| Nevada                                                    |   | 03-0606420                             |
|-----------------------------------------------------------|--------|----------------------------------------|
| (State or other jurisdictionof incorporationor formation) |   | (I.R.S. employeridentification number) |

----

----

| PART I.  FINANCIAL INFORMATION                                                      | 1       |
|-----------------------------------------------------------------------------------------------|---------|
| Item 1.  Financial Statements                                                       | 1       |
| Consolidated Balance Sheets                                                                   | 1       |
| Consolidated Statements of Operations                                                         | 2       |
| Consolidated Statements of Stockholders' Equity (Deficit)                                     | 3       |
| Consolidated Statements of Cash Flows                                                         |  4 |
| Notes to Interim Consolidated Financial Statements                                            | 5       |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 17      |
| Item 3. Quantitative and Qualitative Disclosure About Market Risks                            | 23      |
| Item 4. Controls and Procedures                                                               | 23      |
| PART II. OTHER INFORMATION                                                                    | 23      |
| Item 1. Legal Proceedings                                                                     | 23      |
| Item 1A. Risk Factors                                                                         | 24      |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           | 24      |
| Item 3. Defaults Upon Senior Securities                                                       | 24      |
| Item 5. Other Information                                                                     | 24      |
| Item 6. Exhibits                                                                              | 24      |

----

| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES |   |
|--------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS (UNAUDITED)                |   |

|                                                                                                       |   | March 27 |       |   | December 26 |   |
|------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|-------------|--------|
|  ASSETS                                                                                               |   | 2011     |       |   | 2010        |   |
|  Current assets                                                                                       |   |     |       |   |        |   |
|  Cash and cash equivalents                                                                            |   | $        | 2,138,893  |   |        | $      | 1,358,381 |   |
|  Accounts receivable                                                                                  |   |     | 57,307     |   |        |   | - |   |
|  Inventory                                                                                            |   |     | 379,784    |   |        |   | 339,059 |   |
|  Prepaid assets                                                                                       |   |     | 126,706    |   |        |   | 209,708 |   |
|  Other current assets                                                                                 |   |     | -          |   |        |   | 43,348 |   |
|  Total current assets                                                                                 |   |     | 2,702,690  |   |        |   | 1,950,496 |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Property and equipment, net - restricted assets of VIE                                               |   |     | 1,480,437  |   |        |   | 1,487,993 |   |
|  Property and equipment, net                                                                          |   |     | 19,029,639 |   |        |   | 17,252,599 |   |
|  Intangible assets, net                                                                               |   |     | 1,043,601  |   |        |   | 975,461 |   |
|  Other long-term assets                                                                               |   |     | 69,791     |   |        |   | 80,099 |   |
|  Deferred income taxes                                                                                |   |     | 330,463    |   |        |   | 607,744 |   |
|  Total assets                                                                                         |   |     | 24,656,621 |   |        |   | 22,354,392 |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                       |   |     |       |   |        |   |   |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Current liabilities                                                                                  |   |     |       |   |        |   |   |   |
|  Current portion of long-term debt (including VIE debt of $89,414)                                    |   |     | 2,249,197  |   |        |   | 1,947,676 |   |
|  Accounts payable                                                                                     |   |     | 1,215,998  |   |        |   | 1,388,397 |   |
|  Accrued liabilities                                                                                  |   |     | 1,463,588  |   |        |   | 1,089,112 |   |
|  Deferred rent                                                                                        |   |     | 159,257    |   |        |   | 127,075 |   |
|  Total current liabilities                                                                            |   |     | 5,088,040  |   |        |   | 4,552,260 |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Deferred rent                                                                                        |   |     | 1,700,458  |   |        |   | 1,622,943 |   |
|  Other liabilities - interest rate swap                                                               |   |     | 373,021    |   |        |   | 367,181 |   |
|  Long-term debt, less current portion (including VIE debt of $1,207,084 and $1,229,437, respectively) |   |     | 16,884,565 |   |        |   | 15,936,193 |   |
|  Total liabilities                                                                                    |   |     | 24,046,084 |   |        |   | 22,478,577 |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Commitments and contingencies (Notes 5, 9, and 11)                                                   |   |     |       |   |        |   |   |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Stockholders' equity (deficit)                                                                       |   |     |       |   |        |   |   |   |
| Common stock - $0.0001 par value; 100,000,000 shares authorized, 18,876,000                                |   |
|    shares issued and outstanding                                                            |   |     | 1,888      |   |        |   | 1,888 |   |
|  Additional paid-in capital                                                                           |   |     | 2,653,285  |   |        |   | 2,631,304 |   |
|  Retained earnings (accumulated deficit)                                                              |   |     | (2,381,776 | )      |        |   | (3,096,017 | ) |
|  Total DRH stockholders' equity (deficit)                                                             |   |     | 273,397    |   |        |   | (462,825 | ) |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Noncontrolling interest in VIE                                                                       |   |     | 337,140    |   |        |   | 338,640 |   |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Total stockholders' equity (deficit)                                                                 |   |     | 610,537    |   |        |   | (124,185 | ) |
|                                                                                                       |   |     |       |   |        |   |   |   |
|  Total liabilities and stockholders' equity                                                           |   | $        | 24,656,621 |   |        | $      | 22,354,392 |   |

----

| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES |
|--------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)      |

|                                                                |   | Three Months Ended |       |
|---------------------------------------------------------------------|--------|--------------------|------------|
|                                                                |   | March 27           |       | March 28 |   |
|                                                                |   | 2011               |       |   | 2010 |   |
| Revenue                                                             |   |               |       |   |   |   |
| Food and beverage sales                                             |   | $                  | 15,094,616 |   |   | $ | 10,715,878 |   |
| Total revenue                                                       |   |               | 15,094,616 |   |   |   | 10,715,878 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Operating expenses                                                  |   |               |       |   |   |   |   |   |
| Compensation costs                                                  |   |               | 4,226,553  |   |   |   | 3,036,997 |   |
| Food and beverage costs                                             |   |               | 4,251,632  |   |   |   | 3,337,262 |   |
| General and administrative                                          |   |               | 3,406,055  |   |   |   | 2,455,467 |   |
| Pre-opening                                                         |   |               | 254,136    |   |   |   | 105,258 |   |
| Occupancy                                                           |   |               | 796,534    |   |   |   | 765,650 |   |
| Depreciation and amortization                                       |   |               | 775,361    |   |   |   | 604,889 |   |
| Total operating expenses                                            |   |               | 13,710,271 |   |   |   | 10,305,523 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Operating profit                                                    |   |               | 1,384,345  |   |   |   | 410,355 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Change in fair value of derivative instruments                      |   |               | (5,840     | ) |   |   | (470 | ) |
| Interest expense                                                    |   |               | (286,810   | ) |   |   | (169,263 | ) |
| Other income (expense), net                                         |   |               | (28,966    | ) |   |   | 17,221 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Income before income taxes                                          |   |               | 1,062,729  |   |   |   | 257,843 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Income tax provision                                                |   |               | 309,988    |   |   |   | 122,576 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Net income                                                          |   | $                  | 752,741    |   |   | $ | 135,267 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Less:  Net income attributable to noncontrolling interest |   | $                  | (38,500    | ) |   |   | 0 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Net income attributable to DRH                                      |   | $                  | 714,241    |   |   | $ | 135,267 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Basic earnings per share - as reported                              |   | $                  | 0.04       |   |   | $ | 0.01 |   |
| Fully diluted earnings per share - as reported                      |   | $                  | 0.04       |   |   | $ | 0.01 |   |
|                                                                |   |               |       |   |   |   |   |   |
| Weighted average number of common shares                            |   |               |       |   |   |   |   |   |
| outstanding                                                         |   |               |       |   |   |   |   |   |
| Basic                                                               |   |               | 18,876,000 |   |   |   | 18,870,505 |   |
| Diluted                                                             |   |               | 19,063,203 |   |   |   | 18,952,979 |   |

----

| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES                |
|-----------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED) |

|                                                              |   |         |       |   |    |   |   |         |   |   | Retained      |   |   | Accumulated    |       |    |     |   |     | Total         |   |
|-------------------------------------------------------------------|--------|--------------|------------|--------|---------|--------|--------|--------------|--------|--------|---------------|--------|--------|----------------|------------|---------|----------|--------|----------|---------------|--------|
|                                                              |   |         |       |   |    |   |   | Additional   |   |   | Earnings      |   |   | Other          |       |    |     |   |     | Stockholders' |   |
|                                                              |   | Common Stock |       |   | Paid-in |   |   | (Accumulated |   |   | Comprehensive |   |   | Noncontrolling |       |    | Equity   |   |
|                                                              |   | Shares       |       |   | Amount  |   |   | Capital      |   |   | Deficit)      |   |   | Income (Loss)  |       |    | Interest |   |     | (Deficit)     |   |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |
| Balances - December 26, 2010, as previously reported              |   |         | 18,876,000 |   |    | $      | 1,888  |         |   | $      | 2,631,304     |   |   | $              | (2,728,836 | )       |     | $      | (367,181 | )             |   | $ | - |   |   | $ | (462,825 | ) |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Reclassification of fair value of interest rate swap (see Note 2) |   |         | -          |   |    |   | -      |         |   |   | -             |   |   |           | (367,181   | )  |     |   | 367,181  |          |   |   | - |   |   |   | - |   |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |
| Initial consolidation of VIE                                      |   |         | -          |   |    |   | -      |         |   |   | -             |   |   |           | -          |    |     |   | -        |          |   |   | 338,640 |   |   |   | 338,640 |   |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Balances - December 26, 2010, as adjusted                         |   |         | 18,876,000 |   |    |   | 1,888  |         |   |   | 2,631,304     |   |   |           | (3,096,017 | )       |     |   | -        |          |   |   | 338,640 |   |   |   | (124,185 | ) |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Share-based compensation                                          |   |         | -          |   |    |   | -      |         |   |   | 21,981        |   |   |           | -          |    |     |   | -        |          |   |   | - |   |   |   | 21,981 |   |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Net income                                                        |   |         | -          |   |    |   | -      |         |   |   | -             |   |   |           | 714,241    |    |     |   | -        |          |   |   | 38,500 |   |   |   | 752,741 |   |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Distributions                                                     |   |         | -          |   |    |   | -      |         |   |   | -             |   |   |           | -          |    |     |   | -        |          |   |   | (40,000 | ) |   |   | (40,000 | ) |
|                                                              |   |         |       |   |    |   |   |         |   |   |          |   |   |           |       |    |     |   |     |          |   |   |   |   |   |   |   |   |
| Balances - March 27, 2011                                         |   |         | 18,876,000 |   |    | $      | 1,888  |         |   | $      | 2,653,285     |   |   | $              | (2,381,776 | )       |     | $      | -        |          |   | $ | 337,140 |   |   | $ | 610,537 |   |

----

| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES |
|--------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)      |
|                                                   |   |   |   |   |   |   |
|                                                   |   | Three Months Ended |   |
|                                                   |   | March 27 |   |   | March 28 |   |
|                                                   |   | 2011 |   |   | 2010 |   |
| Cash flows from operating activities                   |   |   |   |   |   |   |
| Net income                                             |   | $ | 752,741 |   |   | $ | 135,267 |   |
| Adjustments to reconcile net income to                 |   |   |   |   |   |   |   |   |
| net cash provided by operating activities              |   |   |   |   |   |   |   |   |
| Depreciation and amortization                          |   |   | 775,361 |   |   |   | 570,013 |   |
| Loss on disposal of property and equipment             |   |   | 23,875 |   |   |   | 34,875 |   |
| Share-based compensation                               |   |   | 21,981 |   |   |   | 8,078 |   |
| Deferred income tax (provision) benefit                |   |   | 277,281 |   |   |   | (39,629 | ) |
| Changes in operating assets and liabilities that       |   |   |   |   |   |   |   |   |
| provided (used) cash                                   |   |   |   |   |   |   |   |   |
| Accounts receivable                                    |   |   | (57,307 | ) |   |   | 376,675 |   |
| Inventory                                              |   |   | (40,725 | ) |   |   | 5,131 |   |
| Prepaid assets                                         |   |   | 83,002 |   |   |   | 50,743 |   |
| Other current assets                                   |   |   | 43,348 |   |   |   | 9,926 |   |
| Intangible assets                                      |   |   | (77,866 | ) |   |   | (73,117 | ) |
| Other long-term assets                                 |   |   | 10,308 |   |   |   | 33,688 |   |
| Accounts payable                                       |   |   | (172,399 | ) |   |   | (116,083 | ) |
| Accrued liabilities                                    |   |   | 374,476 |   |   |   | 117,101 |   |
| Deferred rent                                          |   |   | 109,697 |   |   |   | 32,390 |   |
| Net cash provided by operating activities              |   |   | 2,123,773 |   |   |   | 1,145,058 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities                   |   |   |   |   |   |   |   |   |
| Purchases of property and equipment                    |   |   | (2,558,994 | ) |   |   | (607,877 | ) |
| Net cash used in investing activities                  |   |   | (2,558,994 | ) |   |   | (607,877 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities                   |   |   |   |   |   |   |   |   |
| Proceeds from issuance of long-term debt               |   |   | 1,740,906 |   |   |   | 236,198 |   |
| Repayments of long-term debt                           |   |   | (491,013 | ) |   |   | (771,329 | ) |
| Proceeds from issuance of common stock                 |   |   | - |   |   |   | 250,000 |   |
| Change in fair value of derivative instruments         |   |   | 5,840 |   |   |   | 470 |   |
| Distributions                                          |   |   | (40,000 | )  |   |   | (552,861 | ) |
| Net cash provided by (used in) financing activities    |   |   | 1,215,733 |   |   |   | (837,522 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents   |   |   | 780,512 |   |   |   | (300,341 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period         |   |   | 1,358,381 |   |   |   | 1,594,362 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, end of period               |   | $ | 2,138,893 |   |   | $ | 1,294,021 |   |

----

----

----

----

|                                                         |   | PreviouslyReported |       |   | Adjustment |   |      | AsAdjusted |   |
|--------------------------------------------------------------|--------|--------------------|------------|--------|------------|--------|-----------|------------|--------|
|                                                         |   |               |       |   |       |   |      |       |   |
|  Cash and cash equivalents                              |   |               | 1,305,031  |   |       |   | 53,350    |       |   |   | 1,358,381 |   |
|                                                         |   |               |       |   |       |   |      |       |   |   |   |   |
|  Property and equipment, net - restricted assets of VIE |   |               | -          |   |       |   | 1,487,993 |       |   |   | 1,487,993 |   |
|  Other long-term assets                                 |   |               | 63,539     |   |       |   | 16,560    |       |   |   | 80,099 |   |
|                                                         |   |               |       |   |       |   |      |       |   |   |   |   |
|  Current portion of long-term debt                      |   |               | 1,858,262  |   |       |   | 89,414    |       |   |   | 1,947,676 |   |
|  Deferred rent (long-term)                              |   |               | 1,722,531  |   |       |   | (99,588   | )          |   |   | 1,622,943 |   |
|  Long-term debt, less current portion                   |   |               | 14,706,756 |   |       |   | 1,229,437 |       |   |   | 15,936,193 |   |
|                                                         |   |               |       |   |       |   |      |       |   |   |   |   |
|  Retained earnings (accumulated deficit)                |   |               | (2,728,836 | )      |       |   | (367,181  | )          |   |   | (3,096,017 | ) |
|  Accumulated other comprehensive income (loss)          |   |               | (367,181   | )      |       |   | 367,181   |       |   |   | - |   |
|  Noncontrolling interest in VIE                         |   |               | -          |   |       |   | 338,640   |       |   |   | 338,640 |   |

----

|                                                                         |   | March 27 |        |    | December 26 |   |
|------------------------------------------------------------------------------|--------|----------|-------------|---------|-------------|--------|
|                                                                         |   | 2011     |        |    | 2010        |   |
| Land                                                                         |   | $        | 385,959     |    |        | $      | 385,959 |   |
| Land (restricted assets of VIE)                                              |   |     | 520,000     |    |        |   | 520,000 |   |
| Building                                                                     |   |     | 2,255,246   |    |        |   | 2,255,246 |   |
| Building (restricted assets of VIE)                                     |   |     | 1,570,967   |    |        |   | 1,570,967 |   |
| Equipment                                                                    |   |     | 9,269,706   |    |        |   | 8,140,417 |   |
| Furniture and fixtures                                                       |   |     | 2,592,628   |    |        |   | 2,216,347 |   |
| Leasehold improvements                                                       |   |     | 16,065,769  |    |        |   | 13,925,216 |   |
| Restaurant construction in progress                                          |   |     | -           |    |        |   | 1,247,265 |   |
| Total                                                                        |   |     | 32,660,275  |    |        |   | 30,261,417 |   |
| Less accumulated depreciation                                                |   |     | (11,539,669 | )       |        |   | (10,917,851 | ) |
| Less accumulated depreciation attributable to restricted assets of VIE  |   |     | (610,530    | )  |        |   | (602,974 | )  |
| Property and equipment, net                                                  |   | $        | 20,510,076  |    |        | $      | 18,740,592 |   |

|                          |   | March 27 |      |   | December 26 |   |
|-------------------------------|--------|----------|-----------|--------|-------------|--------|
|                          |   | 2011     |      |   | 2010        |   |
| Amortized Intangibles:        |   |     |      |   |        |   |
| Franchise fees                |   | $        | 373,750   |   |        | $      | 373,750 |   |
| Trademark                     |   |     | 8,025     |   |        |   | 7,475 |   |
| Loan fees                     |   |     | 155,100   |   |        |   | 155,100 |   |
| Total                         |   |     | 536,875   |   |        |   | 536,325 |   |
| Less accumulated amortization |   |     | (124,972  | )      |        |   | (115,246 | ) |
| Amortized Intangibles, net    |   |     | 411,903   |   |        |   | 421,079 |   |
|                          |   |     |      |   |        |   |   |   |
| Unamortized Intangibles:      |   |     |      |   |        |   |   |   |
| Liquor licenses               |   |     | 631,698   |   |        |   | 554,382 |   |
| Total Intangibles, net        |   | $        | 1,043,601 |   |        | $      | 975,461 |   |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | March 27 |       |   | December 26 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|-------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2011     |       |   | 2010        |   |
| Note payable to a bank secured by a senior lien on all company assets. Scheduled monthly principal and interest payments are approximately $120,000 through maturity in May 2017. Interest is charged based on a swap arrangement designed to yield a fixed annual rate of 7.10%.                                                                                                                                                                                                                                  |   | $        | 8,142,197  |   |        | $      | 8,399,538 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Note payable to a bank secured by a senior mortgage on the Brandon Property and a personal guaranty. Scheduled monthly principal and interest payments are approximately $8,000 for the period beginning July 2010 through maturity in June 2030, at which point a balloon payment of $413,550 is due. Interest is charged based on a fixed rate of 6.72%, per annum, through June 2017, at which point the rate will adjust to the U.S. Treasury Securities Rate plus 4% (and every seven years thereafter). |   |     | 1,136,351  |   |        |   | 1,141,188 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Note payable to a bank secured by a junior mortgage on the Brandon Property. Matures in 2030 and requires monthly principal and interest installments of approximately $6,100 until maturity. Interest is charged at a rate of 3.58% per annum.                                                                                                                                                                                                                                                                         |   |     | 907,386    |   |        |   | 915,446 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| DLOC to a bank, secured by a senior lien on all company assets. Scheduled interest payments are charged at a rate of 4% over the 30-day LIBOR (the rate at March 27, 2011 was approximately 4.25%). In November 2011, the DLOC will convert into a term loan bearing interest at 4% over the 30-day LIBOR and will mature in May 2017. The DLOC includes a carrying cost of .25% per year of any available but undrawn amounts.                                                                                    |   |     | 265,586    |   |        |   | 1,424,679 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Note payable to a bank secured by a senior lien on all company assets. Scheduled monthly principal and interest payments are approximately $15,000 through maturity in May 2017. Interest is charged based on a swap arrangement designed to yield a fixed annual rate of 5.91%.                                                                                                                                                                                                                                   |   |     | 1,334,195  |   |        |   | 1,379,098 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Note payable to a bank secured by a senior lien on all company assets. Scheduled monthly principal and interest payments are approximately $33,000 through maturity in May 2017. Interest is charged based on a swap arrangement designed to yield a fixed annual rate of 6.35%.                                                                                                                                                                                                                                   |   |     | 2,900,000  |   |        |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Unsecured note payable that matures in August 2013 and requires monthly principal and interest installments of approximately $2,200, with the balance due at maturity. Interest is 7% per annum.                                                                                                                                                                                                                                                                                                                   |   |     | 239,423    |   |        |   | 241,832 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Note payable to Ford Credit secured by a vehicle purchased by Flyer Enterprises, Inc. to be used in the operation of the business. This is an interest-free loan under a promotional 0% rate. Scheduled monthly principal payments are approximately $430. The note matures in April 2013.                                                                                                                                                                                                                         |   |     | 10,729     |   |        |   | 12,016 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Notes payable -- variable interest entity.  Note payable to a bank secured by a senior mortgage on the property located at 15745 15 Mile Road, Clinton Township, Michigan 48035, a DRH corporate guaranty, and a personal guaranty.  Scheduled monthly principal and interest payments are approximately $12,500 through maturity in 2025. Interest is charged at a rate of 4% over the 30-day LIBOR (the rate at March 27, 2011 was approximately 4.25%).                                                    |   |     | 1,296,498  |   |        |   | 1,318,851 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Notes payable – related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | 2,901,397  |   |        |   | 3,051,221 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     | 19,133,762 |   |        |   | 17,883,869 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Less current portion (includes VIE debt of $89,414)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |     | (2,249,197 | )      |        |   | (1,947,676 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |        |   |   |   |
| Long-term debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $        | 16,884,565 |   |        | $      | 15,936,193 |   |

----

| Year       |   | Amount |            |
|------------|--------|--------|-----------------|
| 2011       |   | $      | 2,249,197       |   |
| 2012       |   |   | 2,309,318       |   |
| 2013       |   |   | 2,680,751       |   |
| 2014       |   |   | 2,602,572       |   |
| 2015       |   |   | 2,768,131       |   |
| Thereafter |   |   |  6,523,793 |   |
| Total      |   | $      | 19,133,762      |   |

----

|                 |   | Three Months Ended |    |
|----------------------|--------|--------------------|---------|
|                 |   | March 272011       |    |   | March 282010 |   |
| Federal              |   |               |    |   |   |   |
|   Current  |   | $                  | -       |   |   | $  | - |   |
|   Deferred |   |               | 223,988 |   |   |   | 105,137 |   |
|                 |   |               |    |   |   |   |   |   |
| State                |   |               |    |   |   |   |   |   |
|   Current  |   |               | 32,707  |   |   |   | 50,101 |   |
|   Deferred |   |               | 53,293  |   |   |   | (32,662 | )  |
|                 |   |               |    |   |   |   |   |   |
| Income Tax Provision |   | $                  | 309,988 |   |   | $ | 122,576 |   |

|                                           |   | March 272011 |     |    | March 282010 |   |
|------------------------------------------------|--------|--------------|----------|---------|--------------|--------|
|                                           |   |         |     |    |         |   |
| Income tax provision at federal statutory rate |   | $            | 350,733  |    |         | $      | 87,667 |   |
| State income tax provision                     |   |         | 86,000   |    |         |   | 17,439 |   |
| Permanent differences                          |   |         | 37,707   |    |         |   | (34,581 | ) |
| Tax credits                                    |   |         | (105,629 | )  |         |   | (35,000 | )  |
| Other                                          |   |         | (58,823  | )  |         |   | 87,051 |   |
|                                           |   |         |     |    |         |   |   |   |
| Income tax provision                           |   | $            | 309,988  |    |         | $      | 122,576 |   |

----

|                                                   |   | March 272011 |      |   | December 262010 |   |
|--------------------------------------------------------|--------|--------------|-----------|--------|-----------------|--------|
| Deferred tax assets:                                   |   |         |      |   |            |   |
| Net operating loss carry forwards                      |   | $            | 694,200   |   |            | $      | 1,252,609 |   |
| Deferred rent expense                                  |   |         | 66,001    |   |            |   | 68,509 |   |
| Start-up costs                                         |   |         | 190,075   |   |            |   | 190,076 |   |
| Tax credit carry forwards                              |   |         | 634,423   |   |            |   | 540,533 |   |
| Other – including state deferred tax assets      |   |         | 595,006   |   |            |   | 487,139 |   |
| Total deferred assets                                  |   |         | 2,179,705 |   |            |   | 2,538,866 |   |
| Deferred tax liabilities:                              |   |         |      |   |            |   |   |   |
| Other – including state deferred tax liabilities |   |         | 340,294   |   |            |   | 425,322 |   |
| Tax depreciation in excess of book                     |   |         | 1,508,948 |   |            |   | 1,505,800 |   |
| Total deferred tax liabilities                         |   |         | 1,849,242 |   |            |   | 1,931,122 |   |
|     Net deferred income tax assets |   | $            | 330,463   |   |            | $      | 607,744 |   |

----

| Year       |   | Amount |       |
|------------|--------|--------|------------|
| 2011       |   | $      | 2,672,770  |   |
| 2012       |   |   | 2,790,753  |   |
| 2013       |   |   | 2,862,396  |   |
| 2014       |   |   | 2,730,112  |   |
| 2015       |   |   | 2,425,788  |   |
| Thereafter |   |   | 7,892,977  |   |
| Total      |   | $      | 21,374,796 |   |

----

|   | • |   | Level 1 — Quoted market prices in active markets for identical assets and liabilities;     |
|--------|---------|--------|--------------------------------------------------------------------------------------------------|
|   | • |   | Level 2 — Inputs, other than level 1 inputs, either directly or indirectly observable; and |

|   | • |   | Level 3 — Unobservable inputs developed using internal estimates and assumptions (there is little or no market data) which reflect those that market participants would use. |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| FAIR VALUE MEASUREMENTS |   |
|-------------------------|--------|
|                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Asset/(Liability) |   |
| Description             |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |   | Total |   |
| Interest Rate Swaps     |   | $ | — |   |   |   | (373,021 | ) |   |   | — |   |   |   | (373,021 | ) |   | $ | (373,021 | ) |

| FAIR VALUE MEASUREMENTS |   |
|-------------------------|--------|
|                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Asset/(Liability) |   |
| Description             |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |   | Total |   |
| Interest Rate Swaps     |   | $ | — |   |   |   | (367,181 | ) |   |   | — |   |   |   | (367,181 | ) |   | $ | (367,181 | ) |

----

----

|                      |                                       | 2011   | 2010   | 2009   | 2008   | 2007   |
|---------------------------|--------------------------------------------|--------|--------|--------|--------|--------|
|                      | Beginning of year                          | 22     | 9      | 8      | 2      | 0      |
|                      | Acquisitions                               | 0      | 9      | 0      | 0      | 0      |
|                      | Openings                                   | 3      | 4      | 1      | 6      | 2      |
|                      | Planned Openings                           | 3      |   |   |   |   |
| Total owned restaurants   | 28                                         | 22     | 9      | 8      | 2      |
|                      |                                       |   |   |   |   |   |
|                      | Affiliate restaurants under common control | 0      | 0      | 9      | 9      | 9      |
| Total managed restaurants | 28                                         | 22     | 18     | 17     | 11     |

----

|                                                 |   | Three Months Ended |   |
|------------------------------------------------------|--------|--------------------|--------|
|                                                 |   | March 27           |   |   | March 28 |   |
|                                                 |   | 2011               |   |   | 2010 |   |
|                                                 |   |               |   |   |   |   |
| Total revenue                                        |   |               | 100.0  | % |   |   | 100.0 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Operating expenses                                   |   |               |   |   |   |   |   |   |
| Compensation costs                                   |   |               | 28.0   | % |   |   | 28.3 | % |
| Food and beverage costs                              |   |               | 28.2   | % |   |   | 31.1 | % |
| General and administrative                           |   |               | 22.6   | % |   |   | 22.9 | % |
| Pre-opening                                          |   |               | 1.7    | % |   |   | 1.0 | % |
| Occupancy                                            |   |               | 5.3    | % |   |   | 7.1 | % |
| Depreciation and amortization                        |   |               | 5.1    | % |   |   | 5.6 | % |
| Total operating expenses                             |   |               | 90.9   | % |   |   | 96.2 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Operating profit                                     |   |               | 9.2    | % |   |   | 3.8 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Change in fair value of derivative instruments  |   |               | 0.0    | %  |   |   | 0.0 | %  |
| Interest expense                                     |   |               | (1.9   | %) |   |   | (1.6 | %) |
| Other income (expense), net                          |   |               | (0.2   | %) |   |   | 0.2 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Income before income taxes                           |   |               | 7.1    | % |   |   | 2.4 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Income tax provision                                 |   |               | 2.1    | % |   |   | 1.1 | % |
|                                                 |   |               |   |   |   |   |   |   |
| Net income                                           |   |               | 5.0    | % |   |   | 1.3 | % |

----

----

| ·   | Traverse City, Michigan – BWW – opened February 7, 2011. |
|--------------------|----------------------------------------------------------------------|

| ·   | Lakeland, Florida – BWW – opened February 13, 2011. |
|--------------------|-----------------------------------------------------------------|

| ·   | Brighton, Michigan – Bagger Dave’s – opened February 27, 2011. |
|--------------------|----------------------------------------------------------------------------------|

| ·   | E. Lansing, Michigan – Bagger Dave’s - construction began in May of 2011 with an anticipated opening date in September of 2011. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | West Michigan area – Bagger Dave’s - construction is scheduled to begin in August of 2011 with an anticipated opening date in December of 2011. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Bradenton, Florida – BWW – construction is scheduled to begin in September of 2011 with an anticipated opening date in December of 2011. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Per a Franchise Agreement dated July 29, 2010 by and between BWWI and Anker, Inc., a wholly-owned subsidiary of the Company, we are obligated to complete a full remodel of our Fenton, Michigan location by August 31, 2011. Estimated cost of this remodel is $450 thousand dollars, which we plan to commence in June 2011. This remodel will be funded by cash from operations. |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | • |   | Clinton Township, Michigan — BWW — in February 2011, we completed a remodel of this location funded by cash from operations in the amount of $72 thousand dollars. This remodel was discretionary and consisted primarily of audio/video equipment upgrades and a freshening up of the interior to enhance the guest experience.                                                                                                                                                                                                             |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Sarasota, Florida — BWW — in February 2011, we completed a remodel of this location funded by cash from operations in the amount of $56 thousand dollars. This remodel was discretionary and consisted primarily of audio/video equipment upgrades and a freshening up of the interior to enhance the guest experience.                                                                                                                                                                                                                      |
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Brandon, Florida — BWW — in February 2011, we completed a remodel of this location funded by cash from operations in the amount of $55 thousand dollars. This remodel was discretionary and consisted primarily of audio/video equipment upgrades and a freshening up of the interior to enhance the guest experience.                                                                                                                                                                                                                       |
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Riverview, Florida — BWW — in March 2011, we completed a remodel of this location funded by cash from operations in the amount of $109 thousand dollars. This remodel was discretionary and consisted primarily of a patio upgrade which includes audio/video equipment and furniture.                                                                                                                                                                                                                                                       |
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Warren, Michigan — BWW — by July 2011, we anticipate completing a remodel of this location funded by cash from operations estimated at $130 thousand dollars. This remodel is discretionary and will consist primarily of audio/video equipment upgrades, new furniture and a freshening up of the interior to enhance the guest experience.                                                                                                                                                                                                 |
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Fish Hawk, Florida— BWW — by July 2011, we anticipate completing a remodel of this location funded by cash from operations and estimated at $105 thousand dollars. This remodel is discretionary and will consist primarily of audio/video equipment upgrades and a freshening up of the interior to enhance the guest experience.                                                                                                                                                                                                           |
|   |    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • |   | Berkley, Michigan — BWW — by August 2011, we anticipate completing an addition to this location funded by cash from operations and estimated at $345 thousand dollars. This addition is discretionary and will consist of an 800 sq. ft. addition to accommodate 48 additional seats, a new draft beer system and cooler and new manager’s office.  This addition will require the demolition of a neighboring building which provides increased visibility of the restaurant, an improved parking plan and a monument sign. |

----

----

| 3.1 | Certificate of Incorporation (filed as an exhibit to the Company's Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on August 10, 2007, and incorporated herein by this reference). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | By-Laws (filed as an exhibit to the Company's Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on August 10, 2007, and incorporated herein by this reference). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Consulting Agreement between the Company and P. Freidman & Associates dated March 15, 2011. |
|------|-------------------------------------------------------------------------------------------------|

| 10.2 | Buffalo Wild Wings Franchise Agreement dated March 25, 2011, by and between Buffalo Wild Wings International, Inc. and AMC Sarasota Inc., a wholly-owned subsidiary of the Company (filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2011, and incorporated herein by this reference). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a). |
|------|----------------------------------------------------------------------|

| 31.2 | Certification Chief Financial Officer pursuant to Rule 13a-14(a). |
|------|-------------------------------------------------------------------|

| 32.1 | Certification Chief Executive Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------|

| 32.2 | Certification Chief Financial Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------|

----

|                           |   |   | DIVERSIFIED RESTAURANT HOLDINGS, INC.                                                           |   |
|--------------------------------|--------|--------|-------------------------------------------------------------------------------------------------|--------|
|                           |   |   |                                                                                            |   |
|                           |   |   |                                                                                            |   |
| Dated:  May 16, 2011 |   |   | By: /s/ T. Michael Ansley                                                                  |   |
|                           |   |   | T. Michael AnsleyPresident and Chief Executive Officer(Principal Executive Officer)             |   |
|                           |   |   |                                                                                            |   |
|                           |   |   |                                                                                            |   |
|                           |   |   | By: /s/ David G. Burke                                                                     |   |
|                           |   |   | David G. BurkeChief Financial Officer and Treasurer(Principal Financial and Accounting Officer) |   |