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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended September 29, 2007

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



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McCormick & Schmicks Seafood Restaurants, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-1193199                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification 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)



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

Large accelerated filer ̈Accelerated filer    x                    Non-accelerated filer ̈

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 14,761,646 shares of common stock outstanding as of September 29, 2007.



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##### Table of Contents

INDEX



|                                                                                                                                |  |   
|------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION                                                                                                   |  |   
|                                                                                                                                | 
|Item 1 - Financial Statements -(Unaudited)                                                                                      |  | 2 
|Consolidated Balance Sheets as of December 30, 2006 and September 29, 2007                                                      |  | 2 
|Consolidated Statements of Income for the thirteen and thirty-nine week periods ended September 30, 2006 and September 29, 2007 |  | 3 
|Consolidated Statements of Cash Flows for the thirty-nine week period ended September 30, 2006 and September 29, 2007           |  | 4 
|Notes to Consolidated Financial Statements                                                                                      |  | 5 
|Item 2 - Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 8 
|Item 3 - Quantitative and Qualitative Disclosures About Market Risk                                                             |  | 14
|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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##### Table of Contents

PART I  FINANCIAL INFORMATION



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

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

Consolidated Balance
Sheets

(in thousands, except per share data)



|                                                                                                           |  |                  |         |                   |   |        
|---------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ----------------- | - | -------
|                                                                                                           |  | December 30,2006 |         | September 29,2007
|                                                                                                           |  |                  |         | (Unaudited)      
|Assets                                                                                                     |  |                  |         |                   |   |        
|Current assets                                                                                             |  |                  |         |                   |   |        
|Cash and cash equivalents                                                                                  |  | $                | 10,553  |                   | $ | 987    
|Trade accounts receivable, net                                                                             |  |                  | 6,498   |                   |   | 10,163 
|Tenant improvement allowance receivables                                                                   |  |                  | 1,538   |                   |   | 5,784  
|Inventories                                                                                                |  |                  | 4,982   |                   |   | 5,630  
|Prepaid expenses and other current assets                                                                  |  |                  | 3,918   |                   |   | 7,698  
|Deferred income taxes                                                                                      |  |                  | 2,888   |                   |   | 6,858  
|                                                                                                           |  |                  |         |                   |   |        
|Total current assets                                                                                       |  |                  | 30,377  |                   |   | 37,120 
|Property and equipment, net                                                                                |  |                  | 124,346 |                   |   | 152,907
|Other assets                                                                                               |  |                  | 53,701  |                   |   | 57,363 
|Goodwill                                                                                                   |  |                  | 19,996  |                   |   | 26,590 
|                                                                                                           |  |                  |         |                   |   |        
|Total assets                                                                                               |  | $                | 228,420 |                   | $ | 273,980
|                                                                                                           |  |                  |         |                   |   |        
|Liabilities and Stockholders Equity                                                                       |  |                  |         |                   |   |        
|Current liabilities                                                                                        |  |                  |         |                   |   |        
|Book overdraft                                                                                             |  | $                |        |                   | $ | 6,108  
|Accounts payable                                                                                           |  |                  | 15,639  |                   |   | 15,975 
|Accrued expenses                                                                                           |  |                  | 24,016  |                   |   | 27,143 
|Capital lease obligations, current portion                                                                 |  |                  | 338     |                   |   | 3,140  
|                                                                                                           |  |                  |         |                   |   |        
|Total current liabilities                                                                                  |  |                  | 39,993  |                   |   | 52,366 
|Revolving credit facility                                                                                  |  |                  |        |                   |   | 9,000  
|Other long-term liabilities                                                                                |  |                  | 17,645  |                   |   | 19,870 
|Deferred income taxes                                                                                      |  |                  | 10,552  |                   |   | 15,981 
|                                                                                                           |  |                  |         |                   |   |        
|Total liabilities                                                                                          |  |                  | 68,190  |                   |   | 97,217 
|                                                                                                           |  |                  |         |                   |   |        
|Commitments and contingencies (Note 10)                                                                    |  |                  |         |                   |   |        
|Stockholders equity                                                                                       |  |                  |         |                   |   |        
|Common stock, $0.001 par value, 120,000 shares authorized, 14,303 and 14,762 shares issued and outstanding |  |                  | 14      |                   |   | 15     
|Additional paid in capital                                                                                 |  |                  | 139,721 |                   |   | 146,670
|Accumulated other comprehensive income                                                                     |  |                  |        |                   |   | 53     
|Retained earnings                                                                                          |  |                  | 20,495  |                   |   | 30,025 
|                                                                                                           |  |                  |         |                   |   |        
|Total stockholders equity                                                                                 |  |                  | 160,230 |                   |   | 176,763
|                                                                                                           |  |                  |         |                   |   |        
|Total liabilities and stockholders equity                                                                 |  | $                | 228,420 |                   | $ | 273,980
|                                                                                                           |  |                  |         |                   |   |        

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



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

Consolidated Statements
of Income-Unaudited

(in thousands, except per share data)



|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|--------------------------------------------- |  | -------------------------- | ------ | ----------------------------- | - | ----------------- |  | ----------------- | ------- |  | - | -------
|                                              |  | Thirteen week period ended |        | Thirty-nine week period ended
|                                              |  | September 30,2006          |        | September 29, 2007            |   | September 30,2006 |  | September 29,2007
|Revenues                                      |  | $                          | 75,648 |                               | $ | 88,095            |  | $                 | 224,017 |  | $ | 259,170
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Restaurant operating costs                    |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Food and beverage                             |  |                            | 22,120 |                               |   | 25,668            |  |                   | 65,505  |  |   | 75,040 
|Labor                                         |  |                            | 23,827 |                               |   | 28,373            |  |                   | 70,364  |  |   | 81,741 
|Operating                                     |  |                            | 11,768 |                               |   | 13,899            |  |                   | 33,392  |  |   | 39,639 
|Occupancy                                     |  |                            | 6,964  |                               |   | 8,001             |  |                   | 20,478  |  |   | 23,301 
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Total restaurant operating costs              |  |                            | 64,679 |                               |   | 75,941            |  |                   | 189,739 |  |   | 219,721
|General and administrative expenses           |  |                            | 4,031  |                               |   | 4,658             |  |                   | 11,985  |  |   | 14,420 
|Restaurant pre-opening costs                  |  |                            | 310    |                               |   | 2,097             |  |                   | 1,795   |  |   | 3,025  
|Depreciation and amortization                 |  |                            | 2,733  |                               |   | 2,952             |  |                   | 8,117   |  |   | 8,584  
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Total costs and expenses                      |  |                            | 71,753 |                               |   | 85,648            |  |                   | 211,636 |  |   | 245,750
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Operating income                              |  |                            | 3,895  |                               |   | 2,447             |  |                   | 12,381  |  |   | 13,420 
|Interest income, net                          |  |                            | 69     |                               |   | 70                |  |                   | 159     |  |   | 349    
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Income before income taxes                    |  |                            | 3,964  |                               |   | 2,517             |  |                   | 12,540  |  |   | 13,769 
|Income tax expense                            |  |                            | 1,261  |                               |   | 477               |  |                   | 3,988   |  |   | 3,965  
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Net income                                    |  | $                          | 2,703  |                               | $ | 2,040             |  | $                 | 8,552   |  | $ | 9,804  
|                                              |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Net income per share                          |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Basic                                         |  | $                          | 0.19   |                               | $ | 0.14              |  | $                 | 0.60    |  | $ | 0.67   
|Diluted                                       |  | $                          | 0.19   |                               | $ | 0.14              |  | $                 | 0.59    |  | $ | 0.66   
|Shares used in computing net income per share |  |                            |        |                               |   |                   |  |                   |         |  |   |        
|Basic                                         |  |                            | 14,230 |                               |   | 14,639            |  |                   | 14,214  |  |   | 14,530 
|Diluted                                       |  |                            | 14,480 |                               |   | 14,817            |  |                   | 14,498  |  |   | 14,767 

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



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

Consolidated Statements
of Cash Flows-Unaudited

(in thousands)



|                                                                                 |  |                               |         |   |                   |   |         |  
|-------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                 |  | Thirty-nine week period ended |        
|                                                                                 |  | September 30,2006             |         |   | September 29,2007 |  
|Operating activities                                                             |  |                               |         |   |                   |   |         |  
|Net income                                                                       |  | $                             | 8,552   |   |                   | $ | 9,804   |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                               |         |   |                   |   |         |  
|Depreciation and amortization                                                    |  |                               | 8,117   |   |                   |   | 8,584   |  
|Deferred income taxes                                                            |  |                               | 1,963   |   |                   |   | 1,687   |  
|Share based compensation                                                         |  |                               | 1,059   |   |                   |   | 1,129   |  
|Changes in operating assets and liabilities                                      |  |                               |         |   |                   |   |         |  
|Trade accounts receivable                                                        |  |                               | (991    | ) |                   |   | (3,753  | )
|Tenant improvement allowance receivables                                         |  |                               | 586     |   |                   |   | (4,246  | )
|Inventories                                                                      |  |                               | 141     |   |                   |   | (920    | )
|Prepaid expenses and other current assets                                        |  |                               | (1,343  | ) |                   |   | (3,819  | )
|Accounts payable                                                                 |  |                               | (1,003  | ) |                   |   | 336     |  
|Accrued expenses                                                                 |  |                               | 1,933   |   |                   |   | 3,682   |  
|Other long-term liabilities                                                      |  |                               | 1,821   |   |                   |   | 1,652   |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Net cash provided by operating activities                                        |  |                               | 20,835  |   |                   |   | 14,136  |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Investing activities                                                             |  |                               |         |   |                   |   |         |  
|Purchase of property and equipment                                               |  |                               | (22,676 | ) |                   |   | (30,011 | )
|Acquisition of The Boathouse Restaurants of Canada, Inc. assets, net             |  |                               |        |   |                   |   | (14,481 | )
|Decrease (increase) in other assets                                              |  |                               | (159    | ) |                   |   | 98      |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Net cash used in investing activities                                            |  |                               | (22,835 | ) |                   |   | (44,394 | )
|                                                                                 |  |                               |         |   |                   |   |         |  
|Financing activities                                                             |  |                               |         |   |                   |   |         |  
|Increase in book overdraft                                                       |  |                               |        |   |                   |   | 6,108   |  
|Borrowings made on revolving credit facility                                     |  |                               |        |   |                   |   | 9,000   |  
|Payments on capital lease obligations                                            |  |                               | (273    | ) |                   |   | (291    | )
|Proceeds from stock options exercised                                            |  |                               | 713     |   |                   |   | 4,108   |  
|Excess tax benefits from share based compensation                                |  |                               | 310     |   |                   |   | 1,714   |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Net cash provided by financing activities                                        |  |                               | 750     |   |                   |   | 20,639  |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                     |  |                               |        |   |                   |   | 53      |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Net decrease in cash and cash equivalents                                        |  |                               | (1,250  | ) |                   |   | (9,566  | )
|                                                                                 |  |                               |         |   |                   |   |         |  
|Cash and cash equivalents, beginning of period                                   |  |                               | 4,705   |   |                   |   | 10,553  |  
|Cash and cash equivalents, end of period                                         |  | $                             | 3,455   |   |                   | $ | 987     |  
|                                                                                 |  |                               |         |   |                   |   |         |  
|Supplemental disclosure of cash flow information                                 |  |                               |         |   |                   |   |         |  
|Cash paid during the period                                                      |  |                               |         |   |                   |   |         |  
|Interest                                                                         |  | $                             | 249     |   |                   | $ | 298     |  
|Income taxes                                                                     |  | $                             | 1,824   |   |                   | $ | 3,762   |  

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



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

Notes to 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 September 29, 2007, the Company operated 77
restaurants, including 72 restaurants in the United States, of which one is operated pursuant to a management agreement, and five restaurants in Canada under The Boathouse name.

2. Basis of Presentation

The accompanying unaudited 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 (consisting of normal recurring accruals) considered necessary for a
fair statement have been included. Operating results for the thirteen and thirty-nine week periods ended September 29, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2007.

The consolidated balance sheet at December 30, 2006 has been derived from the audited 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 consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the fiscal year ended December 30, 2006.

3. Summary of Selected Accounting
Policies

Principles of Consolidation

The
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 in the consolidated statements of income. 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 Standards (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. Share-based compensation expense recognized under SFAS 123R for the thirteen week periods ended September 30, 2006 and September 29, 2007 was $0.5 million and $0.3 million, respectively, and for both the thirty-nine week
periods ended September 30, 2006 and September 29, 2007 was $1.1 million, which consisted of share-based compensation expense related to employee stock options and restricted stock awards.

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



|                          |  |                                            |   |  |                   |  
|------------------------- |  | ------------------------------------------ | - |  | ----------------- | -
|                          |  | Thirteen and thirty-nine weekperiods ended |  
|                          |  | September 30,2006                          |   |  | September 29,2007 |  
|Expected volatility       |  | 24.3                                       | % |  | 24.8              | %
|Option life               |  | 10 years                                   |   |  | 10 years          |  
|Expected term             |  | 5.5 years                                  |   |  | 5.5 years         |  
|Estimated forfeiture rate |  | 9                                          | % |  | 14                | %
|Risk-free interest rate   |  | 3.9                                        | % |  | 3.9               | %
|Dividend yield            |  | 0                                          | % |  | 0                 | %

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. 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
September 29, 2007, there were 76,655 shares of restricted stock outstanding.

Each award expires on the date determined at the date of grant;
however, the maximum term of options, stock appreciation rights (SARs) and other rights to acquire common stock under the Companys 2004 Stock Incentive Plan (the Plan) is ten years after the initial date of the award, subject
to provisions for further deferred



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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 September 29,
2007, 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, the fair market value of the stock on the date of grant. As of September 29, 2007, there
were 337,710 options outstanding, of which 259,377 were exercisable.

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 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 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 $16.9 million and $19.2 million as of December 30, 2006 and September 29, 2007,
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 the cumulative translation adjustment account in stockholders equity. 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 is evaluating the impact, if any, that adopting SFAS 157 may have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Asset and Financial Liability: Including an amendment of FASB Statement
No. 115 (SFAS 159). The standard permits all entities to elect to measure certain financial instruments and other items at fair value with changes in fair value reported in earnings. SFAS 159 is effective as of the beginning
of the first fiscal year that begins after November 15, 2007. The Company is evaluating the impact, if any, that adopting SFAS 159 may have on its consolidated financial statements.

5. Long-Term Debt and Standby Letters of Credit

The Company has a $50.0 million revolving credit facility under
which borrowings are secured by a first priority security interest in all of the Companys assets, that matures on July 23, 2009. As of September 29, 2007, there was $9.0 million outstanding under the credit facility. The interest
rate on the credit facility is based on the lenders prime rate plus a margin of up to 0.75% or the Eurodollar rate plus a margin of 0.75% to 1.75%, with margins determined by certain financial ratios. The interest rate on borrowing under the
credit facility at September 29, 2007 was 6.41%, which was based on the Eurodollar rate of 5.41% plus a margin of 1.00%.

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 the Companys
obligations to pay or perform when required pursuant to certain agreements for 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. At September 29, 2007, the maximum exposure under these standby letters of credit was $3.0 million, and there were no amounts drawn upon these letters of
credit. At September 29, 2007, the Company had $38.0 million available under its revolving credit facility.

Under the revolving credit facility
agreement, the Company is subject to certain financial and non-financial covenants, including an adjusted leverage ratio, a consolidated cash flow ratio, and a growth capital expenditures limitation. The Company was in compliance with these
covenants as of September 29, 2007.

6. Share-Based Compensation

On June 16, 2004, the Company adopted its 2004 Stock Incentive Plan (the Plan) under which 1,500,000 shares were reserved for issuance. Under the Plan, the Company may grant stock options, restricted
stock and other awards to employees, directors, and consultants of the Company and of any parent or subsidiary of the Company. As of September 29, 2007, the Company had issued to officers and employees options to purchase an aggregate of
904,600 shares of common stock at an average exercise price of $12.35 per share. These options become exercisable over a three-year period and are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code. On
May 23, 2006, the Company issued to officers and other employees an aggregate of 142,000 shares of restricted stock. 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. 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.



6



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##### Table of Contents

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 third quarter ended September 29, 2007.

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 September 29,
2007 there were 562,994 shares reserved to be issued pursuant to the plan.

The table below summarizes the status of the Companys stock based
compensation plans, including stock options and restricted stock grants, as of September 29, 2007.



|                                  |  |              |  |                                |       |                  |         |             |         |                         |   |          
|--------------------------------- |  | ------------ |  | ------------------------------ | ----- | ---------------- | ------- | ----------- | ------- | ----------------------- | - | ---------
|                                  |  | StockOptions |  | Weighted AverageExercise Price |       | Restricted Stock |         | TotalShares |         | AggregateIntrinsicValue
|Outstanding at December 30, 2006  |  | 700,691      |  | $                              | 12.00 |                  | 138,500 |             | 839,191 |                         |   |          
|                                  |  |              |  |                                |       |                  |         |             |         |                         |   |          
|Awards granted                    |  | 25,000       |  |                                | 24.71 |                  |        |             | 25,000  |                         |   |          
|Awards exercised                  |  | 342,348      |  |                                | 12.00 |                  | 39,512  |             | 381,860 |                         |   |          
|Awards forfeited                  |  | 45,633       |  |                                | 12.00 |                  | 22,333  |             | 67,966  |                         |   |          
|                                  |  |              |  |                                |       |                  |         |             |         |                         |   |          
|Outstanding at September 29, 2007 |  | 337,710      |  |                                | 12.94 |                  | 76,655  |             | 414,365 |                         | $ | 3,579,223
|                                  |  |              |  |                                |       |                  |         |             |         |                         |   |          
|Exercisable at September 29, 2007 |  | 259,377      |  |                                | 12.00 |                  |        |             | 259,377 |                         |   | 1,771,545

The table below summarizes additional information about stock options outstanding at September 29, 2007.



|                         |  |                   |  |                                                    |  |                                 |  |                   |  |                               
|------------------------ |  | ----------------- |  | -------------------------------------------------- |  | ------------------------------- |  | ----------------- |  | ------------------------------
|Outstanding              |  | Exercisable      
|Range of Exercise Prices |  | Number of Options |  | Weighted AverageRemaining Yearsof Contractual Life |  | Weighted Average Exercise price |  | Number of Options |  | Weighted AverageExercise price
|$12.00  $26.81          |  | 337,710           |  | 6.5                                                |  | $        12.94                  |  | 259,377           |  | $        12.00                

As of September 29, 2007, the unamortized compensation expense related to stock options and restricted stock
granted to employees 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 and thirty-nine week periods ended September 30, 2006 and September 29, 2007 (in thousands).



|                                                                               |  |                            |     |                               |   |                   |  |                   |       |  |   |      
|------------------------------------------------------------------------------ |  | -------------------------- | --- | ----------------------------- | - | ----------------- |  | ----------------- | ----- |  | - | -----
|                                                                               |  | Thirteen week period ended |     | Thirty-nine week period ended
|                                                                               |  | September 30,2006          |     | September 29,2007             |   | September 30,2006 |  | September 29,2007
|Labor                                                                          |  | $                          | 17  |                               | $ | 6                 |  | $                 | 56    |  | $ | 38   
|General and administrative expenses                                            |  |                            | 468 |                               |   | 281               |  |                   | 1,003 |  |   | 1,091
|                                                                               |  |                            |     |                               |   |                   |  |                   |       |  |   |      
|Share-based compensation expense included in total costs and expenses          |  |                            | 485 |                               |   | 287               |  |                   | 1,059 |  |   | 1,129
|Income tax benefit related to share-based compensation                         |  |                            | 141 |                               |   | 98                |  |                   | 249   |  |   | 329  
|                                                                               |  |                            |     |                               |   |                   |  |                   |       |  |   |      
|Share-based compensation expense related to employee stock options, net of tax |  | $                          | 344 |                               | $ | 189               |  | $                 | 810   |  | $ | 800  
|                                                                               |  |                            |     |                               |   |                   |  |                   |       |  |   |      

7. Income Taxes

The Company adopted the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48) on December 31, 2006. As a result of the implementation of FIN 48, the Company
recorded $432,683 of unrecognized tax benefits and recorded $68,081 of accrued interest, all of which would impact the Companys effective tax rate if recognized. The Company recorded a $500,764 increase in other long-term liabilities
representing accrued income taxes in the Companys consolidated balance sheet for unrecognized tax benefits, which was accounted for as a cumulative effect adjustment to the December 31, 2006 balance of retained earnings, net of a related
increase of $227,701 to non-current deferred tax assets. As of December 31, 2006, the Company had accrued $68,081 of interest related to uncertain tax positions. There have been no significant changes to these amounts during the quarter ended
September 29, 2007. It is the Companys policy to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company is subject to U.S. federal tax, Canadian federal and provincial tax and income tax of
multiple state and local jurisdictions. The Company is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for years before 2001. The Company does not anticipate that total unrecognized tax benefits will
significantly change due to the settlement of audits and the expiration of statute of limitations prior to March 29, 2008.

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. The acquisition was funded with
operating cash and borrowings under the Companys credit facility. The total cost of the acquisition has been allocated to the assets acquired (principally tangible and intangible assets) and the liabilities assumed based on their estimated
fair values at the date of acquisition in accordance with SFAS No. 141, Business Combinations. Goodwill and other intangibles, which are deductible for tax purposes, recorded in connection with the acquisition, totaled $6.6 million
and $4.1 million, respectively. The goodwill amount recognized in the acquisition resulted primarily from the acquisition of the assembled restaurant workforce, a proven record of profitable restaurant operations and the assumption of prime leased
locations. The $4.1 million of other intangibles was entirely assigned to The Boathouse registered trademark and was determined to have an indefinite life.



7



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##### Table of Contents

The Companys accompanying consolidated financial statements include the accounts of The Boathouse restaurants and
the results of their operations since the acquisition date of March 30, 2007. The Boathouse assets acquired and liabilities assumed based on their estimated fair values at March 30, 2007 are as follows (in thousands).



|                          |  |   |       
|------------------------- |  | - | ------
|Assets acquired:          |  |   |       
|Cash                      |  | $ | 90    
|Prepaid expenses          |  |   | 38    
|Inventory                 |  |   | 272   
|Property and equipment    |  |   | 4,171 
|Trademark and other       |  |   | 4,111 
|Goodwill                  |  |   | 6,594 
|                          |  |   |       
|Total assets acquired     |  | $ | 15,276
|                          |  |   |       
|Liabilities assumed:      |  |   |       
|Current liabilities       |  | $ | 396   
|                          |  |   |       
|Total liabilities assumed |  |   | 396   
|                          |  |   |       
|Net assets acquired       |  | $ | 14,880
|                          |  |   |       

No unaudited pro forma data is presented due to the insignificant impact of the acquisition on the Companys
consolidated results of operations.

9. Related Party Transactions

The Company leases properties from landlords deemed to be related parties of the Company. Total rent paid to these landlords was $0.3 million for each of the thirteen week periods ended September 29, 2007 and
September 30, 2006, and $0.7 million for each of the thirty-nine week periods ended September 29, 2007 and September 30, 2006, respectively.

10. 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 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.



|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 consolidated financial statements
and notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations for
the year ended December 30, 2006 contained in our 2006 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 September 29, 2007, we operated 77 restaurants, including 72 restaurants in the United States, of which one was operated pursuant to a management agreement
and five restaurants are operated in Canada under The Boathouse name. In May 2007, we terminated our management operations of one restaurant under management contract. The hotel in Santa Rosa, California, in which the restaurant we managed was
located, was sold in March 2007.

McCormick & Schmicks has successfully grown over the past 35 years by offering our customers a
daily-printed menu with a broad selection of affordable, quality 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 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 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 up to $0.1
million in non-cash rent expense during the construction period.

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.



8



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##### Table of Contents

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 35 years has been to consistently offer a broad selection of high quality, fresh seafood, which we believe commands strong loyalty from our guests. 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 2007 plan includes opening eleven domestic
restaurants and one The Boathouse restaurant in Canada, of which seven domestic locations were opened as of September 29, 2007 and the single planned The Boathouse location was opened on October 1, 2007. 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 2006.

Financial Performance Overview

The following are highlights of
our financial performance for the thirteen week period ended September 29, 2007 compared to the thirteen week period ended September 30, 2006:



| |  |  | Revenues increased 16.5% to $88.1 million from $75.6 million
| | - |  | ------------------------------------------------------------



| |  |  | Comparable restaurant sales decreased 0.1%
| | - |  | ------------------------------------------



| |  |  | Restaurant pre-opening costs increased to $2.1 million from $0.3 million
| | - |  | ------------------------------------------------------------------------



| |  |  | Operating income decreased 37.2% to $2.4 million from $3.9 million
| | - |  | ------------------------------------------------------------------



| |  |  | Net income decreased 24.5% to $2.0 million from $2.7 million
| | - |  | ------------------------------------------------------------



| |  |  | Diluted earnings per share decreased to $0.14 from $0.19
| | - |  | --------------------------------------------------------

Thirteen Week Period Ended September 30, 2006 Compared to Thirteen Week Period Ended September 29, 2007

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



|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|----------------------------------- |  | -------------------------- | ------ |  | ----------------- | - |  | - | ------ |  | ----- | -
|                                    |  | Thirteen week period ended |       
|                                    |  | September 30,2006          |        |  | September 29,2007 |  
|                                    |  | (in thousands)             |       
|Revenues                            |  | $                          | 75,648 |  | 100.0             | % |  | $ | 88,095 |  | 100.0 | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Restaurant operating costs          |  |                            |        |  |                   |   |  |   |        |  |       |  
|Food and beverage                   |  |                            | 22,120 |  | 29.2              | % |  |   | 25,668 |  | 29.1  | %
|Labor                               |  |                            | 23,827 |  | 31.5              | % |  |   | 28,373 |  | 32.2  | %
|Operating                           |  |                            | 11,768 |  | 15.6              | % |  |   | 13,899 |  | 15.8  | %
|Occupancy                           |  |                            | 6,964  |  | 9.2               | % |  |   | 8,001  |  | 9.1   | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Total restaurant operating costs    |  |                            | 64,679 |  | 85.5              | % |  |   | 75,941 |  | 86.2  | %
|General and administrative expenses |  |                            | 4,031  |  | 5.3               | % |  |   | 4,658  |  | 5.3   | %
|Restaurant pre-opening costs        |  |                            | 310    |  | 0.4               | % |  |   | 2,097  |  | 2.4   | %
|Depreciation and amortization       |  |                            | 2,733  |  | 3.7               | % |  |   | 2,952  |  | 3.3   | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Total costs and expenses            |  |                            | 71,753 |  | 94.9              | % |  |   | 85,648 |  | 97.2  | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Operating income                    |  |                            | 3,895  |  | 5.1               | % |  |   | 2,447  |  | 2.8   | %
|Interest income, net                |  |                            | 69     |  | 0.1               | % |  |   | 70     |  | 0.1   | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Income before income taxes          |  |                            | 3,964  |  | 5.2               | % |  |   | 2,517  |  | 2.9   | %
|Income tax expense                  |  |                            | 1,261  |  | 1.6               | % |  |   | 477    |  | 0.6   | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  
|Net income                          |  | $                          | 2,703  |  | 3.6               | % |  | $ | 2,040  |  | 2.3   | %
|                                    |  |                            |        |  |                   |   |  |   |        |  |       |  

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 consolidated
statements of income.



|                                 |  |                            |        |                   |   |        |  |   |        |  |      |  
|-------------------------------- |  | -------------------------- | ------ | ----------------- | - | ------ |  | - | ------ |  | ---- | -
|                                 |  | Thirteen week period ended |        | Change            |  
|                                 |  | September 30,2006          |        | September 29,2007 |   | $      |  | % |       
|                                 |  |                            |        | (in thousands)    |   |        |  |   |       
|Revenues                         |  | $                          | 75,648 |                   | $ | 88,095 |  | $ | 12,447 |  | 16.5 | %
|                                 |  |                            |        |                   |   |        |  |   |        |  |      |  
|Restaurant operating costs       |  |                            |        |                   |   |        |  |   |        |  |      |  
|Food and beverage                |  | $                          | 22,120 |                   | $ | 25,668 |  | $ | 3,548  |  | 16.0 | %
|Labor                            |  |                            | 23,827 |                   |   | 28,373 |  |   | 4,546  |  | 19.1 | %
|Operating                        |  |                            | 11,768 |                   |   | 13,899 |  |   | 2,131  |  | 18.1 | %
|Occupancy                        |  |                            | 6,964  |                   |   | 8,001  |  |   | 1,037  |  | 14.9 | %
|                                 |  |                            |        |                   |   |        |  |   |        |  |      |  
|Total restaurant operating costs |  | $                          | 64,679 |                   | $ | 75,941 |  | $ | 11,262 |  | 17.4 | %
|                                 |  |                            |        |                   |   |        |  |   |        |  |      |  



9



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##### Table of Contents

Revenues. Revenues increased $12.4 million, or 16.5%, to $88.1 million in the thirteen week period ended
September 29, 2007 from $75.6 million in the thirteen week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006.

Food and Beverage Costs. Food and beverage costs increased $3.5 million, or 16.0%, to $25.7 million in the thirteen week period ended September 29, 2007
from $22.1 million in the thirteen week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Food and beverage costs as a percentage of revenues decreased to 29.1% in
the thirteen week period ended September 29, 2007 from 29.2% in the thirteen week period ended September 30, 2006, primarily due to menu pricing increases in 2007.

Labor Costs. Labor costs increased $4.5 million, or 19.1%, to $28.4 million in the thirteen week period ended September 29, 2007 from $23.8 million in thirteen week period ended September 30,
2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Labor costs as a percentage of revenues increased to 32.2% in the thirteen week period ended September 29, 2007 from 31.5% in the thirteen
week period ended September 30, 2006, primarily due to restaurant labor inefficiency in the restaurants added within the last 18 months, coupled with deleveraging at the mature restaurants due to lower comparable sales.

Operating Costs. Operating costs increased $2.1 million, or 18.1%, to $13.9 million in the thirteen week period ended September 29, 2007 from $11.8
million in the thirteen week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Operating costs as a percentage of revenues increased to 15.8% in the thirteen
week period ended September 29, 2007 from 15.6% in the thirteen week period ended September 30, 2006, primarily due to an increase in repairs and maintenance expense coupled with an increase in advertising expenses.

Occupancy Costs. Occupancy costs increased $1.0 million, or 14.9%, to $8.0 million in the thirteen week period ended September 29, 2007 from $7.0
million in the thirteen week period ended September 30, 2006, primarily due to the fifteen restaurants added since September 30, 2006. Occupancy costs as a percentage of revenues decreased to 9.1% in the thirteen week period ended
September 29, 2007 from 9.2% in the thirteen week period ended September 30, 2006, primarily due to an increase in revenues.

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 consolidated statements of income.



|                                    |  |                            |       |                   |   |       |  |   |       |  |      |  
|----------------------------------- |  | -------------------------- | ----- | ----------------- | - | ----- |  | - | ----- |  | ---- | -
|                                    |  | Thirteen week period ended |       | Change            |  
|                                    |  | September 30,2006          |       | September 29,2007 |   | $     |  | % |      
|                                    |  |                            |       | (in thousands)    |   |       |  |   |      
|General and administrative expenses |  | $                          | 4,031 |                   | $ | 4,658 |  | $ | 627   |  | 15.6 | %
|Restaurant pre-opening costs        |  |                            | 310   |                   |   | 2,097 |  |   | 1,787 |  | *    |  
|Depreciation and amortization       |  |                            | 2,733 |                   |   | 2,952 |  |   | 219   |  | 8.0  | %



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

General and Administrative
Expenses. General and administrative expenses increased $0.6 million, or 15.6%, to $4.7 million in the thirteen week period ended September 29, 2007 from $4.0 million in the thirteen week period ended September 30, 2006. The
increase in general and administrative expenses was primarily due to the increase in the number of restaurants coupled with increased travel costs. General and administrative expenses as a percentage of revenues were 5.3% in both the thirteen week
period ended September 29, 2007 and September 30, 2006.

Restaurant Pre-Opening Costs. Restaurant pre-opening costs increased $1.8
million, to $2.1 million in the thirteen week period ended September 29, 2007 from $0.3 million in the thirteen week period ended September 30, 2006, primarily due to the timing of restaurant openings and restaurants under construction
coupled with an increase in the average pre-opening costs for each new restaurant added in the thirteen week period ended September 29, 2007, compared to the thirteen week period ended September 30, 2006.

Depreciation and Amortization. Depreciation and amortization increased $0.2 million, or 8.0%, to $3.0 million in the thirteen week period ended
September 29, 2007 from $2.7 million in the thirteen week period ended September 30, 2006. The increase was primarily due to the fifteen restaurants added since September 30, 2006. Depreciation and amortization as a percentage of
revenues decreased to 3.3% in the thirteen week period ended September 29, 2007 from 3.6% in the thirteen week period ended September 30, 2006, primarily due to assets that became fully depreciated in the third quarter of 2006.

Interest Income, net, Income Tax Expense and Net Income

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



|                           |  |                            |       |                   |   |       |  |   |        |   |  |       |   
|-------------------------- |  | -------------------------- | ----- | ----------------- | - | ----- |  | - | ------ | - |  | ----- | --
|                           |  | Thirteen week period ended |       | Change            |  
|                           |  | September 30,2006          |       | September 29,2007 |   | $     |  |   | %      |  
|                           |  |                            |       | (in thousands)    |   |       |  |   |        |  
|Interest income, net       |  | $                          | 69    |                   | $ | 70    |  | $ | 1      |   |  | 1.4   | % 
|                           |  |                            |       |                   |   |       |  |   |        |   |  |       |   
|Income before income taxes |  | $                          | 3,964 |                   | $ | 2,517 |  | $ | (1,447 | ) |  | (36.5 | )%
|Income tax expense         |  |                            | 1,261 |                   |   | 477   |  |   | (784   | ) |  | (62.2 | )%
|                           |  |                            |       |                   |   |       |  |   |        |   |  |       |   
|Net income                 |  | $                          | 2,703 |                   | $ | 2,040 |  | $ | (663   | ) |  | (24.5 | )%
|                           |  |                            |       |                   |   |       |  |   |        |   |  |       |   

Interest Income, Net. Interest income, net of interest expense, was $70,000 for the thirteen week
period ended September 29, 2007 compared to $69,000 in the thirteen week period ended September 30, 2006.

Income Tax Expense. Income
tax expense was $0.5 million in the thirteen week period ended September 29, 2007 compared to $1.3 million in the thirteen week period ended September 30, 2006. Income tax expense reflects an estimated effective annualized tax rate of
28.8% compared to 31.8% in the thirteen week period ended September 30, 2006. The decrease in the estimated effective annualized tax rate is primarily due to the estimated tax impact of share-based compensation and FICA tax credits.

Net Income.Net income decreased $0.7 million to $2.0 million in the thirteen week period ended September 29, 2007 compared to net income of $2.7
million in the thirteen week period ended September 30, 2006, primarily due to an increase in restaurant pre-opening costs coupled with a decrease in restaurant labor efficiency at both the restaurants added within the last 18 months and the
mature restaurants.



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##### Table of Contents

Thirty-nine Week Period Ended September 29, 2007 Compared to Thirty-nine Week Period Ended September 30,
2006

The following are highlights of our financial performance for the thirty-nine week period ended September 29, 2007 compared to the
thirty-nine week period ended September 30, 2006:



| |  |  | Revenues increased 15.7% to $259.2 million from $224.0 million
| | - |  | --------------------------------------------------------------



| |  |  | Comparable restaurant sales increased 1.7%
| | - |  | ------------------------------------------



| |  |  | Operating income increased 8.4% to $13.4 million from $12.4 million
| | - |  | -------------------------------------------------------------------



| |  |  | Net income increased 14.6% to $9.8 million from $8.6 million
| | - |  | ------------------------------------------------------------



| |  |  | Diluted earnings per share increased to $0.66 from $0.59
| | - |  | --------------------------------------------------------

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



|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|----------------------------------- |  | ----------------------------- | ------- |  | ----------------- | - |  | - | ------- |  | ----- | -
|                                    |  | Thirty-nine week period ended |        
|                                    |  | September 30,2006             |         |  | September 29,2007 |  
|                                    |  | (in thousands)                |        
|Revenues                            |  | $                             | 224,017 |  | 100.0             | % |  | $ | 259,170 |  | 100.0 | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Restaurant operating costs          |  |                               |         |  |                   |   |  |   |         |  |       |  
|Food and beverage                   |  |                               | 65,505  |  | 29.2              | % |  |   | 75,040  |  | 29.0  | %
|Labor                               |  |                               | 70,364  |  | 31.5              | % |  |   | 81,741  |  | 31.5  | %
|Operating                           |  |                               | 33,392  |  | 14.9              | % |  |   | 39,639  |  | 15.3  | %
|Occupancy                           |  |                               | 20,478  |  | 9.1               | % |  |   | 23,301  |  | 9.0   | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Total restaurant operating costs    |  |                               | 189,739 |  | 84.7              | % |  |   | 219,721 |  | 84.8  | %
|General and administrative expenses |  |                               | 11,985  |  | 5.4               | % |  |   | 14,420  |  | 5.5   | %
|Restaurant pre-opening costs        |  |                               | 1,795   |  | 0.8               | % |  |   | 3,025   |  | 1.2   | %
|Depreciation and amortization       |  |                               | 8,117   |  | 3.6               | % |  |   | 8,584   |  | 3.3   | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Total costs and expenses            |  |                               | 211,636 |  | 94.5              | % |  |   | 245,750 |  | 94.8  | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Operating income                    |  |                               | 12,381  |  | 5.5               | % |  |   | 13,420  |  | 5.2   | %
|Interest income, net                |  |                               | 159     |  | 0.1               | % |  |   | 349     |  | 0.1   | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Income before income taxes          |  |                               | 12,540  |  | 5.6               | % |  |   | 13,769  |  | 5.3   | %
|Income tax expense                  |  |                               | 3,988   |  | 1.8               | % |  |   | 3,965   |  | 1.5   | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  
|Net income                          |  | $                             | 8,552   |  | 3.8               | % |  | $ | 9,804   |  | 3.8   | %
|                                    |  |                               |         |  |                   |   |  |   |         |  |       |  

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 consolidated
statements of income.



|                                 |  |                               |         |                   |   |         |  |   |        |  |      |  
|-------------------------------- |  | ----------------------------- | ------- | ----------------- | - | ------- |  | - | ------ |  | ---- | -
|                                 |  | Thirty-nine week period ended |         | Change            |  
|                                 |  | September 30,2006             |         | September 29,2007 |   | $       |  | % |       
|                                 |  | (in thousands)                |        
|Revenues                         |  | $                             | 224,017 |                   | $ | 259,170 |  | $ | 35,153 |  | 15.7 | %
|                                 |  |                               |         |                   |   |         |  |   |        |  |      |  
|Restaurant operating costs       |  |                               |         |                   |   |         |  |   |        |  |      |  
|Food and beverage                |  | $                             | 65,505  |                   | $ | 75,040  |  | $ | 9,535  |  | 14.6 | %
|Labor                            |  |                               | 70,364  |                   |   | 81,741  |  |   | 11,377 |  | 16.2 | %
|Operating                        |  |                               | 33,392  |                   |   | 39,639  |  |   | 6,247  |  | 18.7 | %
|Occupancy                        |  |                               | 20,478  |                   |   | 23,301  |  |   | 2,823  |  | 13.8 | %
|                                 |  |                               |         |                   |   |         |  |   |        |  |      |  
|Total restaurant operating costs |  | $                             | 189,739 |                   | $ | 219,721 |  | $ | 29,982 |  | 15.8 | %
|                                 |  |                               |         |                   |   |         |  |   |        |  |      |  

Revenues. Revenues increased $35.2 million, or 15.7%, to $259.2 million in the thirty-nine week period
ended September 29, 2007 from $224.0 million in the thirty-nine week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006.

Food and Beverage Costs. Food and beverage costs increased $9.5 million, or 14.6%, to $75.0 million in the thirty-nine week period ended September 29,
2007 from $65.5 million in the thirty-nine week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Food and beverage costs as a percentage of revenues decreased to
29.0% in the thirty-nine week period ended September 29, 2007 from 29.2% in the thirty-nine week period ended September 30, 2006, primarily due to menu pricing increases in 2007.

Labor Costs. Labor costs increased $11.4 million, or 16.2%, to $81.7 million in the thirty-nine week period ended September 29, 2007 from $70.4 million
in thirty-nine week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Labor costs as a percentage of revenues were 31.5% in both the thirty-nine week period ended
September 29, 2007 and September 30, 2006.

Operating Costs. Operating costs increased $6.2 million, or 18.7%, to $39.6 million in
the thirty-nine week period ended September 29, 2007 from $33.4 million in the thirty-nine week period ended September 30, 2006. This increase was primarily due to the fifteen restaurants added since September 30, 2006. Operating
costs as a percentage of revenues increased to 15.3% in the thirty-nine week period ended September 29, 2007 from 14.9% in the thirty-nine week period ended September 30, 2006, primarily due to an increase in repairs and maintenance
expenses, credit card discount fees and marketing costs.

Occupancy Costs. Occupancy costs increased $2.8 million, or 13.8%, to $23.3 million
in the thirty-nine week period ended September 29, 2007 from $20.5 million in the thirty-nine week period ended September 30, 2006, primarily due to the fifteen restaurants added since September 30, 2006. Occupancy costs as a
percentage of revenues decreased to 9.0% in the thirty-nine week period ended September 29, 2007 from 9.1% in the thirty-nine week period ended September 30, 2006.



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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 consolidated statements of income.



|                                    |  |                               |        |                   |   |        |  |   |       |  |      |  
|----------------------------------- |  | ----------------------------- | ------ | ----------------- | - | ------ |  | - | ----- |  | ---- | -
|                                    |  | Thirty-nine week period ended |        | Change            |  
|                                    |  | September 30,2006             |        | September 29,2007 |   | $      |  | % |      
|                                    |  | (in thousands)                |       
|General and administrative expenses |  | $                             | 11,985 |                   | $ | 14,420 |  | $ | 2,435 |  | 20.3 | %
|Restaurant pre-opening costs        |  |                               | 1,795  |                   |   | 3,025  |  |   | 1,230 |  | 68.5 | %
|Depreciation and amortization       |  |                               | 8,117  |                   |   | 8,584  |  |   | 467   |  | 5.8  | %

General and Administrative Expenses. General and administrative expenses increased $2.4 million, or
20.3%, to $14.4 million in the thirty-nine week period ended September 29, 2007 from $12.0 million in the thirty-nine week period ended September 30, 2006, primarily due to the fifteen restaurants added since September 30, 2006
coupled with increased share-based compensation, legal fees, and travel costs. General and administrative expenses as a percentage of revenues increased to 5.5% in the thirty-nine week period ended September 29, 2007 from 5.4% in the
thirty-nine week period ended September 30, 2006, primarily due to an increase in legal fees and travel costs.

Restaurant Pre-Opening
Costs. Restaurant pre-opening costs increased $1.2 million, or 68.5%, to $3.0 million in the thirty-nine week period ended September 29, 2007 from $1.8 million in the thirty-nine week period ended September 30, 2006, primarily due
to the timing of restaurant openings and restaurants under construction, coupled with an increase in the average pre-opening costs for each new restaurant added in the thirty-nine week period ended September 29, 2007, compared to the
thirty-nine week period ended September 30, 2006.

Depreciation and Amortization. Depreciation and amortization increased $0.5 million, or
5.8%, to $8.6 million in the thirty-nine week period ended September 29, 2007 from $8.1 million in the thirty-nine week period ended September 30, 2006. The increase was primarily due to the fifteen restaurants added since
September 30, 2006. Depreciation and amortization as a percentage of revenues decreased to 3.3% in the thirty-nine week period ended September 29, 2007 from 3.6% in the thirty-nine week period ended September 30, 2006, primarily due
to assets that became fully depreciated in the third quarter of 2006.

Interest Income, net, Income Tax Expense and Net Income

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



|                           |  |                               |        |                   |   |        |  |   |       |   |  |       |   
|-------------------------- |  | ----------------------------- | ------ | ----------------- | - | ------ |  | - | ----- | - |  | ----- | --
|                           |  | Thirty-nine week period ended |        | Change            |  
|                           |  | September 30,2006             |        | September 29,2007 |   | $      |  |   | %     |  
|                           |  | (in thousands)                |       
|Interest income, net       |  | $                             | 159    |                   | $ | 349    |  | $ | 190   |   |  | 119.5 | % 
|                           |  |                               |        |                   |   |        |  |   |       |   |  |       |   
|Income before income taxes |  | $                             | 12,540 |                   | $ | 13,769 |  | $ | 1,229 |   |  | 9.8   | % 
|Income tax expense         |  |                               | 3,988  |                   |   | 3,965  |  |   | (23   | ) |  | (0.6  | )%
|                           |  |                               |        |                   |   |        |  |   |       |   |  |       |   
|Net income                 |  | $                             | 8,552  |                   | $ | 9,804  |  | $ | 1,252 |   |  | 14.6  | % 
|                           |  |                               |        |                   |   |        |  |   |       |   |  |       |   

Interest Income, Net. Interest income, net of interest expense, was $0.3 million in the thirty-nine
week period ended September 29, 2007 compared to interest income, net of interest expense, of $0.2 million in the thirty-nine week period ended September 30, 2006. This change was primarily due to the increase in interest income earned on
our invested cash and cash equivalents, due to a higher average daily cash balance.

Income Tax Expense. Income tax expense was $4.0 million in
both the thirty-nine week period ended September 29, 2007 and September 30, 2006. Income tax expense reflects an estimated effective annualized tax rate of 28.8% compared to 31.8% in the thirty-nine week period ended September 30,
2006. The decrease in the estimated effective annualized tax rate is primarily due to the estimated tax impact of share-based compensation and FICA tax credits.

Net Income.Net income increased $1.3 million to $9.8 million in the thirty-nine week period ended September 29, 2007 compared to net income of $8.6 million in the thirty-nine week period ended September 30, 2006,
primarily due to higher revenues of $35.2 million, coupled with increased interest income and improved food and beverage costs as a percentage of revenues.

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 credit facilities. 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 consolidated statements of cash flows:



|                                                             |  |                               |         |   |                   |   |         |  
|------------------------------------------------------------ |  | ----------------------------- | ------- | - | ----------------- | - | ------- | -
|                                                             |  | Thirty-nine week period ended |        
|                                                             |  | September 30,2006             |         |   | September 29,2007 |  
|                                                             |  | (in thousands)                |        
|Net cash provided by operating activities                    |  | $                             | 20,835  |   |                   | $ | 14,136  |  
|Net cash used in investing activities                        |  |                               | (22,835 | ) |                   |   | (44,394 | )
|Net cash provided by financing activities                    |  |                               | 750     |   |                   |   | 20,639  |  
|Effect of exchange rate changes on cash and cash equivalents |  |                               |        |   |                   |   | 53      |  
|                                                             |  |                               |         |   |                   |   |         |  
|Decrease in cash and cash equivalents                        |  | $                             | (1,250  | ) |                   | $ | (9,566  | )
|                                                             |  |                               |         |   |                   |   |         |  

Net cash provided by operating activities was $14.1 million in the thirty-nine week period ended
September 29, 2007 compared to $20.8 million in the thirty-nine week period ended September 30, 2006. Net cash provided by operating activities in the thirty-nine week period ended September 29, 2007 exceeded net income primarily due
to the effect of depreciation and amortization of $8.6 million, an increase in accrued expenses of $3.7 million and partially offset by an increase in tenant improvement allowance receivables of $4.2 million, trade receivables of $3.8 million
and prepaid expenses of $3.8 million.

Net cash used in investing activities was $44.4 million in the thirty-nine week period ended September 29, 2007
compared to $22.8 million in the thirty-nine week period ended September 30, 2006. The increase in investing activities was primarily due to $29.2 million paid for the construction costs of new restaurant openings and



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##### Table of Contents

capital improvements on existing restaurants, and the $14.9 million we paid for the purchase of The Boathouse restaurants. Net cash used in investing
activities will vary based on the number of new restaurants under construction and the expansion of existing restaurant capacity during the period.

Net
cash provided by financing activities was $20.6 million in the thirty-nine week period ended September 29, 2007. Net cash provided by financing activities was primarily a result of borrowings under our revolving credit facility related to the
acquisition of The Boathouse restaurants, coupled with an increase in book overdraft of $6.1 million and proceeds from stock options exercised of $4.1 million. Net cash provided by financing activities was $0.8 million in the thirty-nine week period
ended September 30, 2006, primarily due to proceeds from stock options exercised of $0.7 million.

As of September 29, 2007, we had $9.0 million
of borrowings under our $50.0 million revolving credit facility. The revolving credit facility agreement also provides for bank guarantees under standby letter of credit arrangements in the normal course of business operations. As of
September 29, 2007, the maximum exposure under these standby letters of credit was $3.0 million. As of September 29, 2007, there were no amounts drawn upon these letters of credit and we had $38.0 million available under our revolving
credit facility.

Under our revolving credit facility, we are subject to certain financial and non-financial covenants, including an adjusted leverage
ratio, a consolidated cash flow ratio and growth capital expenditures limitation We amended our facility to increase the growth capital expenditure limitation on October 31, 2006 to allow for the acquisition of The Boathouse restaurants. We
were in compliance with these covenants as of September 29, 2007.

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.

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. The critical accounting policies and estimates used in the preparation of our consolidated financial
statements are the following:

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Equipment consists primarily of restaurant equipment, furniture, fixtures and smallwares. Depreciation is
calculated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term as defined in Statement of Financial Accounting
Standards (SFAS) No. 13, Accounting for Leases (SFAS 13), as amended, or the estimated useful life of the asset. As discussed in SFAS 13, the lease term includes any period covered by a renewal option
where the renewal is reasonably assured because failure to renew the lease would impose an economic penalty to the lessee. Repairs and maintenance are expensed as incurred; renewals and betterments are capitalized. Estimated useful lives are
generally as follows: equipment3 to 10 years; furniture and fixtures5 to 10 years and leasehold improvements7 to 30 years. Judgments and estimates made by us related to the expected useful lives of these assets are
affected by factors such as changes in economic conditions and changes in operating performance. If these assumptions change in the future, we may be required to record impairment charges for these assets.

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, and at least annually. 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. The determination of
asset fair value is also subject to significant judgment. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment
charges for these assets.

Goodwill and Other Indefinite Lived Assets

Goodwill and 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. 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 are 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 for workers compensation, employee health, general liability, and property damage. 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 estimate 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.

Income Taxes

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS 109). This Statement establishes financial accounting and reporting standards for the effects of income taxes that
result from an enterprises activities during the current and preceding years. It requires an asset and liability approach for financial accounting and reporting of income taxes. We recognize deferred tax liabilities and assets for the future
consequences of events that have been recognized in our consolidated financial statements or tax returns. In the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a
net deferred tax asset, an evaluation is made of the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some
portion of or all deferred tax asset will not be realized. The realization of such net deferred tax asset will generally depend on whether we will have sufficient taxable income of an appropriate character within the carryforward period permitted by
the tax law. Without sufficient taxable income to offset the deductible amounts and carryforwards, the related tax benefits will expire unused. We have evaluated both positive and negative evidence in making a determination as to whether it is more
likely than not that all or some portion of the deferred tax asset will not be realized. Measurement of deferred items is based on enacted tax laws. No deferred tax asset valuation allowance has been recorded as of September 29, 2007.



13



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##### Table of Contents

We adopted the provision of Financial Standards Accounting Board Interpretation No. 48 Accounting for
uncertainty in Income Taxes (FIN 48) on December 31, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS 109. FIN 48 prescribes
a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.

Operating Leases

Rent expense for our operating leases, which generally have escalating rentals over the term of the lease, is recorded using the straight-line method over the lease term
as defined in SFAS 13, which provides among other things that the lease term is determined to commence on the date which is normally when the property is ready for normal tenant improvements (build-out period). Typically, we owe no rent under the
majority of our leases until the facility opens for business. The difference between rent expense using the straight-line method pursuant to the provisions of SFAS 13 and minimum rent paid under our lease agreements is recorded as a deferred
rent liability and is included in the consolidated balance sheets.

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
|------- | ----------------------------------------------------------

Our
market risk exposures are related to our cash and cash equivalents, revolving credit facility and foreign exchange rate fluctuations. 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 0.75% or the Eurodollar rate plus a margin of 0.75% to 1.75%, 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. As of September 29, 2007, we had $9.0 million of outstanding borrowings. Loans under our revolving credit facility mature on July 23, 2009. A hypothetical 10% interest rate increase would not have a material effect on our financial
results.

A portion of our revenue is generated in Canada. As a result, we conduct 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
|------- | -----------------

From time to time, 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. None of these types of litigation, most of which are covered by insurance, has had a material effect on our business, results of operations, financial position or cash flows.



|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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | 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 restaurants in 2005 and seven in 2006 and we plan to open eleven domestic restaurants in 2007. In addition, we recently acquired five The Boathouse
restaurants, and a sixth under development, which we opened October 1, 2007, in Vancouver, British Columbia. 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.

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;
| | - |  | ---------------------------------------------



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



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



| |  |  | 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 decrease.

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 Seattle, Washington area, seven in the Portland, Oregon area, twelve 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, The Boathouse 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.

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 other 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
|------- | --------

EXHIBITS.



|     |  |                                                                                                                                                                                                                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Certificate of Incorporation of the Company, 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  |  | Bylaws of the Company, as amended (incorporated by reference to Exhibits 3.2 and 3.2a to our Registration Statement on Form S-1, File No. 333-114977).                                                                                                                                                                              
|     | 
|4.1  |  | Registration Rights Agreement, dated as of August 22, 2001, by and among McCormick & Schmick Holdings LLC, Bruckmann, Rosser, Sherrill & Co. II, L.P., Castle Harlan
Partners III, L.P. and certain other parties thereto (incorporated by reference to Exhibit 4.2 to our registration statement on Form S-1, file No. 333-114977).
|     | 
|10.1 |  | Third Amendment to Revolving Credit Agreement dated as of November 6, 2007 among McCormick & Schmick Acquisition Corp. and certain of its subsidiaries, as borrowers, and Bank of
America, N.A. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. Rabobank International New York Branch, as lenders.                      
|     | 
|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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##### Table of Contents

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. SchmickChief Executive Officer (principal executive officer)By:

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


Date: November 8, 2007



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##### Table of Contents

EXHIBITS.



|     |  |                                                                                                                                                                                                                                                                                                                                     
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Certificate of Incorporation of the Company, 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  |  | Bylaws of the Company, as amended (incorporated by reference to Exhibits 3.2 and 3.2a to our Registration Statement on Form S-1, File No. 333-114977).                                                                                                                                                                              
|     | 
|4.1  |  | Registration Rights Agreement, dated as of August 22, 2001, by and among McCormick & Schmick Holdings LLC, Bruckmann, Rosser, Sherrill & Co. II, L.P., Castle Harlan
Partners III, L.P. and certain other parties thereto (incorporated by reference to Exhibit 4.2 to our registration statement on Form S-1, file No. 333-114977).
|     | 
|10.1 |  | Third Amendment to Revolving Credit Agreement dated as of November 6, 2007 among McCormick & Schmick Acquisition Corp. and certain of its subsidiaries, as borrowers, and Bank of
America, N.A. and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. Rabobank International New York Branch, as lenders.                      
|     | 
|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.                                                                                                                                                                              



20