<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

  [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
                            Exchange Act of 1934
               For the quarterly period ended September 28, 1996
                                             -------------------

                                       or

  [ ] Transition report pursuant to Section 13 or 15(d) of the Securities and
                             Exchange Act of 1934
               For the transition period from             to
                                              -----------    ---------

                          Commission File No. 0-11271
                                              -------


                             WALL STREET DELI, INC.
             (Exact name of registrant as specified in its Charter)


      DELAWARE                                           63-0514240
(State of Incorporation)                         (IRS Employer I.D. No.)

                       400 Century Park South, Suite 116
                           Birmingham, Alabama 35226
                    (Address of principal executive offices)

                                 (205) 822-3960
                        (Registrant's telephone number)


                        ------------------------------


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

                              Yes  X           No
                                  ---              ---

         Indicate the number of shares outstanding of the registrant's class of
common stock, as of the latest practicable date.

         Class                                 Outstanding at November 5, 1996 
-------------------------------                -------------------------------
Common Stock, $.05 Par Value                            3,411,743
<PAGE>   2

                                     INDEX


<TABLE>
<CAPTION>
                                                                             Page No.
                                                                             --------
<S>     <C>                                                                     <C>
PART I:  FINANCIAL INFORMATION

         ITEM 1:  Financial Statements  . . . . . . . . . . . . . . . . . . . . .  1
                     
                      Consolidated Balance Sheets  . . . . . . . . . . . . . . . . 2
                     
                      Consolidated Statements of Income  . . . . . . . . . . . . . 4
                     
                      Consolidated Statements of Cash Flows  . . . . . . . . . . . 5
                     
                  Notes to Consolidated Financial Statements . . . . . . . . . . . 6
         
         ITEM 2:  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations  . . . . . . . . . . . . . . 7
                                                                                 
                                                                                 
PART II: OTHER INFORMATION                                                       
                                                                                 
         ITEM 6:  Exhibits and Reports on Form 8-K  . . . . . . . . . . . . . . . 13
                                                                                 
         SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
                                                                                 
         EXHIBITS:                                                               
                                                                                 
             Exhibit 10.10:   Asset Purchase Agreement dated                     
                              October 27, 1996 relating to                       
                              Sale of Memphis Division . . . . . . . . . . . . .  15
                                                                                 
             Exhibit 11:      Computation of Earnings                            
                              Per Common Share . . . . . . . . . . . . . . . . .  29
                                                                                                                   
</TABLE>
<PAGE>   3

                         PART I: FINANCIAL INFORMATION

ITEM I:          FINANCIAL STATEMENTS

         The financial statements listed below are included on the following
         pages of this Report on Form 10-Q:

                 Consolidated Balance Sheets at September 28, 1996 (unaudited)
                 and June 29, 1996.

                 Consolidated Statements of Income (unaudited) for the three
                 months ended September 28, 1996 and September 30, 1995.

                 Consolidated Statements of Cash Flows (unaudited) for the
                 three months ended September 28, 1996 and September 30, 1995.

         Notes to Consolidated Financial Statements (unaudited).





                                       1
<PAGE>   4

                             WALL STREET DELI, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                  (Unaudited)
                                              September 28, 1996   June 29, 1996
                                              ------------------   -------------
 <S>                                            <C>                <C>
 ASSETS                                         

 Current:
                                             
    Cash and equivalents                        $    935,498        $ 1,882,844

    Accounts and notes receivable                  1,332,025          1,636,230
                                              
    Inventories (Note 3)                             726,857            686,809
                                              
    Prepaid expenses and other                       335,813            278,732
                                              
    Refundable income taxes                          239,670            239,670

    Deferred tax benefit                           1,008,000          1,043,000
                                                ------------       ------------
                                             
       Total current assets                        4,577,863          5,767,285
                                                ------------       ------------
                                              
 Equipment and improvements:                  
                                              
    Equipment and fixtures                        18,378,598         18,114,226

    Leasehold improvements                        15,328,739         14,672,885
                                                ------------       ------------
                                              
                                                  33,707,337         32,787,111
                                              
 Less accumulated depreciation and            
 amortization                                 
                                                 (17,070,260)       (16,190,946)
                                                ------------       ------------
                                              
      Net equipment and improvements              16,637,077         16,596,165
                                                ------------       ------------
 Other:                                       
                                              
    Long-term portion of notes receivable            626,360            743,103
                                              
    Cash surrender value of officers'         
    life insurance                                   625,611            607,341
                                              
    Deferred tax benefit                           1,895,000          1,955,000
                                                ------------       ------------

      Total other assets                           3,146,971          3,305,444
                                                ------------       ------------
                                              
                                                $ 24,361,911       $ 25,668,894
                                                ============       ============
</TABLE>

See accompanying notes to consolidated financial statements (Unaudited).





                                       2
<PAGE>   5

                             WALL STREET DELI, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                (Unaudited)
                                             September 28, 1996   June 29, 1996
                                             ------------------   -------------
 <S>                                            <C>                <C> 
 LIABILITIES AND STOCKHOLDERS' 
 EQUITY

 Current liabilities:

    Notes payable                               $  1,329,628        $ 2,500,000

    Accounts payable                               1,116,264          1,718,621
                                                
    Accruals                                       3,452,944          3,220,683
                                                ------------           --------
                                                
      Total current liabilities                    5,898,836          7,439,304
                                                ------------         ----------
                                                
 Stockholders' equity:                          

    Common stock, $.05 par value,               
    shares authorized 20,000,000; issued        
    3,411,743 and  3,411,043                         170,587            170,552
                                                
    Additional paid-in capital                    10,771,833         10,766,896
                                                
    Retained earnings                              7,531,203          7,302,690
                                                ------------         ----------
                                                
                                                  18,473,623         18,240,138

    Less treasury stock, at cost                     (10,548)           (10,548)
                                                ------------        -----------
                                                
      Total stockholders' equity                  18,463,075         18,229,590
                                                ------------        -----------
                                                
                                                $ 24,361,911       $ 25,668,894
                                                ============       ============
</TABLE>                                        


See accompanying notes to consolidated financial statements (Unaudited).





                                       3
<PAGE>   6

                             WALL STREET DELI, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                    For the Three Months Ended
                                             September 28, 1996  September 30, 1995
                                             ------------------  ------------------
 <S>                                             <C>                <C>
 Net sales                                       $17,327,832       $17,548,919
                                                                    
 Costs and expenses (income):                                       
                                                                    
    Costs of sales                                15,432,961        15,991,786

    Administrative and general expense             1,495,218         1,558,301
                                                                    
    Interest expense - net                            19,110            55,778
                                                                    
    Income related to units                                         
      sold or closed                                 --                (74,400)
                                                 -----------       -----------
       Total costs and expenses:                  16,947,289        17,531,465
                                                 -----------       -----------

 Income before taxes on income                       380,543            17,454
                                                                    
 Taxes on income                                     152,200              --
                                                 -----------       -----------                   
Net income                                       $   228,343       $    17,454
                                                 ===========       ===========
                                                                              
 Earnings per share (Note 5)                     $       .07       $       .01
                                                 ===========       ===========
 Weighted average number of common and                                        
  common equivalent shares outstanding                                        
  (Note 5)                                         3,413,779         3,473,709
                                                 ===========       ===========
</TABLE>                                                     
                                                



See accompanying notes to consolidated financial statements (Unaudited).





                                       4
<PAGE>   7

                             WALL STREET DELI, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                                      For the Three Months Ended
                                                                               September 28, 1996    September 30, 1995
                                                                               ------------------    ------------------
 <S>                                                                                <C>                  <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income                                                                        $  228,343           $   17,454

    Adjustments to reconcile net income to net cash provided by
    operating activities:

      Depreciation                                                                       860,292              961,714

      Gain on sale of equipment and improvements                                           --                 (74,400)

      Deferred income taxes                                                               95,000                --

      Decrease (increase) in assets:

          Accounts receivable                                                            295,553               39,536

          Inventories                                                                    (40,048)             (83,293)

          Prepaid expenses and other                                                     (57,081)             705,450

      Increase (decrease) in liabilities:

          Accounts payable                                                              (602,357)            (173,803)

          Accruals                                                                       232,261             (278,703)
                                                                                      ----------           ----------
     Net cash provided by operating activities                                         1,011,963            1,113,955
                                                                                      ----------           ----------

 CASH FLOWS FROM INVESTING ACTIVITIES:

     Payments for purchase of equipment and improvements                                (920,226)            (998,368)

     Proceeds from sale of equipment and improvements                                     --                   94,206

     Payments received on notes receivable                                               108,047              109,206

     Increase in cash surrender value of life insurance on officers lives                 18,270              --
                                                                                      ----------           ----------
          Net cash used by investing activities                                         (793,909)            (794,956)
                                                                                      ----------           ----------

 CASH FLOWS FROM FINANCING ACTIVITIES:

     Net payments under line of credit                                                (1,170,372)                --

     Purchase of treasury stock                                                           --                   (2,131)

     Exercise of employee stock options                                                    4,972               16,729
                                                                                      ----------           ----------
     Net cash (used) provided by financing activities                                 (1,165,400)              14,598
                                                                                      ----------           ----------
 NET INCREASE (DECREASE) IN CASH FOR THE PERIOD                                         (947,346)             333,597

   CASH, beginning of period                                                           1,882,844              921,616
                                                                                      ----------           ----------
   CASH, end of period                                                                $  935,498           $1,255,213
                                                                                      ==========           ==========

 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid during the period for:

     Interest                                                                         $   39,322           $   69,185

     Income taxes                                                                     $   26,000           $   70,050
</TABLE>

See accompanying notes to consolidated financial statements (Unaudited).





                                       5
<PAGE>   8

                             WALL STREET DELI, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



1.       In the opinion of the Company, the accompanying unaudited consolidated
         financial statements contain all adjustments (consisting of only
         normal recurring accruals) necessary to present fairly the financial
         position as of September 28, 1996 and the results of operations and
         cash flows for the three month periods ended September 28, 1996 and
         September 30, 1995. The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements. Estimates
         also affect the reported amounts of revenues and expenses during the
         reporting period. Actual results could differ from those estimates.

2.       The results of operations for the three month periods ended September
         28, 1996 and September 30, 1995 are not necessarily indicative of the
         results to be expected for the full year.

3.       Inventories are valued at the lower of cost (first-in, first-out) or
         market.

4.       The Company assesses at each balance sheet date whether there has been
         an impairment of Long-Lived Assets by determining whether projected
         undiscounted future cash flow from operations for each store, as
         defined in Statement of Financial Accounting Standards No. 121,
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to be Disposed Of," exceeds its net book value as of the
         assessment date.

5.       Earnings per common share and common share equivalent have been
         computed based upon the weighted average number of shares outstanding
         during the respective periods. Equivalent shares are those issuable
         upon assumed exercise of stock options granted, net of shares which
         could have been purchased from the proceeds based on the average
         market price. The computation of earnings per common share assuming
         full dilution results in less than 3% dilution during the period.




                        ----------------------------

                                       6
<PAGE>   9

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

         The following is management's discussion and analysis of certain
significant factors that have affected the Company's financial condition and
earnings during the periods included in the accompanying consolidated balance
sheets and statements of income.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, the
percentages of net sales represented by certain items in the Company's
consolidated statements of income.

<TABLE>
<CAPTION>
                                                  Three months ended
                                                  ------------------
                                      September 28, 1996   September 30, 1995
                                      ------------------   ------------------
<S>                                           <C>                  <C>
 Net sales                                    100.0%               100.0%
 Cost of sales                                 89.1                 91.1
                                              -----                -----
 Gross profit                                  10.9                  8.9
 Administrative and general                     8.6                  8.9
                                              -----                -----
    Operating income                            2.3                   .0
 Other income (expense),net                     (.1)                  .1
                                              -----                -----
    Income before taxes on income               2.2                   .1
 Taxes on income                                 .9                  --
                                              -----                -----
 Net income                                     1.3%                  .1%
                                              =====                =====
                                        
NET SALES                               
</TABLE>

         Net sales decreased during the quarter ended September 28, 1996 by
$221,087 or 1.3% from the corresponding three months last year. Same store
sales decreased 4.9% from the first quarter last year. One Wall Street Deli
flagship unit was opened and one R.C. Cooper's unit was converted to a Wall
Street Deli flagship store during this first quarter of fiscal 1997.

         Significant components of the Company's net sales and the percent of
total sales for the three months ended September 28, 1996 and September 30,
1995 are presented in the following schedule:

<TABLE>
<CAPTION>
                          September 28, 1996             September 30, 1995
                          ------------------             -------------------
                       Net Sales      % of Total       Net Sales    % of Total
                      -----------     ----------     ------------   ----------
 <S>                   <C>              <C>           <C>             <C>
 Wall Street Deli      $15,704,857       90.6%        $14,505,200      82.7%
                                                                      
 R.C. Coopers              882,795        5.1%          2,059,433      11.7%

 Catering                  740,180        4.3%            984,286       5.6%
                       -----------      -----         -----------     -----
                                                                      
 Total                 $17,327,832      100.0%        $17,548,919     100.0%
                       ===========      =====         ===========     =====
</TABLE>                                                              





                                       7
<PAGE>   10

         The Company expects the Wall Street Deli component of its sales to
continue growing, both in absolute terms and as a percentage of the Company's
total sales. Management plans to open only Wall Street Delis in the immediate
future and to continue either disposing of the R.C. Cooper units or converting
them to Wall Street Delis. The Company presently separates its sales records
for the Wall Street Deli concepts into two sub-concepts: "flagship" and
"other." The Company's average sales per unit by concept and the same store
sales comparisons for the three months ended September 28, 1996 and September
30, 1995 are as follows:

<TABLE>
<CAPTION>
                                                            Same Store Sales
                            Average Sales Per Unit*   Change from Prior Year
                            ----------------------    ---------------------
                               1996        1995          1996       1995
                             --------    --------       ------     ------
 <S>                         <C>         <C>            <C>        <C>
 Wall Street Deli Flagships  $156,924    $161,903       (5.4)%     (7.5)%

 Wall Street Deli Other        85,221      97,361       (2.9)%     (8.2)%
                                                                 
 R.C. Coopers                  63,057      62,151       (2.0)%     (2.2)%

 All Units                   $133,026    $130,833       (4.9)%     (6.6)%
</TABLE>                                

* Average sales per unit are computed retroactively on the basis of current
grouping, reflecting in some instances conversion of R.C. Cooper's units to
Wall Street Deli units.

         Overall same store sales decreased 4.9% for the quarter, versus a 6.6%
decrease for the first quarter last year. Management believes both economic
uncertainty and aggressive expansion and marketing by competitors had a
negative impact on same store sales.

         The Company's business, particularly the sales component, is dependent
on general economic conditions. Local and national economic uncertainties, as
well as actual downturns, have in the past adversely affected sales and/or
profitability, and should be expected to have similar effects in the future.

COST OF SALES

         Cost of sales as a percentage of net sales decreased to 89.1% during
the three months ended September 28, 1996 from 91.1% in the corresponding three
months in the previous year.





                                       8
<PAGE>   11

         Cost of sales consists of the following significant components:

<TABLE>
<CAPTION>
                                           For the Three Months Ended
                                  September 28, 1996        September 30, 1995
                                  ------------------        ------------------
                                 Amount    % of Sales      Amount      % of Sales    % of Dollar Change
 <S>                           <C>            <C>         <C>             <C>             <C>
 Food/Paper                     $6,326,143    36.5%        $6,416,463     36.6%           (1.4)
                                                                          
 Commissary Expenses                                                      
                                    --         --             315,527      1.8%         (100.0)
                                 ---------    ----         ----------     ----           
 Food/Paper &                                                             
 Commissary Expenses             6,326,143    36.5%         6,731,990     38.4%           (6.0)                                 
                                                                          
 Labor                           3,975,811    22.9%         4,186,545     23.8%           (5.0)
                                                                          
 Store Expenses                  5,131,007    29.6%         5,073,251     28.9%            1.1
                                 ---------    ----         ----------     ----           

                               $15,432,961    89.1%       $15,991,786     91.1%           (3.5)
                               ===========    ====        ===========     ====           =====
</TABLE>                                                                  

         The Company completed the process of phasing out its commissaries
during fiscal 1996 and a single source vendor system was fully implemented. The
decrease in food/paper and commissary expenses of 1.9 percentage points is the
result of these changes. Labor costs decreased .9 percentage points. Shortly
before the end of fiscal 1995 management changed the compensation structure for
store managers by raising the base pay and lowering certain incentive pay
plans. This has made the Company more competitive in hiring managers and these
managers have helped reduce labor costs from the same quarter last year. As
discussed below under the caption "Impact of Inflation," the federal minimum
wage increase will affect the wages paid certain of the Company's employees
subsequent to October 1, 1996. Store expenses as a percentage of sales
increased .7 percentage points from the same quarter last year. This increase
was due in part to the fact that many store expenses are fixed, and the
percentages are thus adversely affected by a decrease in sales.

ADMINISTRATIVE AND GENERAL EXPENSES

         Administrative and general expenses for the three month period ended
September 28, 1996 decreased to $1,495,218, a decrease of $63,083 or 4% less
than the corresponding three months last year. This decrease was due primarily
to a decrease in divisional administrative and general expenses but offset by a
small increase in catering sales and office expenses.





                                       9
<PAGE>   12

FACILITIES CLOSING COSTS

         During the fourth quarter of 1995, the Company adopted a plan designed
to dispose of its remaining commissary locations and eleven non-performing
stores. In connection therewith, a provision of $1,147,950 was recorded related
to the anticipated lease cancellation payments and severance payments to
employees.

         As of June 29, 1996, the Company had closed all of the commissary
locations and had either closed or sold five of the eleven non-performing
stores. Of the remaining six stores, management closed one store in October
1996, has been negotiating lease cancellation terms on three of the properties,
and has entered into negotiations to sell the remaining two stores. Payments of
$90,864 and $201,648 were charged against this provision in the three months
ended September 28, 1996 and September 30, 1995, respectively. It is presently
planned that all the remaining stores will either be closed or sold during
fiscal 1997.

IMPAIRMENT OF LONG-LIVED ASSETS

         In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires the evaluation of assets based on
estimated future cash flows. The Company elected to adopt SFAS No. 121 in the
fourth quarter of 1996.

         Adoption of SFAS No. 121 required that the Company group assets at a
lower level for evaluation and measurement of impairment than under its
previous accounting policy and resulted in noncash charge of $4,712,562 in the
fourth quarter of 1996. As a result of the adoption of SFAS No. 121, the
Company now evaluates and measures for impairment on an individual store basis.
The charge in 1996 reduced the carrying amount of impaired assets associated
with individual restaurant properties to their estimated fair market values
based on the Company's experience in disposing of similar under-performing
properties.

         Depreciation and amortization expense for the first quarter of 1997
decreased by approximately $150,000 as a result of the reduced carrying value
of impaired assets. A decrease of approximately $600,000 is expected for fiscal
1997 depreciation and amortization expense.

SUBSEQUENT EVENT - SALE OF MEMPHIS DIVISION

         The Company announced in September an agreement to sell the operating
assets of its Memphis division to a newly formed company. The transaction was
closed as of October 27, 1996, subsequent to the close of the first quarter.
The assets included in the sale were ten sandwich shops in Memphis, three
operating under the Wall Street Deli trade name, seven operating as R.C.
Cooper's Delis, and the Memphis catering operation now conducted under the
trade name Executive Chef Catering. The sale price totaled approximately
$1,017,000, which was payable $810,305 in cash and short term notes payable,
plus 25,000 shares of Wall Street Deli stock, with the balance of $68,739
payable in two years, with interest at the prime rate, paid quarterly. The book
value of the assets sold was approximately $860,000.





                                       10
<PAGE>   13

         The purchasers of the Memphis Division are Judy M. Gupton, the present
manager of the Memphis division, and Robert G. Barrow, president and chief
executive officer of the Company. Ms. Gupton will serve as president and chief
executive officer of the purchasing company. Mr. Barrow is an investor in the
purchasing company and will continue to serve as president and chief executive
officer of Wall Street Deli, Inc. In fiscal 1996, the ten Memphis sandwich
shops had average annual sales of approximately $178,000 each, and the catering
operation had sales of approximately $2.9 million. Memphis Division operating
income was approximately $268,000 in fiscal 1996. The Board's decision to sell
the Memphis operation was based on a number of considerations including the
small size of the existing store units and the lack of compatibility of the
catering business with the Company's recently installed store-level management
information system and transition to a single source vendor system for food and
restaurant supplies. Prior to this time, the catering business operated as part
of the Company's commissary in Memphis. In fiscal 1996, Wall Street Deli closed
all of its regional commissaries and transitioned to a single source vendor
system. By divesting this operation, the Company believes it will be able to
further streamline its operations and focus on its primary restaurant concept,
Wall Street Deli.

TAXES ON INCOME

         The effective tax rate for the first quarter ended September 28, 1996
was 40 per cent.

INTEREST EXPENSE, NET

         Interest expense, net, during the quarter ended September 28, 1996
decreased $36,668 or 65.7% from the corresponding three months in the previous
year. Interest expense for the quarter ended September 28, 1996 was $33,149
compared to interest expense of $55,778 for the three month period ended
September 30, 1995.

         The Company has a $7,500,000 unsecured bank line of credit, bearing
interest at the banks cost of funds plus 175 basis points, which was 7.0% at
September 28, 1996. Borrowings under this line were approximately $1,329,628
and $3,150,000 for the three months ended September 28, 1996 and September 30,
1995, respectively.

IMPACT OF INFLATION

         Many of the Company's employees are paid hourly rates related to the
federal minimum wage. Accordingly, inflation-related annual increases in the
minimum wage have historically increased the Company's labor costs. In August
1996, legislation was enacted to increase the minimum wage from $4.25 per hour
to $4.75 on October 1, 1996, and further to $5.15 effective September 1, 1997.
Approximately 30 employees were affected by the October 1 increase. The Company
presently has approximately 160 employees who are paid less than $5.15 per
hour.

         Construction costs have also increased to developers who lease space
to the Company. They, in turn, have and may continue to increase rents for
Company restaurants. In addition, most of the leases for Company restaurants
contain rental escalation clauses based upon the cost increases incurred by
lessors. In most cases, the Company has been able to increase prices
sufficiently to match increases in its operating costs, but there is no
assurance that it will be able to do so in the future.





                                       11
<PAGE>   14

LIQUIDITY AND CAPITAL RESOURCES

         The Company's ability to obtain the cash required for the conduct of
its business depends upon cash flow from operations and, to a lesser extent,
bank borrowings. In general, cash flow from operations and periodic bank
borrowings have been sufficient to finance the expansion of the Company's
business. The Company does not have significant receivables or inventory and it
receives trade credit in purchasing food and supplies. Since funds are
available from cash sales, but are not required immediately to pay for food and
supplies or to finance receivables or inventory, such funds may be used for
non-current capital expenditures. In the process of refining the Company's
production units, stores not meeting the Company's performance criteria are
closed and the furniture and equipment sold. The terms of some such sales
require the Company to take back notes, which are contained in the notes
receivable, for all or a portion of the sale price.

         The Company's principal capital requirement is for new equipment and
leasehold improvements for new and existing restaurants. The Company currently
has in place a line of credit which provides for borrowings up to $7,500,000
from AmSouth Bank of Alabama pursuant to the terms of a Credit Agreement dated
June 19, 1996 (the "Credit Agreement").  The Credit Agreement contains certain
covenants that require, among other things, the Company maintain a certain
tangible net worth, to limit the annual capital expenditures of the Company and
certain other covenants. The Company is in compliance with these covenants. It
is presently anticipated that the Company's capital expenditures for fiscal
1997 will be approximately $3,000,000. As mentioned in the discussion under
"Interest Expense, Net," the borrowings under the Credit Agreement were reduced
to $1,329,628 for the three months ended September 28, 1996.

         The Company expects its future capital needs will be met primarily by
internally generated funds and supplemented, as needed, by additional bank
borrowings. The Company's present plans call for opening six to eight new
flagship Wall Street Deli units during fiscal 1997. Capital expenditures for
the three month period ended September 28, 1996 totaled $920,266, compared to
$977,344 for the corresponding three months of the prior year. Cash generated
from operations for the three month period ended September 28, 1996 totalled
$1,011,963 compared to $1,113,955 for the corresponding three months of the
prior year.


                            ----------------------


                                       12
<PAGE>   15

                           PART II: OTHER INFORMATION

ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>

     <S>  <C>                                                               <C>
     (a)  Exhibits
          
          Exhibit 10.10 - Asset Purchase Agreement relating to sale of
          Memphis Division  . . . . . . . . . . . . . . . . . . . . . . . . 15
          
          Exhibit 11 - Computation of Earnings Per Common Share . . . . . . 29

          Exhibit 27 - Financial Data Schedule (for SEC use only) . . . . .

          
     (b)  Reports on Form 8-K:
          
          There were no reports on Form 8-K filed during the quarter
          ended September 28, 1996.
          

</TABLE>




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<PAGE>   16

                                   SIGNATURES



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


DATE:                                      WALL STREET DELI, INC.



November 8, 1996                           /s/ Robert G. Barrow
                                           -------------------------------------
                                           ROBERT G. BARROW
                                           President and Chief Executive Officer




November 8, 1996                           /s/  Arnold McGruder
                                           -------------------------------------
                                           ARNOLD MCGRUDER
                                           Treasurer
                                           (Principal Financial Officer)





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