UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10K

(X) ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

                   For the fiscal year ended September 30, 2006

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES
    EXCHANGE ACT OF 1934

          For the transition period from ____________ to ____________


                          Commission File Number I-6836

                          Flanigan's Enterprises, Inc.
            ---------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                               59-0877638
-------------------------------               -------------------
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)                Identification No.)


   5059 N.E. 18th Avenue, Fort Lauderdale, FL                  33334
--------------------------------------------------           ---------
    (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code, (954) 377-1961
                                                    --------------

Securities registered pursuant to Section 12(b) of the Act:

   Common Stock, $.10 Par Value            American Stock Exchange
   ----------------------------            -----------------------
       Title of each class                  Name of each exchange
                                            on which registered

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has 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

                                       1
<PAGE>

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [_]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act.) Yes [_] No [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act.) Yes [_] No [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  $9,279,000  as of April 1, 2006,  the last  business day of the
registrant's most recently completed second fiscal quarter,  at a price of $9.97
per share.

There were 1,884,365  shares of the  Registrant's  Common Stock $0.10 par value,
outstanding as of December 29, 2006

                       DOCUMENTS INCORPORATED BY REFERENCE

Information  contained in the  Registrant's  2007 definitive  proxy material has
been  incorporated  by  reference in Items 10, 11, 12 and 13 of Part III of this
Annual Report on Form 10-K.

                        Exhibit Index Begins on Page 47



                                     PART I
Item 1. Business
----------------

         When  used  in  this  report,   the  words   "anticipate",   "believe",
"estimate",  "will",  "intend"  and "expect"  and similar  expressions  identify
forward-looking  statements.  Forward-looking statements in this report include,
but are not limited to, those relating to the general expansion of the Company's
business.  Although  we believe  that our  plans,  intentions  and  expectations
reflected in these  forward-looking  statements are  reasonable,  we can give no
assurance that these plans, intentions or expectations will be achieved.


General
-------

     Flanigan's   Enterprises,   Inc.,  (the  "Company")  owns  and/or  operates
restaurants with lounges,  package liquor stores and an  entertainment  oriented
club (collectively the "units").  At September 30, 2006, the Company operated 21
units,  and had  equity  interests  in seven  additional  units  which have been

                                       2
<PAGE>

franchised  by the Company.  The table below  summarizes  the type and number of
units being operated during each of the last three fiscal years.

                         FISCAL  FISCAL  FISCAL
                         YEAR    YEAR    YEAR     NOTE
                         2006    2005    2004     NUMBER
TYPES OF UNITS
-------------------------------------------------------------------
Company Owned:
--------------
  Combination package
  and restaurant          4       4       4
Restaurant only           2       2       2
Package store only        5       5       5

Company Managed
---------------
 Restaurants Only:
 -----------------
  Limited partnerships    7       6       5     (1)(2)(3)(4)
  Franchise               1       1       1
  Unrelated Third Party   1      --      --     (5)

Company Owned Club:       1       1       1
------------------
-------------------------------------------------------------------
TOTAL - Company
  Owned/Operated Units:  21      19      18

FRANCHISED - units        7       7       7    (6)
                         --      --      --

Notes:

         (1) During the third  quarter of fiscal  year  2003,  the  Company,  as
general  partner of the  limited  partnership,  entered  into a Sale of Business
Agreement for the purchase of an existing business in Pinecrest,  Florida, which
transaction  closed  during the first  quarter of fiscal  year 2004.  During the
third quarter of fiscal year 2006, the limited  partnership raised funds through
a private  offering  to  renovate  the  business  premises  for  operation  as a
"Flanigan's  Seafood  Bar and Grill"  restaurant.  The  Company  acts as general
partner  and  owns a thirty  nine  percent  limited  partnership  interest.  The
restaurant opened for business on August 14, 2006.

         (2)  During  the  fourth   quarter  of  fiscal  year  2004,  a  limited
partnership  was  formed  with the  Company as general  partner,  which  limited
partnership  entered into a lease  agreement to own and operate a restaurant  in
Wellington,  Florida under the "Flanigan's  Seafood Bar and Grill" service mark.
During the first  quarter of fiscal year 2005,  the limited  partnership  raised
funds through a private offering to renovate the business premises for operation
as a "Flanigan's Seafood Bar and Grill" restaurant.  The Company acts as general
partner  and  owns a  twenty  six  percent  limited  partnership  interest.  The
restaurant opened for business on May 27, 2005.

         (3) During the first quarter of fiscal year 2006, the Company, as agent
for a limited  partnership to be formed,  entered into a contract to purchase an
existing  restaurant  location  in Davie,  Florida  to  renovate  and  operate a
restaurant under the "Flanigan's Seafood Bar and Grill" servicemark.  Subsequent
to the end of fiscal  year 2006,  a limited  partnership  was  formed,  with the
Company as general partner,  which limited

                                       3
<PAGE>

partnership expects to close on the purchase of the existing restaurant location
at the start of the  second  quarter  of fiscal  year 2007.  The  restaurant  is
expected  to open for  business  during the fourth  quarter of fiscal year 2007,
provided the  landlord's  approval of building  plans and all  necessary  zoning
approvals,  variances  and/or  special  use permits  are timely  received.  This
restaurant is not included in the table of units.

         (4) During the third quarter of fiscal year 2006, the Company, as agent
for a limited  partnership to be formed,  entered into a contract to purchase an
existing restaurant location in Pembroke Pines,  Florida to renovate and operate
a  restaurant  under  the  "Flanigan's   Seafood  Bar  and  Grill"  servicemark.
Subsequent  to the end of fiscal year 2006,  a limited  partnership  was formed,
with the Company as general  partner,  which limited  partnership  closed on the
purchase of the existing restaurant location. The restaurant is expected to open
for business  during the third quarter of fiscal year 2007.  This  restaurant is
not included in the table of units.

         (5) During the second quarter of fiscal year 2006, the Company  assumed
the management of an existing  restaurant in Deerfield Beach,  Florida under its
current  format,  "The Whale's Rib",  pursuant to a management  agreement.  This
restaurant is included in the table of units.

         (6) The Company  manages the  restaurant  for one (1)  franchisee  with
respect to one (1) of the seven (7) franchised units. The franchised  restaurant
is  included in the table of units as a  restaurant  operated by the Company and
the franchise is also included as a unit  franchised by the Company and in which
the Company has an interest.

         With the  exception of the  combination  package  store and  restaurant
located at 4 N. Federal  Highway,  Hallandale,  Florida,  (Store #31),  which is
operated on property  owned by the Company and a wholly owned  subsidiary of the
Company,  all of the Company's package liquor stores,  restaurants and clubs are
operated on leased properties.

         The Company was  incorporated  in Florida in 1959 and operated in South
Florida as a chain of small cocktail lounges and package liquor stores. By 1970,
the Company had established a chain of "Big Daddy's"  lounges and package liquor
stores between Vero Beach and Homestead, Florida. From 1970 to 1979, the Company
expanded its package liquor store and lounge operations  throughout  Florida and
opened clubs in five other "Sun Belt" states. In 1975, the Company  discontinued
most of its package  store  operations  in Florida  except in the South  Florida
areas of Dade,  Broward,  Palm Beach and Monroe  Counties.  In 1982 the  Company
expanded its club operations into the Philadelphia, Pennsylvania area as general
partner of several limited partnerships  organized by the Company. In March 1985
the Company began franchising its package liquor stores and lounges in the South
Florida  area.  See Note 10 to the  consolidated  financial  statements  and the
discussion of franchised units on page 6.

         During fiscal year 1987,  the Company began  renovating  its lounges to
provide full restaurant food service, and subsequently  renovated and added food
service to most of its lounges.  The restaurant  concept,  as the Company offers
it,  has been so well  received  by the  public  that food  sales now  represent
approximately 81% of total restaurant sales.

                                       4
<PAGE>

         The Company's  package liquor stores  emphasize high volume business by
providing  customers  with a wide  variety  of  brand  name  and  private  label
merchandise at discount  prices.  The Company's  restaurants  provide  efficient
service of alcoholic  beverages  and full food service with  abundant  portions,
reasonably priced, served in a relaxed, friendly and casual atmosphere.

         The  Company's  principal  sources of revenue  are the sale of food and
alcoholic beverages.

         The Company  conducts its  operations  directly and through a number of
limited partnerships and wholly owned subsidiaries. The limited partnerships and
operating subsidiaries are as follows:

                                                   STATE OF        PERCENTAGE
             ENTITY                              ORGANIZATION         OWNED
             ------                              ------------         -----

Flanigan's Management Services, Inc.               Florida             100
Flanigan's Enterprises, Inc. of Georgia            Georgia             100
Flanigan's Enterprises, Inc. of Pa.              Pennsylvania          100
CIC Investors #13, Limited Partnership             Florida              39
CIC Investors #60, Limited Partnership             Florida              42
CIC Investors #65, Limited Partnership             Florida              26
CIC Investors #70, Limited Partnership             Florida              40
CIC Investors #75, Limited Partnership             Florida              12
CIC Investors #80, Limited Partnership             Florida              25
CIC Investors #95, Limited Partnership             Florida              28
Josar Investments, LLC                             Florida             100


         The income derived and expenses incurred by the Company relating to the
aforementioned  limited  partnerships  and  subsidiaries  are  consolidated  for
accounting  purposes  with  the  income  and  expenses  of  the  Company  in the
consolidated financial statements in this Form 10-K.

         The Company's  executive offices,  which are owned by the Company,  are
located in a two story  building  at 5059 N.E.  18th  Avenue,  Fort  Lauderdale,
Florida 33334 and its telephone number at such address is (954) 377-1961.


Financial Information Concerning Industry Segments
--------------------------------------------------

         The Company's business is carried out principally in two segments:  the
restaurant segment and the package liquor store segment.

                                       5
<PAGE>

         Financial information broken into these two principal industry segments
for the three fiscal years ended September 30, 2006, October 1, 2005 and October
2, 2004 is set forth in the consolidated financial statements which are attached
hereto.


The Company's Package Liquor Stores and Restaurants
---------------------------------------------------

         The Company's package liquor stores are operated under the "Big Daddy's
Liquors" servicemark.  The Company's package liquor stores emphasize high volume
business by providing  customers with a wide selection of brand name and private
label liquors, beer and wines. The Company has a policy of meeting the published
sales prices of its competitors.  The Company provides  extensive sales training
to its package liquor store personnel. All package liquor stores are open six or
seven days a week from 9:00-10:00 a.m. to 9:00-10:00 p.m., depending upon demand
and local law.  Approximately  half of the Company's  units have "night windows"
with extended evening hours.

         The  Company's  restaurants  offer  full  food and  alcoholic  beverage
service  with   approximately  81%  of  their  sales  being  food  items.  These
restaurants  are  operated  under  the   "Flanigan's   Seafood  Bar  and  Grill"
servicemark.  Although these restaurants provide a neighborhood atmosphere, they
have the degree of standardization prevalent in casual dining restaurant chains,
including menu. The interior decor is nautical with numerous fishing and boating
pictures and decorations.  Drink prices may vary between locations to meet local
conditions.  Food prices are standardized.  The restaurants'  hours of operation
are from 11:00 a.m. to 1:00-5:00  a.m. The Company  continues to develop  strong
customer  recognition  of its  "Flanigan's  Seafood  Bar and Grill"  servicemark
through very competitive pricing and efficient and friendly service.

         The Company's  package liquor stores and  restaurants  were designed to
permit minor modifications  without significant capital  expenditures.  However,
from time to time the Company is required to redesign and refurbish its units at
significant cost. See Item 2, Properties and Item 7 for further discussion.


Franchised Package Liquor Stores and Restaurants
------------------------------------------------

         In March 1985,  the  Company's  Board of  Directors  approved a plan to
sell, on a franchise basis, up to 26 of the Company's  package liquor stores and
lounges in the South  Florida  area.  The Company  had  limited  response to its
franchise  offering and suspended  its franchise  plan at the end of fiscal year
1986.  Many of the units that were  originally  offered as franchises  have been
sold outright and are no longer operated as Flanigan's or Big Daddy's stores. As
of the end of fiscal year 2006, seven units were franchised, of which five units
were  franchised  to  members  of the  family of the  Chairman  of the Board and
Officers and Directors of the Company.

         During  fiscal  year 1995,  the  Company  completed  its new  franchise
agreement for a franchisee to operate a restaurant under the "Flanigan's Seafood
Bar and Grill"  servicemark  pursuant  to a license  from the  Company.

                                       6
<PAGE>

The new franchise  agreement provides the Company with the ability to maintain a
high level of food quality and service at its franchised restaurants,  which are
essential to a successful  operation.  A franchisee is required to execute a new
franchise  agreement  for the balance of the term of its lease for the  business
premises,  extended by the  franchisee's  continued  occupancy  of the  business
premises thereafter,  whether by lease or ownership. The new franchise agreement
provides for a royalty to the Company in the amount of approximately 3% of gross
sales plus a  contribution  to  advertising in an amount between 1-1/2% to 3% of
gross  sales.  All  existing  franchisees  who  operate  restaurants  under  the
"Flanigan's  Seafood  Bar and  Grill"  or  other  authorized  servicemarks  have
executed new franchise agreements.

         Franchise  royalties are "earned"  when sales are made by  franchisees.
This applies to both restaurants and package liquor stores.  Franchise royalties
are paid weekly,  in arrears.  The Company  manages the books and records of all
franchises,  including  collecting  funds  generated  by the same.  As a result,
franchise  royalties are paid to the Company by book entry on a weekly basis and
the franchise royalties are never delinquent.

         The units that continue to be franchised are doing well and continue to
generate income for the Company.


Investment in Limited Partnerships
----------------------------------

         The Company  has  determined  that all but one (1) limited  partnership
discussed  below should be  consolidated  for  accounting  purposes by virtue of
control of the  limited  partnerships  by the  Company.  The  remaining  limited
partnership  in which the Company does not have control has been  accounted  for
utilizing the equity method.

         Beginning  with the limited  partnership  which owns the  restaurant in
Surfside, Florida and for all limited partnerships formed subsequent thereto for
the purpose of owning and operating a restaurant  under the "Flanigan's  Seafood
Bar and Grill"  servicemark,  a standard financial  arrangement has been used in
each limited partnership agreement. Under this financial arrangement,  until the
limited  partnership  has  received  an  aggregate  sum  equal  to  the  initial
investment of all limited partners from the net profit from the operation of the
restaurant,  the limited  partnership  receives an aggregate sum equal to 25% of
the  initial  investment  of all  limited  partners  first each  year,  with any
additional net profit  divided  equally  between the Company,  as manager of the
restaurant,  and the  limited  partnership.  Once the  limited  partnership  has
received  an  aggregate  sum  equal to the  initial  investment  of all  limited
partners  from the net profit  from the  operation  of the  restaurant,  the net
profit is divided equally between the Company, as manager of the restaurant, and
the limited  partnership.  As of September  30, 2006,  the limited  partnerships
which own the restaurants in Kendall, Florida, West Miami, Florida and Surfside,
Florida have each received an aggregate  sum equal to the initial  investment of
their  respective  limited  partners  from the net profit from the  operation of
their respective  restaurants and the Company receives one-half (1/2) of the net
profit as manager of each  restaurant.  The Company  plans to  continue  forming
limited  partnerships  to raise funds to own and operate  restaurants  under the
"Flanigan's  Seafood  Bar  and  Grill"  servicemark  using  the  same  financial
arrangement.

                                       7
<PAGE>

         Each  limited  partnership   agreement,   excluding  only  the  limited
partnership agreement for the franchised restaurant in Fort Lauderdale,  Florida
which is governed by a franchise  agreement,  gives the limited  partnership the
right to use the "Flanigan's  Seafood Bar and Grill" servicemark for a fee equal
to 3% of the gross sales from the operation of the restaurant, while the Company
acts as general partner only. This 3% fee is "earned" when sales are made by the
limited  partnerships  and is paid weekly,  in arrears.  The Company manages the
books and  records  of all  limited  partnerships,  including  collecting  funds
generated  by the same.  As a result,  the 3% fee is paid to the Company by book
entry on a weekly basis and is never delinquent.

Pinecrest, Florida

         During the fourth quarter of fiscal year 2006, the limited  partnership
completed  the  structural  repairs and its  interior  build-out of the business
premises in  Pinecrest,  Florida for the  operation  of a  restaurant  under the
"Flanigan's  Seafood  Bar and Grill"  servicemark.  During the third  quarter of
fiscal  year 2006,  the limited  partnership  completed  its  private  offering,
raising  the  sum of  $3,300,000  to  reimburse  the  Company  for  advances  of
$1,506,000  made to the limited  partnership  in excess of its investment in the
same,  to complete  the  renovations  to the  business  premises  and to provide
working capital. The Company continues to act as general partner and is also the
owner of a thirty  nine  percent  limited  partnership  interest,  as are  other
related  parties,  including,  but not limited to officers and  directors of the
Company and their families.  This  restaurant  opened for business on August 14,
2006. As of the end of fiscal year 2006,  this limited  partnership  had not yet
received a return of the initial investment of all limited partners from the net
profit from the operation of the restaurant.

Fort Lauderdale, Florida

         A related third party acts as general partner of a limited  partnership
which owns and  operates a franchised  restaurant  in Fort  Lauderdale,  Florida
under the  "Flanigan's  Seafood Bar and Grill"  service  mark.  The Company is a
twenty  five  percent  owner of the  limited  partnership  as are other  related
parties, including, but not limited to officers and directors of the Company and
their  families.  This joint  venture is not  consolidated  in the  accompanying
consolidated financial statements of the Company.

Surfside, Florida

         The Company acts as general partner of a limited partnership which owns
and operates a restaurant in Surfside, Florida under the "Flanigan's Seafood Bar
and Grill"  service  mark.  The Company is also a forty two percent owner of the
limited partnership as are other related parties,  including, but not limited to
officers and directors of the Company and their families. This restaurant opened
for business in the second  quarter of fiscal year 1998. As of the end of fiscal
year 2006,  this limited  partnership has received an aggregate sum equal to the
initial  investment  of all  limited  partners  from  the net  profit  from  the
operation of the restaurant.


                                       8
<PAGE>

Kendall, Florida

         The Company acts as general partner of a limited partnership which owns
and operates a restaurant in Kendall,  Florida under the "Flanigan's Seafood Bar
and  Grill"  service  mark.  The  Company is also a forty  percent  owner of the
limited partnership as are other related parties,  including, but not limited to
officers and directors of the Company and their families. This restaurant opened
for  business  on April 9,  2000.  This  limited  partnership  has  received  an
aggregate sum equal to the initial  investment of all limited  partners from the
net profit from the operation of the restaurant.

West Miami, Florida

         The Company acts as general partner of a limited partnership which owns
and operates a restaurant in West Miami,  Florida under the "Flanigan's  Seafood
Bar and Grill"  service mark. The Company is also a twenty five percent owner of
the limited partnership as are other related parties, including, but not limited
to officers and  directors of the Company and their  families.  This  restaurant
opened for business on October 11, 2001. As of the end of fiscal year 2006, this
limited  partnership  has  received  an  aggregate  sum  equal  to  the  initial
investment of all limited partners from the net profit from the operation of the
restaurant.

Weston, Florida

         The Company  acts as general  partner of a limited  partnership,  which
owns and operates a restaurant in Weston,  Florida under the "Flanigan's Seafood
Bar and Grill"  service  mark.  The  Company  is also the owner of twenty  eight
percent of the limited partnership,  as are other related parties, including but
not limited to officers  and  directors of the Company and their  families.  The
restaurant  opened  for  business,  as a  "Flanigan's  Seafood  Bar  and  Grill"
restaurant on January 20, 2003. As of the end of fiscal year 2006,  this limited
partnership has received an aggregate sum equal to 55% of the initial investment
of  all  limited  partners  from  the  net  profit  from  the  operation  of the
restaurant.

Stuart, Florida

         The Company  acts as general  partner of a limited  partnership,  which
owns and operates a restaurant in a Howard  Johnson's  Hotel in Stuart,  Florida
under the  "Flanigan's  Seafood Bar and Grill" service mark. The Company is also
the owner of a twelve percent limited partnership interest, as are other related
parties,  including but not limited to officers and directors of the Company and
their  families.  The  renovated  restaurant  opened for business on January 11,
2004. During fiscal year 2006, this limited  partnership only received three (3)
quarterly   distributions  due  to  the  limited  cash  flow  generated  by  the
restaurant.  As of the end of fiscal year 2006,  this  limited  partnership  has
received  an  aggregate  sum  equal to 22.5% of the  initial  investment  of all
limited partners from the net profit from the operation of the restaurant.

Wellington, Florida

         The Company  acts as general  partner of a limited  partnership,  which
owns and operates a restaurant  in  Wellington,  Florida  under the  "Flanigan's


                                       9
<PAGE>

Seafood Bar and Grill"  service mark.  The Company is also the owner of a twenty
six  percent  limited  partnership  interest,  as  are  other  related  parties,
including  but not limited to officers  and  directors  of the Company and their
families.  The restaurant  opened for business on May 27, 2005. As of the end of
fiscal year 2006,  this limited  partnership has received an aggregate sum equal
to 30% of the initial  investment  of all limited  partners  from the net profit
from the operation of the restaurant.

Davie, Florida

         During the first quarter of fiscal year 2006, the Company, as agent for
a Florida limited partnership to be formed,  entered into a contract to purchase
the  furniture,  fixtures,  equipment  and  leasehold  interest  of an  existing
restaurant  in Davie,  Florida  for a purchase  price of  $650,000.  The Company
intends to renovate and operate a restaurant  under the "Flanigan's  Seafood Bar
and Grill"  servicemark.  During  the third  quarter  of fiscal  year 2006,  the
Company received landlord approval of its preliminary building plans,  including
an outdoor  seating area and  submitted  the same for site plan  approval to the
Town of Davie,  Florida.  During the fourth  quarter  of fiscal  year 2006,  the
application for site plan approval was heard by the Planning and Zoning Board of
the Town of Davie,  Florida and the Company is modifying  its building  plans in
accordance with the comments from the same. Subsequent to the end of fiscal year
2006,  a limited  partnership  was formed with the  Company as general  partner,
which  limited  partnership  expects to enter into a new lease for the  business
premises and close on the purchase of the existing restaurant in Davie,  Florida
at the start of the second  quarter of fiscal year 2007 at the purchase price of
$650,000.  The initial estimates for renovations and pre-opening  expenses is an
additional $1,700,000.  The funds necessary for this limited partnership will be
raised through a private  offering.  The Company will act as general partner and
own up to thirty percent of the limited partnership.  The restaurant is expected
to open for business during the fourth quarter of fiscal year 2007.

Pembroke Pines, Florida

         During the third quarter of fiscal year 2006, the Company, as agent for
a Florida limited partnership to be formed,  entered into a contract to purchase
the liquor license and leasehold interest of an existing  restaurant in Pembroke
Pines, Florida for a purchase price of $500,000. The Company intends to renovate
and  operate  a  restaurant  under  the  "Flanigan's   Seafood  Bar  and  Grill"
servicemark.  Subsequent  to the end of fiscal year 2006, a limited  partnership
was formed  with the  Company  as general  partner,  which  limited  partnership
entered into a new lease for the business premises and closed on the purchase of
the existing  restaurant  in Pembroke  Pines,  Florida.  The purchase  price was
reduced to approximately $305,000 due to the fact that site plan restrictions in
the plat where the business premises is located would not permit outdoor seating
and the liquor license owned by the seller was a restaurant liquor license, with
no market  value,  rather than a quota  liquor  license,  with a market value of
$145,000,  as contracted.  The Company  modified its building plans to limit its
renovations to the interior of the business premises,  thereby avoiding the need
for site plan approval.  The initial  estimate for  renovations  and pre-opening
expenses is an  additional  $1,600,000.  The funds  necessary  for this  limited
partnership  will be raised  through a private  offering.  The  Company  acts as
general  partner and will own

                                       10
<PAGE>

up to thirty percent of the limited  partnership.  The restaurant is expected to
open for business during the third quarter of fiscal year 2007.


Investment in Management Agreement
----------------------------------

Deerfield Beach, Florida


         During the first quarter of fiscal year 2006, the Company  entered into
a management  agreement to operate an existing  restaurant  in Deerfield  Beach,
Florida  under its current  format,  "The  Whale's  Rib",  and to be entitled to
one-half (1/2) of the net profit from the operation of the same. The term of the
management  agreement is for ten (10) years, with four (4) five (5) year renewal
options.  The Company paid $500,000 for the management rights to the restaurant.
The Company  assumed the  management of this  restaurant on January 9, 2006. For
the nine (9) months of fiscal year 2006, the Company recognized income under the
management agreement of $108,000.


Clubs
-----

         As of the end of  fiscal  year  2006,  the  Company  owned  one club in
Atlanta,  Georgia,  which  was  operated  by an  unaffiliated  third  party,  as
discussed below.


Operation of Unit by Unaffiliated Third Party
----------------------------------------------

         The Company has a Management Agreement with Mardi Gras Management, Inc.
for the  operation of the  Company's  club in Atlanta,  Georgia,  under an adult
entertainment format doing business as "Mardi Gras". During the third quarter of
fiscal year 2004, Mardi Gras Management, Inc. entered into a new lease agreement
with the landlord,  which new lease agreement commenced May 1, 2006 for a period
of ten (10) years,  with one (1) ten (10) year renewal  option.  The Company did
not execute or guaranty the new lease and has no  liability  on the same.  Since
Mardi  Gras  Management,  Inc.  still  operates  the club  under the  Management
Agreement, the Company continues to receive an owner's fee of $150,000 per year,
paid monthly,  versus ten (10%) percent of gross sales from the club,  whichever
is greater,  subject to adjustment  annually when rental increases under the new
lease  take  effect.  The  Company  agreed  that  one-half  (1/2) of the  rental
increases  will be credited  against the  owner's  fee each year,  provided  the
owner's fee is never less than $150,000 per year.


Operations and Management
--------------------------

         The Company emphasizes  systematic operations and control of all units.
Each  unit has its own  manager  who is  responsible  for  monitoring  inventory
levels, supervising sales personnel, food preparation and service in restaurants
and  generally  assuring  that the unit is managed in  accordance  with  Company
guidelines  and  procedures.  The Company has in effect an

                                       11
<PAGE>

incentive  cash bonus  program  for its  managers  and  salespersons  based upon
various performance  criteria.  The Company's  operations are supervised by area
supervisors.  Each area supervisor supervises the operations of the units within
his or her territory and visits those units to provide  on-site  management  and
support.  There  are  five  area  supervisors  responsible  for  package  store,
restaurant and club operations in specific geographic districts.

         All  of the  Company's  managers  and  salespersons  receive  extensive
training  in sales  techniques.  The  Company  arranges  for  independent  third
parties,  or  "shoppers",  to inspect  each unit in order to evaluate the unit's
operations, including the handling of cash transactions.


Purchasing and Inventory
------------------------

         The package liquor  business  requires a constant  substantial  capital
investment in inventory in the units. The Company's inventory consists primarily
of liquor and wine products and as such,  does not become  excessive or obsolete
that would  require  identifying  and  recording of the same.  Liquor  inventory
purchased can normally be returned only if defective or broken.

         All  Company  purchases  of  liquor  inventory  are  made  through  its
purchasing  department  from the  Company's  corporate  headquarters.  The major
portion of inventory is purchased under individual purchase orders with licensed
wholesalers and distributors who deliver the merchandise  within one or two days
of the  placing  of an order.  Frequently  there is only one  wholesaler  in the
immediate  marketing  area with an exclusive  distributorship  of certain liquor
product lines. Substantially all of the Company's liquor inventory is shipped by
the wholesalers or  distributors  directly to the Company's  units.  The Company
significantly  increases  its inventory  prior to Christmas,  New Year's Eve and
other  holidays.  Pursuant  to  Florida  law,  the  Company  pays for its liquor
purchases within ten days of delivery.

         During fiscal year 2006,  the Board of Directors  approved the purchase
of a new point of sale computer  system for all Company  package  liquor stores,
including the corporate office,  at an estimated cost of $180,000.  The approval
is  subject  to  management  testing  and  approving  the  system,  prior to the
installation  of the same,  which  testing  should take place  during the second
quarter of fiscal year 2007.

         All  negotiations  with food  suppliers  are  handled by the  Company's
purchasing department at the Company's corporate headquarters. This ensures that
the best  quality and prices  will be  available  to each unit.  Orders for food
products are prepared by each unit's kitchen  manager and reviewed by the unit's
general  manager  before being placed with the approved  vendor.  Merchandise is
delivered by the supplier directly to each unit. Orders are placed several times
a week to  ensure  product  freshness.  Food  inventory  is  primarily  paid for
monthly.


                                       12
<PAGE>

Government Regulation
---------------------

         The  Company  is  subject  to  various  federal,  state and local  laws
affecting its business.  In  particular,  the units  operated by the Company are
subject to licensing  and  regulation  by alcoholic  beverage  control,  health,
sanitation,  safety and fire  department  agencies in the state or  municipality
where located.

         Alcoholic  beverage control  regulations  require each of the Company's
units to apply to a state  authority  and,  in  certain  locations,  county  and
municipal  authorities,  for a license or permit to sell alcoholic  beverages on
and/or off premises.

         In the  State of  Florida,  which  represents  all but one of the total
liquor licenses held by the Company,  most of the Company's  liquor licenses are
issued on a "quota license"  basis.  Quota licenses are issued on the basis of a
population  count  established  from time to time  under the  latest  applicable
census.  Because the total  number of liquor  licenses  available  under a quota
license  system is limited  and  restrictions  placed upon their  transfer,  the
licenses  have  purchase  and resale  value  based upon supply and demand in the
particular  areas in which  they are  issued.  The  quota  licenses  held by the
Company  allow  the  sale of  liquor  for on and off  premises  consumption.  In
Florida,  the other liquor licenses held by the Company or limited  partnerships
of which the Company is the  general  partner are  restaurant  liquor  licenses,
which  do not have  quota  restrictions  and no  purchase  or  resale  value.  A
restaurant  liquor  license  is issued to every  applicant  who meets all of the
state and local licensing requirements, including, but not limited to zoning and
minimum  restaurant size,  seating and menu. The restaurant liquor licenses held
by the Company allow the sale of liquor for on premises consumption only.

         In the State of Georgia, the other state in which the Company operates,
licensed  establishments  also do not have quota  restrictions  for  on-premises
consumption  and such  licenses are issued to any applicant who meets all of the
state and local licensing  requirements based upon extensive license application
filings and investigations of the applicant.

         All licenses  must be renewed  annually and may be revoked or suspended
for cause at any time. Suspension or revocation may result from violation by the
licensee  or its  employees  of any  federal,  state  or  local  law  regulation
pertaining to alcoholic beverage control. Alcoholic beverage control regulations
relate to  numerous  aspects of the daily  operations  of the  Company's  units,
including,   minimum  age  of  patrons  and  employees,   hours  of  operations,
advertising,  wholesale  purchasing,  inventory control,  handling,  storage and
dispensing  of  alcoholic   beverages,   internal  control  and  accounting  and
collection of state alcoholic beverage taxes.

         As the sale of  alcoholic  beverages  constitutes  a large share of the
Company's  revenue,  the failure to receive or retain, or a delay in obtaining a
liquor  license in a particular  location could  adversely  affect the Company's
operations  in that  location and could impair the  Company's  ability to obtain
licenses elsewhere.

         During  fiscal years 2004,  2005 and 2006 and through the present time,
no significant pending matters have been initiated by the Department of Alcohol,
Beverages and Tobacco  concerning  any of the Company's  licenses which

                                       13
<PAGE>

might be  expected  to  result  in a  revocation  of a liquor  license  or other
significant actions against the Company.

         The Company is not aware of any statute,  ordinance, rule or regulation
under  present  consideration  which would  significantly  limit or restrict its
business as now conducted.  However,  in view of the number of  jurisdictions in
which the Company does business,  and the highly  regulated nature of the liquor
business,  there can be no  assurance  that  additional  limitations  may not be
imposed in the future, even though none are presently anticipated.

         Federal  and state  environmental  regulations  have not had a material
effect on the Company's operation.


General Liability Insurance
---------------------------

         The  Company has  general  liability  insurance  which  incorporates  a
semi-self-insured  plan under  which the  Company  assumes  the full risk of the
first $50,000 of exposure per occurrence,  while the limited partnerships assume
the full risk of the first  $10,000 of exposure per  occurrence.  The  Company's
insurance  carrier is responsible for $1,000,000  coverage per occurrence  above
the Company's self-insured  deductible,  up to a maximum aggregate of $2,000,000
per year.  During fiscal year 2004,  fiscal year 2005,  and again in fiscal year
2006 the Company was able to purchase excess liability insurance at a reasonable
premium,  whereby the Company's  excess  insurance  carrier is  responsible  for
$6,000,000  coverage above the Company's  primary  general  liability  insurance
coverage.  With the  exception of one (1) limited  partnership  which has higher
general liability  insurance  coverage to comply with the terms of its lease for
the business  premises,  the Company is un-insured  against  liability claims in
excess of $7,000,000 per occurrence and in the aggregate.

         The Company's  general  policy is to settle only those  legitimate  and
reasonable  claims  asserted  and to  aggressively  defend  and go to trial,  if
necessary,  on frivolous and unreasonable  claims. The Company has established a
select  group of  defense  attorneys  which  it uses in  conjunction  with  this
program.  Under the Company's  current liability  insurance policy,  any expense
incurred by the Company in defending a claim, including adjusters and attorney's
fees, are a part of the $50,000 retention.

         An accrual for the Company's  estimated liability claims is included in
the  consolidated  balance sheets in the caption  "Accounts  payable and accrued
expenses". A significant  unfavorable judgment or settlement against the Company
in excess of its liability  insurance  coverage could have a materially  adverse
effect on the Company.


Property Insurance; Windstorm Insurance; Deductibles
----------------------------------------------------

         For the  policy  year  commencing  December  30,  2006,  the  Company's
property  insurance  provides for full insurance  coverage for property  losses,
other than those caused by windstorm,  such as a hurricane. The losses caused by
hurricanes during the 2004 and 2005 hurricane seasons in South Florida

                                       14
<PAGE>

have made  windstorm  insurance  coverage  difficult to get and where  available
expensive  to the point  that  full  windstorm  coverage  for all  locations  is
economically prohibitive.  For those locations east of I-95, windstorm insurance
coverage was only  available  through the State of Florida  sponsored  insurance
fund and then limited to $1,000,000 per building,  including  personal property,
but without  business  interruption  insurance.  The State of Florida  sponsored
insurance fund has  deductibles of 3% per location,  per  occurrence.  Windstorm
coverage for  locations  west of I-95 was procured  through a private  insurance
carrier,  including business interruption insurance,  which provides coverage of
$10,000,000 per occurrence and in the aggregate,  with "named storm deductibles"
of 5% per location per  occurrence,  with a minimum  deductible  of $100,000 per
occurrence,  and "other windstorm  deductibles" of $100,000 per occurrence.  The
windstorm policy provided by the private insurance carrier contains a limitation
on recovery  for roof  replacement,  with any roofs  dating  prior to 2001 being
covered for their actual  replacement  value, in lieu of their replacement cost.
The Company has determined that only two roofs at its locations west of I-95 for
which it and/or its limited  partnerships are responsible,  pre-date 2001 so the
exposure due to the roof replacement limitation is not significant.  The private
insurance  policy also provides  business  interruption  insurance for locations
east of I-95, with a deductible of 5% per location, per occurrence, for business
interruption  insurance, as well as windstorm insurance in excess of the primary
coverage  provided  through  the  State of  Florida  sponsored  insurance  fund.
Management believes that the windstorm insurance coverage effective December 30,
2006 will provide adequate  insurance coverage for all locations in the event of
a hurricane, but in the event that more than four (4) locations are destroyed by
a hurricane,  thereby requiring total  reconstruction,  the windstorm  insurance
coverage may be inadequate and the Company and/or limited  partnership  may have
to bear the cost of any uninsured  expenses,  which may have a material  adverse
effect upon the financial condition and/or results of operations of the Company.
The Company intends to build its cash balances during hurricane season,  (June 1
- November 30 each year), to provide  liquidity for the Company if it encounters
losses as a result of a hurricane or other casualty loss, as well as to maintain
a line of credit as  additional  protection  against  the  same.  The  Company's
insurance  expense for the policy year commencing  December 30, 2006,  including
insurance  coverage for its consolidated  limited  partnerships,  is expected to
increase by  approximately  $300,000  due  primarily  to  increases in windstorm
insurance coverage.

         For the policy year which commenced  December 30, 2005,  which included
windstorm  insurance  coverage and was the third and final year of the Company's
three  (3) year  property  insurance  policy  with its  insurance  carrier,  the
property  insurance  had a  deductible  of $25,000 - $50,000 per  location,  per
occurrence.  In the event a casualty,  such as a hurricane,  had impacted  every
location  whereby  property damage and business  interruption  claims reached or
exceeded every deductible,  then the Company and its limited  partnerships would
have faced a maximum  deductible of $825,000.  During the policy year commencing
December 30, 2005,  neither the  Company,  nor any of its limited  partnerships,
made a claim against its property insurance.

         For the policy year which commenced  December 30, 2004,  which included
windstorm  insurance coverage and was the second year of the Company's three (3)
year  property  insurance  policy  with  its  insurance  carrier,  the  property
insurance had a deductible  of $50,000 per  occurrence,  with no deductible  per

                                       15
<PAGE>

location. In the event a casualty,  such as Hurricane Wilma, the Company and its
limited  partnerships  faced a maximum  deductible  of $50,000  per  occurrence.
During the policy year commencing December 30, 2004, the Company and its limited
partnerships  made claims  against  its  insurance  carrier  for damages  and/or
business interruption caused by Hurricane Wilma.


Hurricane Wilma; Windstorm Claims
---------------------------------

         During  fiscal  year  2006,  the  Company   submitted  claims  totaling
$1,092,300 for damages and business  interruption  caused when  Hurricane  Wilma
impacted South Florida on October 24, 2005. Subsequent to the end of fiscal year
2006, the Company settled its claims against its insurance carrier for $929,000,
($979,000  less the $50,000  deductible).  During fiscal year 2006,  the Company
received  advances  in the  aggregate  amount of  $700,000,  ($750,000  less the
$50,000  deductible),  from its insurance  carrier and  subsequent to the end of
fiscal year 2006 received a final payment of $229,000.


Competition and the Company's Market
------------------------------------

         The liquor and  hospitality  industries are highly  competitive and are
often affected by changes in taste and entertainment trends among the public, by
local,  national and  economic  conditions  affecting  spending  habits,  and by
population and traffic  patterns.  The Company believes that the principal means
of competition  among package  liquor stores is price and that, in general,  the
principal means of competition among restaurants include the location,  type and
quality of  facilities  and the type,  quality  and price of  beverage  and food
served.

         The Company's package liquor stores compete directly or indirectly with
local retailers and discount "superstores". Due to the competitive nature of the
liquor  industry in South Florida,  the Company has had to adjust its pricing to
stay  competitive,  including  meeting  all  competitors'  advertisements.  Such
practices will continue in the package liquor business. It is the opinion of the
Company's  management that the Company has a competitive  position in its market
because of widespread consumer recognition of the "Big Daddy's" and "Flanigan's"
names.

         As  previously  noted,  at  September  30, 2006 the  Company  owned and
operated  six  restaurants,  all of which had  formerly  been  lounges  and were
renovated  to  provide  full  food  service,   operated  one  restaurant  for  a
franchisee, operated one restaurant for an unrelated third party and operated an
additional seven restaurants as general partner of limited  partnerships.  These
restaurants  compete directly with other restaurants serving liquor in the area.
The Company's restaurants are competitive due to four factors:  product quality,
portion size,  moderate  pricing and a  standardization  throughout  the Company
owned and operated restaurants and the franchises.

         The Company's  business is subject to seasonal effects,  including that
liquor purchases tend to increase during the holiday seasons.

                                       16
<PAGE>

Trade Names
-----------

         The Company operates  principally under two servicemarks;  "Big Daddy's
Liquors" and  "Flanigan's  Seafood Bar and Grill",  both of which are  federally
registered  trademarks  owned by the Company.  Throughout  Florida the Company's
package liquor stores are operated under the "Big Daddy's Liquors"  servicemark.
The Company's  rights to the use of the "Big Daddy's"  servicemark are set forth
under a  consent  decree of a  Federal  Court  entered  into by the  Company  in
settlement  of  federal  trademark  litigation.   The  consent  decree  and  the
settlement  agreement allow the Company to continue,  and expand, its use of the
"Big Daddy's"  servicemark  in connection  with limited food and liquor sales in
Florida.  The consent  decree  further  contained a restriction  upon all future
sales of distilled  spirits in Florida under the "Big Daddy's" name by the other
party who has a federally  registered  servicemark  for "Big Daddy's" use in the
restaurant  business.  The Federal Court  retained  jurisdiction  to enforce the
consent decree.  The Company has acquired  registered  Federal trademarks on the
principal  register for its "Flanigan's" and "Flanigan's  Seafood Bar and Grill"
servicemarks.

         The standard  symbolic  trademark  associated  with the Company and its
facilities  is the bearded face and head of "Big Daddy"  which is  predominantly
displayed  at all  "Flanigan's"  facilities  and all  "Big  Daddy's"  facilities
throughout  the  country.  The face  comprising  this  trademark  is that of the
Company's founder,  Joseph "Big Daddy" Flanigan,  and is a federally  registered
trademark owned by the Company.


Employees
---------

         As of year end, the Company  employed 927 employees,  of which 690 were
full-time and 237 were  part-time.  Of these,  39 were employed at the corporate
offices and 5 were employed in maintenance.  Of the remaining employees, 50 were
employed in package liquor stores and 833 in restaurants.

         None  of  the  Company's   employees  are   represented  by  collective
bargaining  organizations.  The  Company  considers  its labor  relations  to be
favorable.


                      EXECUTIVE OFFICERS OF THE REGISTRANT

                        Positions and Offices              Office or Position
       Name                Currently Held           Age        Held Since
       ----             ---------------------       ---    ------------------

James G. Flanigan       Chairman of the Board        42            2002
                        of Directors, Chief
                        Executive Officer and
                        President

                                       17
<PAGE>

August Bucci            Chief Operating Officer      62            2002
                        and Executive Vice
                        President

Jeffrey D. Kastner      Chief Financial Officer      53            1995
                        General Counsel and
                        Secretary

Jean Picard             Vice President of            68            2002
                        Package Store
                        Operations


Flanigan's 401(k) Plan
----------------------

         Effective  July  1,  2004,  the  Company  began   sponsoring  a  401(k)
retirement   plan  covering   substantially   all  employees  who  meet  certain
eligibility  requirements.  Employees may contribute  elective  deferrals to the
plan up to amounts  allowed under the Internal  Revenue Code. The Company is not
required to contribute  to the plan but may make  discretionary  profit  sharing
and/or matching contributions.  During the fiscal years ended September 30, 2006
and October 1, 2005,  the Board of  Directors  approved  discretionary  matching
contributions totaling $12,000 and $37,500, respectively.


Subsequent Events
-----------------

(a)      Closing of Purchase of New Restaurant Location, (Pembroke Pines, FL.):

         Subsequent  to the end of fiscal year 2006, a limited  partnership  was
formed with the Company as general partner,  which limited  partnership  entered
into a new lease for the  business  premises  and closed on the  purchase of the
existing restaurant in Pembroke Pines,  Florida.  The purchase price was reduced
from  $500,000 to $305,000  due to the fact that site plan  restrictions  in the
plat where the business premises is located would not permit outdoor seating and
the liquor license owned by the seller was a restaurant liquor license,  with no
market  value,  rather  than a quota  liquor  license,  with a  market  value of
$145,000,  as contracted.  The Company  modified its building plans to limit its
renovations to the interior of the business premises,  thereby avoiding the need
for site plan approval.

(b)      Purchase of Real Property Subject to Ground Lease, (Hallandale, FL.):

         Subsequent to the end of fiscal year 2006,  the Company  simultaneously
entered into a contract and closed on the purchase of the real property which is
subject to a ground lease owned by the Company at its combination restaurant and
package liquor store located at 4 North Federal  Highway,  Hallandale,  Florida,
(Store  #31).  The purchase  price for this  property  was  $552,500,  which was
partially  financed with an advance of $250,000 on the mortgage  procured by the
Company  during the fourth  quarter of fiscal year 2006 to purchase  the limited
liability  company  which owns the real  property  and the ground  lease at this
location.

                                       18
<PAGE>

(c)      Purchase of Real Property Subject to Ground Lease, (North Miami, FL.):

          Subsequent to the end of fiscal year 2006, the Company  entered into a
contract and closed on the purchase of the real  property  which is subject to a
ground  lease owned by the Company and  subleased  to an  unrelated  third party
located at 732 - 734 N.E.  125th Street,  North Miami,  Florida (Store #27). The
purchase  price for this  property was  $250,000,  which was paid in cash by the
Company at closing.

(d)      Internal Revenue Service Audit of Company's Corporate Income Tax Return
         for the Fiscal Year Ending October 1, 2005:

         Subsequent  to the  end of  fiscal  year  2006,  the  Company  received
notification  from the Internal  Revenue  Service that its corporate  income tax
return for the fiscal year ending October 1, 2005 was being  audited.  The audit
was completed  prior to the end of the first  quarter of fiscal year 2007,  with
the Company  agreeing that the sum of $107,000 was due as  additional  corporate
income tax for the  fiscal  year  ending  October  1,  2005.  Of the  deductions
disallowed by the Internal Revenue Service,  only $12,000 represents a permanent
disallowance  of deductions.  The impact of the audit results is fully accounted
for in the fiscal year ended September 30, 2006.

(e)      Re-Financing of Corporate Offices

         Subsequent  to the end of fiscal  2006,  the  Company  re-financed  the
mortgage note encumbering the Company's corporate offices. The new mortgage,  in
the original principal amount of $1,000,000, bears interest at the rate of 7.25%
per annum,  is amortized  over twenty (20) years with equal monthly  payments of
principal and interest,  each in the amount of $8,000, with the entire principal
balance and all accrued  interest due in seven (7) years. The pre-payment of the
original  mortgage note,  which otherwise  matured in August,  2008,  incurred a
prepayment penalty of approximately $17,000.

(f)      Increase in Line of Credit

         Subsequent to the end of fiscal 2006, the Company increased its line of
credit from $2,000,000 to $2,650,000, under the same terms and conditions as the
original  line of  credit.  However,  the  Company  granted  its lender a second
mortgage on its corporate  office as additional  collateral  for the increase in
the line of credit. The Company drew an additional $1,200,000, raising the total
balance outstanding to $1,962,000.


Item 1A  Risk Factors
---------------------

         An investment in the Company's  common stock involves a degree of risk.
These risks should be  considered  carefully  with the  uncertainties  described
below,  and all other  information  included in this Annual Report on Form 10-K,
before deciding whether to purchase the Company's common stock. Additional risks
and uncertainties not currently known to management or that management currently
deems immaterial may also become  important  factors that may harm the Company's
business, financial condition or results or operations. The occurrence of any of
the following risks could harm the Company's  business,

                                       19
<PAGE>

financial  condition  and  results  of  operations.  The  trading  price  of the
Company's   common   stock  could   decline  due  to  any  of  these  risks  and
uncertainties, and you may lose part or all of your investment.

         Certain statements in this report contain forward-looking  information.
In general,  forward-looking  statements  include  estimates of future revenues,
cash flows,  capital  expenditures,  or other  financial  items and  assumptions
underlying any of the foregoing. Forward-looking statements reflect management's
current expectations regarding future events and use words such as "anticipate",
"believe",   "expect",  "may",  "will"  and  other  similar  terminology.  These
statements  speak  only as of the date they  were  made and  involve a number of
risks and  uncertainties  that could cause actual  results to differ  materially
from those expressed in the forward-looking  statements.  Several factors,  many
beyond the Company's  control,  could cause actual results to differ  materially
from management's expectations.


Planned Expansion May Not Be Successful
---------------------------------------

         The  Company,  as general  partner  of two  limited  partnerships,  has
submitted  its  building  plans to the  appropriate  governmental  agencies  for
building  permits to build two (2) new restaurants in its existing South Florida
market and  expects,  at a minimum,  to open  these two (2) new  restaurants  in
fiscal  year  2007.  The  Company's  ability  to  open  and  profitably  operate
restaurants  and/or  package  liquor  stores is subject to various risks such as
identification  and availability of suitable and economically  viable locations,
the  negotiation  of  acceptable  leases  or  the  purchase  terms  of  existing
locations, the availability of limited partner investors, the need to obtain all
required  governmental  permits  (including zoning approvals) on a timely basis,
the need to comply  with other  regulatory  requirements,  the  availability  of
necessary  contractors  and  subcontractors,  the  availability  of construction
materials  and labor,  the ability to meet  construction  schedules and budgets,
variations  in labor and building  material  costs,  changes in weather or other
acts of God that could result in  construction  delays and adversely  affect the
results  of  one  or  more  restaurants  and/or  package  liquor  stores  for an
indeterminate amount of time. If the Company is unable to unsuccessfully  manage
these risks, it could face increased costs and lower than  anticipated  revenues
and earnings in future periods.


General Economic Factors May Adversely Affect Results of Operations
-------------------------------------------------------------------

         National,  regional and local economic conditions, such as recessionary
economic cycles, a protracted  economic slowdown or a worsening  economy,  could
adversely affect disposable consumer income and consumer confidence. Unfavorable
changes in these factors or in other business and economic  condition  affecting
the  Company's  customers  could reduce  customer  traffic in some or all of the
Company's  restaurants and/or package liquor stores,  impose practical limits on
pricing and increase  costs,  any of which could lower profit margins and have a
material effect on the Company's results of operations.

                                       20
<PAGE>

Changes in Customer  Preferences for Casual Dining Styles Could Adversely Affect
Financial Performance
-------------------------------------------------------------------------------

         Changing customer preferences,  tastes and dietary habits can adversely
impact the Company's  business and financial  performance.  The Company offers a
large  variety of entrees,  side dishes and desserts and its  continued  success
depends, in part, on the popularity of its cuisine and casual style of dining. A
change  from this  dining  style  may have an  adverse  effect on the  Company's
business.


Labor Shortages,  an Increase in Labor Costs, or Inability to Attract  Employees
Could Harm Company Business
--------------------------------------------------------------------------------

         The  Company's  employees are essential to the operation of the Company
restaurants and/or package liquor stores and the Company's ability to deliver an
enjoyable  dining  experience  to its  customers.  If the  Company  is unable to
attract and retain  enough  qualified  restaurant  and/or  package  liquor store
personnel at a reasonable  cost, and if they do not deliver an enjoyable  dining
experience,  the  Company's  results may be negatively  affected.  Additionally,
competition  for  qualified  employees  could  require the Company to pay higher
wages, which could result in higher labor costs.


Increases in Employee  Minimum  Wages by the Federal or State  Government  Could
Adversely Affect Business
--------------------------------------------------------------------------------

         Certain of the Company  employees are paid wages that relate to federal
and state  minimum  wage rates.  Increases  in the minimum  wage rates,  such as
annual  cost of living  increases  in the State of  Florida  minimum  wage,  may
significantly increase labor costs. In addition, since the Company's business is
labor-intensive,  shortages  in the labor  pool or other  inflationary  pressure
could   increase  labor  costs,   which  could  harm  the  Company's   financial
performance.


Fluctuations in Commodity Prices and Availability of Commodities Including Pork,
Beef, Fish, Poultry and Dairy Could Affect Company Business
--------------------------------------------------------------------------------

         A  significant  component  of the  Company's  costs are related to food
commodities  including pork, beef, fish, poultry and dairy products. If there is
a substantial increase in prices for these products and the Company is unable to
offset the increases with changes in menu prices, the Company's results could be
negatively affected.

                                       21
<PAGE>


Due to the Company's  Geographic  Locations,  Restaurants are Subject to Climate
Conditions that Could Affect Operations
--------------------------------------------------------------------------------

         All but one (1) of the Company  restaurants  and package  liquor stores
are located in South Florida,  with the remaining  restaurant located in Central
Florida.  During hurricane  season,  (June 1st through November 30th each year),
the Company's  restaurants  and/or  package liquor stores may face harsh weather
associated with hurricanes and tropical storms.  These harsh weather  conditions
may make it more difficult for customers to visit the Company's  restaurants and
package liquor stores,  or may  necessitate the closure of the same for a period
of time.  If  customers  are unable to visit the  Company's  restaurants  and/or
package  liquor  stores,  Company sales and operating  results may be negatively
affected.


Due to the Company's  Geographic  Locations,  the Company May Not be Able to Get
Windstorm  Insurance  Coverage or  Adequate  Windstorm  Insurance  Coverage at a
Reasonable Rate
--------------------------------------------------------------------------------

         Due to the anticipated active hurricane seasons in South Florida in the
future, the Company may not be able to get windstorm  insurance coverage for its
restaurant and package liquor store locations on a year-to-year basis or may not
be able to get adequate windstorm insurance coverage at reasonable rates. If the
Company is unable to get  windstorm  insurance  coverage or  adequate  windstorm
insurance  coverage at reasonable  rates,  then the Company will be self-insured
for all or a part of the  exposure for damages  caused by a hurricane  impacting
South  Florida,  which may have a material  adverse  effect  upon the  financial
condition and/or results of operations of the Company.


Inability to Attract and Retain Customers Could Affect Results of Operations
----------------------------------------------------------------------------

         The Company takes pride in its ability to attract and retain customers,
however,  if the Company does not deliver an enjoyable dining experience for its
customers, they may not return and results may be negatively affected.


The Company Faces  Competition in the Restaurant and Liquor  Industries,  and if
the  Company  is Unable to  Compete  Effectively,  its  Business  and  Financial
Performance will be Adversely Affected
--------------------------------------------------------------------------------

         The restaurant and liquor industries are intensely  competitive and are
affected  by changes in customer  tastes,  dietary  habits and by  economic  and
demographic trends. New menu items,  concepts and trends are constantly merging.
The Company competes on quality, variety, value, service, price and location. If
the Company is unable to compete effectively,  its business, financial condition
and results of operations will be materially adversely affected.


                                       22
<PAGE>


Item 2. Properties
------------------

         The Company's  operations  are conducted  primarily on leased  property
with the exceptions  including (i) the Corporate  Headquarters  Office  Building
which was purchased in December, 1999 and has been occupied by the Company since
April 2001; (ii) the real property and improvements of the Company's combination
restaurant and liquor package store in Hallandale, Florida; and (iii) subsequent
to the end of fiscal year 2006,  the real  property  and  improvements  in North
Miami,  Florida subleased by the Company to an unrelated third party.  Initially
most of these  properties  were  leased by the Company on  long-term  ground and
building  leases with the  buildings  either  constructed  by the lessors  under
build-to-suit leases or constructed by the Company. A relatively small number of
business  locations involve the lease or acquisition of existing  buildings.  In
almost every instance where the Company  initially owned the land or building on
leased property, the Company entered into a sale and lease-back transaction with
investors to recover a substantial portion of its per unit investment.

         All of the Company's  units require  periodic  refurbishing in order to
remain  competitive.  The Company has  budgeted  $800,000  for its  refurbishing
program for fiscal year 2007. See Item 7, "Liquidity and Capital  Resources" for
discussion of the amounts spent in fiscal year 2006.

         The following table summarizes the Company's properties as of September
30, 2006 including franchise locations, a club and Company managed locations.

                                              Franchise/
                           Square             License        Lease
Name and Location          Footage   Seats    Owned by       Terms
-----------------          -------   -----    --------       -----

Big Daddy's Liquors #4     1,978      N/A     Company    3/1/02 to 2/28/27
Flanigan's Enterprises                                    and Options to
Inc. (10)                                                 2/28/37
7003 Taft Street
Hollywood, FL

Big Daddy's Liquors #7     1,450      N/A     Company    11/1/00 to 10/31/07
Flanigan's Enterprises                                    and Annual Options
Inc.                                                      to 10/31/15
1550 W. 84th Street
Hialeah, FL

Big Daddy's Liquors #8     1,800      N/A     Company    5/1/99 to 4/30/14
Flanigan's Enterprises
Inc.
959 State Road 84
Fort Lauderdale, FL

Flanigan's Seafood         4,300      130     Company    10/1/71 to 12/31/09
Bar and Grill #9                                          New lease 1/1/10
Flanigan's Enterprises                                    to 12/31/14
Inc. (1)                                                  Options to

                                       23
<PAGE>

                                              Franchise/
                           Square             License        Lease
Name and Location          Footage   Seats    Owned by       Terms
-----------------          -------   -----    --------       -----

1550 W. 84th Street                                        12/31/24
Hialeah, FL

Flanigan's Legends         5,000      150     Franchise    1/4/00 to 1/3/20
Seafood Bar and Grill                                       Option to 1/3/25
#11, 11 Corporation (3)
330 Southern Blvd.
W. Palm Beach, FL

Flanigan's Legends         5,000      180     Franchise    11/15/92 to
Seafood Bar and Grill                                       11/15/07
#12 Galeon Tavern, Inc.(3)                                  Option to
2401 Tenth Ave. North                                       11/15/12
Lake Worth, FL

Flanigan's Seafood         3,320       90     Franchise    6/1/79 to 6/1/09
Bar and Grill #14,                                          Options to 6/1/19
Big Daddy's #14, Inc.(2)(3)(5)(9)
2041 NE Second St.
Deerfield Beach, FL

Piranha Pats II-#15        4,000       90     Franchise/   3/2/76 to 8/31/11
CIC Investors #15 Ltd.(3)(5)                  Limited
1479 E. Commercial Blvd.                      Partnership
Ft. Lauderdale, FL

Flanigan's Seafood         4,300      100     Franchise    2/15/72 to 12/31/10
Bar and Grill #18                                           Options to
Twenty Seven Birds                                          12/31/20
Corp. (2) (3) (5)
2721 Bird Avenue
Miami, FL

Flanigan's Seafood         4,500      160     Company      3/1/72 to 12/31/10
Bar and Grill #19                                           Options to 12/31/20
Flanigan's Enterprises
Inc. (2)(4)
2505 N. University Dr.
Hollywood, FL

Flanigan's Seafood         5,100      140     Company      7/15/68 to 12/31/07
Bar and Grill #20                                          Annual options
Flanigan's Enterprises                                     until the Company
Inc.  (2)                                                  fails to exercise
13205 Biscayne Blvd.                                       Additional Lease
North Miami, FL                                            5/1/69 to 12/31/07
                                                           Annual options
                                                           until the Company
                                                           fails to exercise

                                       24
<PAGE>

                                              Franchise/
                           Square             License        Lease
Name and Location          Footage   Seats    Owned by       Terms
-----------------          -------   -----    --------       -----

Flanigan's Seafood         4,100      200     Company      12/16/68 to
Bar and Grill #22                                          12/31/10
Flanigan's Enterprises                                     Options to 12/31/20
Inc. (2)(4)                                                Option to purchase
2600 W. Davie Blvd.
Ft. Lauderdale, FL

Flanigan's Enterprises     3,000       90     Company      Company Owned
Inc. #27 (8)(11)
732-734 NE 125th St.
North Miami, FL

Flanigan's Seafood         4,600      150     Company      Company Owned
Bar and Grill #31,
Flanigan's Enterprises
Inc. (2)(12)
4 N. Federal Highway
Hallandale, FL

Flanigan's Guppy's         4,620      130     Franchise    11/1/03 to 4/30/11
Seafood Bar and Grill #33
Guppies, Inc. (2)(3)(5)
45 S. Federal Highway
Boca Raton, FL

Big Daddy's Liquors        3,000      N/A     Company      5/29/97 to 5/28/07
#34, Flanigan's                                            Options to 5/28/17
Enterprises, Inc. (1)
9494 Harding Ave.
Surfside, FL

Flanigan's Seafood         4,600      140     Company      4/1/71 to 12/31/10
 Bar and Grill #40                                         Options to 12/31/15
Flanigan's Enterprises
Inc. (2)
5450 N. State Road 7
Ft. Lauderdale, FL

Piranha Pat's #43          4,500       90     Franchise    12/1/72 to 11/30/07
BD 43 Corporation (2)(3)(5)                                Options to 11/30/19
2500 E. Atlantic Blvd.
Pompano Beach, FL

Big Daddy's Liquors        6,000      N/A     Company      12/21/68 to 1/1/10
#47, Flanigan's                                            Options to 1/1/60
Enterprises, Inc. (6)
8600 Biscayne Blvd.
Miami, FL


                                       25
<PAGE>


                                              Franchise/
                           Square             License        Lease
Name and Location          Footage   Seats    Owned by       Terms
-----------------          -------   -----    --------       -----

Flanigan's Seafood         8,000      200     Limited      06/01/91 to 5/31/11
 Bar and Grill #13,                           Partnership  Options to 5/31/21
CIC Investors #13, Ltd
11415 S. Dixie Highway
Pinecrest, FL

Flanigan's Seafood         4,000      200     Limited      10/24/06 to 10/24/11
 Bar and Grill #50,                           Partnership  Options to 10/24/26
CIC investors #50,
Ltd.(13)
17185 Pines Boulevard
Pembroke Pines, FL

Flanigan's Seafood         6,800      200     Limited      8/1/97 to 12/31/11
 Bar and Grill #60,                           Partnership
CIC Investors #60 Ltd.
9516 Harding Avenue
Surfside, FL

Flanigan's Seafood         6,128      200     Limited      4/01/05 to 3/31/15
 Bar and Grill #65                            Partnership  Options to 3/31/25
CIC Investors #65, Ltd
2335 State Road 7,Suite 100
Wellington, FL

Flanigan's Seafood         4,850      161     Limited      4/1/98 to 3/31/08
 Bar and Grill #70                            Partnership  Options to 3/31/28
CIC Investors #70 Ltd.
12790 SW 88 St
Kendall, FL

Flanigan's Seafood         7,000     200      Limited      10/1/03 to 9/30/09
 Bar and Grill #75                            Partnership  Options to 9/30/27
CIC Investors # 75 Ltd.
950 S. Federal Highway
Stuart, FL 34994

Flanigan's Seafood         5,000      165     Limited     6/15/01 to 12/14/19
 Bar and Grill #80                            Partnership Options to 12/14/39
CIC Investors #80 Ltd.
8695 N.W. 12th St
Miami, FL


Flanigan's Seafood         5,700      235     Limited      7/29/01 to 7/28/17
 Bar and Grill #95                            Partnership  Options to 7/28/32
CIC Investors #95 Ltd.
2460 Weston Road
Weston, FL

                                       26
<PAGE>

                                              Franchise/
                           Square             License        Lease
Name and Location          Footage   Seats    Owned by       Terms
-----------------          -------   -----    --------       -----

Mardi Gras                 10,000     400     Company      4/30/06 to 4/30/16
Flanigan's Enterprises,                                    Option to 4/30/26
Inc., #600 (7)(14)
Powers Ferry Landing
Atlanta, GA

(1)      License subject to chattel mortgage.

(2)      License pledged to secure lease rental.

(3)      Franchised by Company.

(4)      Former franchised unit returned and now operated by Company.

(5)      Lease assigned to franchisee.

(6)      The Company owns 48% of the underlying  leasehold from the unaffiliated
         third parties to whom the lease had been assigned and subleased back.

(7)      Location managed by an unaffiliated third party.

(8)      Location was closed in May 1998.  The Company  entered into a five year
         sublease  agreement,  with two five year options,  with an unaffiliated
         third party who is presently operating a restaurant at this location.

(9)      Effective  December  1, 1998,  the  Company  purchased  the  Management
         Agreement to operate the franchised restaurant for the franchisee.

(10)     Ground lease executed by the Company on September 25, 2001. The Company
         constructed a building of 4,120 square feet,  1,978 square feet is used
         by the  Company for the  operation  of a package  liquor  store and the
         other  2,142  square feet is  subleased  as retail  space.  The package
         liquor store opened for business on November 17, 2003.

(11)     Subsequent  to the end of fiscal year 2006,  the Company  purchased the
         real property subject to the ground lease of this location.

(12)     During the fourth  quarter of fiscal year 2006,  the Company  purchased
         the real  property  and for an  assignment  of a  ground  lease of this
         location  pursuant to an option to purchase  contained  in the Sublease
         Agreement.  Subsequent  to the end of fiscal  year  2006,  the  Company
         purchased the real property subject to the ground lease.

(13)     Location  estimated  to open for business  during the third  quarter of
         fiscal year 2007.

(14)     During the third quarter of fiscal year 2006,  the Company's  lease for
         this location expired.  The unaffiliated third party entered into a new
         lease for the business premises  effective May 1, 2006. The Company has
         no liability on the new lease.

                                       27
<PAGE>

Exercise of Option to Purchase; Purchase of Limited Liability Company.
----------------------------------------------------------------------

         During the fourth  quarter of fiscal year 2006,  the Company  closed on
the purchase of 100% of the membership interest of the limited liability company
which  owns the real  property  and  ground  lease  for a small  portion  of the
property  of the  Company's  combination  restaurant  and package  liquor  store
located at 4 North Federal Highway,  Hallandale,  Florida, (Store #31) for total
consideration of $3,876,000,  including a purchase price of $3,862,500, pursuant
to a Mediation  Settlement  Agreement.  The limited  liability  company became a
wholly  owned  subsidiary  of  the  Company.  The  purchase  was  financed  by a
$3,280,000  mortgage.  As  collateral  for the mortgage,  the limited  liability
company granted the lender a first mortgage on its real property and a leasehold
mortgage on the ground lease,  while the Company granted a first mortgage on its
parking lot adjacent to the  above-described  business  location.  The Company's
grant of a first  mortgage on its parking lot included the  satisfaction  of the
purchase  money  mortgage  on the  same for  $266,000.  The new  mortgage  bears
interest  at the rate of seven and  one-half  (7 1/2%)  percent  per  annum,  is
amortized  over twenty (20) years with equal  monthly  payments of principal and
interest,  each in the amount of $26,400,  with the entire principal balance and
all accrued interest due in seven (7) years.


Item 3. Legal Proceedings.
--------------------------

         The corporate  offices consist of a two (2) story building,  with space
initially set aside on the ground floor for a package liquor store.  The Company
filed suit against the adjacent shopping center to determine the Company's right
to  non-exclusive  parking in the  shopping  center.  During  fiscal  year 2005,
summary  judgment was granted in favor of the adjacent  shopping  center denying
the Company  non-exclusive  parking rights in the shopping  center.  The Company
continued pursuing its claim against the seller of the building,  its individual
partners  and its  attorney  for  damages  for  failing  to  disclose  documents
pertaining to the release of the non-exclusive  parking rights. During the first
quarter  of fiscal  year  2006,  summary  judgment  was  granted in favor of the
sellers'  attorney,  but denied as to the seller  and its  individual  partners.
During the third quarter of fiscal year 2006,  the summary  judgment  granted in
favor of the  sellers'  attorney  was  reversed  by the  court.  The  Company is
appealing the granting of the summary judgment in favor of the adjacent shopping
center,  which  appeal is  necessary  to  proceed  against  the  seller  and its
individual  partners  even though the Company no longer  plans to use the ground
floor for a package liquor store.

         Subsequent  to the end of fiscal  year  2006,  the  Company  filed suit
against the landlord of the limited  partnership  which owns the  restaurant  in
Pinecrest,  Florida  seeking to recover  the cost of  structural  repairs to the
business  premises  which it contends  were the  responsibility  of the landlord
pursuant to the terms of the lease and to recover rent paid while the structural
repairs delayed the renovation of the business premises.  The complaint includes
a count by the limited  partnership seeking a determination by the court that it
has the  exclusive  right to the use of the pylon sign in

                                       28
<PAGE>

front of the business premises. The landlord has denied liability for structural
repairs to the business premises,  refused to reimburse the limited  partnership
for any rent paid while  structural  repairs  delayed its renovations and denied
the limited partnership the exclusive use of the pylon sign.

         Certain  states  have liquor  liability  (dram shop) laws which allow a
person  injured  by an  "obviously  intoxicated  person"  to bring a civil  suit
against the business (or social host) who had served intoxicating  liquors to an
already  "obviously  intoxicated  person".  Dram shop  claims  normally  involve
traffic  accidents and the Company  generally does not learn of dram shop claims
until  after a claim is filed  and then the  Company  vigorously  defends  these
claims on the grounds that its employee did not serve an "obviously  intoxicated
person".  Damages in most dram shop cases are substantial.  At the present time,
there are no dram shop cases pending against the Company.  The Company maintains
general liability  insurance.  See Item 1, "Insurance" on page 14 of this annual
report of Form 10-K for a discussion of general liability insurance.

         There is no material  pending  legal  proceedings,  other than ordinary
routine litigation incident to the business,  none of which the Company believes
is material.


Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------

         During  the  fourth  quarter of fiscal  year 2006 the  Company  did not
submit any matter to a vote of the security holders.


                                     PART II
                                     -------

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
Issuer Purchases of Equity Securities.
--------------------------------------------------------------------------------

                    Fiscal 2006     Fiscal 2005    Fiscal 2004
                    -----------     -----------    -----------
                    High    Low     High    Low    High    Low
                    ----    ---     ----    ---    ----    ---

First quarter      10.55    9.38    7.35    6.20    6.85   6.00
Second quarter     10.40    9.09    9.35    6.97    6.90   6.13
Third quarter      11.29    9.45    9.40    7.16    6.70   7.16
Fourth quarter     12.30    7.86    9.90    8.90    6.65   6.21

         On December 9, 2004,  the Company  declared a cash dividend of 32 cents
per share payable on January 28, 2005 to  shareholders  of record on January 14,
2005.

         On January 13, 2006,  the Company  declared a cash dividend of 35 cents
per share payable on February 15, 2006 to  shareholders of record on January 31,
2006.

                                       29
<PAGE>


Item 6. Selected Financial Data.  (In thousands - except EPS)
--------------------------------
-----------------------------------------------------------------------------
              2002         2003         2004         2005         2006
-----------------------------------------------------------------------------
                            Statement of Operations Data
-----------------------------------------------------------------------------
Revenue      $39,124     $40,253      $45,933      $49,032      $55,014
-----------------------------------------------------------------------------
Income from Operations
             $ 2,788     $ 2,024      $ 1,273      $ 2,166      $ 1,699
-----------------------------------------------------------------------------
Net income   $1,383      $   888      $   440      $ 1,107      $ 1,250
-----------------------------------------------------------------------------

Earnings per share $ 0.71  $ 0.46     $ 0.23       $ 0.58       $ 0.66

-----------------------------------------------------------------------------
                               Balance Sheet Data
-----------------------------------------------------------------------------
Total assets $17,367     $18,733      $19,774      $21,099      $27,398
-----------------------------------------------------------------------------
Long term liabilities
             $ 1,593     $ 1,314      $ 1,217      $ 1,383      $ 4,958
-----------------------------------------------------------------------------
Net working capital
             $ 2,980     $ 2,093      $ 2,131      $ 2,137      $ 1,396
-----------------------------------------------------------------------------
Stockholders' equity
             $ 9,957     $10,351      $10,101      $10,273      $10,792
-----------------------------------------------------------------------------
Dividends declared
             $   499     $   520      $   581      $   609      $   658
-----------------------------------------------------------------------------

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.


Overview
---------

         The Company owns and/or  operates  restaurants  with  lounges,  package
liquor  stores and an adult  entertainment  oriented  club.  As of September 30,
2006,  the Company  operated  twenty one units.  The Company had interests in an
additional  seven units which were  franchised  by the  Company,  including  the
franchised  restaurant  managed by the  Company.  Of the units  operated  by the
Company, four were combination package liquor store and restaurant,  eleven were
restaurants  only and five  were  package  liquor  stores  only.  There  was one
restaurant  operated  by the  Company  for an  unrelated  third  party  under  a
management  agreement and one club operated by an  unaffiliated  third party for
the Company under a management  agreement.  During fiscal year 2001, the

                                       30
<PAGE>

Company  entered into a ground lease and  constructed  a building in  Hollywood,
Florida for the  operation of a package  liquor store from one half (1/2) of the
building and to sublease retail space from the other one half (1/2). The package
liquor store opened for  business  during the first  quarter of fiscal year 2004
and the retail  space was  subleased  during the second  quarter of fiscal  year
2004.  At the start of the second  quarter of fiscal  year  2004,  a  restaurant
located in Stuart,  Florida, owned by a limited partnership of which the Company
acts as general partner, opened for business. During the third quarter of fiscal
year 2005,  a  restaurant  located in  Wellington,  Florida,  owned by a limited
partnership of which the Company acts as general  partner,  opened for business.
At the start of the second  quarter of fiscal  year 2006,  the  Company  assumed
management  of a restaurant  owned by an  unaffiliated  third party.  During the
fourth quarter of fiscal year 2006, a restaurant located in Pinecrest,  Florida,
owned by a limited  partnership  of which the Company  acts as general  partner,
opened for business.


Results of Operations
---------------------

THE FISCAL YEARS ENDING SEPTEMBER 30, 2006, ("FISCAL 2006") and OCTOBER 1, 2005,
("FISCAL  2005"),  WERE FIFTY TWO WEEK  FISCAL  YEARS.  THE FISCAL  YEAR  ENDING
OCTOBER 2, 2004,  ("FISCAL  2004"),  WAS A FIFTY  THREE WEEK FISCAL YEAR AND THE
EXTRA WEEK IN FISCAL YEAR 2004 CONTRIBUTED TO INCREASES IN REVENUES AND EXPENSES
FOR THE FISCAL YEAR WHEN  COMPARING THEM TO REVENUES AND EXPENSES FOR THE FISCAL
YEARS 2006 and 2005,  WITH THE  EXCEPTION  OF THE  WEEKLY  AVERAGE OF SAME STORE
SALES.

REVENUES (in thousands):
-----------------------------------------------------------------------------
                     Fifty Two             Fifty Two          Fifty Three
                    Weeks Ended           Weeks Ended         Weeks Ended
                   Sept. 30, 2006        Oct. 1, 2005        Oct. 2, 2004
Sales
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Restaurant, food    $32,847  61.4%      $29,219   61.3%      $26,347   59.1%
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Restaurant, bar      7,610   14.2%        6,610   13.9%        7,351   16.5%
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Package goods       13,046   24.4%       11,810   24.8%       10,911   24.4%
-----------------------------------------------------------------------------

Total               53,503  100.0%       47,639  100.0%       44,609  100.0%
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Franchise revenues      1,114                 984                  958
-----------------------------------------------------------------------------

                                       31
<PAGE>

-----------------------------------------------------------------------------
Owners fee                224                 261                  265
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Other operating
  income                  173                 148                  101
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
Total Revenues        $55,014             $49,032              $45,933
-----------------------------------------------------------------------------

Comparison of Fiscal Years Ended September 30, 2006 and October 1, 2005
-----------------------------------------------------------------------

         As  the  table  above  illustrates,  total  revenues  for  fiscal  2006
increased by 12.2% when compared to fiscal 2005.  The increase in total revenues
for fiscal  2006 was  primarily  due to the  restaurant  in  Pinecrest,  Florida
opening  during the fourth quarter of fiscal 2006, the restaurant in Wellington,
Florida being open for the entire fiscal 2006, increases in same store sales and
menu price increases.  During fiscal year 2007, ("fiscal 2007"),  total revenues
are  expected  to  continue  increasing  primarily  due  to  the  restaurant  in
Pinecrest,  Florida  being  open for the entire  fiscal  year,  the  anticipated
opening of the restaurants in Pembroke Pines,  Florida and Davie, Florida during
the third quarter of fiscal 2007, increased volume and menu price increases.

         Restaurant food sales  represented 61.4% of total sales for fiscal 2006
as compared to 61.3% of total sales for fiscal 2005.  The weekly average of same
store  restaurant  food  sales,  which  includes  five (5)  limited  partnership
restaurants,  was  $568,000  for fiscal 2006 as compared to $540,000  for fiscal
2005, an increase of 5.2%. The weekly average of restaurant food sales increased
for fiscal  2006 as compared  to fiscal  2005 due to  increased  volume and menu
price  increases.  The  percentage  of  restaurant  food sales to total sales is
expected to increase  during fiscal 2007 due to the opening of the restaurant in
Pinecrest,  Florida during the fourth quarter of fiscal 2006 and the anticipated
opening of the restaurants in Pembroke Pines,  Florida and Davie, Florida during
the third and fourth quarters of fiscal 2007, respectively.

         Restaurant bar sales  represented  14.2% of total sales for fiscal 2006
as compared to 13.9% of total sales for fiscal 2005.  The weekly average of same
store  restaurant  bar  sales,  which  includes  five  (5)  limited  partnership
restaurants,  was  $131,000  for fiscal 2006 as compared to $122,000  for fiscal
2005, an increase of 7.4%.  During fiscal 2006, the Company  continued  offering
promotions at the bars only, during limited hours, which promotions began during
fiscal 2005.  With this  promotion,  the increase in the weekly  average of same
store restaurant bar sales is expected to continue, but management is careful to
preserve and continue promoting the Company's perception as a family restaurant.

         Package store sales represented 24.4% of total sales for fiscal 2006 as
compared to 24.8% of total  sales for fiscal  2005.  The weekly  average of

                                       32
<PAGE>

same store  package  sales was  $223,000 for fiscal 2006 as compared to $192,000
for fiscal  2005,  an increase  of 16.1%.  The  increase  was  primarily  due to
increased volume. During fiscal 2007, package store sales are expected to remain
constant due to increased competition.

         The gross profit margin for restaurant  sales was 65.5% for fiscal 2006
as compared to 65.1% for fiscal 2005. The Company offset  increased costs during
fiscal 2006 with menu price  increases,  which  resulted in an  increased  gross
profit margin for restaurant sales when compared to fiscal 2005. Notwithstanding
the increased  gross profit margin for restaurant  sales during fiscal 2006 when
compared  to fiscal  2005,  during the fourth  quarter of fiscal  2006 the gross
profit  margin for  restaurant  sales was 64.1%,  as  compared  to 66.0% for the
fourth  quarter  of fiscal  2005.  The  decline of 1.9% in gross  profit  margin
contributed  to an operating  loss of $135,000 for the fourth  quarter of fiscal
2006. Due to the decline in gross profit margin for restaurant  sales during the
fourth  quarter of fiscal  2006 and the  expectation  that  costs will  continue
increasing  during  fiscal 2007,  the Company  instituted  menu price  increases
during the first quarter of fiscal 2007 to restore and maintain its gross profit
margin for restaurant sales.

         The gross  profit  margin for package  store sales was 28.6% for fiscal
2006 and fiscal 2005. The gross profit margin for package good sales is expected
to remain constant during fiscal 2007.

Operating Costs and Expenses
----------------------------

         Operating  costs and  expenses  for  fiscal  2006 were  $53,315,000  as
compared  to  $46,866,000  for fiscal  2005,  an  increase  of 13.8%.  Operating
expenses are  comprised  of the cost of  merchandise  sold,  payroll and related
costs,  occupancy costs and selling,  general and administrative  expenses.  The
increase in operating  costs and expenses for fiscal 2006 was  primarily  due to
the  opening  of the new  restaurant  in  Pinecrest,  Florida  during the fourth
quarter of fiscal 2006, the restaurant in Wellington, Florida being open for the
entire fiscal year,  increased  payroll and related costs,  as well as a general
increase in overall operating costs and expenses.  During fiscal 2007, operating
costs and  expenses  are expected to continue  increasing  primarily  due to the
restaurant  in Pinecrest,  Florida  being open for the entire  fiscal year,  the
anticipated opening of the new restaurants in Pembroke Pines, Florida and Davie,
Florida during the third and fourth quarters of fiscal 2007,  respectively and a
general increase in overall operating costs and expenses.

         Payroll and related costs were $16,062,000 for fiscal 2006, as compared
to  $13,636,000  for fiscal 2005, an increase of 17.8%.  The increase in payroll
and related  costs for fiscal 2006 was  primarily  due to the opening of the new
restaurant in Pinecrest,  Florida  during the fourth quarter of fiscal 2006, the
impact of the  Florida  minimum  wage  which went into  effect  during the third
quarter of fiscal 2005 and further  impacted by its first  annual cost of living
increase  effective  January 1, 2006 and the restaurant in  Wellington,  Florida
being open for the entire fiscal year. Payroll and related costs are expected to
increase  during fiscal 2007 due to the  restaurant in Pinecrest,  Florida being
open for the entire fiscal year, the  anticipated  opening of the restaurants in
Pembroke Pines,  Florida and Davie, Florida during the third and fourth quarters
of fiscal  2007,  respectively  and

                                       33
<PAGE>

the second  annual  increase  in the  Florida  minimum  wage by a cost of living
increase effective January 1, 2007.

         Occupancy costs,  which include rent, common area maintenance,  repairs
and taxes were  $3,189,000  for fiscal 2006 as compared to $2,853,000 for fiscal
2005, an increase of 11.8%.  The increase in occupancy  costs during fiscal 2006
was primarily  due to increases in real  property  taxes and the payment of rent
for the restaurant in Wellington, Florida for the entire fiscal year.

         Selling,  general and  administrative  expenses  were  $10,800,000  for
fiscal 2006 as compared to $9,439,000 for fiscal 2005, an increase of 14.4%. The
increase in selling,  general and administrative expenses during fiscal 2006 was
primarily due to the opening of the new restaurant in Pinecrest,  Florida during
the fourth quarter of fiscal 2006, the restaurant in Wellington,  Florida having
been open the entire  fiscal year and a general  increase  in overall  expenses,
including  but not limited to  utilities.  Selling,  general and  administrative
expenses are expected to increase  during  fiscal 2007 due to the  restaurant in
Pinecrest,  Florida  being  open for the entire  fiscal  year;  the  anticipated
opening of the  restaurants  in  Pembroke  Pines,  Florida  and Davie,  Florida;
increase in insurance costs and an overall increase in expenses.

Other Income and Expenses
-------------------------

         Other  income  and  expenses,   which  excludes  minority  interest  in
consolidated  limited  partnerships,  were income of $613,000 for fiscal 2006 as
compared to an expense of ($113,000)  for fiscal 2005.  Other income and expense
for fiscal 2006 includes insurance  recovery,  net of casualty loss, of $666,000
which includes the deletion of the net book value of property and equipment as a
result of Hurricane Wilma ($64,000),  repair of damage ($138,000) and food waste
($61,000),  caused  by  Hurricane  Wilma,  offset  by  insurance  recoveries  of
$929,000,  ($979,000 less a $50,000  deductible),  from the Company's  insurance
carrier.

Comparison of Fiscal Years Ended October 1, 2005 and October 2, 2004
-----------------------------------------------------------------------

         As the table above also  illustrates,  total  revenues  for fiscal 2005
increased by 6.7% when compared to fiscal 2004.

         Restaurant food sales  represented 61.3% of total sales for fiscal 2005
as compared to 59.1% of total sales for fiscal 2004.  The weekly average of same
store  restaurant food sales,  which now includes three (3) limited  partnership
restaurants  instead of one (1),  was  $444,000  for fiscal  2005 as compared to
$404,000 for fiscal 2004, an increase of 9.9%.  The weekly average of restaurant
food sales increased for fiscal 2005 as compared to fiscal 2004 due to increased
volume and menu price increases.

         Restaurant bar sales  represented  13.9% of total sales for fiscal 2005
as compared to 16.5% of total sales for fiscal 2004.  The weekly average of same
store  restaurant  bar sales was $99,000 for fiscal 2005 as compared to $101,000
for fiscal  2004,  a decrease of 2.0%.  During  fiscal  2005 the  Company

                                       34
<PAGE>

began offering  promotions at the bars only,  during  limited  hours.  With this
promotion, the increase in the weekly average of same store restaurant bar sales
is expected to  continue,  but  management  is careful to preserve  and continue
promoting the Company's perception as a family restaurant.

         Package store sales represented 24.8% of total sales for fiscal 2005 as
compared to 24.4% of total  sales for fiscal  2004.  The weekly  average of same
store  package  sales was  $192,000  for fiscal 2005 as compared to $180,000 for
fiscal 2004,  an increase of 6.7%.  The increase was  primarily due to increased
volume.

         The gross profit margin for restaurant  sales was 65.1% for fiscal 2005
as compared to 64.4% for fiscal 2004. The Company offset  increased costs during
fiscal 2005 with menu price  increases,  which  resulted in an  increased  gross
profit margin for restaurant sales when compared to fiscal 2004.

         The gross  profit  margin for package  store sales was 28.6% for fiscal
2005 as compared to 27.9% for fiscal  2004.  For fiscal  2005,  the  increase in
gross  profit  is  attributed  to the  purchase  of  "close  out" and  inventory
reduction  merchandise  from wholesalers and the continued  implementation  of a
training program for package store employees.

Operating Costs and Expenses
----------------------------

         Operating  costs and  expenses  for  fiscal  2005 were  $46,866,000  as
compared to $44,660,000 for fiscal 2004. Operating expenses are comprised of the
cost of  merchandise  sold,  payroll  and  related  costs,  occupancy  costs and
selling, general and administrative  expenses.  Operating costs and expenses for
fiscal 2005  increased by 4.9% as compared to  operating  costs and expenses for
fiscal 2004.  The  increase in operating  costs and expenses for fiscal 2005 was
primarily due to the opening of the new restaurant in Wellington, Florida during
the third  quarter of fiscal 2005,  the  restaurant  in Stuart,  Florida and the
package  store in  Hollywood,  Florida being open for the entire fiscal year, as
well as a general increase in overall operating costs and expenses.

         Payroll and related costs were $13,636,000 for fiscal 2005, as compared
to $12,523,000 for fiscal 2004,  representing increases of 8.9%. The increase in
payroll and related  costs for fiscal 2005 was  primarily  due to the opening of
the new  restaurant in  Wellington,  Florida  during the third quarter of fiscal
2005,  the new  Florida  minimum  wage which went into  effect  during the third
quarter of fiscal  2005 and the  restaurant  in Stuart,  Florida and the package
store in Hollywood, Florida being open for the entire fiscal year.

         Occupancy costs,  which include rent, common area maintenance,  repairs
and taxes were  $2,853,000  for fiscal 2005 as compared to $2,740,000 for fiscal
2004.  The increase in occupancy  costs during  fiscal 2005 was due primarily to
the payment of rent for the new restaurant in Wellington, Florida.

         Selling, general and administrative expenses were $9,439,000 for fiscal
2005 as compared to $9,525,000 for fiscal 2004. Excluding non-recurring expenses
and/or adjustments in selling, general and administrative

                                       35
<PAGE>

expenses during fiscal 2004,  which expenses and adjustments  totaled  $467,000,
the increase in selling,  general and administrative expenses during fiscal 2005
was primarily due to the opening of the new  restaurant in  Wellington,  Florida
during the third quarter of fiscal 2005 and the  restaurant  in Stuart,  Florida
and the package store in Hollywood,  Florida  having been open the entire fiscal
year.

         During  fiscal  2004,  the  following   non-recurring  expenses  and/or
adjustments in selling,  general and  administrative  expense adversely effected
earnings:

First Quarter Fiscal Year 2004:

         b.       Adjustment for store supplies                    $104,000

Second Quarter Fiscal Year 2004:

         a.       Adjustment for  allocations of insurance
                  premiums  related to franchises:                 $178,000

         b.       Past Due Real Property Taxes                     $ 52,000

         c.       Excess  opening costs of joint venture           $ 74,000
                  restaurant in Stuart, Florida

Third Quarter Fiscal Year 2004:

         a.       Past Due Real Property Taxes                     $ 59,000

                                                                   --------
         Total:                                                    $467,000


Other Income and Expenses
-------------------------

         Other income and expenses were an expense of ($113,000) for fiscal 2005
as compared to  ($362,000)  for fiscal 2004.  Other income and expense of fiscal
2005 includes the expense of  ($121,000)  relating to the  abandonment  of fixed
assets, as compared to the expense of ($367,000) for fiscal 2004.

New Limited Partnership Restaurants
-----------------------------------

         As the Company  opens new  limited  partnership  restaurants  on a more
regular basis,  the Company's  profitability  may be reduced by the higher costs
associated with the opening of the same for a period of up to 90 days. To insure
that a new  restaurant  opens with the high  quality  of  service  for which the
Company is known,  the Company has a select  group of  employees,  known as "new
restaurant  openers",  who  travel to new  restaurants  for that  purpose.  "New
restaurant openers" may spend up to 90 days at a new restaurant.  In the case of
a new  limited  partnership  restaurant  which  is not  local,  lodging  must be
provided for the "new restaurant  openers",  which may increase the opening cost
significantly  over  the  opening  cost  of  local  restaurants.   In  addition,

                                       36
<PAGE>

immediately  prior to the opening of a new  restaurant and in order to provide a
"test  run" for the same,  the  Company  sponsors  pre-opening  parties  for its
limited partners and the Company employees. By way of illustration,  the opening
of the  limited  partnership  restaurants  in  Pinecrest,  Florida,  Wellington,
Florida and Stuart,  Florida  during  fiscal 2006,  2005 and 2004  respectively,
incurred the following pre-opening and opening expenses:

                      #13 - Pinecrest, Fl  #65- Wellington, Fl  #75- Stuart, Fl.
                      -------------------  -------------------  ----------------

Pre-Opening Rent:          $535,000*           $18,000             $17,000
Pre-Opening Payroll:       $ 80,000            $90,000**           $22,000***
Post-Opening Increased
Payroll Costs (90 days):   $ 55,000            $22,000**           $42,000***
Promotional Costs:         $  6,000            $ 3,000             $ 7,000
                           ---------           ---------           ----------
Total:                     $676,000            $133,000            $88,000

*   includes  the payment of rent,  ($204,000),  while  structural  repairs were
    being made.

**  excludes  lodging and per diem  allowances,  ($51,000),  for new  restaurant
    openers incurred due to the location of this facility.
*** excludes  lodging and per diem  allowances,  ($74,000),  for new  restaurant
    openers incurred due to the location of this facility.

         The pre-opening rent paid is generally less for new leases, rather than
the  purchase  of an existing  location  which  includes  the  assumption  of an
existing  lease.  In  the  negotiation  of a new  lease,  there  is  normally  a
construction period before which the rent payments begin.  However, rent expense
is  recognized  on a  straight  line  basis  over the term of the lease for GAAP
purposes, which results in a deferred rent liability. In the case of the limited
partnership restaurant in Wellington,  Florida, the lease agreement, as amended,
included  a two  hundred  ten (210) day  period for  renovations,  although  the
restaurant  did not open for  seven  and one half (7 1/2)  months  from the date
possession of the business  premises was turned over to the limited  partnership
to begin its build out. Since the opening of the limited partnership  restaurant
in  Surfside,  Florida  and  with  the  exception  of  the  limited  partnership
restaurant  in  Pinecrest,  Florida,  the  pre-opening  rent expense for limited
partnership restaurants has ranged from $17,000 - $137,000. The pre-opening rent
expense for the  limited  partnership  restaurant  in  Pinecrest,  Florida is an
exception to the customary  pre-opening  rent expense due to structural  repairs
which had to be made to the business premises prior to renovations beginning.

         During fiscal 2006,  the limited  partnership  restaurant in Pinecrest,
Florida  reported a loss of $155,000  primarily due to pre-opening  costs,  thus
contributing  to a reduction in the  operating  income for fiscal  2006.  During
fiscal 2007, operating income will be adversely affected by opening costs of the
new  limited  partnership  restaurants  in  Pembroke  Pines,  Florida and Davie,
Florida.

Trends
------

         During the next twelve months,  management expects continued  increases
in restaurant sales due primarily to the restaurant in Pinecrest,  Florida

                                       37
<PAGE>

being  open for the  entire  fiscal  year,  the  anticipated  opening of the new
restaurants  in  Pembroke  Pines,  Florida  and Davie,  Florida,  and  continued
increases  in same store  sales.  Package  goods  sales are  expected  to remain
constant  due to  increased  competition.  Franchise  royalties  are expected to
increase  due to the new  restaurant  in  Pinecrest,  Florida,  the  anticipated
opening of the new restaurants in Pembroke Pines, Florida and Davie, Florida and
continued  increases  in same  store  sales  for the  limited  partnerships  and
franchises.  At the same time,  management  also  expects  higher food costs and
overall  expenses to increase,  although the Company will  continue to raise its
menu  prices to offset  the  higher  food costs and  overall  expenses  wherever
competitively possible.

         The  Company  intends  to  open  additional   restaurants  as  suitable
locations  become  available,  using  limited  partnerships,  of which it is the
general partner, to raise funds to own and operate the same.

         The Company is not actively  searching  for locations for the operation
of a package store,  but if an appropriate  location for a package store becomes
available, the Company will consider the same.

Liquidity and Capital Resources
-------------------------------

Cash Flows
----------

         The following table is a summary of the Company's cash flows for fiscal
years 2006, 2005 and 2004:

----------------------------------------------------------------------------
                                    Fiscal Years
----------------------------------------------------------------------------
                                2006               2005             2004
----------------------------------------------------------------------------
                                       (in thousands)
----------------------------------------------------------------------------
Net cash provided by
operating activities            $2,080            $2,664           $3,411
----------------------------------------------------------------------------
Net cash used in
investing activities            (3,594)           (2,054)          (1,289)
----------------------------------------------------------------------------
Net cash provided by (used in)
financing activities               538              (872)            (773)
----------------------------------------------------------------------------
Net increase (decrease)
in cash and equivalents           (976)             (262)           1,349
----------------------------------------------------------------------------
Cash and equivalents.
beginning of year                2,674             2,936            1,587
----------------------------------------------------------------------------
Cash and equivalents.
end of year                     $1,698            $2,674           $2,936
----------------------------------------------------------------------------

                                       38
<PAGE>

Capital Expenditures
--------------------

         Capital expenditures were approximately $4,311,000,  including $531,000
as a direct  result of Hurricane  Wilma and $601,000  for the  acquisition  of a
subsidiary,  $2,095,000 and $1,532,000  during fiscal years 2006, 2005 and 2004,
respectively.  During  fiscal year 2006,  the  Company  also  purchased  one (1)
vehicle, for a purchase price of $70,000,  which vehicle was 100% financed.  The
capital  expenditures  for each fiscal year included  upgrading  existing  units
serving food and improvements to package liquor stores. The capital expenditures
for fiscal  year 2006  included  renovations  to the  business  premises  by the
limited partnership in Pinecrest, Florida, ($1,681,000).

Contractual Cash Obligations
----------------------------
                                          Less Than        1-5          After
                               Total        1 Year        Years        5 Years
                               -----        ------        -----        -------
Long-term debt              $ 5,181,000   $  223,000   $ 2,132,000   $2,826,000
Operating leases             15,825,000    2,166,000     8,068,000    5,591,000
Rib Contract                  2,800,000    2,800,000
                            -----------   ----------   -----------   ----------

Total                       $23,806,000   $5,189,000   $10,200,000   $8,417,000
                            ===========   ==========   ===========   ==========

             All of the Company's units require  periodic  refurbishing in order
to remain  competitive.  The  budget  for  fiscal  2007  includes  approximately
$800,000 for this purpose,  which is not included in the above table.  The table
also does not include any lease  guarantees  for  franchises,  which  guarantees
total  approximately  $1,570,000.  The  Company  expects  the  funds  for  these
improvements to be provided from operations. In addition, it is anticipated that
during fiscal 2007, two new limited  partnerships,  (Pembroke Pines, Florida and
Davie,   Florida),   will  require  approximately   $2,100,000  and  $2,350,000,
respectively, in capital expenditures to close on the purchase of the restaurant
locations,   complete  their  renovations  and  preparation  for  opening  as  a
"Flanigan's  Seafood  Bar and  Grill"  restaurant,  which  funds  will be raised
through a private  offering.  The  private  offering  will also  raise  funds to
reimburse the Company for any funds advanced in excess of its planned investment
in these  limited  partnerships.  The  table  also  does not  include  any lease
guarantees for franchisees.


Purchase Commitments
--------------------

         Effective  December  1,  2006,  the  Company  entered  into a  purchase
agreement with its rib supplier.  The terms of the agreement  stipulate that the
Company will purchase approximately $2,800,000 of baby back ribs during calendar
year 2007 at a fixed cost.  The Company  contracts for the purchase of baby back
ribs on an  annual  basis to fix the cost and  ensure  adequate

                                       39
<PAGE>

supply for the calendar year.  The Company  purchases all of its rib supply from
this vendor, but management  believes that several other alternative vendors are
available, if needed.


Purchase of Company Common Stock
--------------------------------

         Pursuant to a  discretionary  plan  approved by the Board of Directors,
during fiscal 2006, the Company  purchased 14,350 shares of its common stock for
an aggregate purchase price of $139,000.  Of the shares purchased,  7,500 shares
of its common stock were purchased from the Chief Operating Officer and Director
of the  Company,  during the second and third  quarters  of fiscal  2006,  at an
aggregate  purchase  price of $77,000,  which per share  purchase price was less
than the closing per share market price on the date of each purchase.


Long Term Debt
--------------

         As of the end of fiscal 2006,  the Company had long term debt including
the line of credit of $5,181,000, as compared to $1,557,000 and $1,314,000 as of
the end of fiscal 2005 and 2004,  respectively,  increases of 232.8% and 294.3%,
respectively.  The net  increase in long term debt as of the end of fiscal 2006,
as  compared  to long term debt as of the end of fiscal  2005 and  fiscal  2004,
includes the unsecured loan from Bank Atlantic ($762,000),  one (1) secured auto
loan ($70,000) and the mortgage loan for the purchase of the membership interest
of the limited liability company ($3,280,000),  reduced by the satisfaction of a
purchase money mortgage ($266,000).

         The Company  repaid long term debt,  including the Bank of America note
payable, the Bank Atlantic note payable, auto loans, mortgages and capital lease
obligations  in the amount of  $489,000,  $309,000  and $278,000 in fiscal 2006,
2005 and 2004 respectively.

         During the fourth  quarter of fiscal  2006,  the Company  financed  the
purchase of the membership  interest of the limited liability company which owns
the real  property and ground  lease for a small  portion of the property of the
Company's  combination  restaurant  and package  liquor store located at 4 North
Federal Highway, Hallandale, Florida, (Store #31) with a $3,280,000 mortgage. As
collateral for the mortgage,  the limited liability company granted the lender a
first  mortgage  on its real  property  and a  leasehold  mortgage on the ground
lease, while the Company granted a first mortgage on its parking lot adjacent to
the above-described  business location.  The Company's grant of a first mortgage
on its parking lot,  included the satisfaction of the purchase money mortgage on
the same for $266,000.  The new mortgage bears interest at the rate of seven and
one-half (7 1/2%)  percent per annum,  is amortized  over twenty (20) years with
equal monthly payments of principal and interest, each in the amount of $26,400,
with the entire  principal  balance  and all accrued  interest  due in seven (7)
years.

         Subsequent to the end of fiscal 2006,  the Company  received an advance
of  $250,000  on the new  mortgage  procured  by the  Company  to  purchase  the
membership  interest  of the  limited  liability  company  which  owns  the real
property and ground lease at the Company's  combination  restaurant  and package

                                       40
<PAGE>

liquor store located at 4 N. Federal Highway,  Hallandale,  Florida (Store #31).
The new mortgage still bears interest at the rate of seven and one-half (7 1/2%)
percent  per annum,  is  amortized  over  twenty  (20) years with equal  monthly
payments of  principal  and  interest,  each in the amount of $28,600,  with the
entire  principal  balance and all accrued  interest  still due on its  original
maturity date in seven (7) years.

         Subsequent  to the end of fiscal  2006,  the  Company  re-financed  the
mortgage note encumbering the Company's corporate offices. The new mortgage,  in
the original principal amount of $1,000,000, bears interest at the rate of 7.25%
per annum,  is amortized  over twenty (20) years with equal monthly  payments of
principal and interest,  each in the amount of $8,000, with the entire principal
balance and all accrued  interest due in seven (7) years. The pre-payment of the
mortgage note, which otherwise  matured in August,  2008,  incurred a prepayment
penalty of $17,000.

         Subsequent to the end of fiscal 2006, the Company increased its line of
credit from  $2,000,000 to $2,650,000.  The Company  granted its lender a second
mortgage on its corporate  offices as additional  collateral for the increase in
the line of credit,  in addition to a security  interest in substantially all of
the assets of the  Company.  The Company  drew  additional  funds on the line of
credit  in  the  aggregate  amount  of  $1,200,000  raising  the  total  balance
outstanding to $1,962,000.

         As of  September  30,  2006,  the  Company  is in  compliance  with the
affirmative covenants contained in any of its loan documents.


Working capital
---------------

         The table below summarizes the current assets,  current liabilities and
working capital for the fiscal 2006, 2005 and 2004:


                       Sept. 30      Oct. 1       Oct. 1
                         2006         2005          2004

Current assets        $6,315,000   $6,091,000   $5,889,000

Current liabilities    4,919,000    3,954,000    3,758,000

Working capital        1,396,000    2,137,000    2,131,000

         Working  capital for fiscal 2006  decreased by 34.7% and 34.5% from the
working capital for fiscal 2005 and 2004, respectively.  The decrease in working
capital during fiscal 2006, which was supplemented by a draw of $762,000 against
the  Company's  line  of  credit,  was  due to the  purchase  of the  management
agreement to operate the  restaurant  in Deerfield  Beach,  Florida  ($500,000);
investment in the limited  partnership  restaurant  which owns the restaurant in
Pinecrest, Florida ($1,295,000);  and the purchase of the membership interest of
the limited liability company which owns the real property and ground lease to a
small portion of property of the Company's  combination  restaurant  and package
liquor store located at 4 N. Federal Highway, Hallandale, Florida.

         Management  believes  that  positive  cash  flow from  operations  will
adequately  fund  operations  and debt  reductions,  but not all of the  planned

                                       41
<PAGE>

capital  expenditures in fiscal 2007, which will have to be supplemented through
future  advances on the Company's line of credit.  It is also  anticipated  that
during fiscal 2007,  working  capital will be adversely  affected by investments
and/or  advances  made by the  Company to the limited  partnerships  in Pembroke
Pines, Florida and/or Davie,  Florida pending  reimbursement of advances made by
the  Company  in excess of its  investment  once the  private  offering  by each
limited partnership is completed;  payment of the balance due upon completion of
the  installation  for DSL service for all package  liquor store and  restaurant
locations,  including on-line security ($65,000);  payment of the balance of the
cost  of  improvements  to  two  (2)  existing  Company  restaurants   ($168,000
estimated);  purchase of a new point of sale system for Company  package  liquor
stores ($180,000  estimated);  and the cash to close on the purchase of the real
property  subject  to ground  leases of two  locations  currently  leased by the
Company ($600,000 estimated).


Critical Accounting Policies
----------------------------

         The Company's significant  accounting policies are more fully described
in Note 1 to the Company's  consolidated  financial statements located in Item 8
of this Annual Report on Form 10-K. The  preparation of financial  statements in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported amounts of assets, liabilities, revenues, and expenses, and the related
disclosures of contingent  assets and  liabilities.  Actual results could differ
from those  estimates  under  different  assumptions or conditions.  The Company
believes  that  the  following  critical  accounting  policies  are  subject  to
estimates and judgments used in the  preparation of its  consolidated  financial
statements:


Estimated Useful Lives of Property and Equipment
------------------------------------------------

         The estimate of useful lives for property and equipment are significant
estimates.  Expenditures  for the leasehold  improvements  and equipment  when a
restaurant is first constructed are material. In addition, periodic refurbishing
takes place and those  expenditures  can be material.  Management  estimates the
useful life of those assets by  considering,  among other things,  expected use,
life of the lease on the  building,  and warranty  period,  if  applicable.  The
assets are then  depreciated  using a straight line method over those  estimated
lives.  These  estimated  lives  are  reviewed   periodically  and  adjusted  if
necessary.  Any  necessary  adjustment  to  depreciation  expense is made in the
income  statement  of the period in which the  adjustment  is  determined  to be
necessary.


Consolidation of Limited Partnerships
-------------------------------------

         The Company  operates seven (7)  restaurants as general  partner of the
limited partnerships that own the operations of these restaurants. Additionally,
the  Company  expects  that any  expansion  which  takes  place in  opening  new
restaurants will also result in the Company operating the

                                       42
<PAGE>

restaurants as general partner. In addition to the general partnership  interest
the Company also purchases limited  partnership units ranging from 12% to 42% of
the total units  outstanding.  As a result of these controlling  interests,  the
Company  consolidates the operations of these limited partnerships with those of
the Company  despite  the fact the Company  does not own in excess of 50% of the
equity interests. All intercompany transactions are eliminated in consolidation.
The minority interests in the earnings of these limited partnerships are removed
from net income and are not included in the calculation of earnings per share.


Income Taxes
------------

         Financial  Accounting Standards Board Statement No. 109, Accounting for
Income Taxes  requires,  among other things,  recognition of future tax benefits
measured at enacted  rates  attributable  to  deductible  temporary  differences
between  financial  statement and income tax bases of assets and liabilities and
to tax net  operating  loss and tip  credit  carryforwards  to the  extent  that
realization of said benefits is more likely than not. For  discussion  regarding
the  Company's  carryforwards  refer  to  Note 8 to the  consolidated  financial
statements for fiscal 2006.


Other Matters
-------------

Impact of Inflation
--------------------

         The Company does not believe that inflation has had any material effect
during the past three fiscal years.  To the extent allowed by  competition,  the
Company recovers increased costs by increasing prices.


                                       43
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

         The Company does not ordinarily hold market risk sensitive  instruments
for trading purposes. During the fourth quarter of fiscal 2006, the Company sold
its one equity security,  realizing a gain of $78,000. As of September 30, 2006,
the Company held no equity securities.


Interest Rate Risk
------------------

         At September 30, 2006, the Company has two debt arrangements which have
a variable  interest  rate. For one of these  instruments,  a mortgage note, the
Company has entered into an interest  rate swap  agreement to hedge the interest
rate risk. The mortgage note has an outstanding  principal  balance at September
30, 2006 of  $788,000.  The other  instrument,  the secured  $2,000,000  line of
credit,  has a  variable  interest  rate,  which is at prime.  During the second
quarter of fiscal 2006, the Company paid the unsecured promissory note which had
an original principal balance of $100,000 and a variable interest rate which was
at prime,  in full,  using funds from its secured  line of credit.  Increases in
interest rates may have a material affect upon results of operations,  depending
upon the outstanding principal balance on the line of credit from time to time.

         Subsequent  to the end of fiscal  2006,  the  Company  re-financed  the
mortgage note for which the Company entered into an interest rate swap agreement
to hedge the interest rate risk, with a new mortgage,  in the original principal
amount  of  $1,000,000,  with a fixed  interest  rate of 7.25%  per  annum.  The
pre-payment  of the mortgage  note,  which  otherwise  matured in August,  2008,
incurred a prepayment penalty of $17,000.

         At September 30, 2006,  the Company's  cash  resources earn interest at
variable rates. Accordingly,  the Company's return on these funds is affected by
fluctuations  in interest  rates.  Any  decrease  in interest  rates will have a
negative effect on the Company's earnings.

         There is no assurance  that  interest  rates will  increase or decrease
over the next fiscal year.


Item 8. Financial Statements and Supplementary Data.
---------------------------------------------------

         Financial  statements  of the Company at September 30, 2006 and October
1, 2005, which include each of the three years in the period ended September 30,
2006 and the independent  certified  public  accountants'  report  thereon,  are
included herein.


Item 9A. Controls and Procedures.
-------------------------------

(a)      Evaluation of Disclosure Controls and Procedures

                                       44
<PAGE>

         Our Chief Executive  Officer and Chief Financial Officer have, with the
participation  of  management  evaluated  the  effectiveness  of the  design and
operation of the Company's  "disclosure  controls and procedures" (as defined in
the  Securities  Exchange  Act  of  1934  ("Exchange  Act")  Rule  13a-15(e)  or
15d-15(e)) as of September 30, 2006. It is the conclusion of our Chief Executive
Officer and Chief Financial Officer that such disclosure controls and procedures
operate such that  important  information  flows to  appropriate  collection and
disclosure points in a timely manner and are effective in ensuring that material
information is accumulated and  communicated to management and made known to the
Chief Executive  Officer and Chief  Financial  Officer  particularly  during the
period in which this  report  was  prepared,  as  appropriate,  to allow  timely
decisions   regarding  timely  disclosure.   In  designing  and  evaluating  the
disclosure  controls and  procedures,  management  recognizes that any system of
controls and procedures, no matter how well designed and operated, is subject to
limitations, including the exercise of our judgment in evaluating the same. As a
result,  there can be no assurance that our  disclosure  controls and procedures
will prevent all errors.

(b)      Change in Internal Control over Financial Reporting

         During fiscal 2006, the Company  continued to assess the  effectiveness
of its  "internal  controls over  financial  reporting" on an account by account
basis  as a part of our  on-going  accounting  and  financial  reporting  review
process.  The assessments were made by management,  under the supervision of our
Chief Financial Officer.  During fiscal 2006, the Company made no changes in its
internal  control over financial  reporting  that  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial  reporting.  Notwithstanding,  the  effectiveness  of  our  system  of
internal control over financial  reporting is subject to limitations,  including
the exercise of our judgment in evaluating  the same. As a result,  there can be
no assurance that our internal control over financial reporting will prevent all
errors.


                              PART III

Item 10. Directors and Executive Officers of the Registrant.
------------------------------------------------------------

         The information set forth under the caption  "Election of Directors" in
the  Company's  definitive  Proxy  Statement  for its  2007  Annual  Meeting  of
Shareholders,  filed with the  Securities  and Exchange  Commission  pursuant to
regulation  14A under the  Securities  and Exchange Act of 1934, as amended (the
2006 Proxy Statement),  is incorporated herein by reference. See also "Executive
Officers of the Registrant" included in Part I hereof.


Item 11. Executive Compensation.
--------------------------------

         The information set forth in the 2007 Proxy Statement under the caption
"Executive Compensation" is incorporated by reference.

                                       45
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Shareholder Matters.
---------------------------------------------------------------------------

         The  information  set forth under the caption  "Security  Ownership  of
Certain  Beneficial  Owners  and  Management"  in the 2007  Proxy  Statement  is
incorporated by reference.


Item 13. Certain Relationships and Related Transactions.
--------------------------------------------------------

         The  information  set forth under the caption  "Election  of  Directors
-Certain  Relationships and Related Transactions" in the 2007 Proxy Statement is
incorporated by reference.


Item 14.  Principal Accountant Fees and Services.
-------------------------------------------------

         The information set forth in the 2007 Proxy Statement under the caption
"Audit Fee" and "All Other Fees" is incorporated by reference.



                               PART IV

Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
-------------------------------------------------------------------------

(a) 1. Financial Statements

         All  the  financial   statements,   financial  statement  schedule  and
supplementary  data listed in the  accompanying  Index to Exhibits  are filed as
part of this Annual Report.

    2. Exhibits

         The exhibits listed on the accompanying  Index to Exhibits are filed as
part of this Annual Report.

(b) Reports on Form 8-K

         No reports on Form 8-K were filed  during the fourth  quarter of fiscal
year 2006 or subsequent to year end.


                                       46
<PAGE>

                                Index to Exhibits
                                Item (14) (a) (2)

                                   Description
                                   -----------

(2)  Plan of  Reorganization,  Amended  Disclosure  Statement,  Amended  Plan of
reorganization,   Modification  of  Amended  Plan  of   Reorganization,   Second
Modification  of  Amended  Plan  of  Reorganization,  Order  Confirming  Plan of
Reorganization, (Item 7 (c) of Quarterly Report on Form 8-K filed May 5, 1987 is
incorporated herein by reference).

(3) Restated Articles of Incorporation (Part IV, Item 4 (a) (2) of Annual Report
on Form 10-K filed on December 29, 1982 is incorporated herein by reference).

(10)(a)(1)  Employment Agreement with Joseph G. Flanigan (Exhibit A of the Proxy
Statement dated January 27, 1988 is incorporated herein by reference).

(10)(a)(2)  Form of  Employment  Agreement  between  Joseph G.  Flanigan and the
Company (as ratified and amended by the  stockholders at the 1988 annual meeting
is incorporated herein by reference).

(10)(c) Consent  Agreement  regarding the Company's  Trademark  Litigation (Part
7(c)(19)  of the Form  8-K  dated  April  10,  1985 is  incorporated  herein  by
reference).

(10)(d) King of Prussia  (#850)  Partnership  Agreement  (Part 7 (c) (19) of the
Form 8-K dated April 10, 1985 is incorporated herein by reference).

(10)(o) Management Agreement for Atlanta,  Georgia, (#600) (Item 14(a)(10)(o) of
the Form 10-K dated October 3, 1992 is incorporated herein by reference).

(10)(p) Settlement Agreement with Former Vice Chairman of the Board of Directors
(re  #5)  (Item  14  (a)(10)(p)  of the  Form  10-K  dated  October  3,  1992 is
incorporated herein by reference).

(10)(q)  Hardware   Purchase   Agreement  and  Software  License  Agreement  for
restaurant point of sale system. (Item 14(a)(10)(g) of Form 10-KSB dated October
2, 1993 is incorporated herein by reference).

(10)(a)(3)  Key Employee  Incentive  Stock  Option Plan  (Exhibit A of the Proxy
Statement dated January 26, 1994 is incorporated herein by reference).

(10)(r)  Limited  Partnership  Agreement of CIC  Investors  #13,  Ltd,.  between
Flanigan's Enterprises,  Inc., as General Partner and fifty percent owner of the
limited partnership,  and Hotel Properties, LTD. (Item 14 (a)(10)(r) of the Form
10-KSB dated September 30, 1995 is incorporated herein by reference).

(10)(s) Form of Franchise  Agreement between  Flanigan's  Enterprises,  Inc. and
Franchisees.  (Item 14 (a)(10)(s) of the Form 10-KSB dated September 30, 1995 is
incorporated herein by reference).

                                       47
<PAGE>

(10)(t) Licensing  Agreement between Flanigan's  Enterprises,  Inc. and James B.
Flanigan,  dated  November 4, 1996,  for  non-exclusive  use of the  servicemark
"Flanigan's"  in the  Commonwealth of  Pennsylvania.  (Item 14 (a)(10)(t) of the
Form 10-KSB dated September 28, 1996 is incorporated herein by reference).

(10)(u) Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28,
1997,  between B.D. 15 Corp. as General Partner and numerous  limited  partners,
including Flanigan's  Enterprises,  Inc. as a limited partner owning twenty five
percent of the limited  partnership (Item 14 (a)(10)(u) of the Form 10-KSB dated
September 27, 1997 is incorporated herein by reference).

(10)(v) Limited  Partnership  Agreement of CIC Investors #60 Ltd., dated July 8,
1997,  between  Flanigan's  Enterprises,  Inc., as General  Partner and numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning forty  percent of the limited  partnership  (Item 14  (a)(10)(v)  of Form
10-KSB dated September 27, 1997 is incorporated herein by reference).

(10)(w)  Stipulated  Agreed  Order  of  Dismissal  upon  Mediation  with  former
franchisee  (Item 14  (a)(10)(w)  of Form  10-KSB  dated  September  27, 1997 is
incorporated herein by reference).

(10)(x) Limited Partnership  Agreement of CIC Investors #70, Ltd. dated February
1999  between  Flanigan's  Enterprises,  Inc. as General  Partner  and  numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning forty percent of the limited  partnership.  (Item 14 (a) (10) (x) of Form
10-KSB dated October 2, 1999 is incorporated herein by reference)

(10)(y)  Limited  Partnership  Agreement of CIC Investors #80,  Ltd.,  dated May
2001,  between  Flanigan's  Enterprises,  Inc. as General  Partner and  numerous
limited partners,  including  Flanigan's  Enterprises,  Inc., as limited partner
owning  twenty five percent of the limited  partnership.  (Item 14(a) (10)(y) of
Form 1--KSB dated September 29, 2001 is incorporated herein by reference.)

(10)(z)  Limited  Partnership  Agreement of CIC Investors #95, Ltd.,  dated July
2001,  between  Flanigan's  Enterprises,  Inc., as General  Partner and numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning twenty eight percent of the limited  partnership.(Item  14 (a) (10)(z) of
Form 10-KSB dated September 29, 2001 is incorporated herein by reference.)

(10)(aa)  Limited  Partnership  Agreement of CIC Investors #75, Ltd., dated June
17, 2003, between Flanigan's Enterprises, Inc., as General Partner, and numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning twelve percent of the limited  partnership.  (Item  14(a)(10)(aa) of Form
10-K dated October 2, 2004 is incorporated herein by reference.)

(10)(bb)  Limited  Partnership  Agreement of CIC Investors #65, Ltd., dated June
24, 2004, between Flanigan's Enterprises, Inc., as General Partner, and numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning twenty six percent of the limited  partnership.  (Item  14(a)(10)(bb)  of
Form 10-K dated October 1, 2005 is incorporated herein by reference.)

(10)(cc) Amended and Restated Limited  Partnership  Certificate and Agreement of
CIC Investors #13, Ltd., dated March 1, 2006,  between  Flanigan's  Enterprises,
Inc., as General  Partner,  Flanigan's  Management  services,  Inc. and numerous
limited  partners,  including  Flanigan's  Enterprises,  Inc. as limited partner
owning thirty nine percent of the limited partnership.

                                       48
<PAGE>

(13)  Registrant's  Form 10-K  constitutes the Annual Report to Shareholders for
the fiscal year ended September 30, 2006.

(22)(a) Company's subsidiaries are set forth in this Annual Report on Form 10-K.

31.1    CERTIFICATION PURSUANT  TO 302 OF SARBANES-OXLEY  ACT OF 2002  OF  CHIEF
EXECUTIVE OFFICER

31.2    CERTIFICATION PURSUANT  TO 302 OF SARBANES-OXLEY  ACT OF 2002  OF  CHIEF
FINANCIAL OFFICER

32.1    CERTIFICATION  PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

32.2    CERTIFICATION  PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the  registrant  had duly caused this annual report on Form
10K to be signed on its behalf by the undersigned thereunto duly authorized.

                            Flanigan's Enterprises, Inc.
                            Registrant

                            By: /s/ JAMES G. FLANIGAN II
                                ------------------------
                                JAMES G. FLANIGAN II
                                Chief Executive Officer
                                Date: 12/29/06



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this annual report on Form 10K has been signed below by the following persons on
behalf of the registrant and in their capacities and on the dates indicated.

/s/ JAMES G. FLANIGAN II      Chairman of the Board,        Date: 12/29/06
----------------------        Chief Executor Officer,
James G. Flanigan II            and Director


/s/ JEFFREY D. KASTNER        Chief Financial Officer       Date: 12/29/06
----------------------        Secretary and Director
Jeffrey D. Kastner


/s/ MICHAEL ROBERTS           Director                      Date: 12/29/06
----------------------
MICHAEL ROBERTS

                                       49
<PAGE>

/s/ GERMAINE M. BELL          Director                      Date: 12/29/06
----------------------
Germaine M. Bell


/s/  BARBARA J. KRONK         Director                      Date: 12/29/06
----------------------
Barbara J. Kronk


/s/ AUGIE BUCCI               Chief Operating Officer       Date: 12/29/06
----------------------        and Director
Augie Bucci


/s/ MICHAEL B. FLANIGAN       Director                      Date: 12/29/06
----------------------
Michael B. Flanigan


/s/ PATRICK J. FLANIGAN       Director                      Date: 12/29/06
-----------------------
Patrick J. Flanigan


/s/  CHRISTOPHER O'NEIL       Director                      Date: 12/29/06
-----------------------
Christopher O'Neil

<PAGE>

================================================================================

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES



                        CONSOLIDATED FINANCIAL STATEMENTS



            SEPTEMBER 30, 2006, OCTOBER 1, 2005, AND OCTOBER 2, 2004

================================================================================


<PAGE>




                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES



                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------




                                                                        PAGE
                                                                        ----



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 F-1


CONSOLIDATED FINANCIAL STATEMENTS

   Balance Sheets                                                       F-2

   Statements of Income                                                 F-3

   Statements of Stockholders' Equity                                   F-4

   Statements of Cash Flows                                             F-5

   Notes to Financial Statements                                     F-6 - F-33



<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------


Board of Directors and Stockholders
Flanigan's Enterprises, Inc.
Fort Lauderdale, Florida


We have  audited the  accompanying  consolidated  balance  sheets of  Flanigan's
Enterprises,  Inc. and Subsidiaries as of September 30, 2006 and October 1, 2005
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year  period ended  September 30, 2006.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Flanigan's  Enterprises,  Inc. and  Subsidiaries  as of  September  30, 2006 and
October 1, 2005, and the consolidated results of their operations and their cash
flows for each of the years in the three-year period ended September 30, 2006 in
conformity with accounting principles generally accepted in the United States.


                            RACHLIN COHEN & HOLTZ LLP


Fort Lauderdale, Florida
December 21, 2006


                                      F-1
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                     SEPTEMBER 30, 2006 AND OCTOBER 1, 2005

<TABLE>
<CAPTION>
                              ASSETS                                    2006            2005
                              ------                                    ----            ----
<S>                                                                     <C>             <C>
Current Assets:
    Cash and cash equivalents                                      $  1,698,000    $  2,674,000
    Marketable securities                                                    --         353,000
    Notes and mortgages receivable, current maturities                   12,000          16,000
    Due from franchisees                                                569,000         119,000
    Other receivables                                                   821,000         189,000
    Inventories                                                       2,215,000       1,990,000
    Prepaid expenses                                                    813,000         721,000
    Deferred tax assets                                                 187,000          29,000
                                                                   ------------    ------------
      Total current assets                                            6,315,000       6,091,000
                                                                   ------------    ------------

Property and Equipment, Net                                          18,939,000      13,127,000
                                                                   ------------    ------------

Investment in Limited Partnership                                       153,000         122,000
                                                                   ------------    ------------

Other Assets:
    Liquor licenses, net                                                347,000         347,000
    Notes and mortgages receivable                                      103,000         116,000
    Deferred tax assets                                                 397,000         435,000
    Other                                                             1,144,000         861,000
                                                                   ------------    ------------
         Total other assets                                           1,991,000       1,759,000
                                                                   ------------    ------------
         Total assets                                              $ 27,398,000    $ 21,099,000
                                                                   ============    ============

               LIABILITIES AND STOCKHOLDERS' EQUITY
               ------------------------------------
Current Liabilities:
    Accounts payable and accrued expenses                          $  4,096,000    $  2,916,000
    Income taxes payable                                                264,000         295,000
    Due to franchisees                                                  268,000         493,000
    Current portion of long-term debt                                   223,000         174,000
    Deferred revenues                                                    54,000          62,000
    Deferred rent                                                        14,000          14,000
                                                                   ------------    ------------
         Total current liabilities                                    4,919,000       3,954,000
                                                                   ------------    ------------

Long-Term Debt, Net of Current Maturities                             4,196,000       1,383,000
                                                                   ------------    ------------

Line of Credit                                                          762,000              --
                                                                   ------------    ------------

Deferred Rent, Net of Current Portion                                   223,000         241,000
                                                                   ------------    ------------

Minority Interest in Equity of Consolidated Limited Partnerships      6,506,000       5,248,000
                                                                   ------------    ------------

Commitments, Contingencies and Subsequent Events

Stockholders' Equity:
    Common stock, $.10 par value; 5,000,000 shares authorized;
      4,197,642 shares issued                                           420,000         420,000
    Capital in excess of par value                                    6,203,000       6,148,000
    Retained earnings                                                10,064,000       9,472,000
    Accumulated other comprehensive income                                   --          50,000
    Treasury stock, at cost, 2,313,277 and 2,323,047 shares          (5,895,000)     (5,817,000)
                                                                   ------------    ------------
         Total stockholders' equity                                  10,792,000      10,273,000
                                                                   ------------    ------------
         Total liabilities and stockholders' equity                $ 27,398,000    $ 21,099,000
                                                                   ============    ============
</TABLE>

                See notes to consolidated financial statements.

                                      F-2
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

       YEARS ENDED SEPTEMBER 30, 2006, OCTOBER 1, 2005 AND OCTOBER 2, 2004

<TABLE>
<CAPTION>
                                                                  2006            2005            2004
                                                                  ----            ----            ----
<S>                                                            <C>             <C>             <C>
Revenues:
    Restaurant food sales                                    $ 32,847,000    $ 29,219,000    $ 26,347,000
    Restaurant beverage sales                                   7,610,000       6,610,000       7,351,000
    Package store sales                                        13,046,000      11,810,000      10,911,000
    Franchise-related revenues                                  1,114,000         984,000         958,000
    Owner's fee                                                   224,000         261,000         265,000
    Other operating income                                        173,000         148,000         101,000
                                                             ------------    ------------    ------------
                                                               55,014,000      49,032,000      45,933,000
                                                             ------------    ------------    ------------
Costs and Expenses:
    Cost of merchandise sold:
      Restaurants and lounges                                  13,952,000      12,502,000      12,002,000
      Package goods                                             9,312,000       8,436,000       7,870,000
    Payroll and related costs                                  16,062,000      13,636,000      12,523,000
    Occupancy costs                                             3,189,000       2,853,000       2,740,000
    Selling, general and administrative expenses               10,800,000       9,439,000       9,525,000
                                                             ------------    ------------    ------------
                                                               53,315,000      46,866,000      44,660,000
                                                             ------------    ------------    ------------

Income from Operations                                          1,699,000       2,166,000       1,273,000
                                                             ------------    ------------    ------------

Other Income (Expense):
    Interest expense                                             (206,000)       (116,000)       (136,000)
    Interest and other income                                     183,000         106,000         135,000
    Limited partnership income                                     31,000          18,000           6,000
    Loss on abandonment of property and equipment                 (61,000)       (121,000)       (367,000)
    Insurance recovery, net of casualty loss                      666,000              --              --
                                                             ------------    ------------    ------------
                                                                  613,000        (113,000)       (362,000)
                                                             ------------    ------------    ------------

Income Before Provision for Income Taxes and
    Minority Interest in Earnings of Consolidated
    Limited Partnerships                                        2,312,000       2,053,000         911,000
                                                             ------------    ------------    ------------

Provision for Income Taxes:
    Current                                                       870,000         525,000         332,000
    Deferred                                                     (120,000)         18,000        (162,000)
                                                             ------------    ------------    ------------
                                                                  750,000         543,000         170,000
                                                             ------------    ------------    ------------

    Minority Interest in Earnings of Consolidated
    Limited Partnerships                                         (312,000)       (403,000)       (301,000)
                                                             ------------    ------------    ------------


Net Income                                                   $  1,250,000    $  1,107,000    $    440,000
                                                             ============    ============    ============

Net Income Per Common Share:
    Basic                                                    $       0.66    $       0.58    $       0.23
                                                             ============    ============    ============
    Diluted                                                  $       0.65    $       0.58    $       0.23
                                                             ============    ============    ============

Weighted Average Shares and Equivalent Shares Outstanding:
    Basic                                                       1,884,000       1,895,000       1,922,000
                                                             ============    ============    ============
    Diluted                                                     1,909,000       1,923,000       1,933,000
                                                             ============    ============    ============
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

       YEARS ENDED SEPTEMBER 30, 2006 OCTOBER 1, 2005 AND OCTOBER 2, 2004

<TABLE>
<CAPTION>

                                     Common Stock                                Accumulated      Treasury Stock
                                     ------------      Capital in                   Other         --------------
                                                        Excess of     Retained  Comprehensive
                                  Shares      Amount    Par Value     Earnings     Income      Shares       Amount         Total
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------
<S>                             <C>        <C>         <C>         <C>           <C>         <C>         <C>           <C>
Balance, September 27, 2003      4,197,642  $  420,000  $6,103,000  $ 9,115,000   $  26,000   2,271,172   $(5,313,000)  $10,351,000

Year Ended October 2, 2004:
   Comprehensive income:
      Net income                        --          --          --      440,000          --          --            --       440,000
      Net unrealized loss on
        securities                      --          --          --           --      (1,000)         --            --        (1,000)
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------
                                        --          --          --      440,000      (1,000)         --            --       439,000

   Purchase of treasury stock           --          --          --           --          --      30,400      (201,000)     (201,000)
   Exchange of shares -
    exercise of stock options           --          --      44,000           --          --     (20,755)       49,000        93,000
   Dividends paid
    ($0.30 per share)                   --          --          --     (581,000)         --          --            --      (581,000)
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------

Balance, October 2, 2004         4,197,642     420,000   6,147,000    8,974,000      25,000   2,280,817    (5,465,000)   10,101,000

Year Ended October 1, 2005:
   Comprehensive income:
      Net income                        --          --          --    1,107,000          --          --            --     1,107,000
      Net unrealized gain on
        securities                      --          --          --           --      25,000          --            --        25,000
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------
                                        --          --          --    1,107,000      25,000          --            --     1,132,000

   Purchase of treasury stock           --          --          --           --          --      42,720      (353,000)     (353,000)
   Exchange of shares -
     exercise of stock options          --          --       1,000           --          --        (490)        1,000         2,000
   Dividends paid
    ($0.32 per share)                   --          --          --     (609,000)         --          --            --      (609,000)
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------

Balance, October 1, 2005         4,197,642     420,000   6,148,000    9,472,000      50,000   2,323,047    (5,817,000)   10,273,000

Year ended September 30, 2006
   Comprehensive income:
      Net income                        --          --          --    1,250,000          --          --            --     1,250,000
      Net unrealized gain on
        securities                      --          --          --           --     (50,000)         --            --       (50,000)
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------
                                        --          --          --    1,250,000     (50,000)         --            --     1,200,000

   Purchase of treasury stock           --          --          --           --          --      14,350      (139,000)     (139,000)
   Exchange of shares -
     exercise of stock options          --          --      55,000           --          --     (24,120)       61,000       116,000
   Dividends paid
   ($0.35 per share)                    --          --          --     (658,000)         --          --            --      (658,000)
                                ----------  ----------  ----------  -----------   ---------   ---------   -----------   -----------
Balance, September 30, 2006      4,197,642  $  420,000  $6,203,000  $10,064,000   $      --   2,313,277   $(5,895,000)  $10,792,000
                                ==========  ==========  ==========  ===========   =========   =========   ===========   ===========
</TABLE>

                See notes to consolidated financial statements.

                                      F-4
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

       YEARS ENDED SEPTEMBER 30, 2006, OCTOBER 1, 2005 AND OCTOBER 2, 2004

<TABLE>
<CAPTION>
                                                                                2006          2005           2004
                                                                                ----          ----           ----
<S>                                                                             <C>            <C>             <C>
Cash Flows from Operating Activities:
   Net income                                                               $ 1,250,000    $ 1,107,000    $   440,000
   Adjustments to reconcile net income to net cash provided by
     operating activities:
       Depreciation and amortization                                          1,817,000      1,543,000      1,545,000
       Loss on abandonment of property and equipment                             61,000        121,000        367,000
       Insurance recovery, net of casualty loss                                (666,000)            --             --
       Gain on sale of marketable securities                                    (78,000)            --             --
       Deferred income taxes                                                   (120,000)        18,000       (162,000)
       Deferred rent                                                            (18,000)            --             --
       Minority interests in earning of consolidated limited partnerships       312,000        403,000        301,000
       Income from unconsolidated limited partnership                           (31,000)       (18,000)        (6,000)
       Recognition of deferred revenues                                          (8,000)        (8,000)            --
       Changes in operating assets and liabilities:
         (Increase) decrease in:
           Due from franchisees                                                (450,000)      (119,000)            --
           Other receivables                                                   (221,000)        82,000        106,000
           Inventories                                                         (225,000)      (340,000)      (288,000)
           Prepaid expenses                                                     (92,000)      (156,000)       316,000
           Refundable deposit, major supplier                                        --             --         77,000
           Other assets                                                        (375,000)       (82,000)      (359,000)
         Increase (decrease) in:
           Accounts payable and accrued expenses                              1,180,000         83,000        198,000
           Income taxes payable                                                 (31,000)       304,000        518,000
           Due to franchisees                                                  (225,000)      (274,000)       358,000
                                                                            -----------    -----------    -----------
             Net cash provided by operating activities                        2,080,000      2,664,000      3,411,000
                                                                            -----------    -----------    -----------

Cash Flows from Investing Activities:
   Collections on notes and mortgages receivable                                 17,000         21,000         19,000
   Purchase of property and equipment                                        (3,710,000)    (2,095,000)    (1,532,000)
   Acquisition of subsidiary                                                   (601,000)            --             --
   Distributions from unconsolidated limited partnership                             --         20,000         14,000
   Proceeds from redemption of certificate of deposit                                --             --        354,000
   Investment in marketable securities                                               --             --       (144,000)
   Proceeds from insurance settlement                                           700,000             --             --
                                                                            -----------    -----------    -----------
             Net cash used in investing activities                           (3,594,000)    (2,054,000)    (1,289,000)
                                                                            -----------    -----------    -----------

Cash Flows from Financing Activities:
   Payments of long-term debt                                                  (489,000)      (309,000)      (278,000)
   Proceeds from long-term debt                                                      --        250,000             --
   Proceeds from line of credit                                                 762,000             --             --
   Dividends paid                                                              (658,000)      (609,000)      (581,000)
   Purchase of treasury stock                                                  (139,000)      (353,000)      (201,000)
   Distributions to limited partnerships' minority partners                  (1,054,000)    (1,218,000)    (1,131,000)
   Proceeds from limited partnership interests                                2,000,000*     1,365,000**    1,325,000***
   Proceeds from exercise of stock options                                      116,000          2,000         93,000
                                                                            -----------    -----------    -----------
             Net cash provided by (used in) financing activities                538,000       (872,000)      (773,000)
                                                                            -----------    -----------    -----------

Net Increase (Decrease) in Cash and Cash Equivalents                           (976,000)      (262,000)     1,349,000

Cash and Cash Equivalents, Beginning                                          2,674,000      2,936,000      1,587,000
                                                                            -----------    -----------    -----------

Cash and Cash Equivalents, Ending                                           $ 1,698,000    $ 2,674,000    $ 2,936,000
                                                                            ===========    ===========    ===========


Supplemental Disclosure of Cash Flow Information:
   Cash paid during the year for:
     Interest                                                               $   206,000    $   116,000    $   136,000
                                                                            ===========    ===========    ===========
     Income taxes                                                           $   881,000    $   225,000    $   173,000
                                                                            ===========    ===========    ===========

   Non-Cash Financing and Investing Activities:
     Purchase of vehicles in exchange for debt                              $    70,000    $   302,000    $        --
                                                                            ===========    ===========    ===========
     Purchase of Josar Investments, LLC in exchange for debt                $ 3,280,000    $        --    $        --
                                                                            ===========    ===========    ===========
     Sale of marketable securities not settled by September 30, 2006        $   381,000    $        --    $        --
                                                                            ===========    ===========    ===========
</TABLE>

* exclusive of the Company's  investment in the limited  partnership  owning the
restaurant in Pinecrest, Florida of $1,300,000.
** exclusive of the Company's  investment in the limited  partnership owning the
restaurant in Wellington, Florida of $485,000.
*** exclusive of the Company's  investment in the limited partnership owning the
restaurant in Stuart,  Florida of $175,000.

                See notes to consolidated financial statements.

                                      F-5
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             SEPTEMBER 30, 2006, OCTOBER 1, 2005 AND OCTOBER 2, 2004


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization and Capitalization

             Incorporated in 1959, Flanigan's Enterprises, Inc. ("Flanigan's" or
             the "Company") operates in South Florida as a chain of full-service
             restaurants and package liquor stores. Restaurant food and beverage
             sales make up the majority of total revenue. At September 30, 2006,
             the Company owned and operated two full-service  restaurants,  five
             package liquor stores and four combination full-service restaurants
             and  package  liquor  stores in South  Florida.  In  addition,  the
             Company  operates  one  full-service  restaurant  in South  Florida
             pursuant to a management  agreement  with an unrelated  third party
             and owns one club in Atlanta,  Georgia,  which is operated pursuant
             to a  management  agreement  with an  unrelated  third  party.  The
             Company holds  interests in seven limited  partnerships  as general
             partner.   The  Company's   restaurants   are  operated  under  the
             "Flanigan's  Seafood Bar and Grill" servicemark while the Company's
             package  stores  are  operated  under  the  "Big  Daddy's  Liquors"
             servicemark.

             The Company's Articles of Incorporation,  as amended, authorize the
             Company  to issue and have  outstanding  at any one time  5,000,000
             shares of common stock at a par value of $.10.

             The Company  operates  under a 52-53 week year ending the  Saturday
             closest  to  September  30.  Fiscal  years  2006  and 2005 are each
             comprised of a 52-week period,  while fiscal year 2004 is comprised
             of a 53-week period.

         Principles of Consolidation

             The consolidated  financial  statements include the accounts of the
             Company and its  subsidiaries,  all of which are wholly owned,  and
             the accounts of the seven limited partnerships in which the Company
             acts  as  general  partner  and  has  controlling  interests.   All
             significant  intercompany   transactions  and  balances  have  been
             eliminated in consolidation.

         Use of Estimates

             The consolidated  financial  statements and related disclosures are
             prepared  in  conformity  with  accounting   principles   generally
             accepted in the U.S.  Management is required to make  estimates and
             assumptions   that  affect  the  reported  amounts  of  assets  and
             liabilities, the disclosure of contingent assets and liabilities at
             the date of the  financial  statements,  and revenue  and  expenses
             during the period reported.  These estimates  include assessing the
             estimated   useful  lives  of  tangible   assets.   Estimates   and
             assumptions are reviewed  periodically and the effects of revisions
             are  reflected  in the  consolidated  financial  statements  in the
             period  they  are  determined  to  be  necessary.   Although  these
             estimates are based on management's knowledge of current events and
             actions it may undertake in the future,  they may ultimately differ
             from actual results.

                                      F-6
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Cash and Cash Equivalents

             The Company  considers all highly liquid debt  instruments  with an
             original  maturity of three  months or less at the date of purchase
             to be cash equivalents.

         Investments

             In accordance with Statement of Financial  Accounting Standards No.
             115,  "Accounting  for Certain  Debt and Equity  Securities"  (SFAS
             115),  securities are  classified  into three  categories:  held-to
             maturity, available-for-sale, and trading.

             The   Company's    marketable    securities   are   classified   as
             available-for-sale,  which  means they may be sold in  response  to
             changes in interest rates, liquidity needs, and for other purposes.
             Available-for-sale securities are reported at fair value.

             Unrealized  holding gains and losses are excluded from earnings and
             reported,  net of any income tax effect, as a separate component of
             stockholders'  equity.  Realized  gains and losses are  reported in
             earnings based on the adjusted cost of the specific security sold.

         Inventories

             Inventories,  which consist  primarily of package liquor  products,
             are stated at the lower of average cost or market.

         Liquor Licenses

             In accordance with Statement of Financial  Accounting Standards No.
             142,  "Goodwill and Other  Intangible  Assets"  (SFAS 142),  liquor
             licenses are no longer being amortized, but are tested annually for
             impairment (see Note 7).

         Property and Equipment

             Property and equipment are stated at cost.  Expenditures  for major
             improvements  are  capitalized.  Depreciation  commences  when  the
             assets are placed in service. Maintenance and repairs, which do not
             improve or extend the life of the respective assets, are charged to
             expense as incurred.  Upon disposal of assets, the cost and related
             accumulated depreciation are removed from the accounts and any gain
             or loss is  included  in  income.  Depreciation  is  recorded  on a
             straight-line   basis  over  the  estimated  useful  lives  of  the
             respective assets.

             The  estimated  useful  lives  range  from  three to five years for
             vehicles,  and three to seven years for  furniture  and  equipment.
             Leasehold  interests are amortized over the term of the lease up to
             a maximum of 15 years.  Leasehold  improvements are currently being
             amortized  over the life of the lease up to a maximum  of 20 years.
             The building and building  improvements of the corporate offices in
             Fort Lauderdale, Florida and the combination restaurant and package
             liquor store in Hallandale,  Florida owned by the Company are being
             depreciated over forty years.

                                      F-7
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Investment in Limited Partnerships

             The Company uses the  consolidation  method of accounting  when the
             Company has a controlling  interest in other  companies and limited
             partnerships. The Company uses the equity method of accounting when
             the  Company  has an interest  between  twenty to fifty  percent in
             other  companies  and limited  partnerships,  but does not exercise
             control. Under the equity method, original investments are recorded
             at cost and are adjusted for the Company's  share of  undistributed
             earnings  or  losses.  All  significant  intercompany  profits  are
             eliminated.

         Concentrations of Credit Risk

             Financial  instruments  that  potentially  subject  the  Company to
             concentrations  of  credit  risk are  cash  and  cash  equivalents,
             investments, other receivables and notes and mortgages receivable.

         Cash and Cash Equivalents

             From time to time  during the year,  the  Company  had  deposits in
             financial  institutions in excess of the federally  insured limits.
             At  September  30,  2006,  the  Company  had  deposits in excess of
             federally insured limits of approximately  $1,611,000.  The Company
             maintains its cash with high quality financial institutions,  which
             the Company believes limits these risks.

         Notes and Mortgages Receivable

             Notes and mortgages  receivable  arise  primarily  from the sale of
             operating  assets,  including  liquor  licenses.  Generally,  those
             assets serve as collateral for the receivable.  Management believes
             that the  collateral,  coupled  with  the  credit  standing  of the
             purchasers, limits these risks.

         Major Supplier

             Throughout  fiscal years 2006, 2005 and 2004, the Company purchased
             substantially  all of its food  products  from its  major  supplier
             pursuant to a master  distribution  agreement  which  entitled  the
             Company  to  receive  certain  purchase   discounts,   rebates  and
             advertising  allowances.  Management  believes  that several  other
             alternative vendors are available, if necessary.

         Revenue Recognition

             The Company records  revenues from normal  recurring sales upon the
             sale of food and beverages and the sale of package liquor products.
             Continuing  royalties,  which  are a  percentage  of net  sales  of
             franchised stores, are accrued as income when earned.

                                      F-8
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Pre-opening Costs

             Pre-opening  costs are those typically  associated with the opening
             of a new restaurant and generally  include payroll costs associated
             with the "new restaurant  openers" (a team of select  employees who
             travel  to new  restaurants  to  ensure  that  the  Company's  high
             standards  for  quality  are  met),  rent  and  promotional  costs.
             Pre-opening  costs are  expensed  as  incurred.  Pre-opening  costs
             incurred for the fiscal years ended September 30, 2006,  October 1,
             2005 and  October 2, 2004 were approximately $343,000, $416,000 and
             $315,000, respectively.

         Advertising Costs

             Advertising  costs are  expensed  as  incurred.  Advertising  costs
             incurred for the years ended  September  30, 2006,  October 1, 2005
             and  October  2, 2004 were  approximately  $464,000,  $375,000  and
             $319,000 respectively.

         Fair Value of Financial Instruments

             The respective carrying value of certain on-balance-sheet financial
             instruments   approximated  their  fair  value.  These  instruments
             include cash and cash equivalents, investments, notes and mortgages
             receivable,  other  receivables,   accounts  payables  and  accrued
             expenses.  Fair values were assumed to approximate  carrying values
             for those financial instruments,  which are short-term in nature or
             are receivable or payable on demand.

             The fair  value of  long-term  debt is  estimated  based on current
             rates offered to the Company for debt of comparable  maturities and
             similar collateral requirements.

         Derivative Financial Instruments and Hedging Activities

             The Company holds a derivative financial instrument for the purpose
             of  hedging  the  risk  of  certain  identifiable  and  anticipated
             transactions.  In general, the type of risk hedged is that relating
             to the  variability  of future  earnings  and cash flows  caused by
             movements  in  interest  rates.  In hedging  the  transaction,  the
             Company,  in the normal course of business,  holds an interest rate
             swap,  which  hedges the fair value of variable  rate debt and cash
             flows of variable-rate financial assets.

             Derivatives  are held only for the  purpose of hedging  such risks,
             not for  speculation.  Generally,  the  Company  entered  into  the
             hedging  relationship  such that changes in the fair values or cash
             flows of items and  transactions  being  hedged are  expected to be
             offset by corresponding changes in the value of the derivative.  At
             September 30, 2006, a hedging relationship existed for the mortgage
             obligation  described  in Note 9.  Subsequent  to the end of fiscal
             year 2006,  the Company  re-financed  this mortgage  obligation and
             terminated this hedging relationship. See Note 17.

                                      F-9
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Income Taxes

             The  Company  accounts  for its income  taxes  using SFAS No.  109,
             "Accounting  for Income Taxes",  which requires the  recognition of
             deferred  tax  liabilities  and  assets  for  expected  future  tax
             consequences of events that have been included in the  consolidated
             financial  statements or tax returns.  Under this method,  deferred
             tax liabilities  and assets are determined  based on the difference
             between  the  financial  statement  and tax  bases  of  assets  and
             liabilities using enacted tax rates in effect for the year in which
             the differences are expected to reverse.

         Comprehensive Income

             The Company  reports  comprehensive  income in accordance  with the
             Statement of  Financial  Accounting  Standard  No. 130,  "Reporting
             Comprehensive  Income"  ("SFAS 130").  This  statement  establishes
             standards for the reporting and display of comprehensive income and
             its  components  in  a  full  set  of   general-purpose   financial
             statements.  Comprehensive  income generally represents all changes
             in stockholders' equity during the year except those resulting from
             investments by, or distributions to, stockholders.

         Stock-Based Compensation

             On January 1,  2006,  the  Company  adopted  SFAS No. 123  (revised
             2004),  "Share-Based  Payment,"  (SFAS  No.  123R) to  account  for
             stock-based  employee  compensation.  Among other items,  SFAS 123R
             eliminates the use of Accounting  Principles  Board Opinion ("APB")
             No.  25,  "Accounting  for  Stock  Issued  to  Employees,"  and the
             intrinsic  value method of  accounting  and  requires  companies to
             recognize  the cost of employee  services  received in exchange for
             stock-based  awards  based on the grant  date  fair  value of those
             awards in their  financial  statements.  The Company elected to use
             the  modified  prospective  method  for  adoption,  which  requires
             compensation  expense to be recorded for all unvested stock options
             beginning in the first quarter of adoption.  For stock-based awards
             granted or  modified  subsequent  to January 1, 2006,  compensation
             expense,  based on the fair  value  on the date of  grant,  will be
             recognized  in  the  consolidated  financial  statements  over  the
             vesting  period.  This  application  requires the Company to record
             compensation  expense  for all  awards  granted  to  employees  and
             directors  after the adoption date and for the unvested  portion of
             awards that are  outstanding  at the date of adoption.  The Company
             had no unvested  stock options as of January 1, 2006 and granted no
             stock options in the nine months ended September 30, 2006, so there
             is no  impact  of  SFAS  No.  123R  on the  Company's  consolidated
             financial  statements  for the year ended  September  30, 2006.  In
             accordance  with the modified  prospective  method,  the  Company's
             consolidated  financial  statements for prior periods have not been
             restated to reflect and do not include the impact of SFAS No. 123R.

             Had compensation  cost for the options been determined based on the
             fair value at the grant  date  during  fiscal  years 2005 and 2004,
             consistent  with SFAS 123, the Company's net income would have been
             as follows:

                                      F-10
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Stock-Based Compensation (Continued)
                                                            2005         2004
                                                            ----         ----

             Net income, as reported                     $1,107,000    $440,000
             Deduct:  Total stock-based employee
                compensation expense determined
                under fair value based method for
                all awards, net of related tax effects      (88,000)    (25,000)
                                                         ----------    --------

             Pro forma net income                        $1,019,000    $415,000
                                                         ==========    ========


             Earnings Per Share:
                Basic:
                   As reported                           $     0.58    $   0.23
                   Pro forma                             $     0.54    $   0.22
                Diluted:
                   As reported                           $     0.58    $   0.23
                   Pro forma                             $     0.53    $   0.21

             The  Company  used  the  Black-Scholes   option-pricing   model  to
             determine  the fair value of grants made in 2004.  For  purposes of
             disclosure,  the  estimated  fair value of the  options  were being
             amortized to expense over the options  vesting  period of one year.
             The following assumptions were applied in determining the pro forma
             compensation cost:

                                                                      2004
                                                                      ----
              Risk Free Interest Rate                                 3.1%
              Expected Dividend Yield                                 5.0%
              Expected Option Life                                  5 years
              Expected Stock Price Volatility                          24%

         Long-Lived Assets

             The Company continually  evaluates whether events and circumstances
             have  occurred that may warrant  revision of the estimated  life of
             its intangible and other long-lived assets or whether the remaining
             balance of its  intangible  and other  long-lived  assets should be
             evaluated for possible impairment. If and when such factors, events
             or  circumstances  indicate  that  intangible  or other  long-lived
             assets  should be evaluated  for possible  impairment,  the Company
             will determine the fair value of the asset by making an estimate of
             expected  future  cash  flows  over  the  remaining  lives  of  the
             respective  assets and  compare  that fair value with the  carrying
             value  of  the  assets  in  measuring  their   recoverability.   In
             determining  the  expected  future cash  flows,  the assets will be
             grouped at the lowest level for which there are cash flows,  at the
             individual store level.

         Reclassifications

             Certain amounts in the prior year consolidated financial statements
             have been  reclassified to conform to the  presentation of the 2006
             consolidated financial statements.

                                      F-11
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Accounting Pronouncements

             In September  2006,  the SEC issued Staff  Accounting  Bulletin No.
             108,  "Considering  the  Effects of Prior Year  Misstatements  when
             Quantifying  Misstatements  in Current Year  Financial  Statements"
             (SAB 108). SAB 108 requires  companies to evaluate the  materiality
             of identified  unadjusted  errors on each  financial  statement and
             related  disclosures  using both the  rollover and the iron curtain
             approach. SAB 108 applies to annual financial statements for fiscal
             years ending after  November 15, 2006.  The Company does not expect
             the adoption of SAB 108 to have a material  impact on its financial
             condition or results of operation.

             In  September   2006,   the  FASB  issued  SFAS  157,  "Fair  Value
             Measurements"  which  provides  guidance  for using  fair  value to
             measure assets and liabilities. The standard applies whenever other
             standards  require (or permit) assets or liabilities to be measured
             at fair  value but does not expand the use of fair value in any new
             circumstances.  The standard  clarifies that for items that are not
             actively traded,  such as certain kinds of derivatives,  fair value
             should   reflect  the  price  in  a   transaction   with  a  market
             participant,  including  an  adjustment  for  risk,  not  just  the
             company's  mark-to-model  value.  SFAS 157 also  requires  expanded
             disclosure  of the  effect on  earnings  for items  measured  using
             unobservable  data.  The  provisions  of SFAS 157 are effective for
             financial  statements  issued  for  fiscal  years  beginning  after
             November 15, 2007 and interim  periods  within those fiscal  years.
             The  Company  does  not  expect  the  adoption  of SFAS  157 at the
             beginning of 2008 to have a material impact

             In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)
             issued  Interpretation No. 48, Accounting for Uncertainty in Income
             Taxes,   an   interpretation   of  SFAS  Statement  No.  109.  This
             Interpretation  clarifies the accounting for  uncertainty in income
             taxes  recognized  in  an  enterprise's   financial  statements  in
             accordance  with SFAS  Statement  No.  109,  Accounting  for Income
             Taxes. This Interpretation  prescribes a recognition  threshold and
             measurement  attribute for the financial statement  recognition and
             measurement  of a tax  position  taken or expected to be taken in a
             tax  return.   This   Interpretation   also  provides  guidance  on
             de-recognition,  classification, interest and penalties, accounting
             in interim periods, disclosure, and transition. This Interpretation
             is effective for fiscal years  beginning  after  December 15, 2006.
             The Company does not expect the adoption of  Interpretation  No. 48
             to have a material impact.

             On  April  13,   2006,   the  FASB  issued  FSP  No.  FIN  46(R)-6,
             "Determining  the  Variability  to Be  Considered  in Applying FASB
             Interpretation  No. 46(R)," which requires the use of a "by design"
             approach  for  determining  whether an interest  is  variable  when
             applying FASB  Interpretation  No. 46,  "Consolidation  of Variable
             Interest  Entities." This approach includes  evaluating  whether an
             interest  is  variable  based on a  thorough  understanding  of the
             design of the potential variable interest entity ("VIE"), including
             the  nature of the risks that the  potential  VIE was  designed  to
             create  and pass  along to  interest  holders  in the  entity.  The
             guidance in this FSP is effective for reporting  periods  beginning
             after June 15, 2006. The Company adopted the guidance  presented in
             this FSP in the fourth quarter of 2006 on a prospective  basis. The
             implementation  did not have an effect on the results of operations
             or financial position.

                                      F-12
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Accounting Pronouncements (Continued)

             On  February  3,  2006,  the  FASB  issued  FSP  No.  FAS  123(R)-4
             "Classification  of  Options  and  Similar  Instruments  Issued  as
             Employee  Compensation  That  Allow  for Cash  Settlement  upon the
             Occurrence of a Contingent Event." This FSP amends SFAS No. 123(R),
             addressing cash settlement features that can be exercised only upon
             the occurrence of a contingent event that is outside the employee's
             control.  These  instruments are not required to be classified as a
             liability until it becomes  probable that the event will occur. The
             Company  adopted  this  FSP in the  second  quarter  of  2006.  The
             implementation  did not have an effect on the results of operations
             or financial position.

             In November 2005, the FASB issued final FASB Staff Position ("FSP")
             FAS No. 123R-3,  "Transition Election Related to Accounting for the
             Tax Effects of  Share-Based  Payment  Awards."  The FSP provides an
             alternative  method of  calculating  excess tax  benefits  from the
             method  defined  in SFAS  No.  123R  for  share-based  payments.  A
             one-time  election  to adopt the  transition  method in this FSP is
             available to those entities adopting SFAS No. 123R using either the
             modified  retrospective or modified  prospective  method. Up to one
             year from the initial  adoption of SFAS No. 123R or effective  date
             of the FSP is provided  to make this  one-time  election.  However,
             until an entity makes its election,  it must follow the guidance in
             SFAS No. 123R. The FSP is effective  upon initial  adoption of SFAS
             No. 123R and became effective for the Company in the second quarter
             of 2006. The Company is currently  evaluating the allowable methods
             for  calculating  excess tax benefits  and have not yet  determined
             whether it will make a one-time  election  to adopt the  transition
             method  described  in this  FSP,  nor the  expected  impact  on its
             position or results of operation.

             In May 2005, the FASB issued SFAS No. 154,  "Accounting for Changes
             and Error Corrections, a Replacement of APB Opinion No. 20 and FASB
             Statement  No. 3".  SFAS 154  applies to all  voluntary  changes in
             accounting  principle  and requires  retrospective  application  to
             prior  periods'  financial  statements  of  changes  in  accounting
             principle.   This   statement   also  requires  that  a  change  in
             depreciation,  amortization,  or depletion  method for  long-lived,
             non-financial  assets be  accounted  for as a change in  accounting
             estimate  effected by a change in  accounting  principle.  SFAS 154
             carries  forward  without change the guidance  contained in Opinion
             No.  20 for  reporting  the  correction  of an error in  previously
             issued  financial  statements and a change in accounting  estimate.
             This statement is effective for accounting  changes and corrections
             of errors made in fiscal years  beginning  after December 15, 2005.
             The Company does not expect the adoption of this standard to have a
             material impact on its financial condition,  results of operations,
             or liquidity.

                                      F-13
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Accounting Pronouncements (Continued)

             In March 2005, the Financial Accounting Standards Board issued FASB
             Interpretation No. 47, "Accounting for Conditional Asset Retirement
             Obligations,  an  Interpretation  of FASB  Statement No. 143." This
             Interpretation clarifies that the term conditional asset retirement
             obligation  refers  to a  legal  obligation  to  perform  an  asset
             retirement  activity  in  which  the  timing  and  (or)  method  of
             settlement are conditional on a future event that may or may not be
             within  the  control  of the  entity.  Accordingly,  an  entity  is
             required  to  recognize  a  liability  for  the  fair  value  of  a
             conditional  asset  retirement  obligation if the fair value can be
             reasonably  estimated.  This  Interpretation  is effective no later
             than the end of fiscal years ending  after  December 15, 2005.  The
             adoption  of this  standard  did not have a material  impact on the
             financial  condition,  results of  operations,  or liquidity of the
             Company.

             In December  2004,  the FASB issued  SFAS No. 123  (revised  2004),
             "Share-Based  Payment."  SFAS No.  123(R) is a revision of SFAS No.
             123, "Accounting for Stock-Based  Compensation," and supersedes APB
             Opinion  No.  25,  "Accounting  for  Stock  Issued  to  Employees."
             Statement No. 123(R) will require the fair value of all stock based
             awards  issued to  employees  to be recorded as an expense over the
             related vesting period. The statement also requires the recognition
             of  compensation  expense for the fair value of any unvested  stock
             based awards  outstanding  at the date of adoption.  This statement
             became effective January 1, 2006. The adoption of this standard did
             not have a material impact on the financial condition or results of
             operations of the Company.

NOTE 2.  ACQUISITION

         On July 26, 2006, the Company acquired Josar  Investments,  LLC (Josar)
         for $3,876,000 of total consideration. The assets acquired, liabilities
         assumed  and the  results  of  operations  have  been  included  in the
         Company's  consolidated  financial  statements  as of  that  date.  The
         acquisition  of Josar  included  the purchase by the Company of 100% of
         the  membership  interests  of  Josar,  which  became  a  wholly  owned
         subsidiary of the Company.  The Company purchased Josar for the purpose
         of  acquiring  the land and  building  owned by Josar and leased by the
         Company  for  a  combination   restaurant   and  package  liquor  store
         operation. The purchase price was fully attributed to the fair value of
         the land and building.

         Contemporaneous  to  closing  on the  purchase  of Josar,  the  Company
         entered into a mortgage  loan on the property  acquired  together  with
         property owned by the Company adjacent thereto for $3,280,000. Proceeds
         from the  mortgage  loan were used to satisfy a portion of the purchase
         price, to retire the previous  mortgage loan on the Company's  adjacent
         property  for  $266,000  and to pay certain  fees  associated  with the
         transaction.

                                      F-14
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 3.  INVESTMENTS

         Cost and fair value of investments available for sale are as follows:

                                                                     2005
                                                                     ----
         Cost - equity instruments                                 $303,000
         Gross unrealized gains                                      50,000
                                                                   --------
         Total                                                     $353,000
                                                                   ========

         All  funds  held  at  October  1,  2005  were  invested  in  marketable
         securities of one entity.  This  investment  was sold during the fiscal
         year  ended  September  30,  2006,  resulting  in a  gain  on  sale  of
         approximately $78,000.

NOTE 4.  NOTES AND MORTGAGES RECEIVABLE

         Receivables  consist of the following at September 30, 2006 and October
         1, 2005:
<TABLE>
<CAPTION>
                                                                                       2006       2005
                                                                                       ----       ----
<S>                                                                                   <C>       <C>
         Notes and mortgages receivable from unrelated parties, bearing interest
         at rates ranging from 10.5% to 15% and due in varying
         installments through 2013                                                   $ 45,000  $ 51,000

         Mortgage  receivable  from  related  party,  bearing  interest  at 14%
         and due in installments through 2011                                          70,000    81,000
                                                                                     --------  --------

                                                                                      115,000   132,000
         Current portion                                                               12,000    16,000
                                                                                     --------  --------
                                                                                     $103,000  $116,000
                                                                                     ========  ========
</TABLE>

         The majority of the notes and mortgages  receivable  represent  amounts
         owed to the  Company  for store  operations  which were sold.  Unless a
         significant  amount of cash is received on the sale, a pro rata portion
         of the gain is deferred  and  recognized  only as payments on the notes
         and  mortgages  are  received  by the  Company.  Any losses on sales of
         stores are recognized currently.  Approximately $8,000 of deferred gain
         was recognized on collections of such notes  receivable  during each of
         the fiscal  years  ended  September  30,  2006 and  October 1, 2005 and
         $6,000 was recognized during the fiscal year ended October 2, 2004.

         Future  scheduled  payments on the  receivables  at September  30, 2006
         consist of the following:

          2007                                               $12,000
          2008                                                14,000
          2009                                                16,000
          2010                                                19,000
          2011                                                 9,000
          Thereafter                                          45,000
                                                            --------
                                                            $115,000
                                                            ========

                                      F-15
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 5.  PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                              2006          2005
                                                              ----          ----
<S>                                                        <C>           <C>
         Furniture and equipment                          $ 8,057,000   $ 7,367,000
         Leasehold interests and improvements              15,716,000    13,309,000
         Land and land improvements                         4,203,000     1,024,000
         Building and improvements                          2,121,000     1,168,000
         Vehicles                                             665,000       585,000
         Construction in progress                                  --       260,000
                                                          -----------   -----------
                                                           30,762,000    23,713,000
         Less accumulated depreciation and amortization    11,823,000    10,586,000
                                                          -----------   -----------
                                                          $18,939,000   $13,127,000
                                                          ===========   ===========
</TABLE>

NOTE 6.  INVESTMENTS IN LIMITED PARTNERSHIPS

         The  Company  has  determined  that  all  but one  limited  partnership
         discussed  below  should  be  consolidated  by  virtue  of  control  as
         evidenced by general  partnership  interests held by the Company.  As a
         result, the accompanying  consolidated financial statements reflect the
         limited  partnerships  in which the Company  has a general  partnership
         interest on a consolidated  basis. The remaining limited partnership in
         which  the  Company  does  not have  control  has  been  accounted  for
         utilizing the equity method.

         Beginning  with the limited  partnership  which owns the  restaurant in
         Surfside,  Florida and for all limited  partnerships  formed subsequent
         thereto for the purpose of owning and operating a restaurant  under the
         "Flanigan's  Seafood Bar and Grill"  servicemark,  a standard financial
         arrangement has been used in each limited partnership agreement.  Under
         this financial arrangement,  until the limited partnership has received
         an  aggregate  sum  equal  to the  initial  investment  of all  limited
         partners from the net profit from the operation of the restaurant,  the
         limited  partnership  receives  an  aggregate  sum  equal to 25% of the
         initial  investment of all limited  partners first each year,  with any
         additional net profit divided equally  between the Company,  as manager
         of the  restaurant,  and the  limited  partnership.  Once  the  limited
         partnership  has  received  an  aggregate  sum  equal  to  the  initial
         investment  of all  limited  partners  from  the net  profit  from  the
         operation of the restaurant,  the net profit is divided equally between
         the Company, as manager of the restaurant, and the limited partnership.
         As of  September  30,  2006,  the  limited  partnerships  which own the
         restaurants  in Kendall,  Florida,  West Miami,  Florida and  Surfside,
         Florida  have each  received  an  aggregate  sum  equal to the  initial
         investment  of their  respective  limited  partners from the net profit
         from the  operation  of their  respective  restaurants  and the Company
         receives   one-half  (1/2)  of  the  net  profit  as  manager  of  each
         restaurant.  The Company plans to continue forming limited partnerships
         to raise funds to own and  operate  restaurants  under the  "Flanigan's
         Seafood   Bar  and  Grill"   servicemark   using  the  same   financial
         arrangement.

                                      F-16
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.  INVESTMENTS IN LIMITED PARTNERSHIPS   (Continued)

             Each  limited  partnership  agreement,  excluding  only the limited
             partnership   agreement  for  the  franchised  restaurant  in  Fort
             Lauderdale,  Florida  which is governed  by a franchise  agreement,
             gives the  limited  partnership  the  right to use the  "Flanigan's
             Seafood  Bar and  Grill"  servicemark  for a fee equal to 3% of the
             gross sales from the operation of the restaurant, while the Company
             acts as general  partner  only.  This 3% fee is "earned" when sales
             are  made  by the  limited  partnerships  and is  paid  weekly,  in
             arrears.  The Company  manages the books and records of all limited
             partnerships,  including collecting funds generated by the same. As
             a  result,  the 3% fee is paid to the  Company  by book  entry on a
             weekly basis and is never delinquent.

         Pinecrest, Florida

             During  the  fourth  quarter  of  fiscal  year  2006,  the  limited
             partnership  completed  the  structural  repairs  and its  interior
             build-out of the business  premises in  Pinecrest,  Florida for the
             operation of a  restaurant  under the  "Flanigan's  Seafood Bar and
             Grill"  servicemark.  During the third quarter of fiscal year 2006,
             the limited partnership completed its private offering, raising the
             sum  of  $3,300,000  to  reimburse  the  Company  for  advances  of
             $1,506,000  made  to  the  limited  partnership  in  excess  of its
             investment in the same, to complete the renovations to the business
             premises and to provide working capital.  The Company  continues to
             act as  general  partner  and is also the  owner  of a thirty  nine
             percent limited partnership interest, as are other related parties,
             including, but not limited to officers and directors of the Company
             and their families.  This restaurant  opened for business on August
             14, 2006. This entity is consolidated in the accompanying financial
             statements.

         Surfside, Florida

             The  Company  has an  investment  in a limited  partnership,  which
             purchased  the assets of a  restaurant  in  Surfside,  Florida  and
             renovated it for operation  under the  "Flanigan's  Seafood Bar and
             Grill"  servicemark.  The  Company  acts as general  partner of the
             limited  partnership  and  is  also  a  forty-two  percent  limited
             partner.  Other  related  parties,  including,  but not limited to,
             officers and  directors of the Company and their  families are also
             investors.  As of the  second  quarter  of fiscal  year  2006,  the
             limited  partners  had  received  distributions  from  the  limited
             partnership equal to their original  investment and pursuant to the
             limited  partnership  agreement,  the Company  thereafter  receives
             fifty  percent  of  the  net  profit  from  the  operation  of  the
             restaurant as a management  fee. This entity is consolidated in the
             accompanying financial statements.

         Kendall, Florida

             The Company  owns an  investment  in a limited  partnership,  which
             constructed  and now  operates a restaurant  under the  "Flanigan's
             Seafood Bar and Grill" servicemark in Kendall, Florida. The Company
             is the general partner and has a forty percent limited  partnership
             interest.  As of April 1, 2003,  the limited  partners had received
             distributions from the limited  partnership equal to their original
             investment and pursuant to the limited partnership  agreement,  the
             Company  thereafter  receives  fifty percent of the net profit from
             the operation of the restaurant as a management fee. This entity is
             consolidated in the accompanying financial statements.

                                      F-17
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.  INVESTMENTS IN LIMITED PARTNERSHIPS   (Continued)

         West Miami, Florida

             The Company  owns an  investment  in a limited  partnership,  which
             purchased,  renovated  and now  operates  a  restaurant  under  the
             "Flanigan's  Seafood  Bar and  Grill"  servicemark  in West  Miami,
             Florida.  The Company is the general  partner and has a twenty-five
             percent  limited  partnership  interest.   Other  related  parties,
             including,  but not  limited  to,  officers  and  directors  of the
             Company and their families are also  investors.  As of December 31,
             2005,  the limited  partners  had received  distributions  from the
             limited partnership equal to their original investment and pursuant
             to  the  limited  partnership  agreement,  the  Company  thereafter
             receives  fifty percent of the net profit from the operation of the
             restaurant as a management  fee. This entity is consolidated in the
             accompanying financial statements.

         Weston, Florida

             The Company  owns an  investment  in a limited  partnership,  which
             acquired,  renovated  and  now  operates  a  restaurant  under  the
             "Flanigan's Seafood Bar and Grill" servicemark in Weston,  Florida.
             The Company is the general  partner and has a twenty-eight  percent
             limited partnership interest. Other related parties, including, but
             not limited to,  officers  and  directors  of the Company and their
             families are also  investors.  This entity is  consolidated  in the
             accompanying financial statements.

         Stuart, Florida

             The Company  owns an  investment  in a limited  partnership,  which
             acquired,  renovated  and  now  operates  a  restaurant  under  the
             "Flanigan's Seafood Bar and Grill" servicemark in Stuart,  Florida.
             The Company is the general partner and has a twelve percent limited
             partnership  interest.  Other related parties,  including,  but not
             limited  to,  officers  and  directors  of the  Company  and  their
             families are also  investors.  This entity is  consolidated  in the
             accompanying financial statements.

         Wellington, Florida

             The Company  owns an  investment  in a limited  partnership,  which
             acquired,  renovated  and  now  operates  a  restaurant  under  the
             "Flanigan's  Seafood  Bar and  Grill"  servicemark  in  Wellington,
             Florida.  The Company is the  general  partner and has a twenty six
             percent  limited  partnership  interest.   Other  related  parties,
             including,  but not  limited  to,  officers  and  directors  of the
             Company and their  families  are also  investors.  This  restaurant
             opened for business on May 27, 2005. This entity is consolidated in
             the accompanying financial statements.

                                      F-18
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.  INVESTMENTS IN LIMITED PARTNERSHIPS   (Continued)

         Davie, Florida

             During the first quarter of fiscal year 2006, the Company, as agent
             for a Florida  limited  partnership  to be formed,  entered  into a
             contract to purchase an existing restaurant in Davie, Florida for a
             purchase  price of $650,000 to  renovate  and operate a  restaurant
             under  the   "Flanigan's   Seafood  Bar  and  Grill"   servicemark.
             Subsequent  to the end of fiscal year 2006,  a limited  partnership
             was  formed  with the  Company as general  partner,  which  limited
             partnership  expects  to enter  into a new lease  for the  business
             premises  and  close on the  purchase  at the  start of the  second
             quarter of fiscal year 2007. The initial  estimate for  renovations
             and pre-opening expenses is $1,700,000. The funds necessary will be
             raised through a private offering by the limited  partnership.  The
             Company will act as general partner and own up to thirty percent of
             the limited  partnership.  The  restaurant  is expected to open for
             business during the fourth quarter of fiscal year 2007.

         Pembroke Pines, Florida

             During the third quarter of fiscal year 2006, the Company, as agent
             for a Florida  limited  partnership  to be formed,  entered  into a
             contract  to purchase an  existing  restaurant  in Pembroke  Pines,
             Florida for a purchase  price of $500,000 to renovate and operate a
             restaurant   under  the   "Flanigan's   Seafood   Bar  and   Grill"
             servicemark.  Subsequent  to the end of fiscal year 2006, a limited
             partnership was formed with the Company as general  partner,  which
             limited  partnership  entered  into a new  lease  for the  business
             premises and closed on the purchase. The purchase price was reduced
             to   approximately   $305,000  due  to  the  fact  that  site  plan
             restrictions  in the plat where the  business  premises  is located
             would not permit  outdoor  seating and the liquor  license owned by
             the seller was a restaurant  liquor license,  with no market value,
             rather  than a  quota  liquor  license,  with  a  market  value  of
             $145,000,  as contracted.  The initial estimate for renovations and
             pre-opening  expenses is  $1,600,000.  The funds  necessary will be
             raised through a private offering by the limited  partnership.  The
             Company  will act as  general  partner  and  will own up to  thirty
             percent of the limited  partnership.  The restaurant is expected to
             open for business during the third quarter of fiscal year 2007.

         Fort Lauderdale, Florida

             The Company has a franchise  agreement  with a limited  partnership
             which  owns a  restaurant  in Fort  Lauderdale.  The  Company  is a
             twenty-five percent limited partner in the franchise. Other related
             parties,  including,  but not limited to, officers and directors of
             the Company and their families are also  investors.  This entity is
             reported using the equity method in the  accompanying  consolidated
             financial statements.

                                      F-19
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 6.   INVESTMENTS IN LIMITED PARTNERSHIPS   (Continued)

             The  following  is  a  summary  of  condensed  unaudited  financial
             information   pertaining  to  the  Company's  limited   partnership
             investment in Fort Lauderdale, Florida:

                                            2006         2005          2004
                                            ----         ----          ----
             Financial Position:
               Current assets            $   68,000   $   47,000   $  109,000
               Non-current assets           588,000      544,000      483,000
               Current liabilities           88,000      134,000      118,000
               Non-current liabilities       71,000       81,000       91,000

             Operating Results:
               Revenues                   2,171,000    2,111,000    2,244,000
               Gross profit               1,426,000    1,378,000    1,438,000
               Net income                   122,000       72,000       25,000

NOTE 7.  LIQUOR LICENSES

         The Company  stopped  amortizing  liquor  licenses  September 29, 2002.
         Liquor  licenses are tested for  impairment in September of each fiscal
         year. The fair value of liquor licenses at September 30, 2006, exceeded
         the carrying amount; therefore, no impairment loss was recognized.  The
         fair  value of the liquor  licenses  was  evaluated  by  comparing  the
         carrying  value to recent  sales for  similar  liquor  licenses  in the
         County  issued.  At September  30, 2006 and October 1, 2005,  the total
         carrying amount of liquor licenses was  approximately  $347,000.  There
         were no liquor  licenses  acquired  in fiscal  year 2006 which  require
         capitalization.

NOTE 8.  INCOME TAXES

         The  components of the Company's  provision for income taxes for fiscal
         years 2006, 2005 and 2004 are as follows:

                             2006         2005         2004
                             ----         ----         ----
             Current:
                Federal   $ 703,000    $ 407,000    $ 252,000
                State       167,000      118,000       80,000
                          ---------    ---------    ---------
                            870,000      525,000      332,000
                          ---------    ---------    ---------
             Deferred:
                Federal     (94,000)      21,000     (146,000)
                State       (26,000)      (3,000)     (16,000)
                          ---------    ---------    ---------
                           (120,000)      18,000     (162,000)
                          ---------    ---------    ---------
                          $ 750,000    $ 543,000    $ 170,000
                          =========    =========    =========

                                      F-20
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 8.  INCOME TAXES (Continued)

         A reconciliation  of income tax computed at the statutory  federal rate
         to income tax expense is as follows:
<TABLE>
<CAPTION>
                                                                2006         2005         2004
                                                                ----         ----         ----
<S>                                                          <C>          <C>          <C>
             Tax provision at the statutory rate of 34%      $ 795,000    $ 561,000    $ 207,000
             State income taxes, net of federal income tax      93,000       76,000       40,000
             Tax benefit of tip credit generated              (127,000)    (118,000)    (125,000)
             Tax benefit of employee retention credit          (14,000)          --           --
             Other                                               3,000       24,000       48,000
                                                             ---------    ---------    ---------
                                                             $ 750,000    $ 543,000    $ 170,000
                                                             =========    =========    =========
</TABLE>

         At October 1, 2005,  the  Company  had  alternative  minimum tax credit
         carryforwards  available of approximately  $61,000, which were utilized
         in the fiscal year ending September 30, 2006.

         The Company  has  deferred  tax assets  which  arise  primarily  due to
         depreciation  recorded  at  different  rates for tax and book  purposes
         offset by cost  basis  differences  in  depreciable  assets  due to the
         deferral of the recognition of insurance  recoveries on casualty losses
         for tax purposes,  investments  in limited  partnerships,  accruals for
         potential  uninsured  claims and bonuses  accrued for book purposes but
         not  paid  within  two  and a half  months  for tax  purposes,  and the
         capitalization   of  certain  inventory  costs  for  tax  purposes  not
         recognized for financial reporting purposes.

         The  components of the deferred tax assets were as follows at September
         30, 2006 and October 1, 2005:

<TABLE>
<CAPTION>
                                                                   2006       2005
                                                                   ----       ----
<S>                                                                 <C>       <C>
             Current:
                Reversal of aged payables                        $ 27,000   $     --
                Capitalized inventory costs                        22,000         --
                Accrued bonuses                                   132,000         --
                Accruals for potential uninsured claims             6,000     29,000
                                                                 --------   --------
                                                                 $187,000   $ 29,000
                                                                 ========   ========
             Long-Term:
                Book/tax differences in property and equipment   $233,000   $351,000
                Alternative minimum tax credit                         --     61,000
                Limited partnership investments                   164,000     23,000
                                                                 --------   --------
                                                                 $397,000   $435,000
                                                                 ========   ========
</TABLE>

                                      F-21
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)
<TABLE>
<CAPTION>

NOTE 9.  DEBT

         Long-Term Debt
                                                                                           2006            2005
                                                                                           ----            ----
<S>                                                                                      <C>             <C>
             Mortgage payable to bank;  secured by first mortgage on a building;
             payable $2,248 per month, plus interest through maturity in August,
             2008, at which time the unpaid principal of approximately  $736,000
             plus unpaid  interest  becomes due. The Company has entered into an
             interest rate swap agreement for a notional amount of approximately
             $895,000.  The  interest  rate swap  agreement  hedges the variable
             interest rate of the mortgage payable to a fixed rate of 8.62%.             $788,000        $813,000

             Note  payable to bank by limited  partnership,  unsecured,  bearing
             interest at 6.5%, payable in monthly installments of principal and
             interest of approximately $4,600, maturing in March 2008.                     79,000         127,000

             Mortgage payable,  secured by land, bearing interest at 8%; payable
             in monthly  installments of principal and interest of approximately
             $3,000, which mortgage was paid off during the fourth quarter of
             fiscal 2006.                                                                       -         275,000

             Mortgage payable, secured by land and building, bearing interest at
             7.5%; payable in monthly installments of principal and interest of
             $26,645, maturing in August 2013.                                          3,274,000               -

             Notes  payable to bank,  secured by vehicles,  bearing  interest at
             0.9% payable in monthly installments of principal and interest of
             approximately $1,800 per month, maturing in October 2007.                     24,000          46,000

             Note  payable  to finance  company,  secured  by  vehicle,  bearing
             interest at 9.25%, payable in monthly installments of principal and
             interest of approximately  $4,500 through maturity in July 2010, at
             which time the unpaid principal of $45,000 becomes due.                      196,000         227,000

             Note  payable  to finance  company,  secured  by  vehicle,  bearing
             interest at 9.04%, payable in monthly installments of principal and
             interest of approximately $1,300 through maturity in February 2011.           58,000             ---
</TABLE>

                                      F-22
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)
<TABLE>
<CAPTION>

NOTE 9.  DEBT (Continued)

         Long-Term Debt (Continued)
                                                                                           2006           2005
                                                                                           ----           ----
<S>                                                                                       <C>             <C>
             Note payable to bank, unsecured,  bearing interest at prime payable
             in monthly  installments of principal and interest of approximately
             $3,100, which was paid off during the second quarter of fiscal year
             2006 with funds drawn on the Company's line of credit.
                                                                                               --          69,000
                                                                                       ----------      ----------
                                                                                        4,419,000       1,557,000
             Less current portion                                                         223,000         174,000
                                                                                       ----------      ----------
                                                                                       $4,196,000      $1,383,000
                                                                                       ==========      ==========

             Long-term debt at September 30, 2006 matures as follows:

              2007                                                                       $223,000
              2008                                                                        925,000
              2009                                                                        145,000
              2010                                                                        190,000
              2011                                                                        110,000
              Thereafter                                                                2,826,000
                                                                                       ----------
                                                                                       $4,419,000
                                                                                       ==========
</TABLE>

         Line of Credit

             As of the end of fiscal 2006, the Company has a $2,000,000  line of
             credit,  which has a variable interest rate at prime and is payable
             in  monthly  installments  of  interest  only  on  the  outstanding
             principal  balance,  with a two (2)  year  maturity  in the  second
             quarter of fiscal year 2008.  Subsequent to the end of fiscal 2006,
             the Company  increased its line of credit to $2,650,000,  under the
             same terms and conditions.  However, the Company granted its lender
             a second mortgage on its corporate offices as additional collateral
             for the  increase  in the line of credit in  addition to a security
             interest in substantially  all of the assets of the Company.  As of
             September 30, 2006,  the line of credit had a principal  balance of
             $762,000.  Subsequent  to the end of fiscal year 2006,  the Company
             drew  additional  funds on its  line of  credit,  in the  aggregate
             amount of  $1,200,000,  raising  the total  outstanding  balance to
             $1,962,000.

NOTE 10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

         Legal Matters

             The  Company  is a party  to  various  claims,  legal  actions  and
             complaints  arising in the ordinary course of its business.  In the
             opinion  of  management,  all such  matters  are  without  merit or
             involve such amounts that an unfavorable disposition would not have
             a material  adverse effect on the financial  position or results of
             operations of the Company.

                                      F-23
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

         Leases

             The Company leases a substantial  portion of the land and buildings
             used in its  operations  under leases with initial  terms  expiring
             between 2007 and 2049. Renewal options are available on many of the
             leases.  Most of the  leases  are  fixed  rent  agreements.  In two
             instances,  lease  rentals are subject to sales  overrides  ranging
             from 1.75% to 4% of annual  sales in excess of  between  $1,162,000
             and $1,200,000. Rent expense is recognized on a straight line basis
             over the term of the lease.  Certain  of the leases are  subject to
             fair  market  rental  appraisals  at the time of  renewal.  Certain
             properties are subleased through various expiration dates.

             During the fourth quarter of fiscal year 2001, the Company  entered
             into a ground lease for an out parcel in  Hollywood,  Florida.  The
             Company constructed a building on the out parcel, one-half (1/2) of
             which is used by the Company for the operation of a package  liquor
             store and the other  one-half (1/2) was subleased by the Company as
             retail space during the second quarter of fiscal 2004. Rent for the
             retail space  commenced  January 1, 2005, and income of $45,000 and
             $31,400 was derived  from this source  during  fiscal  years ending
             September 30, 2006 and October 1, 2005, respectively.

             Future minimum lease payments under non-cancelable operating leases
             are as follows:

              2007                                            $ 2,156,000
              2008                                              2,026,000
              2009                                              1,842,000
              2010                                              1,682,000
              2011                                              1,300,000
              Thereafter                                        6,604,000
                                                              -----------
                 Total                                        $15,610,000
                                                              ===========

             Total rent  expense  for all  operating  leases  was  approximately
             $2,355,000,  $2,158,000 and  $1,957,000 in fiscal years 2006,  2005
             and 2004, respectively, and is included in "Occupancy costs" in the
             accompanying  consolidated  statements  of income.  This total rent
             expense is comprised of the following:

                             2006         2005          2004
                             ----         ----          ----

             Minimum      $2,172,000   $2,158,000   $1,957,000
             Contingent      183,000      175,000      159,000
                          ----------   ----------   ----------
             Total        $2,355,000   $2,333,000   $2,116,000
                          ==========   ==========   ==========

             The Company  guarantees  various leases for franchisees.  Remaining
             rental  payments  required  under these leases total  approximately
             $1,570,000.

                                      F-24
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

         Purchase Commitments

             Effective  December 1, 2006,  the Company  entered  into a purchase
             agreement  with  its  rib  supplier.  The  terms  of the  agreement
             stipulate that the Company will purchase  approximately  $2,800,000
             of baby back ribs  during the 2007  calendar  year at a fixed cost.
             The  Company  contracts  for the  purchase  of baby back ribs on an
             annual  basis to fix the cost and  ensure  adequate  supply for the
             calendar  year.  The Company  purchases  all of its rib supply from
             this vendor, but management believes that several other alternative
             vendors are available, if necessary.

         Franchise Program

             At September  30,  2006,  the Company was the  franchisor  of seven
             units under franchise  agreements.  Of the seven franchised stores,
             four are owned and operated by related parties. Under the franchise
             agreements,  the  Company  agrees to provide  guidance,  advice and
             management assistance to the franchisees.  In addition, the Company
             acts as  fiscal  agent  for the  franchisees  whereby  the  Company
             collects all revenues and pays all expenses and distributions.  The
             Company also,  from time to time,  advances  funds on behalf of the
             franchisees  for the cost of  renovations.  The  resulting  amounts
             receivable  from and payable to these  franchisees are reflected in
             the accompanying consolidated balance sheet as either an asset or a
             liability.   The   Company   also  agrees  to  sponsor  and  manage
             cooperative  buying  groups on behalf  of the  franchisees  for the
             purchase  of  inventory.   The  franchise  agreements  provide  for
             royalties to the Company of  approximately  3% of gross sales.  The
             Company is not currently offering or accepting new franchises.

         Employment Agreement/Bonuses

             On December 31, 2004, the Company renewed the employment  agreement
             with its former Chief Executive  Officer,  Joseph G. Flanigan,  for
             calendar year 2005. The agreement provided, among other things, for
             a base annual salary not to exceed $150,000 and a performance bonus
             equal  to  20%  of  pre-tax  net  income  before  depreciation  and
             amortization in excess of $650,000, 10% of which is to be allocated
             to other members of management. The employment agreement terminated
             upon the death of Joseph G. Flanigan on January 28, 2005.

             Bonuses  for  fiscal  year  2004  under  the  employment  agreement
             amounted to approximately $224,000 (none in 2006 or 2005).

             As of September 30, 2006, the Company had no employment agreements.

             During  the  second  quarter  of  fiscal  year  2005,  the Board of
             Directors  approved an annual  performance  bonus,  with 14% of the
             pre-tax net income before  depreciation  and amortization in excess
             of  $650,000  paid to the Chief  Executive  Officer  and 6% paid to
             other members of management.  Bonuses for fiscal year 2006 and 2005
             amounted to approximately $523,000 and $448,000, respectively.

                                      F-25
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)

         Employment Agreement/Bonuses (Continued)

             During  the  second  quarter  of  fiscal  year  2005,  the Board of
             Directors also approved an annual performance bonus, with 5% of the
             pre-tax net income before  depreciation and  amortization  from the
             Company's  restaurants  and the Company's  share of the pre-tax net
             income before  depreciation and  amortization  from the restaurants
             owned  by the  limited  partnerships  paid to the  Chief  Operating
             Officer  and 5% paid to the Chief  Financial  Officer.  Bonuses for
             fiscal  year  2006 and 2005  amounted  to  $298,000  and  $216,000,
             respectively.

             During  the  second  quarter  of  fiscal  year  2005,  the Board of
             Directors  approved  an annual  performance  bonus,  with 3% of the
             pre-tax net income before  depreciation and  amortization  from the
             package  liquor  stores  paid  to the  Vice  President  of  Package
             Operations and 2% paid to the package store supervisor. Bonuses for
             fiscal  year  2006  and  2005  amounted  to  $52,000  and  $48,000,
             respectively.

         Management Agreements

             Atlanta, Georgia

                During fiscal years 2006, 2005 and 2004, the Company received an
                owner's  fee   pursuant  to  a  management   agreement   with  a
                non-related  company that  operates a club in Atlanta,  Georgia,
                which  club is owned by the  Company.  The  non-related  company
                entered into a new lease  agreement  for the business  premises,
                which new lease  commenced  May 1, 2006 for a period of ten (10)
                years,  with one (1) ten (10) year renewal  option.  The Company
                has no  liability  on the new lease,  but since the  non-related
                company  still  operates  under the  management  agreement,  the
                Company  continues  to receive an owner's  fee of  $150,000  per
                year, paid monthly, versus ten (10%) percent of gross sales from
                the club,  whichever is greater,  subject to adjustment annually
                as rental  increases  under the new lease take effect.  One-half
                (1/2) of the  rental  increases  will be  credited  against  the
                owner's fee,  each year,  provided the owner's fee is never less
                than $150,000 per year. The management  agreement provided for a
                security  deposit of $200,000,  but during  fiscal year 2005 and
                2006, $130,000 and $70,000, respectively of the security deposit
                was applied towards  outstanding  additional owner's fee due the
                Company.  As of September  30, 2006,  no balance  remains of the
                security  deposit.  In fiscal  years  2006,  2005 and 2004,  the
                owner's  fee  earned  was   $224,000,   $261,000  and  $265,000,
                respectively.

             Deerfield Beach, Florida

                During  the first  quarter  of fiscal  year  2006,  the  Company
                entered  into a  management  agreement  to operate  an  existing
                restaurant in Deerfield Beach, Florida under its current format,
                "The Whale's Rib",  and to be entitled to one-half  (1/2) of the
                net  profit  from the  operation  of the  same.  The term of the
                management  agreement is for ten (10) years,  with four (4) five
                (5) year  renewal  options.  The Company  paid  $500,000 for the
                management  rights to the  restaurant.  The Company  assumed the
                management of this  restaurant on January 9, 2006.  For the nine
                (9) months of fiscal year 2006,  the Company  recognized  income
                under the management agreement of $108,000.

                                      F-26
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 11. COMMON STOCK

         Treasury Stock

             Purchase of Common Shares

                During fiscal years 2006, 2005 and 2004, the Company purchased a
                total of  14,350,  42,720 and  30,400  shares of Company  common
                stock, respectively,  at a total cost of approximately $139,000,
                $353,000 and $201,000,  respectively, under a repurchase program
                authorized  by the  Board of  Directors.  Of the  shares  of the
                Company's  common stock purchased during fiscal year 2006, 7,500
                shares were purchased from the Chief Operating  Officer/Director
                of the Company,  at a total cost of  approximately  $77,000.  No
                shares of the  Company's  common stock  purchased  during fiscal
                years 2005 and 2004 were purchased from officers or directors of
                the Company.

             Sale of Common Shares

                During  fiscal  years 2006,  2005 and 2004,  the Company sold an
                aggregate of 24,120,  490 and 20,755 shares of its common stock,
                respectively,  pursuant to the  exercise of options,  to certain
                employee  and officers  for a total of  approximately  $116,000,
                $2,000 and $93,000, respectively.

         Stock Options

             There were no options granted during fiscal years 2006 and 2005.

             In May 2004, the Company  granted options to purchase 50,000 shares
             of Company  common stock to certain  employees.  The options vested
             one  year  from the  grant  date,  have a  five-year  life,  and an
             exercise  price of $6.35 per share,  the then  market  price of the
             common  stock.  At September 30, 2006,  options to purchase  45,000
             shares remain outstanding and exercisable.

             In October 2003,  the Company  granted  options to purchase  16,550
             shares of Company  common stock to certain  employees.  The options
             vested one year from the grant date,  have a five-year life, and an
             exercise  price of $6.14 per share,  the then  market  price of the
             common  stock.  At September 30, 2006,  options to purchase  12,900
             shares remain outstanding and exercisable.

             Effective  January  1,  2006,  the  Company  adopted  SFAS No.  123
             (revised 2004),  "Share-Based  Payment," (SFAS No. 123R) to account
             for stock-based employee  compensation.  The Company elected to use
             the  modified  prospective  method  for  adoption,  which  requires
             compensation  expense to be recorded for all unvested stock options
             beginning  in the first  quarter of  adoption.  The  Company had no
             unvested  stock  options as of January 1, 2006 and granted no stock
             options  in  the  nine  months  ended  September  30,  2006,  so no
             compensation cost has been recognized on the Company's consolidated
             financial statements for the year ended September 30, 2006.

                                      F-27
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 11. COMMON STOCK (Continued)

         Stock Options (Continued)

             Changes in outstanding incentive stock options for common stock are
             as follows:
<TABLE>
<CAPTION>
                                                     2006        2005         2004
                                                     ----        ----         ----
<S>                                                 <C>            <C>      <C>
                Outstanding at beginning of year    100,810     101,900     122,660
                Options granted                          --          --      66,550
                Options exercised                   (24,120)       (490)    (20,755)
                Options expired                      (8,840)       (600)    (66,555)
                                                   --------    --------    --------
                Outstanding at end of year           67,850     100,810     101,900
                                                   --------    --------    --------
                Exercisable at end of year           67,850     100,810      51,900
                                                   ========    ========    ========
</TABLE>

             The  weighted-average  grant-date  fair value of the 66,550 options
             granted during the year ended October 2, 2004 was $419,000 (none in
             2005 or 2006).

             The intrinsic value as of the exercise date of the 24,120,  490 and
             20,755 stock options exercised during the years ended September 30,
             2006, October 1, 2005 and October 2, 2004 were $124,000, $2,000 and
             $42,000 , respectively.

             Weighted average option exercise price information for fiscal years
             2006, 2005 and 2004 is as follows:

                                                    2006      2005       2004
                                                    ----      ----       ----

                Outstanding at beginning of year   $  5.75   $  5.77   $  4.61
                                                   =======   =======   =======
                Granted during the year            $    --   $    --   $  6.30
                                                   =======   =======   =======
                Exercised during the year          $  4.83   $  4.56   $  4.50
                                                   =======   =======   =======
                Outstanding at end of year         $  6.27   $  5.75   $  5.77
                                                   =======   =======   =======
                Exercisable at end of year         $  6.27   $  5.75   $  5.20
                                                   =======   =======   =======

             Significant  option  groups  outstanding  at September 30, 2006 and
             related weighted average price and life information are as follows:

                Grant       Options        Options      Exercise     Remaining
                Date      Outstanding    Exercisable     Price      Life (Years)
                ----      -----------    -----------     -----      ------------

                4-2-02        9,950          9,950       $6.10          0.5
               10-1-03       12,900         12,900       $6.14          2.0
               5-20-04       45,000         45,000       $6.35          2.5

             The weighted-average  remaining  contractual terms of stock options
             outstanding and stock options exercisable at September 30, 2006 was
             2.2 years. The aggregate intrinsic value of options outstanding and
             stock options  exercisable at September 30, 2006 was  approximately
             $186,000.

                                      F-28
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE 12. NET INCOME PER COMMON SHARE

         The Company  follows  SFAS No.  128,  "Earnings  per  Share."  SFAS 128
         provides for the  calculation of basic and diluted  earnings per share.
         Basic  earnings  per share  includes  no  dilution  and is  computed by
         dividing  income  available  to  common  stockholders  by the  weighted
         average  number of common shares  outstanding  for the period.  Diluted
         earnings per share assume the exercise of options granted. Earnings per
         share are computed by dividing income available to common  stockholders
         by the basic and diluted weighted average number of common shares.

<TABLE>
<CAPTION>
                                                        2006        2005        2004
                                                        ----        ----        ----
<S>                                                   <C>         <C>         <C>

         Basic weighted average shares                1,884,000   1,895,000   1,922,000
         Incremental shares relating to outstanding
           options                                       25,000      28,000      11,000
                                                      ---------   ---------   ---------
         Diluted weighted average shares              1,909,000   1,923,000   1,933,000
                                                      =========   =========   =========
</TABLE>

NOTE 13. RELATED PARTY TRANSACTIONS

         The  Company's  Chief  Executive  Officer  manages one of the Company's
         franchised stores.

         During fiscal year 2004, the Company incurred legal fees in the form of
         salary of  approximately  $55,000 for services  provided by a member of
         the Board of Directors. These legal fees ceased during fiscal year 2004
         when this Board member became a full-time  employee and the  associated
         salary was included in officers' payroll.

         The Company paid  approximately  $109,000 in lease rentals to an entity
         owned and  controlled  by a former  member  of its  Board of  Directors
         during  fiscal year 2004.  During  fiscal year 2004,  the related party
         sold all related property.

         Also  see  Notes  4,  6,  10,  and  11  for  additional  related  party
         transactions.

NOTE 14. BUSINESS SEGMENTS

         The Company  operates  principally in two segments  -package stores and
         restaurants.  The operation of package stores consists of retail liquor
         sales.

         Information concerning the revenues and operating income for the fiscal
         years ended 2006,  2005 and 2004, and  identifiable  assets for the two
         segments  in which the  Company  operates,  are shown in the  following
         table.  Operating income is total revenue less cost of merchandise sold
         and operating expenses relative to each segment. In computing operating
         income,  none of the  following  items  have  been  included:  interest
         expense,  other  non-operating  income and  expense  and income  taxes.
         Identifiable  assets by segment  are those  assets that are used in the
         Company's operations in each segment.  Corporate assets are principally
         cash,  notes and mortgages  receivable,  real  property,  improvements,
         furniture,  equipment  and  vehicles.  The  Company  does  not have any
         operations  outside of the United States and intersegment  transactions
         are not material.

                                      F-29
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

<TABLE>
<CAPTION>

NOTE 14. BUSINESS SEGMENTS (Continued)
                                                                   2006             2005           2004
                                                                   ----             ----           ----
<S>                                                              <C>             <C>             <C>
         Operating Revenues:
            Restaurants                                        $ 40,457,000    $ 35,829,000    $ 33,698,000
            Package stores                                       13,046,000      11,810,000      10,911,000
            Other revenues                                        1,511,000       1,393,000       1,324,000
                                                               ------------    ------------    ------------
               Total operating revenues                        $ 55,014,000    $ 49,032,000    $ 45,933,000
                                                               ============    ============    ============

         Operating Income Reconciled to Income
         before Income Taxes: and Minority Interest in
         Earnings of Consolidated Limited Partnerships
               Restaurants                                     $  3,311,000    $  3,457,000    $  3,023,000
               Package stores                                       817,000         744,000         348,000
                                                               ------------    ------------    ------------
                                                                  4,128,000       4,201,000       3,371,000
               Corporate expenses, net of other revenues         (2,429,000)     (2,035,000)     (2,098,000)
                                                               ------------    ------------    ------------
               Operating income                                   1,699,000       2,166,000       1,273,000
               Equity in net income of limited partnership           31,000          18,000           6,000
               Minority interest in earnings of consolidated
                 limited partnerships                              (312,000)       (403,000)       (301,000)
               Interest expense, net of interest income            (164,000)        (68,000)        (80,000)
               Other                                                807,000          58,000          79,000
             Loss on abandonment of property and
                  equipment                                         (61,000)       (121,000)       (367,000)
                                                               ------------    ------------    ------------
                     Income Before Income Taxes                $  2,000,000    $  1,650,000    $    610,000
                                                               ============    ============    ============

         Identifiable Assets:
            Restaurants                                        $ 15,635,000    $ 10,277,000    $ 10,033,000
            Package store                                         3,602,000       3,527,000       2,505,000
                                                               ------------    ------------    ------------
                                                                 19,237,000      13,804,000      12,538,000
            Corporate                                             8,161,000       7,295,000       7,236,000
                                                               ------------    ------------    ------------
         Consolidated Totals                                   $ 27,398,000    $ 21,099,000    $ 19,774,000
                                                               ============    ============    ============

         Capital Expenditures:
            Restaurants                                        $  2,891,000    $  1,848,000    $    987,000
            Package stores                                          148,000         251,000         211,000
                                                               ------------    ------------    ------------
                                                                  3,039,000       2,099,000       1,198,000
            Corporate                                               741,000         298,000         334,000
                                                               ------------    ------------    ------------
         Total Capital Expenditures                            $  3,780,000    $  2,397,000    $  1,532,000
                                                               ============    ============    ============

         Depreciation and Amortization:
            Restaurants                                        $  1,255,000    $  1,166,000    $  1,208,000
            Package stores                                          229,000         163,000         133,000
                                                               ------------    ------------    ------------
                                                                  1,484,000       1,329,000       1,341,000
            Corporate                                               333,000         214,000         204,000
                                                               ------------    ------------    ------------
         Total Depreciation and Amortization                   $  1,817,000    $  1,543,000    $  1,545,000
                                                               ============    ============    ============
</TABLE>

                                      F-30
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 15. QUARTERLY INFORMATION (UNAUDITED)

         The following is a summary of the Company's unaudited quarterly results
         of operations for the quarters in fiscal years 2006 and 2005.

<TABLE>
<CAPTION>
                                                                       Quarter Ended
                                                 ----------------------------------------------------------
                                                   December 31,     April 1,      July 1,     September 30,
                                                      2005            2006         2006           2006
                                                      ----            ----         ----           ----
<S>                                                    <C>            <C>           <C>          <C>

         Revenues                                 $ 13,249,000   $ 14,477,000   $13,851,000   $13,437,000
         Income (loss) from operations                 662,000        518,000       654,000      (135,000)
         Net income (loss)                             363,000        582,000       203,000       102,000
         Net income (loss) per share -
           basic                                          .19            .31            .11           .05
         Net income (loss) per share -
           diluted                                        .19            .30            .11           .05
         Weighted average common
            stock outstanding - basic                1,874,776      1,879,809     1,893,486       1,887,167
         Weighted average common
            stock outstanding - diluted              1,913,990      1,908,919     1,920,472       1,912,147

         The  following  is  a  summary  of  the   significant   fourth  quarter
         adjustments for fiscal year 2006:

         Additional accrual for officers' bonuses                                $ 116,000
                                                                                 =========

<CAPTION>
                                                                       Quarter Ended
                                                 ----------------------------------------------------------
                                                   January 1,       April 2,      July 2,      October 1,
                                                      2005            2005         2005           2005
                                                      ----            ----         ----           ----
<S>                                                    <C>            <C>           <C>          <C>

         Revenues                                  $11,825,000   $12,449,000   $12,342,000    $12,416,000
         Income from operations                        339,000       598,000       716,000        513,000
         Net income (loss)                             240,000       327,000       499,000         41,000
         Net income (loss) per share -
           basic                                         0.13          0.17           0.26           0.02
         Net income (loss) per share -
           diluted                                       0.12          0.17           0.26           0.02
         Weighted average common
            stock outstanding - basic                1,915,000     1,905,000     1,885,000        1,874,000
         Weighted average common
            stock outstanding - diluted              1,929,000     1,933,000     1,912,000        1,914,000

         The  following  is  a  summary  of  the   significant   fourth  quarter
         adjustments for fiscal year 2005:

         Additional accrual for officers' bonuses                               $  250,000
         Adjusting estimated income taxes to actual                                100,000
         Abandonment of property and equipment                                     121,000
                                                                                ----------
                                                                                $  471,000
                                                                                ==========
</TABLE>

                                      F-31
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 15. QUARTERLY INFORMATION (UNAUDITED) (Continued)

         Quarterly  operating  results  are not  necessarily  representative  of
         operations for a full year for various  reasons  including the seasonal
         nature of both the restaurant and package store segments.

NOTE 16. 401(k) PLAN

         Effective July 2004, the Company began  sponsoring a 401(k)  retirement
         plan covering  substantially all employees who met certain  eligibility
         requirements.  Employees may contribute  elective deferrals to the plan
         up to amounts  allowed under the Internal  Revenue Code. The Company is
         not  required  to  contribute  to the plan  but may make  discretionary
         profit sharing and matching contributions.  During fiscal year 2006 and
         2005,  the  Company  made  discretionary  contributions  of $12,000 and
         $37,500, respectively (none in 2004).

NOTE 17.  SUBSEQUENT EVENTS

         Hurricane Wilma

             During fiscal year 2006,  the Company  submitted  insurance  claims
             totaling   $1,092,300   for   damages   and  losses  for   business
             interruption  caused when Hurricane Wilma impacted South Florida on
             October 24, 2005. Other income and expense for fiscal 2006 includes
             insurance  recovery,  net  of  casualty  loss,  of  $666,000  which
             includes  the  deletion  of the net  book  value  of  property  and
             equipment  as a result  of  Hurricane  Wilma  ($64,000),  repair of
             damage  ($138,000) and food waste ($61,000).  Subsequent to the end
             of fiscal  year 2006,  the Company  settled its claims  against its
             insurance   carrier  for  $929,000,   ($979,000  less  the  $50,000
             deductible). During fiscal year 2006, the Company received advances
             in the  aggregate  amount of $700,000,  ($750,000  less the $50,000
             deductible),  from its insurance  carrier and subsequent to the end
             of fiscal year 2006 received a final payment of $229,000.

         Contracts to Purchase Real Property

             Purchase of Real Property Subject to Ground Lease (Hallandale,FL.)

                Subsequent  to  the  end  of  fiscal  year  2006,   the  Company
                simultaneously  entered  into  a  contract  and  closed  on  the
                purchase of the real property which is subject to a ground lease
                owned by the Company at its  combination  restaurant and package
                liquor store located in  Hallandale,  Florida,  (Store #31). The
                purchase  price  for  this  property  was  $552,500,  which  was
                partially  financed  with an advance of  $250,000  on a mortgage
                (see Note 2).

                                      F-32
<PAGE>

                  FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 17.  SUBSEQUENT EVENTS (Continued)

         Contracts to Purchase Real Property (Continued)

             Purchase of Real Property Subject to Ground Lease (N. Miami, FL.)

                Subsequent to the end of fiscal year 2006,  the Company  entered
                into a contract and closed on the purchase of the real  property
                which is  subject to a ground  lease  owned by the  Company  and
                subleased  to an unrelated  third party  located in North Miami,
                Florida  (Store #27).  The purchase  price for this property was
                $250,000, which was paid in cash by the Company at closing.

         Internal Revenue Service Audit of Company's Corporate Income Tax Return
         for the Fiscal Year Ending October 1, 2005

             Subsequent  to the end of fiscal year 2006,  the  Company  received
             notification  from the Internal  Revenue Service that its corporate
             income tax return for the fiscal  year  ending  October 1, 2005 was
             being  audited.  The  audit was  completed  prior to the end of the
             first quarter of fiscal year 2007,  with the Company  agreeing that
             the sum of $107,000 was due as additional  corporate income tax for
             the fiscal year ending October 1, 2005.

         Re-Financing

             Corporate Offices

                Subsequent  to the end of fiscal 2006,  the Company  re-financed
                the mortgage note encumbering the Company's  corporate  offices.
                The  new  mortgage,   in  the  original   principal   amount  of
                $1,000,000,  bears  interest at the rate of 7.25% per annum,  is
                amortized over twenty (20) years with equal monthly  payments of
                principal and interest,  each in the amount of $8,000,  with the
                entire  principal  balance and all accrued interest due in seven
                (7) years. The pre-payment of the mortgage note, which otherwise
                matured  in  August,  2008,  incurred  a  prepayment  penalty of
                $17,000.



         Schedule II - Valuation and Qualifying Accounts

             The Company  maintains no accounts  that qualify for this  schedule
             for each of the three years ended  September  30, 2006,  October 1,
             2005 or October 2, 2004.

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

                                      F-33