than the statutory rate as a result of the inclusion of tax credits and operating income attributable to the non-controlling interests of the VIEs that is not taxable to the Company. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from current estimates.

The Company's overall effective tax rate in the future will be affected by factors such as the level of losses incurred at the Company's New York facilities, which cannot be consolidated for state and local tax purposes, pre-tax income earned outside of New York City, the utilization of state and local net operating loss carryforwards and the utilization of FICA tax credits. Nevada has no state income tax and other states in which the Company operates have income tax rates substantially lower in comparison to New York. In order to utilize more effectively tax loss carryforwards at restaurants that were unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries.

Liquidity and Capital Resources

Our primary source of capital has been cash provided by operations. We utilize cash generated from operations to fund the cost of developing and opening new restaurants, acquiring existing restaurants owned by others and remodeling existing restaurants we own.

Net cash used in investing activities for the 39-week period ended June 30, 2012 was $5,688,000 and resulted primarily from purchases of fixed assets at existing restaurants and the construction of Clyde Frazier's Wine and Dinelocated at the New York City partially offset by net proceeds from sales of investment securities.

Net cash provided by investing activities for the 39-week period ended July 2, 2011 was $3,170,000 and resulted from net proceeds from the sales of investment securities partially offset by purchases of fixed assets at existing restaurants and the construction of The Broadway Burger Bar located at the New York-New York Hotel & Casino in Las Vegas, NV.

Net cash used in financing activities for the 39-week period ended June 30, 2012 of $5,337,000 was principally used for the payment of dividends, purchase of treasury stock and distributions to non-controlling interests.

Net cash used in financing activities for the 39-week period ended July 2, 2011 of $3,980,000 was principally used for the payment of dividends and distributions to non-controlling interests.

On December 30, 2011, April 4, 2012 and June 29, 2012 the Company paid a quarterly cash dividend in the amount of $0.25 per share on the Company's common stock. The Company intends to continue to pay such quarterly cash dividends for the foreseeable future, however, the payment of future dividends is at the discretion of the Company's Board of Directors and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation and other relevant factors.

In February 2010, the Company entered into an amendment to its lease for the food court space at the New York-New York Hotel and Casino in Las Vegas, Nevada. Pursuant to this amendment, the Company agreed to, among other things; commit no less than $3,000,000 to remodel the food court during 2012. In exchange for this commitment, the landlord agreed to extend the food court lease for an additional four years. As of June 30, 2012, the Company has spent approximately $2,000,000 related to this commitment.

On June 7, 2011, the Company entered into a 10-year exclusive agreement to manage a yet to be constructed restaurant and catering service at Basketball City in New York City in exchange for a fee of $1,000,000 (all of which has been paid as of June 30, 2012 and is included in Intangible Assets in the accompanying Consolidated Balance Sheet). Under the terms of the agreement, the owner of the property will construct the facility at its expense and the Company will pay the owner an annual fee based on sales, as defined in the agreement. The Company expects to begin operating this property within the next 12 months.

Recent Restaurant Expansion

In August 2010, the Company entered into an agreement to lease the former ESPN Zonespace at the New York-New York Hotel & Casino Resort in Las Vegas and re-open the space under the name The Sporting House. Such lease is cancellable upon 90 days written notice and provides for rent based on profits only. This restaurant opened at the end of October 2010 and the Company did not invest significant funds to re-open the space.

In the quarter ended January 1, 2011, the Company combined three fast food outlets located in the Village Eateries in the New York-New York Hotel & Casino Resort in Las Vegas into a new restaurant, The Broadway Burger Bar, which opened at the end of December 2010.

On March 18, 2011, a subsidiary of the Company entered into a lease agreement to operate a restaurant and bar in New York City named Clyde Frazier's Wine and Dine. In connection with the agreement, the landlord has agreed to contribute up to $1,800,000 towards the construction of the facility (of which $1,000,000 was received as of June 30, 2012), which totaled approximately $7,000,000. The initial term of the lease for this facility expires on March 31, 2027 and has one five-year renewal. This restaurant opened during the second quarter of fiscal 2012 and as a result the Consolidated Condensed Statement of Operations for the 39-weeks ended June 30, 2012 includes approximately $970,000 of pre-opening and early operating losses related to this facility.

Recent Restaurant Dispositions

Lease Expirations - On July 8, 2011, the Company entered into an agreement with the landlord of The Grill Room property located in New York City, whereby in exchange for a payment of $350,000 the Company vacated the property on October 31, 2011. Such payment and the related loss on closure of the property, in the amount of $179,000, are included in Other Operating Costs and Expenses in the Consolidated Condensed Statement of Operations for the 39-weeks ended June 30, 2012. This lease was scheduled to expire on December 31, 2011.

The Company was advised by the landlord that it would have to vacate the Americaproperty located in Washington, DC, which was on a month-to-month lease. The closure of this property occurred on November 7, 2011. The related loss on closure of this property, in the amount of $186,000, is included in Other Operating Costs and Expenses in the Consolidated Condensed Statement of Operations for the 39-weeks ended June 30, 2012.

Discontinued Operations - During the fourth fiscal quarter of 2010, the Company closed its Pinch & S'Mac operation located in New York City, and re-concepted the location as Polpette, which featured meatballs and other Italian food. Sales at Polpette failed to reach the level sufficient to achieve the results the Company required. As a result, the Company closed this restaurant on February 6, 2011 and it was sold on April 28, 2011 for $400,000. The Company realized a loss on the sale of $71,000 which was recorded during the second quarter of fiscal 2011 as well as operating losses of $148,000 for the 39-weeks ended July 2, 2011, all of which are included in discontinued operations in the accompanying Consolidated Statement of Operations.

The results of discontinued operations were as follows:

                                            13 Weeks Ended          39 Weeks Ended
                                        ----------------------   ---------------------
                                        June 30,      July 2,     June 30,    July 2,
                                          2012         2011         2012        2011
                                        ---------    ---------   ----------   --------
                                            (In thousands)          (In thousands)

    Income (loss) before income taxes   $       2    $    (264 ) $     (613 ) $ (1,219 )
    Income tax expense (benefit)              (39 )         10         (218 )     (182 )
                                        --- -----    -- ------   --- ------   - ------

    Net income (loss)                   $      41    $    (274 ) $     (395 ) $ (1,037 )
                                        --- -----    -- ------   --- ------   - ------

Critical Accounting Policies

The preparation of financial statements requires the application of certain accounting policies, which may require the Company to make estimates and assumptions of future events. In the process of preparing its consolidated condensed financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources. The primary estimates underlying the Company's consolidated condensed financial statements include allowances for potential bad debts on accounts and notes receivable, leases, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters. Management bases its estimates on certain assumptions, which they believe are reasonable in the circumstances, and actual results could differ from those estimates. Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company's consolidated financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

The Company's critical accounting policies are described in the Company's Form 10-K for the year ended October 1, 2011. There have been no significant changes to such policies during fiscal 2012.

Recently Adopted and Issued Accounting Standards

See Note 1 to the Consolidated Condensed Financial Statements for a description of recent accounting pronouncements, including those adopted in fiscal 2012 and the expected dates of adoption and the anticipated impact on the Consolidated Condensed Financial Statements.