Overview

As of December 29, 2012, the Company owned and operated 19 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.

Accounting Period

Our fiscal year ends on the Saturday nearest September 30. We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method, certain years will contain 53 weeks. The periods ended December 29, 2012 and December 31, 2011 included 13 weeks.

Reclassifications

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 condensed financial statements. Accordingly, the Company has reclassified its consolidated condensed statement of income for the prior period presented. These dispositions are discussed below in "Recent Restaurant Dispositions."

Seasonality

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's operating income of $282,000 for the 13-weeks ended December 29, 2012 decreased 82.2% compared to operating income of $1,587,000 for the 13-weeks ended December 31, 2011. This decrease resulted primarily from: (i) the negative effects of Hurricane Sandy on our businesses located in New York, Atlantic City, NJ and Washington, DC and the losses associated with the closure of our properties Red and Sequoialocated in New York, NY as a result, totaling approximately $900,000 which includes approximately $256,000 of assets written off that were destroyed as a result of the hurricane, (ii) operating losses in the amount of approximately $600,000 related to our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012, and (iii) the negative impact of additional room capacity in Las Vegas, NV, all partially offset by the absence of a non-recurring expenses in the amount of $500,000 recorded in the quarter ended December 31, 2011 related to the resignation of the Company's former President.

The following table summarizes the significant components of the Company's operating results for the 13-week periods ended December 29, 2012 and December 31, 2011, respectively:

                                         Year Ended                            Variance
                              December 29,        December 31,
                                  2012                2011                $                %
                                       (in thousands)

REVENUES:
Food and beverage sales      $       31,029      $       32,603      $    (1,574 )           -4.8 %
Other revenue                           307                 258               49             19.0 %
Total revenues                       31,336              32,861           (1,525 )           -4.6 %

COSTS AND EXPENSES:
Food and beverage cost of
sales                                 7,749               8,358             (609 )           -7.3 %
Payroll expenses                     10,845              10,707              138              1.3 %
Occupancy expenses                    4,535               4,458               77              1.7 %
Other operating costs and
expenses                              4,339               4,032              307              7.6 %
General and
administrative expenses               2,410               2,781             (371 )          -13.3 %
Depreciation and
amortization                          1,176                 938              238             25.4 %
Total costs and expenses             31,054              31,274             (220 )           -0.7 %
OPERATING INCOME             $          282      $        1,587      $    (1,305 )          -82.2 %

Revenues

During the Company's 13-week period ended December 29, 2012, revenues decreased 4.6% as compared to revenues in the 13-week period ended December 31, 2011. This decrease resulted primarily from: (i) the negative effects of Hurricane Sandy on our businesses located in New York, Atlantic City, NJ and Washington, DC and the related closure of our properties Red and Sequoia located in New York, NY in October 2012 as a result, and (ii) the negative impact of additional room capacity in Las Vegas, NV, partially offset by revenues related to our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012.

Food and Beverage Same-Store Sales



On a Company-wide basis, same store sales decreased 4.6% during the first fiscal
quarter of 2013 compared to the same period last year as follows:



                                        13 Weeks Ended                     Variance
                                December 29,       December 31,
                                    2012               2011             $            %
                                        (in thousands)

     Las Vegas                 $       13,497     $       14,359     $   (862 )      -6.0 %
     New York                           7,191              7,044          147         2.1 %
     Washington, DC                     3,137              3,340         (203 )      -6.1 %
     Atlantic City, NJ                    538                787         (249 )     -31.6 %
     Boston                               960                971          (11 )      -1.1 %
     Connecticut                          876                916          (40 )      -4.4 %
     Florida                            3,357              3,569         (212 )      -5.9 %
     Same Store Sales                  29,556             30,986     $ (1,430 )      -4.6 %
     Other                              1,473              1,617
     Food and beverage sales   $       31,029     $       32,603

Same-store sales in Las Vegas decreased 6.0% in the first fiscal quarter of 2013 compared to 2012 primarily as a result of the negative impact of additional room capacity without a corresponding increase in overall traffic. Same-store sales in New York (which excludes the Red and Sequoia properties as they were closed in October 2012) increased 2.1% during the first quarter of

fiscal 2013 compared to 2012 primarily as a result of strong catering revenues. Same-store sales in Washington, DC decreased 6.1% in the first fiscal quarter of 2013 compared to 2012 primarily as a result of increased competition. Same-store sales in Atlantic City decreased 31.6% in the first quarter of fiscal 2013 compared to 2012 due to the negative effects of Hurricane Sandy. Same-store sales in Connecticut decreased 4.4% in the first quarter of fiscal 2013 compared to 2012 due to declining traffic at the Foxwoods Resort and Casino where our properties are located. Same-store sales in Florida decreased 5.9% in the first quarter of fiscal 2013 compared to 2012 due to a decrease in the usage of complimentaries by the ownership of the casinos where our properties are located. 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 other closures and therefore not included in discontinued operations.

Costs and Expenses



Costs and expenses from continuing operations for the 13-weeks ended December
29, 2012 and December 31, 2011 were as follows (in thousands):



                            13-Weeks                          13-Weeks
                             Ended              %              Ended              %                Increase
                          December 29,       to Total       December 31,       to Total           (Decrease)
                              2012           Revenues           2011           Revenues         $            %

Food and beverage cost
of sales                 $        7,749           24.7 %   $        8,358           25.4 %   $   (609 )       -7.3 %
Payroll expenses                 10,845           34.6 %           10,707           32.6 %        138          1.3 %
Occupancy expenses                4,535           14.5 %            4,458           13.6 %         77          1.7 %
Other operating costs
and expenses                      4,339           13.8 %            4,032           12.3 %        307          7.6 %
General and
administrative
expenses                          2,410            7.7 %            2,781            8.5 %       (371 )      -13.3 %
Depreciation and
amortization                      1,176            3.8 %              938            2.9 %        238         25.4 %
                         $       31,054                    $       31,274                    $   (220 )

Food and beverage costs as a percentage of total revenues for the 13-weeks ended December 29, 2012 decreased as compared to the same period of fiscal 2012 as a result of improved menu costing partially offset by higher commodity prices.

Payroll expenses for the 13-weeks ended December 29, 2012 increased slightly as compared to the same period of fiscal 2012 as a result of payroll incurred at our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012, partially offset by a reduction in payroll expenses related to properties that were closed (as discussed above) due to flooding from Hurricane Sandy.

Occupancy expenses for the 13-weeks ended December 29, 2012 increased as compared to the same period of fiscal 2012 as a result of occupancy expenses incurred at our new restaurant in New York City, Clyde Frazier's Wine and Dine, which opened in March 2012, partially offset by a reduction in occupancy expenses related to properties that were closed (as discussed above) due to flooding from Hurricane Sandy.

Other operating costs and expenses for the 13-weeks ended December 29, 2012 increased as compared to the same period of fiscal 2012 due to the opening of Clyde Frazier's Wine & Dine in March 2012, losses related to the closure of two properties in New York as a result of Hurricane sandy, in the amount of $256,000, partially offset a reduction in other operating costs and expenses related to properties that were closed (as discussed above) due to flooding from Hurricane Sandy.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13-weeks ended December 29, 2012 decreased compared to the same period of fiscal 2012 primarily as a result of the inclusion of the former President's severance in the prior period in connection with his resignation in December 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 13-week periods ended December 29, 2012 and December 31, 2011 reflect effective tax rates of approximately 32% and 23%, respectively. 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.

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 13-week period ended December 29, 2012 was $3,374,000 and resulted primarily from purchases of fixed assets at existing restaurants and the purchase of the Florida membership interests.

Net cash used in investing activities for the 13-week period ended December 31, 2011 was $2,590,000 and resulted primarily from purchases of fixed assets at existing restaurants and the construction of Clyde Frazier's Wine and Dine located at the New York City.

Net cash used in financing activities for the 13-week period ended December 29, 2012 of $1,499,000 was principally used for the payment of dividends and distributions to non-controlling interests.

Net cash used in financing activities for the 13-week period ended December 31, 2011 of $2,424,000 was principally used for the payment of dividends, purchase of treasury stock and distributions to non-controlling interests.

The Company's working capital surplus of $593,000 at December 29, 2012, decreased by $3,468,000 as compared to a working capital surplus of $4,061,000 at September 29, 2012 resulting primarily from the purchase of Florida membership interests. We believe that our existing cash balances, investments and cash provided by operations will be sufficient to meet our liquidity and capital spending requirements at least through the next 12 months.

On December 28, 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 dividend 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 December 29, 2012, the Company has spent approximately $2,300,000 related to this commitment.

On November 28, 2012, the Company entered into an agreement to design and lease a restaurant at the Tropicana Hotel and Casino in Atlantic City, NJ. The initial term of the lease for this facility will expire 10 years after the date the property first opens for business to the public following its current refurbishment and will have two five-year renewals. The Company anticipates the cost to construct this restaurant will be approximately $1,000,000 and it will open during the third quarter of the 2013 fiscal year

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 and is included in Intangible Assets in the accompanying Consolidated Condensed Balance Sheets). 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

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 $1,500,000 was received as of December 29, 2012 and is being deferred over the lease term), 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.

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 Income for the 13-weeks ended December 31, 2011. This lease was scheduled to expire on December 31, 2011.

The Company was advised by the landlord that it would have to vacate the America property 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 Income for the 13-weeks ended December 31, 2011.

Discontinued Operations - Effective March 15, 2012, the Company vacated its food court operations at the MGM Grand Casino at the Foxwoods Resort Casinoin Ledyard, CT. The Company determined that it would not be able to operate this facility profitably at this location at the current rent.

The results of discontinued operations were as follows:

                                                 13 Weeks Ended
                                        December 29,        December 31,
                                            2012                2011
                                                 (In thousands)

             Revenues                   $           -       $         507
             Costs and expenses                     -                 673
             Loss before income taxes               -                (166 )
             Income tax benefit                     -                 (39 )

             Net loss                   $           -       $        (127 )

Other - On October 29, 2012, the Company suffered a flood at its Red and Sequoia properties located in New York, NY as a result of a hurricane. The Company did not reopen these properties as the underlying leases were due to expire in the second quarter of fiscal 2013. Losses related to the closure of these properties, in the amount of $256,000, are included in Other Operating Costs and Expenses in the Consolidated Condensed Statement of Income for the 13-weeks ended December 29, 2012.

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 September 29, 2012. There have been no significant changes to such policies during fiscal 2013 other than those disclosed in Note 1 to the Consolidated Condensed Financial Statements.

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 2013 and the expected dates of adoption and the anticipated impact on the Consolidated Condensed Financial Statements.