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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 29, 2008

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 000-50845





McCormick & Schmicks Seafood Restaurants, Inc.

(Exact name of registrant as specified in its charter)







|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 20-1193199                         
|(State or other jurisdiction ofincorporation or organization) |  | (IRS EmployerIdentification Number)
|                                                              | 
|720 SW Washington Street, Suite 550 Portland, Oregon          |  | 97205                              
|(Address of principal executive offices)                      |  | (Zip Code)                         

(503) 226-3440

(Registrants telephone number, including area code)





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 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                                               |  |                             
|-------------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x                         
|Non-accelerated filer   ̈   |  | (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

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

There were 14,824,948 shares of common stock outstanding as of April 17, 2008.









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Table of Contents

INDEX



|                                                                                                                     |  |   
|-------------------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION                                                                                        |  |   
|                                                                                                                     | 
|Item 1 - Financial Statements - (Unaudited)                                                                          |  | 3 
|Condensed Consolidated Balance Sheets as of December 29, 2007 and March 29, 2008                                     |  | 3 
|Condensed Consolidated Statements of Income for the thirteen week period ended March 31, 2007 and March 29, 2008     |  | 4 
|Condensed Consolidated Statements of Cash Flows for the thirteen week period ended March 31, 2007 and March 29, 2008 |  | 5 
|Notes to Condensed Consolidated Financial Statements                                                                 |  | 6 
|Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 9 
|Item 3 - Quantitative and Qualitative Disclosures About Market Risk                                                  |  | 13
|Item 4 - Controls and Procedures                                                                                     |  | 14
|                                                                                                                     | 
|PART II. OTHER INFORMATION                                                                                           |  |   
|                                                                                                                     | 
|Item 1 - Legal Proceedings                                                                                           |  | 14
|Item 1A - Risk Factors                                                                                               |  | 14
|Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds                                                 |  | 18
|Item 3 - Defaults Upon Senior Securities                                                                             |  | 18
|Item 4 - Submissions of Matters to a Vote of Security Holders                                                        |  | 18
|Item 5 - Other Information                                                                                           |  | 18
|Item 6 - Exhibits                                                                                                    |  | 18
|Signatures                                                                                                           |  | 19



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

McCormick &
Schmicks Seafood Restaurants, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)



|                                                                                                           |  |                  |         |               |   |        
|---------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ------------- | - | -------
|                                                                                                           |  | December 29,2007 |         | March 29,2008
|                                                                                                           |  |                  |         | (Unaudited)  
|Assets                                                                                                     |  |                  |         |               |   |        
|Current assets                                                                                             |  |                  |         |               |   |        
|Cash and cash equivalents                                                                                  |  | $                | 7,343   |               | $ | 2,992  
|Trade accounts receivable, net                                                                             |  |                  | 10,135  |               |   | 8,258  
|Tenant improvement allowance receivables                                                                   |  |                  | 7,663   |               |   | 7,045  
|Income tax receivable                                                                                      |  |                  | 1,736   |               |   |       
|Inventories                                                                                                |  |                  | 5,997   |               |   | 6,054  
|Prepaid expenses and other current assets                                                                  |  |                  | 3,939   |               |   | 4,477  
|Deferred income taxes                                                                                      |  |                  | 5,206   |               |   | 6,033  
|                                                                                                           |  |                  |         |               |   |        
|Total current assets                                                                                       |  |                  | 42,019  |               |   | 34,859 
|Property and equipment, net                                                                                |  |                  | 156,956 |               |   | 163,470
|Other assets                                                                                               |  |                  | 58,899  |               |   | 58,821 
|Goodwill                                                                                                   |  |                  | 27,769  |               |   | 27,486 
|                                                                                                           |  |                  |         |               |   |        
|Total assets                                                                                               |  | $                | 285,643 |               | $ | 284,636
|                                                                                                           |  |                  |         |               |   |        
|Liabilities and Stockholders Equity                                                                       |  |                  |         |               |   |        
|Current liabilities                                                                                        |  |                  |         |               |   |        
|Accounts payable                                                                                           |  | $                | 24,158  |               | $ | 19,135 
|Accrued expenses                                                                                           |  |                  | 33,668  |               |   | 30,413 
|Capital lease obligations, current portion                                                                 |  |                  | 3,107   |               |   | 2,995  
|                                                                                                           |  |                  |         |               |   |        
|Total current liabilities                                                                                  |  |                  | 60,933  |               |   | 52,543 
|Revolving credit facility                                                                                  |  |                  | 13,000  |               |   | 20,000 
|Other long-term liabilities                                                                                |  |                  | 21,392  |               |   | 22,203 
|Deferred income taxes                                                                                      |  |                  | 11,521  |               |   | 11,579 
|                                                                                                           |  |                  |         |               |   |        
|Total liabilities                                                                                          |  |                  | 106,846 |               |   | 106,325
|                                                                                                           |  |                  |         |               |   |        
|Commitments and contingencies (Note 11)                                                                    |  |                  |         |               |   |        
|Stockholders equity                                                                                       |  |                  |         |               |   |        
|Common stock, $0.001 par value, 120,000 shares authorized, 14,685 and 14,685 shares issued and outstanding |  |                  | 15      |               |   | 15     
|Additional paid in capital                                                                                 |  |                  | 146,918 |               |   | 147,061
|Accumulated other comprehensive income                                                                     |  |                  | 2,828   |               |   | 2,081  
|Retained earnings                                                                                          |  |                  | 29,036  |               |   | 29,154 
|                                                                                                           |  |                  |         |               |   |        
|Total stockholders equity                                                                                 |  |                  | 178,797 |               |   | 178,311
|                                                                                                           |  |                  |         |               |   |        
|Total liabilities and stockholders equity                                                                 |  | $                | 285,643 |               | $ | 284,636
|                                                                                                           |  |                  |         |               |   |        

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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McCormick & Schmicks Seafood Restaurants, Inc. and Subsidiaries

Condensed Consolidated Statements of Income-Unaudited

(in thousands, except per share data)



|                                              |  |                            |        |   |               |   |        |  
|--------------------------------------------- |  | -------------------------- | ------ | - | ------------- | - | ------ | -
|                                              |  | Thirteen week period ended |       
|                                              |  | March 31,2007              |        |   | March 29,2008 |  
|Revenues                                      |  | $                          | 81,428 |   |               | $ | 92,337 |  
|Restaurant operating costs                    |  |                            |        |   |               |   |        |  
|Food and beverage                             |  |                            | 23,547 |   |               |   | 28,071 |  
|Labor                                         |  |                            | 25,764 |   |               |   | 30,397 |  
|Operating                                     |  |                            | 12,153 |   |               |   | 14,501 |  
|Occupancy                                     |  |                            | 7,486  |   |               |   | 8,798  |  
|                                              |  |                            |        |   |               |   |        |  
|Total restaurant operating costs              |  |                            | 68,950 |   |               |   | 81,767 |  
|General and administrative expenses           |  |                            | 4,703  |   |               |   | 5,569  |  
|Restaurant pre-opening costs                  |  |                            | 448    |   |               |   | 1,184  |  
|Depreciation and amortization                 |  |                            | 2,800  |   |               |   | 3,394  |  
|                                              |  |                            |        |   |               |   |        |  
|Total costs and expenses                      |  |                            | 76,901 |   |               |   | 91,914 |  
|                                              |  |                            |        |   |               |   |        |  
|Operating income                              |  |                            | 4,527  |   |               |   | 423    |  
|Interest expense (income), net                |  |                            | (176   | ) |               |   | 329    |  
|Other income                                  |  |                            |       |   |               |   | (75    | )
|                                              |  |                            |        |   |               |   |        |  
|Income before income taxes                    |  |                            | 4,703  |   |               |   | 169    |  
|Income tax expense                            |  |                            | 1,458  |   |               |   | 51     |  
|                                              |  |                            |        |   |               |   |        |  
|Net income                                    |  | $                          | 3,245  |   |               | $ | 118    |  
|                                              |  |                            |        |   |               |   |        |  
|Net income per share                          |  |                            |        |   |               |   |        |  
|Basic                                         |  | $                          | 0.23   |   |               | $ | 0.01   |  
|Diluted                                       |  | $                          | 0.22   |   |               | $ | 0.01   |  
|Shares used in computing net income per share |  |                            |        |   |               |   |        |  
|Basic                                         |  |                            | 14,403 |   |               |   | 14,685 |  
|Diluted                                       |  |                            | 14,701 |   |               |   | 14,685 |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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McCormick & Schmicks Seafood Restaurants, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows-Unaudited

(in thousands)



|                                                                                           |  |                            |         |   |               |   |         |  
|------------------------------------------------------------------------------------------ |  | -------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                           |  | Thirteen week period ended |        
|                                                                                           |  | March 31,2007              |         |   | March 29,2008 |  
|Operating activities                                                                       |  |                            |         |   |               |   |         |  
|Net income                                                                                 |  | $                          | 3,245   |   |               | $ | 118     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities |  |                            |         |   |               |   |         |  
|Depreciation and amortization                                                              |  |                            | 2,800   |   |               |   | 3,394   |  
|Deferred income taxes                                                                      |  |                            | 1,458   |   |               |   | 51      |  
|Share based compensation                                                                   |  |                            | 392     |   |               |   | 258     |  
|Changes in operating assets and liabilities                                                |  |                            |         |   |               |   |         |  
|Trade accounts receivable                                                                  |  |                            | (601    | ) |               |   | 1,861   |  
|Tenant improvement allowance receivables                                                   |  |                            | (1,155  | ) |               |   | 618     |  
|Income tax receivable                                                                      |  |                            |        |   |               |   | 1,736   |  
|Inventories                                                                                |  |                            | (225    | ) |               |   | (74     | )
|Prepaid expenses and other current assets                                                  |  |                            | (63     | ) |               |   | (545    | )
|Accounts payable                                                                           |  |                            | (1,434  | ) |               |   | (4,959  | )
|Accrued expenses                                                                           |  |                            | (1,017  | ) |               |   | (4,114  | )
|Other long-term liabilities                                                                |  |                            | (895    | ) |               |   | 829     |  
|                                                                                           |  |                            |         |   |               |   |         |  
|Net cash provided by (used in) operating activities                                        |  |                            | 2,505   |   |               |   | (827    | )
|                                                                                           |  |                            |         |   |               |   |         |  
|Investing activities                                                                       |  |                            |         |   |               |   |         |  
|Purchase of property and equipment                                                         |  |                            | (5,818  | ) |               |   | (10,280 | )
|Acquisition of The Boathouse Restaurants of Canada, Inc. assets, net                       |  |                            | (14,481 | ) |               |   |        |  
|Decrease (increase) in other assets                                                        |  |                            | 616     |   |               |   | (173    | )
|                                                                                           |  |                            |         |   |               |   |         |  
|Net cash used in investing activities                                                      |  |                            | (19,683 | ) |               |   | (10,453 | )
|                                                                                           |  |                            |         |   |               |   |         |  
|Financing activities                                                                       |  |                            |         |   |               |   |         |  
|Borrowings made on revolving credit facility                                               |  |                            | 9,000   |   |               |   | 36,000  |  
|Payments made on revolving credit facility                                                 |  |                            |        |   |               |   | (29,000 | )
|Payments on capital lease obligations                                                      |  |                            | (95     | ) |               |   | (9      | )
|Proceeds from stock options exercised                                                      |  |                            | 2,572   |   |               |   |        |  
|Excess tax benefits from share based compensation                                          |  |                            | 1,022   |   |               |   |        |  
|                                                                                           |  |                            |         |   |               |   |         |  
|Net cash provided by financing activities                                                  |  |                            | 12,499  |   |               |   | 6,991   |  
|                                                                                           |  |                            |         |   |               |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                               |  |                            | 45      |   |               |   | (62     | )
|                                                                                           |  |                            |         |   |               |   |         |  
|Net decrease in cash and cash equivalents                                                  |  |                            | (4,634  | ) |               |   | (4,351  | )
|Cash and cash equivalents, beginning of period                                             |  |                            | 10,553  |   |               |   | 7,343   |  
|                                                                                           |  |                            |         |   |               |   |         |  
|Cash and cash equivalents, end of period                                                   |  | $                          | 5,919   |   |               | $ | 2,992   |  
|                                                                                           |  |                            |         |   |               |   |         |  
|Supplemental disclosure of cash flow information                                           |  |                            |         |   |               |   |         |  
|Cash paid during the period                                                                |  |                            |         |   |               |   |         |  
|Interest                                                                                   |  | $                          | 41      |   |               | $ | 90      |  
|Income taxes                                                                               |  | $                          | 836     |   |               | $ | 92      |  

The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.



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McCormick & Schmicks Seafood Restaurants, Inc. and Subsidiaries

Notes to Condensed
Consolidated Financial Statements-Unaudited

1. The Business and Organization

McCormick & Schmicks Seafood Restaurants, Inc. is a leading national seafood restaurant operator in the affordable upscale dining
segment. As of March 29, 2008, the Company operated 85 restaurants, including 79 restaurants in the United States, of which one is operated pursuant to a management agreement, and six restaurants in Canada under The Boathouse name.

2. Basis of Presentation

The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair statement have been included. Operating results for the thirteen week period ended March 29, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending
December 27, 2008.

The condensed consolidated balance sheet at December 29, 2007 has been derived from the audited condensed
consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to
the condensed consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended December 29, 2007.

3. Summary of Selected Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the assets, liabilities and results of operations of McCormick & Schmicks Seafood
Restaurants, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Management
Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at the time. Actual results could differ from those estimates under
different assumptions or conditions.

Revenue Recognition

Revenues are recognized at the point of delivery of products and services. The Company recognizes income from gift cards when the gift card is redeemed by the customer or when the likelihood of the gift card being
redeemed by the customer is remote (gift card breakage) and the Company determines there is no legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. The Company determines the gift card breakage rate based on
historical redemption patterns. Gift card income is included within revenues. Revenues are presented net of sales tax and the related obligation is recorded as a liability until the taxes are remitted to the appropriate taxing authorities.

Share-Based Compensation

The Company
determines the fair value of stock option awards on the date of grant using the Black-Scholes option-pricing model in accordance with Statement of Financial Accounting Standard (SFAS) No. 123, Share Based Payment (revised
2004) (SFAS 123R) using the modified prospective transition method. The Black-Scholes model is affected by the Companys stock price as well as the Companys assumptions regarding a number of complex and subjective
variables, including but not limited to the Companys expected stock price volatility over the term of the awards, life of the option, expected term of the option, the estimated forfeiture rate, the risk-free interest rate and the expected
dividend yield.

Basic and Diluted Net Income per Share

Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common non-vested
shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of employee stock options and restricted stock awards.

SFAS No. 128, Earnings per Share, requires that employee equity share options, non-vested shares and similar equity instruments granted by the Company be treated as potential common shares outstanding
in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options and is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury
stock method, assumed proceeds include the amount the employee must pay for exercising stock options, any purchase price the grantee pays for restricted stock, the amount of compensation cost for future service that the Company has not yet
recognized and the amount of tax benefits, if any, that would be credited to additional paid-in capital upon the exercise of the options or vesting of the restricted stock and restricted stock awards.

Leases

The Company generally operates its
restaurants in leased premises. The Company records the minimum base rents for its operating leases using the straight-line method over the life of the lease term, including option periods that are reasonably assured of renewal due to the presence
of certain economic penalties. For purposes of calculating straight-line rents, the lease term commences on the date the Company obtains control of the property, which is normally when the property is ready for normal tenant improvements (build-out
period). For certain leases the Company only has the right to exercise its option for renewal if certain sales targets are achieved at or near the renewal date. These renewal option periods have been included in the lease term when the Company
determines, at lease inception or at the



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acquisition date of the restaurant, if later, that the sales targets are non-substantive and achievement of such sales targets is reasonably assured. The
difference between rent expense calculated using the straight-line method and minimum rent paid is recorded as a deferred rent liability. The Company receives certain tenant improvement allowances, which are considered lease incentives and are
amortized as reduction of rent expense over the lease term. Accordingly, the Company has recorded a deferred rent liability for the straight-lining of rents and lease incentives, which is included in other long-term liabilities, of $14.9 million and
$15.8 million as of December 29, 2007 and March 29, 2008, respectively.

Foreign Currency

The Canadian dollar is the functional currency of the Companys subsidiary in Canada. Monetary assets and liabilities related to the Companys
operations in Canada are translated into U.S. dollars at the rate of exchange at the end of the applicable fiscal reporting period. Non-monetary assets and liabilities are translated into U.S. dollars at historical exchange rates. Revenues and
expenses are translated at the average rate of exchange for the applicable fiscal reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included in accumulated other comprehensive
income. Gains and losses resulting from foreign currency transactions are included in the Companys results of operations.

4. Recent Accounting
Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The standard expands required disclosures about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS 157 which did
not have an impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business
Combinations, SFAS 141(R), a replacement of SFAS No. 141, Business Combinations. The provisions of SFAS 141(R) establish principles and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest acquired and the goodwill acquired. SFAS 141(R) also establishes disclosure requirements which will enable users to evaluate the nature and financial
effects of a business combination, and applies to business combinations for which the acquisition date is on or after December 15, 2008, and may not be early adopted. The effect of SFAS 141(R) on the Company will be dependent upon any business
combination activity in the future.

5. Long-Term Debt and Standby Letters of Credit

On December 28, 2007, the Company completed an amendment to its existing revolving credit facility to increase its availability under the facility to
$150.0 million and up to $200.0 million at the Companys request if specified conditions are met.

As of March 29, 2008, the
outstanding balance on the Companys revolving credit facility was $20.0 million. The interest rate on the credit facility is based on the financial institutions prime rate plus a margin of up to 0.50% or the Eurodollar rate plus a margin
of 0.625% to 1.50%, with margins determined by certain financial ratios. The terms of the facility also allow the Company to borrow up to $10.0 million in Canadian dollars, which reduces the limit available for borrowings under the credit facility
by an equal amount, with an interest rate based on the Canadian Eurodollar Rate plus a margin of 0.725% to 1.60%, with margins determined by certain financial ratios. As of March 29, 2008, the Companys effective interest rate on its
borrowings was 5.25%, which was the prime rate. Under the revolving credit facility, the Company is required to comply with certain financial covenants, including a maximum adjusted leverage ratio, a minimum fixed charge ratio and a maximum capital
expenditure. The Company was in compliance with these covenants as of March 29, 2008.

Under the Companys revolving credit
facility agreement, borrowings are collateralized by the stock of the subsidiaries of the Company and are scheduled to mature on December 28, 2012. The revolving credit facility agreement also provides for bank guarantees under standby letter
of credit arrangements in the normal course of business operations. The Companys commercial bank issues standby letters of credit to secure our obligations to pay or perform when required to do so, pursuant to the requirements of an underlying
agreement or the provision of goods and services. The standby letters of credit are cancelable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in
accordance with its terms. As of March 29, 2008, the maximum exposure under these standby letters of credit was $3.0 million. As of March 29, 2008, the Company had $127.0 million available under its revolving credit facility.

6. Share-Based Compensation

Share-based
compensation expense recognized under SFAS 123R for the thirteen week period ended March 31, 2007 and March 29, 2008 was $0.4 million and $0.3 million, respectively.

The fair value of the Companys stock options was estimated using the following assumptions:



|                          |  |                            |   |  |               |  
|------------------------- |  | -------------------------- | - |  | ------------- | -
|                          |  | Thirteen week period ended |  
|                          |  | March 31,2007              |   |  | March 29,2008 |  
|Expected volatility       |  | 24.8                       | % |  | 24.8          | %
|Option life               |  | 10 years                   |   |  | 10 years      |  
|Expected term             |  | 5.5 years                  |   |  | 5.5 years     |  
|Estimated forfeiture rate |  | 14                         | % |  | 14            | %
|Risk-free interest rate   |  | 3.9                        | % |  | 3.9           | %
|Dividend yield            |  | 0                          | % |  | 0             | %

In July 2004 the Company awarded 879,600 options at $12.00, the fair market value on the date of
grant. In May 2006, the Board of Directors approved a total of 30,000 options to be issued at the discretion of management, of which 25,000 options have been awarded to various employees at a price equal to the fair market value on the date of
grant. As of March 29, 2008, options to acquire a total of 904,600 shares of the Companys common stock have been granted under the Plan at an average grant price of $12.35. As of March 29, 2008, there were 337,277 options
outstanding, of which 266,279 were exercisable.

In May 2006, the Company issued 142,000 shares of restricted stock to certain employees
and executive officers at a price equal to $23.05, the fair market value of the stock on the date of grant. In March 2008, the Company issued 68,968 shares of restricted stock to certain employees and executive officers at a price equal to $11.71,
the fair market value of the stock on the date of grant. One-third of the restricted stock grant vests on each of the three anniversary dates following the grant date if the grantee is then employed by the Company. As of March 29, 2008, there
were 139,957 shares of restricted stock outstanding.

Additional awards granted under the Plan may be in the form of nonqualified stock
options, incentive stock options, stock appreciation rights (SARs), restricted stock, stock bonuses and performance-based awards.



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Incentive stock options must have an exercise price that is at least equal to the fair market value of
the common stock, or 110% of the fair market value of the common stock for any greater than 10% owner of the Companys common stock, on the date of grant. Vesting of awards under the Plan may vary. Each award granted under the Plan may, at the
discretion of the board of directors of the Company, become fully exercisable or payable, as applicable, upon a change of control of the Company. There were no options issued in the quarter ended March 29, 2008.

Each award expires on the date determined at the date of grant; however, the maximum term of options, SARs and other rights to acquire common stock under
the Plan is ten years after the initial date of the award, subject to provisions for further deferred payment in certain circumstances. These and other awards may also be issued solely or in part for services. Any shares subject to awards that
are not paid or exercised before they expire or are terminated will become available for other award grants under the Plan. If not sooner terminated by the Companys board of directors, the Plan will terminate on June 16, 2014. As of
March 29, 2008 there were 500,125 shares reserved to be issued pursuant to the plan.

The following table summarizes the status of the
Companys share-based compensation plans, including stock options and restricted stock grants, as of March 29, 2008.



|                                 |  |              |  |                                |       |                 |         |             |         |                         |   |          
|-------------------------------- |  | ------------ |  | ------------------------------ | ----- | --------------- | ------- | ----------- | ------- | ----------------------- | - | ---------
|                                 |  | StockOptions |  | Weighted AverageExercise Price |       | RestrictedStock |         | TotalShares |         | AggregateIntrinsicValue
|Outstanding at December 29, 2007 |  | 337,277      |  | $                              | 12.94 |                 | 73,322  |             | 410,599 |                         |   |          
|Awards granted                   |  |             |  |                                |      |                 | 68,968  |             | 68,968  |                         | $ | 840,720  
|Awards exercised                 |  |             |  |                                |      |                 |        |             |        |                         |   |         
|Awards forfeited                 |  |             |  |                                |      |                 | 2,333   |             | 2,333   |                         |   | 28,439   
|                                 |  |              |  |                                |       |                 |         |             |         |                         |   |          
|Outstanding at March 29, 2008    |  | 337,277      |  |                                | 12.94 |                 | 139,957 |             | 477,234 |                         |   | 1,765,408
|                                 |  |              |  |                                |       |                 |         |             |         |                         |   |          
|Exercisable at March 29, 2008    |  | 266,279      |  | $                              | 12.34 |                 |        |             | 266,279 |                         | $ | 49,199   

The aggregate intrinsic value represents the difference between the Companys closing stock
price of $12.19 as of March 29, 2008 and the exercise price multiplied by the number of options outstanding as of that date. In the case of the restricted stock the aggregate intrinsic value is calculated using the closing price of the stock as
of March 29, 2008 multiplied by the number of shares outstanding as of that date.

The table following table summarizes additional
information about stock options outstanding at March 29, 2008.



|                         |  |                   |  |                                                    |  |                                |       |                   |         |                                |   |      
|------------------------ |  | ----------------- |  | -------------------------------------------------- |  | ------------------------------ | ----- | ----------------- | ------- | ------------------------------ | - | -----
|Outstanding              |  | Exercisable      
|Range of Exercise Prices |  | Number of Options |  | Weighted AverageRemaining Yearsof Contractual Life |  | Weighted AverageExercise price |       | Number of Options |         | Weighted AverageExercise price
|$12.00  $26.81          |  | 337,277           |  | 6.03                                               |  | $                              | 12.94 |                   | 266,279 |                                | $ | 12.34

As of March 29, 2008, unamortized compensation expense related to stock options and
restricted stock under the Companys 2004 Stock Incentive Plan was $1.7 million.

The following table summarizes share-based
compensation expense related to employee stock options and restricted stock awards under SFAS 123R for the thirteen week periods ended March 31, 2007 and March 29, 2008 (in thousands).



|                                                                               |  |                            |     |               |   |    
|------------------------------------------------------------------------------ |  | -------------------------- | --- | ------------- | - | ---
|                                                                               |  | Thirteen week period ended
|                                                                               |  | March 31,2007              |     | March 29,2008
|Labor                                                                          |  | $                          | 15  |               | $ | 3  
|General and administrative expenses                                            |  |                            | 377 |               |   | 255
|                                                                               |  |                            |     |               |   |    
|Share-based compensation expense included in total costs and expenses          |  |                            | 392 |               |   | 258
|Income tax benefit related to share-based compensation                         |  |                            | 105 |               |   | 97 
|                                                                               |  |                            |     |               |   |    
|Share-based compensation expense related to employee stock options, net of tax |  | $                          | 287 |               | $ | 161
|                                                                               |  |                            |     |               |   |    

7. Income Taxes

As of March 29, 2008, there have been no material changes to the Companys uncertain tax position disclosure as provided in the 2007 Annual Report on Form 10-K. The Company does not anticipate any
significant changes to the balance of unrecognized tax benefits in the next twelve months. It is the Companys policy to recognize interest and penalties related to uncertain tax positions in income tax expense.

8. Acquisition of The Boathouse Restaurants

On
March 30, 2007, the Company acquired all of the operating assets and intellectual property of The Boathouse restaurant brand from The Spectra Group of Great Restaurants, Inc. There are six operating The Boathouse restaurants in the greater
Vancouver, British Columbia area, including the Port Moody location, which opened October 1, 2007. The aggregate purchase price for The Boathouse restaurants was $14.9 million, including capitalized transaction costs of $0.4 million. No
unaudited pro forma data is presented due to the insignificant impact of the acquisition on the Companys condensed consolidated results of operations.

9. Comprehensive Income

The components of comprehensive income for the thirteen week periods ended March 31, 2007 and
March 29, 2008 are as follows:



|                             |  |                             |       |               |   |      |  
|---------------------------- |  | --------------------------- | ----- | ------------- | - | ---- | -
|                             |  | Thirteen week periods ended |      
|                             |  | March 31,2007               |       | March 29,2008 |  
|Net income                   |  | $                           | 3,245 |               | $ | 118  |  
|Other comprehensive income:  |  |                             |       |               |   |      |  
|Foreign currency translation |  |                             | 45    |               |   | (747 | )
|                             |  |                             |       |               |   |      |  
|Total comprehensive income   |  | $                           | 3,290 |               | $ | (629 | )
|                             |  |                             |       |               |   |      |  



8



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##### Table of Contents

10. Related Party Transactions

The Company leases properties from landlords deemed to be related parties of the Company. Total rent paid to these landlords was $0.2 million for each of the thirteen week periods ended March 31, 2007 and
March 29, 2008.

11. Commitments and Contingencies

The Company is subject to various claims, possible legal actions, and other matters arising in the normal course of business. While it is difficult to accurately predict the outcome of these issues, the Company
believes that adequate provision for potential losses has been made in the accompanying condensed consolidated financial statements and that the ultimate resolution of these matters will not have a material adverse effect on the Companys
financial position, results of operations or cash flows.

In 2006, the Company was named in a class action complaint regarding employment
practices filed in the U.S. District Court for the Northern District of California. The Company contested the claims and negotiated with the plaintiffs to reach a settlement. In February 2008, the Company negotiated a resolution of the claims with
the private plaintiffs and the parties submitted the settlement to the Court for approval. The negotiated settlement includes a monetary settlement and some changes to the Companys hiring and employment practices. The Company recorded a $2.2
million charge in fiscal 2007 for the settlement of the claims. The Company does not anticipate the changes to its hiring and employment practices in connection with the settlement will significantly affect its operations. The settlement was
approved by the court, and the settlement amount was paid, in April 2008.

The Companys primary insurer has informed the Company it
believes the Company has exhausted its insurance coverage with respect to employment claims arising in the Companys 2004 coverage year, which it believes includes the litigation in California and possibly similar future claims. The Company
disagrees with this interpretation of the coverage, but has taken this interpretation into account in connection with the charge related to the settlement of class action claims.

12. Net Income Per Share

Net income per share is computed in accordance with SFAS 128, Earnings
per Share. Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed based on the weighted average number of shares of common
stock and potentially dilutive securities, which includes options and restricted stock outstanding under the Companys 2004 Stock Incentive Plan. For the thirteen week periods ended March 31, 2007 and March 29, 2008, 3,000 and
477,234, respectively, of the Companys shares were excluded from the calculation due to their anti-dilutive effect.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS

This information should be read in conjunction with the condensed consolidated financial
statements and notes thereto included in Item 1 of Part I of this Quarterly Report and the audited condensed consolidated financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and
Results of Operations for the year ended December 29, 2007 contained in our 2007 Annual Report on Form 10-K.

The following section contains
forward-looking statements which are subject to risks and uncertainties. These forward-looking statements include those regarding anticipated restaurant openings, anticipated costs and sizes of future restaurants, anticipated costs savings and the
adequacy of anticipated sources of cash to fund our future capital requirements. Our actual results may differ materially from those discussed in the forward-looking statements. Words such as believes, anticipates,
expects, intends, plans and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.

Important factors that could cause actual results to differ materially from our expectations include those discussed below under Risk Factors. We do not
undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or expectations.

Overview

As of March 29, 2008, we operated 85 restaurants, including 79 restaurants in the
United States, of which one was operated pursuant to a management agreement and six restaurants operated in Canada under The Boathouse name. In May 2007, we terminated our management operations of one restaurant under management contract.

McCormick & Schmicks has successfully grown over the past 36 years by offering our customers menus that are printed twice daily with a
broad selection of affordable, quality, and fresh seafood in an upscale environment, serviced by knowledgeable and professional management and staff. McCormick & Schmicks inviting atmosphere and high quality, diverse menu offering and
compelling price-value proposition appeals to a diverse base of casual diners, families, travelers and the business community. Our revenues are generated by sales at our restaurants, including banquets.

We utilize a broad based marketing approach to drive guest traffic which includes advertisement in the USA Today and Cranes Business Journals, as well as in-house
marketing campaigns, including our preferred guest program and e-marketing programs. We have successfully grown our preferred guest program to more than 33,000 members since inception in 2006 and our online marketing e-mail club database to over
70,000 individuals.

We measure performance using key operating indicators such as comparable restaurant sales, food and beverage costs, labor costs,
restaurant operating expenses, and occupancy costs, with a focus on these costs and expenses as a percentage of revenues. For purposes of comparable restaurant sales, a restaurant is included in the comparable restaurant base in the first full
quarter following the eighteenth month of operations. We also track trends in average weekly revenues at both the restaurant level and on a condensed consolidated basis as an indicator of our performance. The key operating measure used by
management in evaluating our operating results is operating income. Operating income is calculated by deducting total restaurant operating costs, general and administrative expenses, restaurant pre-opening costs, depreciation and amortization and
other corporate costs from revenues. Restaurant pre-opening costs are analyzed based on the number and timing of restaurant openings and by comparison to budgeted amounts, with an overall target of approximately $0.3 million to $0.4 million per
restaurant opening, which may include non-cash rent expense during the construction period.



9



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##### Table of Contents

The most significant restaurant operating costs are food and beverage costs and labor and related employee benefits. We
believe our national and regional presence allows us to achieve better quality and pricing on key products than most of our competitors. We closely monitor food and beverage costs and regularly review our selection of preferred vendors on the basis
of several key metrics, including pricing. In addition, because we print our menu at least once daily in most of our restaurants, we are able to adapt the seafood items we offer to changes in vendor pricing to optimize our revenue mix and mitigate
the impact of cost increases in any particular seafood item by substituting a lower-cost alternative on our menu or by adjusting the price. With respect to labor costs, we believe the combination of future growth in revenues and the resulting
greater restaurant coverage of our vice presidents of operations and regional managers will allow us to leverage payroll expenses over time. Our employee benefits include health insurance, the cost of which continues to increase faster than the
general rate of inflation. We continually monitor this cost and review and implement strategies to effectively control increases.

General and
administrative expenses are controlled in absolute amounts and monitored as a percentage of revenues. As we have continued our growth, we have incurred substantial training costs and made significant investments in infrastructure, including our
information systems. As we continue to grow and are able to leverage investments made in our people and systems, we expect these expenses to decrease as a percentage of revenues over time.

Identification of appropriate new restaurant sites is essential to our growth strategy. We evaluate and invest in new restaurants based on site-specific projected
returns on investment. We believe our restaurant model and flexible real estate strategy provide us with continued opportunities to find attractive real estate locations on favorable terms.

Strategic Focus and Operating Outlook

Our primary
business focus for over 36 years has been to consistently offer a broad selection of high quality, fresh seafood, which we believe commands strong loyalty from our guests. During the fourth quarter of 2007 we initiated a new steak program to
complement our seafood offerings. Under the new program, we increased the range of beef offerings on our menu, upgraded the quality of beef served and implemented new cooking techniques. As a result of the new program, our beef sales have increased
to approximately 9% of our entrée sales in the first quarter of 2008.

We have successfully expanded our McCormick & Schmicks Seafood
Restaurant concept throughout the United States and have competed effectively with national and regional restaurant chains and with local restaurant operators. On March 30, 2007, we completed the acquisition of The Boathouse restaurants,
consisting of five restaurants and one under development, which opened October 1, 2007, in the greater Vancouver, British Columbia area.

Our
objective is to continue to prudently grow McCormick & Schmicks seafood restaurants and The Boathouse restaurants in existing and new markets. Our 2008 plan includes opening twelve domestic restaurants, of which three locations were
opened as of March 29, 2008. We also consider acquisitions of additional restaurants or restaurant groups when opportunities are presented to us. In addition to new restaurant growth, we are committed to improving comparable restaurant sales
and operating margins over the levels achieved in 2007.

Financial Performance Overview

The following are highlights of our financial performance for the thirteen week period ended March 29, 2008 compared to the thirteen week period ended March 31,
2007:



| |  |  | Revenues increased 13.4% to $92.3 million from $81.4 million
| | - |  | ------------------------------------------------------------



| |  |  | Comparable restaurant sales decreased 5.8%
| | - |  | ------------------------------------------



| |  |  | Restaurant pre-opening costs increased to $1.2 million from $0.4 million
| | - |  | ------------------------------------------------------------------------



| |  |  | Operating income decreased to $0.4 million from $4.5 million
| | - |  | ------------------------------------------------------------



| |  |  | Net income decreased to $0.1 million from $3.2 million
| | - |  | ------------------------------------------------------



| |  |  | Diluted earnings per share decreased to $0.01 from $0.22
| | - |  | --------------------------------------------------------

Thirteen Week Period Ended March 31, 2007 Compared to Thirteen Week Period Ended March 29, 2008

The following table sets forth
our operating results from our unaudited condensed consolidated statements of income.



|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|----------------------------------- |  | -------------------------- | ------ | - | ------------- | ----- | -- |  | - | ------ | - |  | ----- | --
|                                    |  | Thirteen week period ended |       
|                                    |  | March 31,2007              |        |   | March 29,2008 |      
|                                    |  | (in thousands)             |       
|Revenues                            |  | $                          | 81,428 |   |               | 100.0 | %  |  | $ | 92,337 |   |  | 100.0 | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Restaurant operating costs          |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Food and beverage                   |  |                            | 23,547 |   |               | 28.9  | %  |  |   | 28,071 |   |  | 30.4  | % 
|Labor                               |  |                            | 25,764 |   |               | 31.7  | %  |  |   | 30,397 |   |  | 32.9  | % 
|Operating                           |  |                            | 12,153 |   |               | 14.9  | %  |  |   | 14,501 |   |  | 15.7  | % 
|Occupancy                           |  |                            | 7,486  |   |               | 9.2   | %  |  |   | 8,798  |   |  | 9.5   | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Total restaurant operating costs    |  |                            | 68,950 |   |               | 84.7  | %  |  |   | 81,767 |   |  | 88.5  | % 
|General and administrative expenses |  |                            | 4,703  |   |               | 5.8   | %  |  |   | 5,569  |   |  | 6.0   | % 
|Restaurant pre-opening costs        |  |                            | 448    |   |               | 0.5   | %  |  |   | 1,184  |   |  | 1.3   | % 
|Depreciation and amortization       |  |                            | 2,800  |   |               | 3.4   | %  |  |   | 3,394  |   |  | 3.7   | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Total costs and expenses            |  |                            | 76,901 |   |               | 94.4  | %  |  |   | 91,914 |   |  | 99.5  | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Operating income                    |  |                            | 4,527  |   |               | 5.6   | %  |  |   | 423    |   |  | 0.5   | % 
|Interest expense (income), net      |  |                            | (176   | ) |               | (0.2  | )% |  |   | 329    |   |  | 0.4   | % 
|Other income                        |  |                            |       |   |               |      |    |  |   | (75    | ) |  | (0.1  | )%
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Income before income taxes          |  |                            | 4,703  |   |               | 5.8   | %  |  |   | 169    |   |  | 0.2   | % 
|Income tax expense                  |  |                            | 1,458  |   |               | 1.8   | %  |  |   | 51     |   |  | 0.1   | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   
|Net income                          |  | $                          | 3,245  |   |               | 4.0   | %  |  | $ | 118    |   |  | 0.1   | % 
|                                    |  |                            |        |   |               |       |    |  |   |        |   |  |       |   



10



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##### Table of Contents

Revenues and Restaurant Operating Costs

The following table sets forth revenues and restaurant operating costs, including food and beverage, labor, operating and occupancy costs from our unaudited condensed consolidated statements of income.



|                                 |  |                            |        |                |   |        |  |   |        |  |      |  
|-------------------------------- |  | -------------------------- | ------ | -------------- | - | ------ |  | - | ------ |  | ---- | -
|                                 |  | Thirteen week period ended |        | Change         |  
|                                 |  | March 31,2007              |        | March 29,2008  |   | $      |  | % |       
|                                 |  |                            |        | (in thousands) |   |        |  |   |       
|Revenues                         |  | $                          | 81,428 |                | $ | 92,337 |  | $ | 10,909 |  | 13.4 | %
|                                 |  |                            |        |                |   |        |  |   |        |  |      |  
|Restaurant operating costs       |  |                            |        |                |   |        |  |   |        |  |      |  
|Food and beverage                |  | $                          | 23,547 |                | $ | 28,071 |  | $ | 4,524  |  | 19.2 | %
|Labor                            |  |                            | 25,764 |                |   | 30,397 |  |   | 4,633  |  | 18.0 | %
|Operating                        |  |                            | 12,153 |                |   | 14,501 |  |   | 2,348  |  | 19.3 | %
|Occupancy                        |  |                            | 7,486  |                |   | 8,798  |  |   | 1,312  |  | 17.5 | %
|                                 |  |                            |        |                |   |        |  |   |        |  |      |  
|Total restaurant operating costs |  | $                          | 68,950 |                | $ | 81,767 |  | $ | 12,817 |  | 18.6 | %
|                                 |  |                            |        |                |   |        |  |   |        |  |      |  

Revenues. Revenues increased $10.9 million, or 13.4%, to $92.3 million in the thirteen week period
ended March 29, 2008 from $81.4 million in the thirteen week period ended March 31, 2007. This increase was primarily due to the fourteen restaurants added since March 31, 2007, which was partially offset by a 5.8% decrease in
comparable restaurants sales.

Food and Beverage Costs. Food and beverage costs increased $4.5 million, or 19.2%, to $28.1 million in the
thirteen week period ended March 29, 2008 from $23.5 million in the thirteen week period ended March 31, 2007. This increase was primarily due to the fourteen restaurants added since March 31, 2007. Food and beverage costs as a
percentage of revenues increased to 30.4% in the thirteen week period ended March 29, 2008 from 28.9% in the thirteen week period ended March 31, 2007, primarily due to increased food costs as a result of the recently implemented beef
program, coupled with increased liquor costs, as a percentage of revenues.

Labor Costs. Labor costs increased $4.6 million, or 18.0%, to $30.4
million in the thirteen week period ended March 29, 2008 from $25.8 million in thirteen week period ended March 31, 2007. This increase was primarily due to the fourteen restaurants added since March 31, 2007. Labor costs as a
percentage of revenues increased to 32.9% in the thirteen week period ended March 29, 2008 from 31.7% in the thirteen week period ended March 31, 2007, primarily due to deleveraging of sales at the comparable restaurants, coupled with the
higher mix of new restaurants, which typically have higher labor run rates in the first 18 months of operation.

Operating Costs. Operating
costs increased $2.3 million, or 19.3%, to $14.5 million in the thirteen week period ended March 29, 2008 from $12.2 million in the thirteen week period ended March 31, 2007. This increase was primarily due to the fourteen restaurants
added since March 31, 2007. Operating costs as a percentage of revenues increased to 15.7% in the thirteen week period ended March 29, 2008 from 14.9% in the thirteen week period ended March 31, 2007, primarily due to the
deleveraging of sales at the comparable restaurants, coupled with an increase in advertising expense. Deleveraging of sales occurs due to the fact that a large portion of the associated costs are fixed and when the sales decline the related costs
have a larger impact as a percentage of revenues.

Occupancy Costs. Occupancy costs increased $1.3 million, or 17.5%, to $8.8 million in the
thirteen week period ended March 29, 2008 from $7.5 million in the thirteen week period ended March 31, 2007, primarily due to the fourteen restaurants added since March 31, 2007. Occupancy costs as a percentage of revenues increased
to 9.5% in the thirteen week period ended March 29, 2008 from 9.2% in the thirteen week period ended March 31, 2007, primarily due to deleveraging of fixed occupancy costs at the comparable restaurants.

General and Administrative Expenses, Restaurant Pre-Opening Costs and Depreciation and Amortization

The following table sets forth general and administrative expenses, restaurant pre-opening costs, and depreciation and amortization from our unaudited condensed
consolidated statements of income.



|                                    |  |                            |       |                |   |       |  |   |     |  |       |  
|----------------------------------- |  | -------------------------- | ----- | -------------- | - | ----- |  | - | --- |  | ----- | -
|                                    |  | Thirteen week period ended |       | Change         |  
|                                    |  | March 31,2007              |       | March 29,2008  |   | $     |  | % |    
|                                    |  |                            |       | (in thousands) |   |       |  |   |    
|General and administrative expenses |  | $                          | 4,703 |                | $ | 5,569 |  | $ | 866 |  | 18.4  | %
|Restaurant pre-opening costs        |  |                            | 448   |                |   | 1,184 |  |   | 736 |  | 164.3 | %
|Depreciation and amortization       |  |                            | 2,800 |                |   | 3,394 |  |   | 594 |  | 21.2  | %

General and Administrative Expenses. General and administrative expenses increased $0.9 million, or
18.4%, to $5.6 million in the thirteen week period ended March 29, 2008 from $4.7 million in the thirteen week period ended March 31, 2007, primarily due to the fourteen restaurants added since March 31, 2007. General and
administrative expenses as a percentage of revenues increased to 6.0% in the thirteen week period ended March 29, 2008 from 5.8% in the thirteen week period ended March 31, 2007, primarily due to the higher costs associated with the
fourteen restaurants added since March 31, 2007, a 20% increase in the restaurant base.

Restaurant Pre-Opening Costs. Restaurant
pre-opening costs increased $0.7 million, to $1.2 million in the thirteen week period ended March 29, 2008 from $0.4 million in the thirteen week period ended March 31, 2007, primarily due to the timing of restaurant openings and the
number of restaurants under construction.

Depreciation and Amortization. Depreciation and amortization increased $0.6 million, or 21.2%, to
$3.4 million in the thirteen week period ended March 29, 2008 from $2.8 million in the thirteen week period ended March 31, 2007. The increase was primarily due to the fourteen restaurants added since March 31, 2007. Depreciation and
amortization as a percentage of revenues increased to 3.7% in the thirteen week period ended March 29, 2008 from 3.4% in the thirteen week period ended March 31, 2007, primarily due to the fourteen restaurants added since March 31,
2007.

Interest Income, net, Other income, Income Tax Expense and Net Income

The following table sets forth interest income, net, other income, income tax expense and net income from our unaudited condensed consolidated statements of income.



|                               |  |                            |       |   |                |   |     |   |  |   |        |   |  |        |   
|------------------------------ |  | -------------------------- | ----- | - | -------------- | - | --- | - |  | - | ------ | - |  | ------ | --
|                               |  | Thirteen week period ended |       |   | Change         |  
|                               |  | March 31,2007              |       |   | March 29,2008  |   |     | $ |  |   | %      |  
|                               |  |                            |       |   | (in thousands) |   |     |   |  |   |        |  
|Interest expense (income), net |  | $                          | (176  | ) |                | $ | 329 |   |  | $ | 505    |   |  | *      |   
|Other income                   |  |                            |      |   |                |   | (75 | ) |  |   | (75    | ) |  | (100.0 | )%
|                               |  |                            |       |   |                |   |     |   |  |   |        |   |  |        |   
|Income before income taxes     |  | $                          | 4,703 |   |                | $ | 169 |   |  | $ | (4,534 | ) |  | (96.4  | )%
|Income tax expense             |  |                            | 1,458 |   |                |   | 51  |   |  |   | (1,407 | ) |  | (96.5  | )%
|                               |  |                            |       |   |                |   |     |   |  |   |        |   |  |        |   
|Net income                     |  | $                          | 3,245 |   |                | $ | 118 |   |  | $ | (3,127 | ) |  | (96.4  | )%
|                               |  |                            |       |   |                |   |     |   |  |   |        |   |  |        |   



|* | Percentage is non-meaningful
|- | ----------------------------



11



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##### Table of Contents

Interest Expense (Income), Net. Interest expense (income), net, was a net interest expense of $0.3 million
for the thirteen week period ended March 29, 2008 compared to a net interest income of $0.2 million in the thirteen week period ended March 31, 2007, primarily due to the increased average borrowings outstanding and lower interest income
earned on investment balances for the quarter ended March 29, 2008.

Other Income. Other income was $75,000 for the thirteen week period ended
March 29, 2008, due to estimated business interruption insurance proceeds. The business interruption was caused by weather related damage to our location at the CNN center in Atlanta, GA, which caused the restaurant to close briefly for
repairs. The damaged restaurant was repaired and was re-opened and operating as of March 29, 2008.

Income Tax Expense. Income tax expense
was $51,000 in the thirteen week period ended March 29, 2008 compared to $1.5 million in the thirteen week period ended March 31, 2007. Income tax expense reflects an estimated effective tax rate of 30.0% compared to 31.0% in the thirteen
week period ended March 31, 2007. The decrease in the estimated effective annualized tax rate is primarily due to the estimated tax impact of FICA tax credits being calculated on a lower income before tax.

Net Income.Net income decreased $3.1 million to $0.1 million in the thirteen week period ended March 29, 2008 from net income of $3.2 million in the
thirteen week period ended March 31, 2007, primarily due to a decrease in comparable restaurant sales, coupled with an increase in total restaurant operating costs, restaurant pre-opening costs, and interest expense, net.

Liquidity and Capital Resources

Our primary cash needs have
been for new restaurant construction, restaurant acquisition, working capital and general corporate purposes, including payments under credit facilities. Our main sources of cash have been issuance of common stock, net cash provided by operating
activities and borrowings under our credit facility. We financed the acquisition of The Boathouse restaurants with borrowings under our credit facility and cash on hand.

The following table summarizes our sources and uses of cash and cash equivalents from our unaudited condensed consolidated statements of cash flows:



|                                                             |  |                            |         |   |               |   |         |  
|------------------------------------------------------------ |  | -------------------------- | ------- | - | ------------- | - | ------- | -
|                                                             |  | Thirteen week period ended |        
|                                                             |  | March 31,2007              |         |   | March 29,2008 |  
|                                                             |  | (in thousands)             |        
|Net cash provided by (used in) operating activities          |  | $                          | 2,505   |   |               | $ | (827    | )
|Net cash used in investing activities                        |  |                            | (19,683 | ) |               |   | (10,453 | )
|Net cash provided by financing activities                    |  |                            | 12,499  |   |               |   | 6,991   |  
|Effect of exchange rate changes on cash and cash equivalents |  |                            | 45      |   |               |   | (62     | )
|                                                             |  |                            |         |   |               |   |         |  
|Net decrease in cash and cash equivalents                    |  | $                          | (4,634  | ) |               | $ | (4,351  | )
|                                                             |  |                            |         |   |               |   |         |  

The change in net cash used in operating activities of $0.8 million in the thirteen week period ended
March 29, 2008 compared to net cash provided by operating activities of $2.5 million in the thirteen week period ended March 31, 2007 was primarily due to the change in net income between periods of $3.1 million.

Net cash used in investing activities was $10.5 million in the thirteen week period ended March 29, 2008 compared to $19.7 million in the thirteen week period ended
March 31, 2007. We use cash primarily for equipment purchases and construction costs related to new restaurant openings, to purchase restaurants, and to upgrade and add capacity to existing restaurants. Net cash used in investing activities
varied in the periods presented based on the number of new restaurants opened and existing restaurant capacity expanded during the period. In March 2007, we also purchased all of the assets of The Boathouse Restaurants in Vancouver B.C. for $14.9
million, including capitalized transaction costs of $0.4 million. Purchases of property and equipment also include purchases of information technology systems and expenditures relating to our corporate headquarters.

Net cash provided by financing activities was $7.0 million in the thirteen week period ended March 29, 2008 compared to $12.5 million in the thirteen week period
ended March 31, 2007. Net cash provided by financing activities was primarily due to the borrowings on our revolving credit facility related to the amounts paid for construction of new restaurant openings during the first quarter of 2008 and
restaurants we plan to open during the fiscal year 2008. Net cash provided by financing activities for the thirteen week period ended March 31, 2007 was primarily the result of borrowings under our revolving credit facility related to the
acquisition of The Boathouse restaurants

On December 28, 2007, we amended our existing senior credit facility to, among other things, increase the
availability under the facility to $150.0 million, and up to $200.0 million at our request if specified conditions are met. As of March 29, 2008, there was an outstanding balance on our revolving credit facility of $20.0 million. The interest
rate on the credit facility is based on the financial institutions prime rate plus a margin of up to 0.50% or the Eurodollar rate plus a margin of 0.625% to 1.50%, with margins determined by certain financial ratios. The terms of the facility
also allow us to borrow up to $10.0 million in Canadian dollars, with an interest rate based on the Canadian Eurodollar Rate plus a margin of 0.725% to 1.60%, with margins determined by certain financial ratios. Under our revolving credit facility
agreement, we are subject to certain financial and non-financial covenants, including an adjusted leverage ratio, a consolidated fixed charge coverage ratio, and growth capital expenditures limitations. We were in compliance with these covenants as
of March 29, 2008.

Under our revolving credit facility agreement, loans are collateralized by the stock of the subsidiaries of the Company and are
scheduled to mature on December 28, 2012. The revolving credit facility agreement also provides for bank guarantees under standby letter of credit arrangements in the normal course of business operations. Our commercial bank issues standby
letters of credit to secure our obligations to pay or perform when required to do so, pursuant to the requirements of an underlying agreement or the provision of goods and services. The standby letters of credit are cancelable only at the option of
the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. As of March 29, 2008 the maximum exposure under these standby letters of credit was $3.0
million. At March 29, 2008 we had $127.0 million available under our revolving credit facility.

We believe the net cash provided by operating
activities and funds available from our revolving credit facility will be sufficient to satisfy our working capital and capital expenditure requirements, including restaurant construction, and pre-opening costs and potential initial operating losses
related to new restaurant openings, for at least the next twelve months.



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Critical Accounting Policies and Use of Estimates

Our significant accounting policies are those that we believe are both important to the portrayal of our financial condition and results and require our
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe our critical accounting policies and estimates used in the preparation of our
condensed consolidated financial statements are the following:

Impairment of Long-Lived Assets

We review property and equipment (which includes leasehold improvements) for impairment when events or circumstances indicate these assets might be
impaired. We test impairment using historical cash flow and other relevant facts and circumstances as the primary basis for our estimates of future cash flows. The analysis is performed at the restaurant level for indicators of permanent impairment.
In determining future cash flows, significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by
calculating the amount by which the asset-carrying amount exceeds its fair value. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment.

In our most recent impairment evaluation for long-lived assets, we identified assets at three restaurant locations that were determined to be impaired as
of December 29, 2007. We recorded an impairment charge of $5.4 million related to the impairment of fixtures, equipment, and leasehold improvements. These locations are currently operating and management is evaluating whether or not the Company
will continue to operate the restaurants. There were no impairments during 2005 or 2006.

Goodwill and Other Indefinite Lived Assets

Goodwill and other indefinite lived assets that resulted from our acquisition of The Boathouse restaurants in March 2007, as well
as other intangible assets with indefinite lives are not subject to amortization. However, such assets must be tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and at least
annually. We completed our most recent impairment test on balances as of December 29, 2007, and determined that there was no impairment related to goodwill and other indefinite lived assets. In assessing the recoverability of goodwill and other
indefinite lived assets, market values and projections regarding estimated future cash flows and other factors are used to determine the fair value of the respective assets. The estimated future cash flows were projected using significant
assumptions, including future revenues and expenses. If these estimates or related projections change in the future, we may be required to record impairment charges for these assets.

Insurance Liability

We maintain various insurance policies including workers
compensation, employee health, and general liability. Pursuant to those policies, we are responsible for losses up to certain limits and are required to estimate a liability that represents our ultimate exposure for aggregate losses below those
limits. This liability is based on managements estimates of the ultimate costs to be incurred to settle known claims and claims not reported as of the balance sheet date. Our estimated liability is not discounted and is based on a number of
assumptions and factors, including historical trends, actuarial assumptions, and economic conditions. If actual trends differ from our estimates, our financial results could be impacted. In addition, we may exceed our insurance coverage for
specified matters. Our primary insurer has informed us it believes we have exhausted our insurance coverage with respect to employment claims arising in our 2004 coverage year, which it believes includes the litigation in California and possibly
similar future claims. We disagree with this interpretation of our coverage, but we have taken this interpretation into account in connection with our accounting for claims under the policy. See PART II. OTHER INFORMATIONITEM 1. LEGAL
PROCEEDINGS.

Income Taxes

We
account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this
method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including
scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the
future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes. Accrued interest and penalties are included within the related tax liability in the condensed
consolidated balance sheet.

Operating Leases

The Company generally operates its restaurants in leased premises. The Company records the minimum base rents for its operating leases on a straight-line basis over the life of the lease term, including option periods
which are reasonably assured of renewal due to the presence of certain economic penalties. For purposes of calculating straight-line rents, the lease term commences on the date the lessee obtains control of the property, which is normally when the
property is ready for normal tenant improvements (build-out-period). For certain leases the Company only has the right to exercise its option for renewal if certain sales targets are achieved at or near the renewal date. These renewal option periods
have been included in the lease term when the Company determines at lease inception or at the acquisition date of the restaurant, if later, that the sales targets are non-substantive and achievement of such sales targets is virtually certain. The
difference between rent expense calculated on a straight-line basis and rent paid is recorded as deferred rent liability. The Company receives certain tenant improvement allowances which are considered lease incentives and are amortized as a
reduction of rent expense over the lease term. Accordingly, the Company has recorded a deferred rent liability for the straight lining of rents and lease incentives, which is included in other long-term liabilities of $14.9 million and $15.8
million, as of December 29, 2007 and March 29, 2008, respectively.

Share-Based Compensation

We account for share-based compensation in accordance with the fair value recognition provisions of SFAS No. 123, Share Based Payment (revised
2004) (SFAS 123R). We adopted SFAS 123R using the modified prospective transition method as of January 1, 2006, the first day of our fiscal year 2006. Under SFAS 123R, we determined the fair value of share-based payment awards
on the date of grant using the Black-Scholes option-pricing model. The model is affected by our stock price as well as our assumptions regarding a number of complex and subjective variables, including but not limited to our expected stock price
volatility over the term of the awards, life of the option, expected term of the option, the estimated forfeiture rate, the risk-free interest rate and the expected dividend yield.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We are exposed to various market risks, including changes in interest rates and foreign currency exchange rates. Our foreign exchange rate risk relates to our operations in Canada.



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Our market risk exposure for changes in interest rates relates to our cash and cash equivalents and
revolving credit facility. We invest any excess cash in highly liquid short-term investments with maturities of less than one year. These investments are not held for trading or other speculative purposes. Changes in interest rates affect the
investment income we earn on our investments and, therefore, impact our cash flows and results of operations.

Under our revolving credit
facility, we are exposed to market risk from changes in interest rates on borrowings, which bear interest at the financial institutions prime rate plus a margin of up to 0.50% or the Eurodollar rate plus a margin of 0.625% to 1.50%, with
margins determined by certain financial ratios. At our option, we may convert loans under our revolving credit facility from one type of rate to the other. The terms of the facility also allow us to borrow up to $10.0 million in Canadian dollars,
with an interest rate based on the Canadian Eurodollar Rate plus a margin of 0.725% to 1.60%, with margins determined by certain financial ratios. As of March 29, 2008, there was an outstanding balance of $20.0 million under our revolving
credit facility. A hypothetical 100 basis point change in our effective borrowing rate would not have a material effect on our results of operations.

A portion of our revenue is generated in Canada. As a result, we conduct some transactions in Canadian currency, which increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S.
dollar. A hypothetical 10% decline in the foreign exchange rate between the Canadian dollar and the U.S. dollar would not have a material effect on our financial results.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls and
Procedures.Our management has evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period
covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of
the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely
manner, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.There have been no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

Occasionally, we are a defendant
in litigation arising in the ordinary course of our business, including claims resulting from slip and fall accidents, employment related claims and claims from guests or employees alleging illness, injury or other food quality, health
or operational concerns. These may include claims brought against us by private party plaintiffs and various government agencies, including federal, state and local taxing agencies, various state and local health departments, and the Equal
Employment Opportunity Commission (EEOC) and other employment related agencies, among others. In certain instances we may settle claims if management concludes that future costs to defend the suits outweigh the costs to settle the
claims.

In 2006, the Company was named in a class action complaint regarding employment practices filed in the U.S. District Court for the
Northern District of California. The Company contested the claims and negotiated with the plaintiffs to reach a settlement. In February 2008, the Company negotiated a resolution of the claims with the private plaintiffs and the parties submitted the
settlement to the Court for approval. The negotiated settlement includes a monetary settlement and some changes to the Companys hiring and employment practices. The Company recorded a $2.2 million charge in fiscal 2007 for the pending
settlement of the claims. The Company does not anticipate the changes to its hiring and employment practices in connection with the settlement will significantly affect its operations. The settlement was approved by the court, and the settlement
amount was paid, in April 2008.

The Companys primary insurer has informed the Company it believes the Company has exhausted its
insurance coverage with respect to employment claims arising in the Companys 2004 coverage year, which it believes includes the litigation in California and possibly similar future claims. The Company disagrees with this interpretation of the
coverage, but has taken this interpretation into account in connection with the accounting for employment claims.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Restaurant companies have been the target of
class-actions and other lawsuits alleging, among other things, violation of federal and state law.

We are subject to a variety of
claims arising in the ordinary course of our business brought by or on behalf of our customers or employees, including personal injury claims, contract claims, and employment-related claims. In recent years, a number of restaurant companies have
been subject to lawsuits, including class-action lawsuits, alleging violations of federal and state law regarding workplace, employment and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the
defendants. Similar lawsuits have been instituted against us from time to time. Regardless of whether any claims against us are valid or whether we are ultimately determined to be liable, claims may be expensive to defend and may divert time and
money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations, and adverse publicity resulting
from these allegations may materially adversely affect our business. We may incur substantial damages and expenses resulting from lawsuits, which could have a material adverse effect on our business.

Our ability to expand our restaurant base is influenced by factors beyond our control and therefore we may not be able to achieve our planned growth.

Our growth strategy depends in large part on our ability to open new restaurants and to operate these restaurants profitably.
Delays or failures in opening new restaurants could impair our ability to meet our growth objectives. We have in the past experienced delays in restaurant openings and may experience similar delays in the future. Our ability to expand our business
successfully will depend upon numerous factors, including:



| |  |  | hiring, training and retaining skilled management, chefs and other qualified personnel to open, manage and operate new restaurants;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | locating and securing a sufficient number of suitable new restaurant sites in new and existing markets on acceptable lease terms;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | managing the amount of time and construction and development costs associated with the opening of new restaurants;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | obtaining adequate financing for the construction of new restaurants;
| | - |  | ---------------------------------------------------------------------



| |  |  | securing governmental approvals and permits required to open new restaurants in a timely manner, if at all;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | successfully promoting our new restaurants and competing in the markets in which our new restaurants are located; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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| |  |  | general economic conditions.
| | - |  | ----------------------------

Some
of these factors are beyond our control. We may not be able to achieve our expansion goals and our new restaurants may not be able to achieve operating results similar to those of our existing restaurants.

Unexpected expenses and low market acceptance could adversely affect the profitability of restaurants that we open in new markets.

Our growth strategy includes opening restaurants in markets where we have little or no operating experience and in which potential customers may not be
familiar with our restaurants. The success of these new restaurants may be affected by different competitive conditions, consumer tastes and discretionary spending patterns, and our ability to generate market awareness and acceptance of the
McCormick & Schmicks brand and our other brands. As a result, we may incur costs related to the opening, operation and promotion of these new restaurants that are greater than those incurred in other areas. Even though we may incur
substantial additional costs with these new restaurants, they may attract fewer customers than our more established restaurants in existing markets. Sales at restaurants we open in new markets may take longer to reach our average annual sales, if at
all. As a result, the results of operations at our new restaurants may be inferior to those of our existing restaurants. We may not be able to profitably open restaurants in new markets.

Our growth may strain our infrastructure and resources, which could slow our development of new restaurants and adversely affect our ability to manage our existing restaurants.

We opened seven company-owned restaurants in 2006, and in 2007 we opened twelve company-owned restaurants and acquired five The Boathouse restaurants in
March 2007. We plan to open twelve company-owned restaurants in 2008, of which we have opened three as of March 29, 2008. Our expansion and our future growth may strain our restaurant management systems and resources, financial controls and
information systems. Those demands on our infrastructure and resources may also adversely affect our ability to manage our existing restaurants. If we fail to continue to improve our infrastructure or to manage other factors necessary for us to meet
our expansion objectives, our operating results could be materially and adversely affected.

Failure of our existing or new restaurants to achieve
predicted results could have a negative impact on our revenues and performance results.

The results achieved by our restaurants may
not be indicative of longer term performance or the potential market acceptance of restaurants in other locations. We cannot be assured that any new restaurant that we open will have similar operating results to those of prior restaurants. The
failure of our existing or new restaurants to perform as predicted could result in an impairment charge, which could negatively impact our results of operations. In 2007, we recorded an impairment charge of $5.4 million related to long lived assets
at three of our existing restaurants.

Any acquisition of new restaurants could strain our financial resources or result in dilution to our existing
stockholders.

Future acquisitions of existing restaurants, which may be accomplished with cash or through the issuance of our
equity securities, or a combination of both, could result in dilutive issuances of our equity securities, the incurrence of debt and contingent liabilities and impairment charges related to goodwill and other intangible assets, any of which could
harm our business, financial condition or results of operations.

Our ability to raise capital in the future may be limited, which could adversely
impact our growth.

Changes in our operating plans, acceleration of our expansion plans, lower than anticipated sales, increased
expenses or other events described in this section may require us to seek additional debt or equity financing. Financing may not be available on acceptable terms and our failure to raise capital when needed could negatively impact our growth and our
financial condition and results of operations. Additional equity financing may be dilutive to the holders of our common stock, and debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability
to operate our business.

Our operations are susceptible to changes in food availability and costs, which could adversely affect our operating
results.

Our profitability depends significantly on our ability to anticipate and react to changes in seafood costs. We rely on
local, regional and national suppliers to provide our seafood. Increases in distribution costs or sale prices or failure to perform by these suppliers could cause our food costs to increase. We could also experience significant short-term
disruptions in our supply if a significant supplier failed to meet its obligations. The supply of seafood is more volatile than other types of food. The type, variety, quality and price of seafood is subject to factors beyond our control, including
weather, governmental regulation, availability and seasonality, each of which may affect our food costs or cause a disruption in our supply. Changes in the price or availability of certain types of seafood could affect our ability to offer a broad
menu and price offering to customers and could materially adversely affect our profitability.

Our operating results may fluctuate significantly and
could fall below the expectations of securities analysts and investors due to seasonality and other factors, resulting in a decline in our stock price.

Our operating results may fluctuate significantly because of several factors, including:



| |  |  | our ability to achieve and manage our planned expansion;
| | - |  | --------------------------------------------------------



| |  |  | our ability to achieve market acceptance, particularly in new markets;
| | - |  | ----------------------------------------------------------------------



| |  |  | our ability to raise capital;
| | - |  | -----------------------------



| |  |  | changes in the availability and costs of food;
| | - |  | ----------------------------------------------



| |  |  | the loss of key management personnel;
| | - |  | -------------------------------------



| |  |  | the concentration of our restaurants in specific geographic areas;
| | - |  | ------------------------------------------------------------------



| |  |  | our ability to protect our name and logo and other proprietary information;
| | - |  | ---------------------------------------------------------------------------



| |  |  | changes in consumer preferences or discretionary spending;
| | - |  | ----------------------------------------------------------



| |  |  | fluctuations in the number of visitors or business travelers to downtown locations;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | health concerns about seafood or other foods;
| | - |  | ---------------------------------------------



| |  |  | our ability to attract, motivate and retain qualified employees;
| | - |  | ----------------------------------------------------------------



| |  |  | increases in labor costs;
| | - |  | -------------------------



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| |  |  | the impact of federal, state or local government regulations relating to our employees or the sale or preparation of food and the sale of alcoholic beverages;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact of litigation;
| | - |  | -------------------------



| |  |  | the effect of competition in the restaurant industry; and
| | - |  | ---------------------------------------------------------



| |  |  | economic trends generally.
| | - |  | --------------------------

Our
business also is subject to seasonal fluctuations. Historically, sales in most of our restaurants have been higher during the second and fourth quarter of each year. As a result, our quarterly and annual operating results and restaurant sales may
fluctuate significantly as a result of seasonality and the factors discussed above. Accordingly, results for any one fiscal quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable
restaurant sales for any particular future period may decrease. Our operating results may also fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely be adversely affected.

A decline in visitors or business travelers to downtown areas where our restaurants are located could negatively affect our restaurant sales.

Many of our restaurants are located in downtown areas. We depend on both local residents and business travelers to frequent these
locations. If the number of visitors to downtown areas declines due to economic or other conditions, changes in consumer preferences, changes in discretionary consumer spending or for other reasons, our revenues could decline significantly and our
results of operations could be adversely affected.

If we lose the services of any of our key management personnel our business could suffer.

We depend on the services of our key senior management personnel. If we lose the services of any members of our senior management
or key personnel for any reason, we may be unable to replace them with qualified personnel, which could have a material adverse effect on our business and growth. We do not carry key person life insurance on any of our executive officers.

Many of our restaurants are concentrated in local or regional areas and, as a result, we are sensitive to economic and other trends and developments
in these areas.

We operate five restaurants in the Chicago, Illinois area, five restaurants in the Seattle, Washington area, seven
in the Portland, Oregon area, thirteen in California, and six in the greater Vancouver, British Columbia area; our East Coast restaurants are concentrated in and around Washington, D.C. As a result, adverse economic conditions, weather and labor
markets in any of these areas could have a material adverse effect on our overall results of operations.

In addition, given our geographic
concentrations, negative publicity regarding any of our restaurants in these areas could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes, oil spills, terrorist attacks, energy
shortages or increases in energy prices, droughts or earthquakes or other natural disasters.

Our success depends on our ability to protect our
proprietary information. Failure to protect our trademarks, service marks or trade secrets could adversely affect our business.

Our
business prospects depend in part on our ability to develop favorable consumer recognition of the McCormick & Schmicks name. Although McCormick & Schmicks, M&S Grill, McCormick & Schmicks Grill, The
Boathouse Restaurants, and other of our service marks are registered trademarks, our trademarks could be imitated in ways that we cannot prevent. In addition, we rely on trade secrets, proprietary know-how, concepts and recipes. Our methods of
protecting this information may not be adequate, however, and others could independently develop similar know-how or obtain access to our trade secrets, know-how, concepts and recipes.

Moreover, we may face claims of misappropriation or infringement of third parties rights that could interfere with our use of our proprietary
know-how, concepts, recipes or trade secrets. Defending these claims may be costly and, if unsuccessful, may prevent us from continuing to use this proprietary information in the future, and may result in a judgment or monetary damages.

We do not maintain confidentiality and non-competition agreements with all of our executives, key personnel or suppliers. If competitors independently
develop or otherwise obtain access to our know-how, concepts, recipes or trade secrets, the appeal of our restaurants could be reduced and our business could be harmed.

Our insurance policies may not provide adequate levels of coverage against all claims.

We believe we maintain insurance coverage that is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we
believe are not commercially reasonable to insure. These losses, if they occur, could have a material and adverse effect on our business and results of operations. Our primary insurer has informed us it believes we have exhausted our insurance
coverage with respect to employment claims arising in our 2004 coverage year, which it believes includes the litigation in California and possibly similar future claims. We disagree with this interpretation of our coverage, but we have taken this
interpretation into account in connection with the accounting for employment claims, see PART II. OTHER INFORMATION - ITEM 1. LEGAL PROCEEDINGS. We may not succeed in our planned contest of our insurers conclusion. If we are unsuccessful, and
if our insurer determines that other existing employment claims arose in 2004 and are therefore not covered, our resolution of those claims would be more expensive.

Expanding our restaurant base by opening new restaurants in existing markets could reduce the business of our existing restaurants.

Our growth strategy includes opening restaurants in markets in which we already have existing restaurants. We may be unable to attract enough customers to
the new restaurants for them to operate at a profit. Even if we are able to attract enough customers to the new restaurants to operate them at a profit, those customers may be former customers of one of our existing restaurants in that market and
the opening of new restaurants in the existing market could reduce the revenue of our existing restaurants in that market.

We may not be able to
successfully integrate into our business the operations of restaurants that we acquire, which may adversely affect our business, financial condition and results of operations.

We completed our purchase of The Boathouse restaurants in March 2007. These restaurants, all of which are located in the greater Vancouver, British
Columbia area, are the first we own and operate outside of the United States. We may seek to selectively acquire existing restaurants and integrate them into our business operations. Achieving the expected benefits of any restaurants that we acquire
will depend in large part on our ability to successfully integrate the operations of the acquired restaurants and personnel in a timely and efficient manner. The risks involved in such restaurant acquisitions and integration include:



| |  |  | challenges and costs associated with the acquisition and integration of restaurant operations located in markets where we have limited or no experience;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | possible disruption to our business as a result of the diversion of managements attention from its normal operational responsibilities and duties; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | consolidation of the corporate, information technology, accounting and administrative infrastructure and resources of the acquired restaurants into our business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

We may be unable to successfully integrate the operations, or realize the anticipated benefits, of any restaurants that
we acquire. If we cannot overcome the challenges and risks that we face in integrating the operations of newly acquired restaurants, our business, financial condition and results of operations could be adversely affected.

Negative publicity concerning food quality, health and other issues and costs or liabilities resulting from litigation may have a material adverse effect on our
results of operations.

We are sometimes the subject of complaints or litigation from customers alleging illness, injury or other
food quality, health or operational concerns. Litigation or adverse publicity resulting from these allegations may materially and adversely affect us or our restaurants, regardless of whether the allegations are valid or whether we are liable.
Further, these claims may divert our financial and management resources from revenue-generating activities and business operations.

Health concerns
relating to the consumption of seafood or other foods could affect consumer preferences and could negatively impact our results of operations.

We may lose customers based on health concerns about the consumption of seafood or negative publicity concerning food quality, illness and injury generally, such as negative publicity concerning the accumulation of
mercury or other carcinogens in seafood, e-coli, mad cow or foot-and-mouth disease, publication of government or industry findings about food products served by us or other health concerns or operating issues stemming from
one of our restaurants. In addition, our operational controls and training may not be fully effective in preventing all food-borne illnesses. Some food-borne illness incidents could be caused by food suppliers and transporters and would be outside
of our control. Any negative publicity, health concerns or specific outbreaks of food-borne illnesses attributed to one or more of our restaurants, or the perception of an outbreak, could result in a decrease in guest traffic to our restaurants and
could have a material adverse effect on our business.

Changes in consumer preferences or discretionary consumer spending could negatively impact our
results of operations.

The restaurant industry is characterized by the introduction of new concepts and is subject to rapidly
changing consumer preferences, tastes and purchasing habits. Our continued success depends in part upon the popularity of seafood and the style of dining we offer. Shifts in consumer preferences away from this cuisine or dining style could
materially and adversely affect our operating results. Our success will depend in part on our ability to anticipate and respond to changing consumer preferences, tastes and purchasing habits, and to other factors affecting the restaurant industry,
including new market entrants and demographic changes. If we change our concept and menu to respond to changes in consumer tastes or dining patterns, we may lose customers who do not like the new concept or menu, and may not be able to attract a
sufficient new customer base to produce the revenue needed to make the restaurant profitable. Our success also depends to a significant extent on numerous factors affecting discretionary consumer spending, including economic conditions, disposable
consumer income and consumer confidence. Adverse changes in these factors could reduce guest traffic or impose practical limits on pricing, either of which could harm our results of operations.

Labor shortages or increases in labor costs could slow our growth or harm our business.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including regional operational
managers and regional chefs, restaurant general managers and executive chefs, necessary to continue our operations and keep pace with our growth. Qualified individuals are in short supply and competition for these employees is intense. If we are
unable to recruit and retain sufficient qualified individuals, our business and our growth could be adversely affected. Additionally, competition for qualified employees could require us to pay higher wages, which could result in higher labor costs.
If our labor costs increase, our results of operations will be negatively affected.

We may incur costs or liabilities and lose revenue, and our
growth strategy may be adversely impacted, as a result of government regulation.

Our restaurants are subject to various federal,
state and local government regulations, including those relating to employees, the preparation and sale of food and the sale of alcoholic beverages. These regulations affect our restaurant operations and our ability to open new restaurants.

Each of our restaurants must obtain licenses from regulatory authorities to sell liquor, beer and wine, and each restaurant must obtain a
food service license from local health authorities. Each liquor license must be renewed annually and may be revoked at any time for cause, including violation by us or our employees of any laws and regulations relating to the minimum drinking age,
advertising, wholesale purchasing and inventory control. In certain jurisdictions where we operate, the number of alcoholic beverage licenses available is limited and licenses are traded at market prices.

The failure to maintain our food and liquor licenses and other required licenses, permits and approvals could adversely affect our operating results.
Difficulties or failure in obtaining the required licenses and approvals could delay or result in our decision to cancel the opening of new restaurants.

We are subject to dram shop statutes in some states. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. A judgment substantially in excess of our insurance coverage could harm our operating results and financial condition.

Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime pay, unemployment tax rates, workers
compensation rates, and citizenship requirements. Additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, increased tax reporting and tax payment requirements for employees who
receive gratuities, or a reduction in the number of states that allow tips to be credited toward minimum wage requirements could harm our operating results and financial condition.

The Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. Although our
restaurants are designed to be accessible to the disabled, we could be required to make modifications to our restaurants to provide service to, or make reasonable accommodations for, disabled persons.

Our operations and profitability are susceptible to the effects of violence, war and economic trends.

Terrorist attacks and other acts of violence or war and U.S. military reactions to such attacks may negatively affect our operations and an investment in
our shares of common stock. The terrorist attacks in New York and Washington, D.C. on September 11, 2001 led to a temporary interruption in deliveries from some of our suppliers and, we believe, contributed to the decline in average annual
comparable restaurant sales in 2001 and 2002.



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Future acts of violence or war could cause a decrease in travel and in consumer confidence, decrease
consumer spending, result in increased volatility in the United States and worldwide financial markets and economy, or result in an economic recession in the United States or abroad. They could also impact consumer leisure habits, for example, by
increasing time spent watching television news programs at home, and may reduce the number of times consumers dine out, which could adversely impact our revenue. Any of these occurrences could harm our business, financial condition or results of
operations, and may result in the volatility of the market price for our securities and on the future price of our securities.

Terrorist
attacks could also directly impact our physical facilities or those of our suppliers, and attacks or armed conflicts may make travel and the transportation of our supplies and products more difficult and more expensive and ultimately affect our
revenues.

We may not be able to compete successfully with other restaurants, which could adversely affect our results of operations.

The restaurant industry is intensely competitive with respect to price, service, location, food quality, ambiance and the overall
dining experience. Our competitors include a large and diverse group of restaurant chains and individual restaurants that range from independent local operators to well capitalized national restaurant companies. Some of our competitors have been in
existence for a substantially longer period than we have and may be better established in the markets where our restaurants are or may be located. Some of our competitors may have substantially greater financial, marketing and other resources than
we do. If our restaurants are unable to compete successfully with other restaurants in new and existing markets, our results of operations will be adversely affected. We also compete with other restaurants for experienced management personnel and
hourly employees, and with other restaurants and retail establishments for quality restaurant sites.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS
|------- | --------

Items identified with an asterisk (*) are
management contracts or compensatory plan arrangements.



|       |  |                                                                                                                                                                                                                
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|3.1    |  | Certificate of Incorporation of McCormick & Schmicks Seafood Restaurants, Inc., as amended. Incorporated by reference to Exhibit 3.1 to the Companys Registration
Statement on Form S-1, File No. 333-114977.
|       | 
|3.2    |  | Amended and Restated Bylaws of McCormick & Schmicks Seafood Restaurants, Inc., as amended (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K dated
February 14, 2008)                
|       | 
|10.1 * |  | Form of Restricted Stock Agreement with Non-Employee Directors                                                                                                                                                 
|       | 
|31.1   |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                          
|       | 
|31.2   |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                          
|       | 
|32.1   |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                         
|       | 
|32.2   |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                         



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SIGNATURES

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



MCCORMICK & SCHMICKS SEAFOOD RESTAURANTS, INC.By:

/s/ DOUGLAS L. SCHMICKDouglas L. Schmick Chief Executive Officer (principal executive officer)By:

/s/ EMANUEL N. HILARIOEmanuel N. Hilario Chief Financial Officer (principal financial and accounting officer)


Date: May 7, 2008



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